G.R. No.
188661 April 11, 2012 San Manuel Branch, San Manuel, Isabela [Rural Bank of
ESTELITA VILLAMAR, Petitioner,
vs.
BALBINO MANGAOIL, Respondent.
DECISION
REYES, J.:
The Case
Before us is a petition for review on certiorari1 under Rule 45
of the Rules of Court filed by Estelita Villamar (Villamar) to
assail the Decision2 rendered by the Court of Appeals (CA)
on February 20, 2009 in CA-G.R. CV No. 86286, the
dispositive portion of which reads:
WHEREFORE, the instant appeal is DISMISSED. The
assailed decision is AFFIRMED in toto.
SO ORDERED.3
The resolution4 issued by the CA on July 8, 2009 denied the
petitioner's motion for reconsideration to the foregoing.
The ruling5 of Branch 23, Regional Trial Court (RTC) of
Roxas, Isabela, which was affirmed by the CA in the herein
assailed decision and resolution, ordered the (1) rescission of
the contract of sale of real property entered into by Villamar
and Balbino Mangaoil (Mangaoil); and (2) return of the down
payment made relative to the said contract.
Antecedents Facts
The CA aptly summarized as follows the facts of the case
prior to the filing by Mangaoil of the complaint6 for rescission
of contract before the RTC:
Villamar is the registered owner of a 3.6080 hectares parcel
of land [hereinafter referred as the subject property] in San
Francisco, Manuel, Isabela covered by Transfer Certificate of
Title (TCT) No. T-92958-A. On March 30, 1998, she entered
into an Agreement with Mangaoil for the purchase and sale
of said parcel of land, under the following terms and
conditions:
"1. The price of the land is ONE HUNDRED AND
EIGHTY THOUSAND (180,000.00) PESOS per
hectare but only the 3.5000 hec. shall be paid and
the rest shall be given free, so that the total purchase
or selling price shall be [P]630,000.00 only;
2. ONE HUNDRED EIGHTY FIVE THOUSAND
(185,000.00) PESOS of the total price was already
received on March 27, 1998 for payment of the
loan secured by the certificate of title covering
the land in favor of the Rural Bank of Cauayan,
Cauayan], in order that the certificate of title thereof be
withdrawn and released from the said bank, and the rest shall
be for the payment of the mortgag[e]s in favor of Romeo
Lacaden and Florante Parangan;
3. After the release of the certificate of title covering the land
subject-matter of this agreement, the necessary deed of
absolute sale in favor of the PARTY OF THE SECOND PART
shall be executed and the transfer be immediately effected so
that the latter can apply for a loan from any lending institution
using the corresponding certificate of title as collateral therefor,
and the proceeds of the loan, whatever be the amount, be given
to the PARTY OF THE FIRST PART;
4. Whatever balance left from the agreed purchase price of the
land subject matter hereof after deducting the proceed of the
loan and the [P]185,000.00 already received as above-
mentioned, the PARTY OF THE SECOND PART shall pay unto
the PARTY OF THE FIRST PART not later than June 30,
1998 and thereafter the parties shall be released of any
obligations for and against each other; xxx"
On April 1, 1998, the parties executed a Deed of Absolute
Sale whereby Villamar (then Estelita Bernabe) transferred the
subject parcel of land to Mangaoil for and in consideration of
[P]150,000.00.
In a letter dated September 18, 1998, Mangaoil informed
Villamar that he was backing out from the sale agreed upon
giving as one of the reasons therefor:
"3. That the area is not yet fully cleared by incumbrances as
there are tenants who are not willing to vacate the land without
giving them back the amount that they mortgaged the land."
Mangaoil demanded refund of his [P]185,000.00 down
payment. Reiterating said demand in another letter dated April
29, 1999, the same, however, was unheeded.7 x x x (Citations
omitted)
On January 28, 2002, the respondent filed before the RTC a
complaint8 for rescission of contract against the petitioner. In
the said complaint, the respondent sought the return
of P185,000.00 which he paid to the petitioner, payment of
interests thereon to be computed from March 27, 1998 until the
suit's termination, and the award of damages, costs
and P20,000.00 attorney's fees. The respondent's factual
allegations were as follows:
5. That as could be gleaned the "Agreement" (Annex "A"), the
plaintiff [Mangaoil] handed to the defendant [Villamar] the sum
of [P]185,000.00 to be applied as follows; [P]80,000 was for the
redemption of the land which was mortgaged to the Rural Bank
of Cauayan, San Manuel Branch, San Manuel, Isabela, to
enable the plaintiff to get hold of the title and register the
sale x x x and [P]105,000.00 was for the redemption of
the said land from private mortgages to enable plaintiff to
posses[s] and cultivate the same;
6. That although the defendant had already long
redeemed the said land from the said bank and
withdrawn TCT No. T-92958-A, she has failed and
refused, despite repeated demands, to hand over the
said title to the plaintiff and still refuses and fails to do so;
7. That, also, the plaintiff could not physically, actually
and materially posses[s] and cultivate the said land
because the private mortgage[e]s and/or present
possessors refuse to vacate the same;
xxxx
11. That on September 18, 1998, the plaintiff sent a letter
to the defendant demanding a return of the amount so
advanced by him, but the latter ignored the same, x x x;
12. That, again, on April 29, 1999, the plaintiff sent to the
defendant another demand letter but the latter likewise
ignored the same, x x x;
13. That, finally, the plaintiff notified the defendant by a
notarial act of his desire and intention to rescind the said
contract of sale, xxx;
x x x x.9 (Citations omitted)
In the respondents answer to the complaint, she averred that she
had complied with her obligations to the respondent. Specifically,
she claimed having caused the release of TCT No. T-92958-A by
the Rural Bank of Cauayan and its delivery to a certain "Atty.
Pedro C. Antonio" (Atty. Antonio). The petitioner alleged that Atty.
Antonio was commissioned to facilitate the transfer of the said title
in the respondent's name. The petitioner likewise insisted that it
was the respondent who unceremoniously withdrew from their
agreement for reasons only the latter knew.
The Ruling of the RTC
On September 9, 2005, the RTC ordered the rescission of the
agreement and the deed of absolute sale executed between the
respondent and the petitioner. The petitioner was, thus directed to
return to the respondent the sum of P185,000.00 which the latter
tendered as initial payment for the purchase of the subject
property. The RTC ratiocinated that:
There is no dispute that the defendant sold the LAND to the
plaintiff for [P]630,000.00 with down payment of [P]185,000.00.
There is no evidence presented if there were any other partial
payments made after the perfection of the contract of sale.
Article 1458 of the Civil Code provides:
"Art. 1458. By the contract of sale[,] one of the contracting
parties obligates himself to transfer the ownership of and
to deliver a determinate thing, and the other to pay
therefore a price certain in money or its equivalent."
As such, in a contract of sale, the obligation of the vendee to
pay the price is correlative of the obligation of the vendor to
deliver the thing sold. It created or established at the same
time, out of the same course, and which result in mutual
relations of creditor and debtor between the parties.
The claim of the plaintiff that the LAND has not been delivered
to him was not refuted by the defendant. Considering that
defendant failed to deliver to him the certificate of title and of
the possession over the LAND to the plaintiff, the contract
must be rescinded pursuant to Article 1191 of the Civil Code
which, in part, provides:
"Art. 1191. The power of rescind obligations is implied in
reciprocal ones in case one of the obligors should not
comply with what is incumbent upon him."10
The petitioner filed before the CA an appeal to challenge the
foregoing. She ascribed error on the part of the RTC when the
latter ruled that the agreement and deed of sale executed by
and between the parties can be rescinded as she failed to
deliver to the respondent both the subject property and the
certificate of title covering the same.
The Ruling of the CA
On February 20, 2009, the CA rendered the now assailed
decision dismissing the petitioners appeal based on the
following grounds:
Burden of proof is the duty of a party to prove the truth of his
claim or defense, or any fact in issue necessary to establish
his claim or defense by the amount of evidence required by
law. In civil cases, the burden of proof is on the defendant
if he alleges, in his answer, an affirmative defense, which
is not a denial of an essential ingredient in the plaintiff's cause
of action, but is one which, if established, will be a good
defense i.e., an "avoidance" of the claim, which prima facie,
the plaintiff already has because of the defendant's own
admissions in the pleadings.
Defendant-appellant Villamar's defense in this case was
an affirmative defense. She did not deny plaintiff-appellees
allegation that she had an agreement with plaintiff-appellee
for the sale of the subject parcel of land. Neither did she deny
that she was obliged under the contract to deliver the
certificate of title to plaintiff-appellee immediately after said
title/property was redeemed from the bank. What she rather
claims is that she already complied with her obligation to
deliver the title to plaintiff-appellee when she delivered
the same to Atty. Antonio as it was plaintiff-appellee himself who
engaged the services of said lawyer to precisely work for the immediate
transfer of said title in his name. Since, however, this affirmative defense
as alleged in defendant-appellant's answer was not admitted by plaintiff-
appellee, it then follows that it behooved the defendant-appellant to
prove her averments by preponderance of evidence.
Yet, a careful perusal of the record shows that the defendant-appellant
failed to sufficiently prove said affirmative defense. She failed to prove
that in the first place, "Atty. Antonio" existed to receive the title for
and in behalf of plaintiff-appellee. Worse, the defendant-appellant
failed to prove that Atty. Antonio received said title "as allegedly agreed
upon."
We likewise sustain the RTC's finding that defendant-appellant
V[i]llamar failed to deliver possession of the subject property to
plaintiff-appellee Mangaoil. As correctly observed by the RTC - "[t]he
claim of the plaintiff that the land has not been delivered to him was not
refuted by the defendant." Not only that. On cross-examination, the
defendant-appellant gave Us insight on why no such delivery could
be made, viz.:
"x x x x
Q: So, you were not able to deliver this property to Mr. Mangaoil
just after you redeem the property because of the presence of
these two (2) persons, is it not?
xxx
A: Yes, sir.
Q: Forcing you to file the case against them and which according to
you, you have won, is it not?
A: Yes, sir.
Q: And now at present[,] you are in actual possession of the land?
A: Yes, sir. x x x"
With the foregoing judicial admission, the RTC could not have erred in
finding that defendant-[appellant] failed to deliver the possession of the
property sold, to plaintiff-appellee.
Neither can We agree with defendant-appellant in her argument that the
execution of the Deed of Absolute Sale by the parties is already
equivalent to a valid and constructive delivery of the property to
plaintiff-appellee. Not only is it doctrinally settled that in a contract of
sale, the vendor is bound to transfer the ownership of, and to
deliver the thing that is the object of the sale, the way Article 1547 of
the Civil Code is worded, viz.:
"Art. 1547. In a contract of sale, unless a contrary intention appears,
there is:
(1) An implied warranty on the part of the seller that he has
a right to sell the thing at the time when the ownership is to
pass, and that the buyer shall from that time have and
enjoy the legal and peaceful possession of the thing;
(2) An implied warranty that the thing shall be free from
any hidden defaults or defects, or any change or
encumbrance not declared or known to the buyer.
x x x."
shows that actual, and not mere constructive delivery is warrantied
by the seller to the buyer. "(P)eaceful possession of the thing"
sold can hardly be enjoyed in a mere constructive delivery.
The obligation of defendant-appellant Villamar to transfer
ownership and deliver possession of the subject parcel of land
was her correlative obligation to plaintiff-appellee in exchange for
the latter's purchase price thereof. Thus, if she fails to comply with
what is incumbent upon her, a correlative right to rescind such
contract from plaintiff-appellee arises, pursuant to Article 1191 of
the Civil Code.11 x x x (Citations omitted)
The Issues
Aggrieved, the petitioner filed before us the instant petition and
submits the following issues for resolution:
I.
WHETHER THE FAILURE OF PETITIONER-SELLER TO
DELIVER THE CERTIFICATE OF TITLE OVER THE PROPERTY
TO RESPONDENT-BUYER IS A BREACH OF OBLIGATION IN
A CONTRACT OF SALE OF REAL PROPERTY THAT WOULD
WARRANT RESCISSION OF THE CONTRACT;
II.
WHETHER PETITIONER IS LIABLE FOR BREACH OF
OBLIGATION IN A CONTRACT OF SALE FOR FAILURE OF
RESPONDENT[-]BUYER TO IMMEDIATELY TAKE ACTUAL
POSSESSION OF THE PROPERTY NOTWITHSTANDING THE
ABSENCE OF ANY STIPULATION IN THE CONTRACT
PROVIDING FOR THE SAME;
III.
WHETHER THE EXECUTION OF A DEED OF SALE OF REAL
PROPERTY IN THE PRESENT CASE IS ALREADY
EQUIVALENT TO A VALID AND CONSTRUCTIVE DELIVERY
OF THE PROPERTY TO THE BUYER;
IV.
WHETHER OR NOT THE CONTRACT OF SALE SUBJECT
MATTER OF THIS CASE SHOULD BE RESCINDED ON SLIGHT
OR CASUAL BREACH;
V.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
AFFIRMING THE DECISION OF THE RTC ORDERING THE
RESCISSION OF THE CONTRACT OF SALE[.]12
The Petitioner's Arguments
The petitioner avers that the CA, in ordering the rescission of
the agreement and deed of sale, which she entered into with
the respondent, on the basis of her alleged failure to deliver
the certificate of title, effectively imposed upon her an extra
duty which was neither stipulated in the contract nor required
by law. She argues that under Articles 149513 and 149614 of
the New Civil Code (NCC), the obligation to deliver the thing
sold is complied with by a seller who executes in favor of a
buyer an instrument of sale in a public document. Citing Chua
v. Court of Appeals,15 she claims that there is a distinction
between transferring a certificate of title in the buyer's name,
on one hand, and transferring ownership over the property
sold, on the other. The latter can be accomplished by the
seller's execution of an instrument of sale in a public
document. The recording of the sale with the Registry of
Deeds and the transfer of the certificate of title in the buyer's
name are necessary only to bind third parties to the transfer
of ownership.16
The petitioner contends that in her case, she had already
complied with her obligations under the agreement and the
law when she had caused the release of TCT No. T-92958-A
from the Rural Bank of Cauayan, paid individual mortgagees
Romeo Lacaden (Lacaden) and Florante Parangan
(Paranga), and executed an absolute deed of sale in the
respondent's favor. She adds that before T-92958-A can be
cancelled and a new one be issued in the respondent's favor,
the latter decided to withdraw from their agreement. She also
points out that in the letters seeking for an outright rescission
of their agreement sent to her by the respondent, not once did
he demand for the delivery of TCT.
The petitioner insists that the respondent's change of heart
was due to (1) the latter's realization of the difficulty in
determining the subject property's perimeter boundary; (2) his
doubt that the property he purchased would yield harvests in
the amount he expected; and (3) the presence of mortgagees
who were not willing to give up possession without first being
paid the amounts due to them. The petitioner contends that
the actual reasons for the respondent's intent to rescind their
agreement did not at all constitute a substantial breach of her
obligations.
The petitioner stresses that under Article 1498 of the NCC,
when a sale is made through a public instrument, its execution
is equivalent to the delivery of the thing which is the contract's
object, unless in the deed, the contrary appears or can be
inferred. Further, in Power Commercial and Industrial
Corporation v. CA,17 it was ruled that the failure of a seller to eject
lessees from the property he sold and to deliver actual and physical
possession, cannot be considered a substantial breach, when such
failure was not stipulated as a resolutory or suspensive condition in the
contract and when the effects and consequences of the said failure were
not specified as well. The execution of a deed of sale operates as a
formal or symbolic delivery of the property sold and it already authorizes
the buyer to use the instrument as proof of ownership.18
The petitioner argues that in the case at bar, the agreement and the
absolute deed of sale contains no stipulation that she was obliged to
actually and physically deliver the subject property to the respondent.
The respondent fully knew Lacaden's and Parangan's possession of the
subject property. When they agreed on the sale of the property, the
respondent consciously assumed the risk of not being able to take
immediate physical possession on account of Lacaden's and
Parangan's presence therein.
The petitioner likewise laments that the CA allegedly misappreciated the
evidence offered before it when it declared that she failed to prove the
existence of Atty. Antonio. For the record, she emphasizes that the said
lawyer prepared and notarized the agreement and deed of absolute sale
which were executed between the parties. He was also the petitioners
counsel in the proceedings before the RTC. Atty. Antonio was also the
one asked by the respondent to cease the transfer of the title over the
subject property in the latter's name and to return the money he paid in
advance.
The Respondent's Contentions
In the respondent's comment,19 he seeks the dismissal of the instant
petition. He invokes Articles 1191 and 1458 to argue that when a seller
fails to transfer the ownership and possession of a property sold, the
buyer is entitled to rescind the contract of sale. Further, he contends that
the execution of a deed of absolute sale does not necessarily amount to
a valid and constructive delivery. In Masallo v. Cesar,20 it was ruled that
a person who does not have actual possession of real property cannot
transfer constructive possession by the execution and delivery of a
public document by which the title to the land is transferred. In Addison
v. Felix and Tioco,21 the Court was emphatic that symbolic delivery by
the execution of a public instrument is equivalent to actual delivery only
when the thing sold is subject to the control of the vendor.
Our Ruling
The instant petition is bereft of merit.
There is only a single issue for resolution in the instant petition, to wit,
whether or not the failure of the petitioner to deliver to the respondent
both the physical possession of the subject property and the certificate
of title covering the same amount to a substantial breach of the former's
obligations to the latter constituting a valid cause to rescind the
agreement and deed of sale entered into by the parties.
We rule in the affirmative.
The RTC and the CA both found that the petitioner failed to comply
with her obligations to deliver to the respondent both the
possession of the subject property and the certificate of title
covering the same.
Although Articles 1458, 1495 and 1498 of the NCC and case
law do not generally require the seller to deliver to the buyer
the physical possession of the property subject of a contract
of sale and the certificate of title covering the same, the
agreement entered into by the petitioner and the respondent
provides otherwise. However, the terms of the agreement
cannot be considered as violative of law, morals, good
customs, public order, or public policy, hence, valid.
Article 1458 of the NCC obliges the seller to transfer the ownership
of and to deliver a determinate thing to the buyer, who shall in turn
pay therefor a price certain in money or its equivalent. In addition
thereto, Article 1495 of the NCC binds the seller to warrant the
thing which is the object of the sale. On the other hand, Article
1498 of the same code provides that when the sale is made
through a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the object of the
contract, if from the deed, the contrary does not appear or cannot
clearly be inferred.
In the case of Chua v. Court of Appeals,22 which was cited by the
petitioner, it was ruled that "when the deed of absolute sale is
signed by the parties and notarized, then delivery of the real
property is deemed made by the seller to the buyer."23 The
transfer of the certificate of title in the name of the buyer is not
necessary to confer ownership upon him.
In the case now under our consideration, item nos. 2 and 3 of the
agreement entered into by the petitioner and the respondent
explicitly provide:
2. ONE HUNDRED EIGHTY FIVE THOUSAND
(P185,000.00) PESOS of the total price was already
received on March 27, 1998 for payment of the loan
secured by the certificate of title covering the land in favor
of the Rural Bank of Cauayan, San Manuel Branch, San
Manuel, Isabela, in order that the certificate of title thereof
be withdrawn and released from the said bank, and
the rest shall be for the payment of the mortgages in
favor of Romeo Lacaden and Florante Parangan;
3. After the release of the certificate of title covering the
land subject-matter of this agreement, the necessary
deed of absolute sale in favor of the PARTY OF THE
SECOND PART shall be executed and the transfer be
immediately effected so that the latter can apply for a
loan from any lending institution using the corresponding
certificate of title as collateral therefor, and the proceeds
 of the loan, whatever be the amount, be given to the
PARTY OF THE FIRST PART;24 (underlining
supplied)
As can be gleaned from the agreement of the contending
parties, the respondent initially paid the
petitioner P185,000.00 for the latter to pay the loan obtained
from the Rural Bank of Cauayan and to cause the release from
the said bank of the certificate of title covering the subject
property. The rest of the amount shall be used to pay the
mortgages over the subject property which was executed in
favor of Lacaden and Parangan. After the release of the TCT,
a deed of sale shall be executed and transfer shall be
immediately effected so that the title covering the subject
property can be used as a collateral for a loan the respondent
will apply for, the proceeds of which shall be given to the
petitioner.
Under Article 1306 of the NCC, the contracting parties may
establish such stipulations, clauses, terms and conditions as
they may deem convenient, provided they are not contrary to
law, morals, good customs, public order or public policy.
While Articles 1458 and 1495 of the NCC and the doctrine
enunciated in the case of Chua do not impose upon the
petitioner the obligation to physically deliver to the respondent
the certificate of title covering the subject property or cause
the transfer in the latter's name of the said title, a stipulation
requiring otherwise is not prohibited by law and cannot be
regarded as violative of morals, good customs, public order or
public policy. Item no. 3 of the agreement executed by the
parties expressly states that "transfer [shall] be immediately
effected so that the latter can apply for a loan from any lending
institution using the corresponding certificate of title as
collateral therefore." Item no. 3 is literal enough to mean that
there should be physical delivery of the TCT for how else can
the respondent use it as a collateral to obtain a loan if the title
remains in the petitioners possession. We agree with the RTC
and the CA that the petitioner failed to prove that she delivered
the TCT covering the subject property to the respondent.
What the petitioner attempted to establish was that she gave
the TCT to Atty. Antonio whom she alleged was
commissioned to effect the transfer of the title in the
respondent's name. Although Atty. Antonio's existence is
certain as he was the petitioners counsel in the proceedings
before the RTC, there was no proof that the former indeed
received the TCT or that he was commissioned to process the
transfer of the title in the respondent's name.
It is likewise the petitioners contention that pursuant to Article
1498 of the NCC, she had already complied with her
obligation to deliver the subject property upon her execution
of an absolute deed of sale in the respondents favor. The
petitioner avers that she did not undertake to eject the mortgagors
Parangan and Lacaden, whose presence in the premises of the subject
property was known to the respondent.
We are not persuaded.
In the case of Power Commercial and Industrial Corporation25 cited by
the petitioner, the Court ruled that the failure of the seller to eject the
squatters from the property sold cannot be made a ground for rescission
if the said ejectment was not stipulated as a condition in the contract of
sale, and when in the negotiation stage, the buyer's counsel himself
undertook to eject the illegal settlers.
The circumstances surrounding the case now under our consideration
are different. In item no. 2 of the agreement, it is stated that part of
the P185,000.00 initially paid to the petitioner shall be used to pay the
mortgagors, Parangan and Lacaden. While the provision does not
expressly impose upon the petitioner the obligation to eject the said
mortgagors, the undertaking is necessarily implied. Cessation of
occupancy of the subject property is logically expected from the
mortgagors upon payment by the petitioner of the amounts due to them.
We note that in the demand letter26 dated September 18, 1998, which
was sent by the respondent to the petitioner, the former lamented that
"the area is not yet fully cleared of incumbrances as there are tenants
who are not willing to vacate the land without giving them back the
amount that they mortgaged the land." Further, in the proceedings
before the RTC conducted after the complaint for rescission was filed,
the petitioner herself testified that she won the ejectment suit against the
mortgagors "only last year".27 The complaint was filed on September 8,
2002 or more than four years from the execution of the parties'
agreement. This means that after the lapse of a considerable period of
time from the agreement's execution, the mortgagors remained in
possession of the subject property.
Notwithstanding the absence of stipulations in the agreement and
absolute deed of sale entered into by Villamar and Mangaoil
expressly indicating the consequences of the former's failure to
deliver the physical possession of the subject property and the
certificate of title covering the same, the latter is entitled to demand
for the rescission of their contract pursuant to Article 1191 of the
NCC.
We note that the agreement entered into by the petitioner and the
respondent only contains three items specifying the parties'
undertakings. In item no. 5, the parties consented "to abide with all the
terms and conditions set forth in this agreement and never violate the
same."28
Article 1191 of the NCC is clear that "the power to rescind obligations is
implied in reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him." The respondent cannot be deprived
of his right to demand for rescission in view of the petitioners failure to
abide with item nos. 2 and 3 of the agreement. This remains true
notwithstanding the absence of express stipulations in the agreement
indicating the consequences of breaches which the parties may
commit. To hold otherwise would render Article 1191 of the NCC
as useless.
Article 1498 of the NCC generally considers the execution of
a public instrument as constructive delivery by the seller to
the buyer of the property subject of a contract of sale. The
case at bar, however, falls among the exceptions to the
foregoing rule since a mere presumptive and not conclusive
delivery is created as the respondent failed to take material
possession of the subject property.
Further, even if we were to assume for argument's sake that the
agreement entered into by the contending parties does not require
the delivery of the physical possession of the subject property from
the mortgagors to the respondent, still, the petitioner's claim that
her execution of an absolute deed of sale was already sufficient
as it already amounted to a constructive delivery of the thing sold
which Article 1498 of the NCC allows, cannot stand.
In Philippine Suburban Development Corporation v. The Auditor
General,29 we held:
When the sale of real property is made in a public instrument, the
execution thereof is equivalent to the delivery of the thing object
of the contract, if from the deed the contrary does not appear or
cannot clearly be inferred.1wphi1
In other words, there is symbolic delivery of the property subject
of the sale by the execution of the public instrument, unless from
the express terms of the instrument, or by clear inference
therefrom, this was not the intention of the parties. Such would be
the case, for instance, x x x where the vendor has no control over
the thing sold at the moment of the sale, and, therefore, its
material delivery could not have been made.30 (Underlining
supplied and citations omitted)
Stated differently, as a general rule, the execution of a public
instrument amounts to a constructive delivery of the thing subject
of a contract of sale. However, exceptions exist, among which is
when mere presumptive and not conclusive delivery is created in
cases where the buyer fails to take material possession of the
subject of sale. A person who does not have actual possession of
the thing sold cannot transfer constructive possession by the
execution and delivery of a public instrument.
In the case at bar, the RTC and the CA found that the petitioner
failed to deliver to the respondent the possession of the subject
property due to the continued presence and occupation of
Parangan and Lacaden. We find no ample reason to reverse the
said findings. Considered in the light of either the agreement
entered into by the parties or the pertinent provisions of law, the
petitioner failed in her undertaking to deliver the subject property
to the respondent.
IN VIEW OF THE FOREGOING, the instant petition
is DENIED. The February 20, 2009 Decision and July 8, 2009
Resolution of the Court of Appeals, directing the rescission of
the agreement and absolute deed of sale entered into by
Estelita Villamar and Balbino Mangaoil and the return of the
down payment made for the purchase of the subject property,
are AFFIRMED. However, pursuant to our ruling in Eastern
Shipping Lines, Inc. v. CA,31 an interest of 12% per
annum is imposed on the sum of P185,000.00 to be returned
to Mangaoil to be computed from the date of finality of this
Decision until full satisfaction thereof.
G.R. No. 173171 July 11, 2012
PHILIPPINE CHARITY SWEEPSTAKES OFFICE
(PCSO), Petitioner,
vs.
NEW DAGUPAN METRO GAS CORPORATION, PURITA
E. PERALTA and PATRICIA P. GALANG, Respondents.
DECISION
REYES, J.:
This is a petition for review under Rule 45 of the Rules of
Court, assailing the Decision1 dated September 29, 2005 and
Resolution2 dated June 9, 2006 of the Court of Appeals (CA)
in CA-G.R. CV No. 59590.
In the assailed Decision, the CA Affirmed the Decision3 dated
January 28, 1998 of the Regional Trial Court (RTC), Branch
42 of Dagupan City in Civil Case No. 94-00200-D, ordering
petitioner Philippine Charity Sweepstakes Office (PCSO) to
surrender the owners duplicate of Transfer
Certificate of Title (TCT) No. 52135 to the Register of Deeds
of Dagupan City for cancellation and issuance of a new
certificate of title in the name of respondent New Dagupan
Metro Gas Corporation (New Dagupan).
In its Resolution4 dated June 9, 2006, the CA denied PCSOs
motion for reconsideration.
The Factual Antecedents
Respondent Purita E. Peralta (Peralta) is the registered owner
of a parcel of land located at Bonuan Blue Beach Subdivision,
Dagupan City under TCT No. 52135. On March 8, 1989, a real
estate mortgage was constituted over such property in favor
of PCSO to secure the payment of the sweepstakes tickets
purchased by one of its provincial distributors, Patricia P.
Galang (Galang). The salient provisions of the Deed of
Undertaking with First Real Estate Mortgage,5 where Galang,
PCSO and Peralta were respectively designated as
"principal", "mortgagee" and "mortgagor", are as follows:
WHEREAS, the PRINCIPAL acknowledges that he/she has an
outstanding and unpaid account with the MORTGAGEE in the amount
of FOUR HUNDRED FIFTY THOUSAND (P450,000.00), representing
the balance of his/her accountabilities for all draws;
WHEREAS, the PRINCIPAL agrees to liquidate or pay said account ten
(10) days after each draw with interest at the rate of 14% per annum.
xxxx
The PRINCIPAL shall settle or pay his/her account of FOUR HUNDRED
FIFTY THOUSAND PESOS (P450,000.00) PESOS with the
MORTGAGEE, provided that the said balance shall bear interest
thereon at the rate of 14% per annum;
To secure the faithful compliance and as security to the obligation of the
PRINCIPAL stated in the next preceding paragraph hereof, the
MORTGAGOR hereby convey unto and in favor of the MORTGAGEE,
its successor and assigns by way of its first real estate mortgage, a
parcel/s of land together with all the improvements now or hereafter
existing thereon located at BOQUIG, DAGUPAN CITY, covered by TCT
No. 52135, of the Register of Deeds of DAGUPAN CITY, and more
particularly described as follows:
xxxx
4. During the lifetime of this mortgage, the MORTGAGOR shall not
alienate, sell, or in any manner dispose of or encumber the above-
mentioned property, without the prior written consent of the
MORTGAGEE;
xxxx
15. Upon payment of the principal amount together with interest and
other expenses legally incurred by the MORTGAGEE, the above
undertaking is considered terminated.6
On July 31, 1990, Peralta sold, under a conditional sale, the subject
property to New Dagupan, the conveyance to be absolute upon the
latters full payment of the price of P800,000.00. New Dagupan obliged
to pay Peralta P200,000.00 upon the execution of the corresponding
deed and the balance of P600,000.00 by monthly instalments of
P70,000.00, the first instalment falling due on August 31, 1990. Peralta
showed to New Dagupan a photocopy of TCT No. 52135, which bore no
liens and encumbrances, and undertook to deliver the owners duplicate
within three (3) months from the execution of the contract.7
New Dagupan withheld payment of the last instalment, which was
intended to cover the payment of the capital gains tax, in view of
Peraltas failure to deliver the owners duplicate of TCT No. 52135 and
to execute a deed of absolute sale in its favor. Further, New Dagupan,
through its President, Julian Ong Cua (Cua), executed an affidavit of
adverse claim, which was annotated on TCT No. 52135 on October 1,
1991 as Entry No. 14826.8
In view of Peraltas continued failure to deliver a deed of absolute
sale and the owners duplicate of the title, New Dagupan filed a
complaint for specific performance against her with the RTC on
February 28, 1992. New Dagupans complaint was raffled to
Branch 43 and docketed as Civil Case No. D-10160.
On May 20, 1992, during the pendency of New Dagupans
complaint against Peralta, PCSO caused the registration of the
mortgage.9
On February 10, 1993, PCSO filed an application for the
extrajudicial foreclosure sale of the subject property in view of
Galangs failure to fully pay the sweepstakes she purchased in
1992.10 A public auction took place on June 15, 1993 where
PCSO was the highest bidder. A certificate of sale was
correspondingly issued to PCSO.11
The certified true copy of TCT No. 52135 that New Dagupan
obtained from the Register of Deeds of Dagupan City for its use in
Civil Case No. D-10160 reflected PCSOs mortgage lien. New
Dagupan, claiming that it is only then that it was informed of the
subject mortgage, sent a letter to PCSO on October 28, 1993,
notifying the latter of its complaint against Peralta and its claim
over the subject property and suggesting that PCSO intervene and
participate in the case.
On January 21, 1994, the RTC Branch 43 rendered a Decision,
approving the compromise agreement between Peralta and New
Dagupan. Some of the stipulations made are as follows:
3. For her failure to execute, sign and deliver a Deed of
Absolute Sale to plaintiff by way of transferring TCT No.
52135 in the name of the latter, defendant hereby waives
and quitclaims the remaining balance of the purchase
price in the amount of P60,000.00 in favor of the plaintiff,
it being understood that the said amount shall be treated
as a penalty for such failure;
xxxx
6. Upon the signing of this compromise agreement,
possession and ownership of the above described
property, together with all the improvements existing
thereon, are hereby vested absolutely upon, and
transferred to the plaintiff whom the defendant hereby
declares and acknowledges to be the absolute owner
thereof, now and hereafter;
7. This compromise agreement shall be without prejudice
to whatever rights and remedies, if any, that the
Philippine Charity Sweepstakes Office has against the
herein defendant and Patricia P. Galang under the Deed
of Undertaking adverted to under par. 2(f) hereof.12
As the RTC Branch 43 Decision dated January 21, 1994
became final and executory, New Dagupan once again
demanded Peraltas delivery of the owners duplicate of TCT
No. 52135. Also, in a letter dated March 29, 1994, New
Dagupan made a similar demand from PCSO, who in
response, stated that it had already foreclosed the mortgage
on the subject property and it has in its name a certificate of
sale for being the highest bidder in the public auction that took
place on June 15, 1993.
Thus, on June 1, 1994, New Dagupan filed with the RTC a
petition against PCSO for the annulment of TCT No. 52135 or
surrender of the owners duplicate thereof.13 The petition was
docketed as Civil Case No. 94-00200-D and raffled to Branch
43.
In an Answer14 dated March 7, 1995, PCSO alleged that: (a)
New Dagupan was a buyer in bad faith; (b) New Dagupan and
Peralta colluded to deprive PCSO of its rights under the
subject mortgage; (c) New Dagupan is estopped from
questioning the superior right of PCSO to the subject property
when it entered into the compromise agreement subject of the
RTC Branch 43 Decision dated January 21, 1994; and (d)
New Dagupan is bound by the foreclosure proceedings where
PCSO obtained title to the subject property.
In a Motion for Leave to File Third-Party Complaint15 dated
April 17, 1995, PCSO sought the inclusion of Peralta and
Galang who are allegedly indispensable parties. In its Third-
Party Complaint,16 PCSO reiterated its allegations in its
Answer dated March 7, 1995 and made the further claim that
the sale of the subject property to New Dagupan is void for
being expressly prohibited under the Deed of Undertaking
with First Real Estate Mortgage.
In their Answer to Third-Party Complaint with
Counterclaims17 dated January 2, 1996, Peralta and Galang
claimed that: (a) the provision in the Deed of Undertaking with
First Real Estate Mortgage prohibiting the sale of the subject
property is void under Article 2130 of the Civil Code; (b)
PCSOs failure to intervene in Civil Case No. D-10160 despite
notice barred it from questioning the sale of the subject
property to New Dagupan and the compromise agreement
approved by the RTC Branch 43; (c) it was due to PCSOs
very own neglect in registering its mortgage lien that
preference is accorded to New Dagupans rights as a buyer of
the subject property; and (d) PCSO no longer has any cause
of action against them following its decision to foreclose the
subject mortgage.
On March 6, 1996, Civil Case No. 94-00200-D was transferred
to Branch 42, after the presiding judge of Branch 43 inhibited
himself.
On January 28, 1998, the RTC Branch 42 rendered a Decision18 in New
Dagupans favor, the dispositive portion of which states:
WHEREFORE, judgment is hereby rendered in favor of the petitioner
and against the defendant, ordering PCSO to deliver the owners
duplicate copy of TCT No. 52135 in its possession to the Registry of
Deeds of Dagupan City for the purpose of having the decision in favor
of the petitioner annotated at the back thereof. Should said defendant
fail to deliver the said title within 30 days from the date this decision
becomes final and executory, the said owners duplicate certificate of
title is hereby cancelled and the Register of Deeds can issue a new one
carrying all the encumbrances of the original owners duplicate subject
of this case. Further, the defendant is ordered to pay to petitioner the
sum of Ten Thousand Pesos (P10,000.00) as attorneys fees. It is also
ordered to pay costs.
SO ORDERED.19
The RTC Branch 42 ruled that New Dagupan is a buyer in good faith,
ratiocinating that:
In other words, the evidence of the petitioner would show that although
the Deed of Undertaking with First Real Estate Mortgage was executed
on March 8, 1989 its annotation was made long after the conditional sale
in favor of the petitioner was executed and annotated at the back of the
title in question. Because of the said exhibits, petitioner contended that
it was a buyer in good faith and for value.
Defendant, to controvert the aforementioned evidence of the plaintiff,
alleged that Exhibits C, C-1 to C-1-C was contrary to the testimony of
Mr. Julian Ong Cua to the effect that when defendants sold the property
to petitioner only the xerox copy of the title was shown and petitioner
should have verified the original as it was a buyer in bad faith. Defendant
also alleged that the decision in Civil Case D-10160 dated January 21,
1994 would show that there was a collusion between the petitioner and
the third-party defendants.
The Court cannot go along with the reasoning of the defendant because
what was shown to Mr. Cua by the third-party defendants was Exhibit
"C" which did not carry any encumbrance at the back of the subject title
and the annotation made on May 20, 1992 in favor of the PCSO. Mr.
Cua verified the title x x x but the encumbrance on the title was not still
there at [that] time. One thing more, there was nothing indicated in the
decision in Civil Case No. D-10160 that petitioner already knew that
there was already a mortgage in favor of the PCSO. Worst, defendant
did not even introduce any oral evidence to show that petitioner was in
bad faith except the manifestations of counsel. Unfortunately,
manifestations could not be considered evidence.
xxxx
Defendant should not be allowed to profit from its negligence of not
registering the Deed of Undertaking with First Real Estate Mortgage in
its favor.20
Also, the RTC Branch 42 ruled that the prohibition on the sale of
the subject property is void. Specifically:
Suffice it to say that there is no law prohibiting a mortgagor from
encumbering or alienating the property mortgaged. On the
contrary, there is a law prohibiting an agreement forbidding the
owner from alienating a mortgaged property. We are referring to
Article 2130 of the New Civil Code which provides as follows:
"A stipulation forbidding the owner from alienating the immovable
mortgage shall be void."21
Moreover, the RTC Branch 42 ruled that PCSO had no right to
foreclose the subject mortgage as the land in question had already
been disencumbered after Galangs full payment of all the
sweepstakes tickets she purchased in 1989 and 1990.
It should be recalled that Amparo Abrigo, OIC Chief of the Credit
Accounts Division of the PCSO, admitted not only once but twice
that Patricia Galang has no more liability with the PCSO for the
years 1989 and 1990 x x x. Another witness, Carlos Castillo who
is the OIC of the Sales Department of the PCSO, joined Amparo
Abrigo in saying that Patricia Galang has already paid her liability
with the PCSO for the years 1989 and 1990 x x x. Thus, the
undertaking was already discharged. Both of the said witnesses
of the PCSO alleged that the undertaking has been re-used by
Patricia Galang for the years 1991 to 1992 yet there is no proof
whatsoever showing that Purita Peralta consented to the use of
the undertaking by Patricia Galang for 1991 to 1992. Incidentally,
it is not far-fetched to say that Purita Peralta might have thought
that the undertaking was already discharged which was the
reason she executed the Deed of Conditional Sale x x x in favor
of petitioner in 1990. That being the case, the foreclosure sale in
favor of the PCSO has no legal leg to stand as the Deed of
Undertaking with First Real Estate Mortgage has already been
discharged before the foreclosure sale was conducted.22
According to the RTC Branch 42, the intent to use the subject
property as security for Galangs purchases for the years after
1989, as PCSO claimed, is not clear from the Deed of Undertaking
with First Real Estate Mortgage:
Was it not provided in the deed that the undertaking would be for
"all draws". That might be true but the terms of the Contract should
be understood to mean only to cover the draws relative to the
current liabilities of Patricia Galang at the time of the execution of
the undertaking in 1989. It could have not been agreed upon that
it should also cover her liability for 1991 up to 1992 because if that
was the intention of the parties, the undertaking should have so
provided expressly. The term of the undertaking with respect to
the period was ambiguous but any ambiguity in the Contract
should be resolved against PCSO because the form used was a
standard form of the defendant and it appeared that it was its
lawyers who prepared it, therefore, it was the latter which
caused the ambiguity.23
PCSOs appeal from the foregoing adverse decision was
dismissed. By way of its assailed decision, the CA did not
agree with PCSOs claim that the subject mortgage is in the
nature of a continuing guaranty, holding that Peraltas
undertaking to secure Galangs liability to PCSO is only for a
period of one year and was extinguished when Peralta
completed payment on the sweepstakes tickets she
purchased in 1989.
The instant appeal must fail. There is nothing in the Deed of
Undertaking with First Real Estate Mortgage, expressly or
impliedly, that would indicate that Peralta agreed to let her
property be burdened as long as the contract of undertaking
with real estate mortgage was not cancelled or revoked. x x x
xxxx
A perusal of the deed of undertaking between the PCSO and
Peralta would reveal nothing but the undertaking of Peralta to
guarantee the payment of the pre-existing obligation of
Galang, constituting the unpaid sweepstakes tickets issued to
the latter before the deed of undertaking was executed, with
the PCSO in the amount of P450,000.00. No words were
added therein to show the intention of the parties to regard it
as a contract of continuing guaranty. In other jurisdictions, it
has been held that the use of the particular words and
expressions such as payment of "any debt", "any
indebtedness", "any deficiency", or "any sum", or the guaranty
of "any transaction" or money to be furnished the principal
debtor "at any time", or "on such time" that the principal debtor
may require, have been construed to indicate a continuing
guaranty. Similar phrases or words of the same import or
tenor are not extant in the deed of undertaking. The deed of
undertaking states:
"WHEREAS, the PRINCIPAL acknowledges that he/she has
an outstanding and unpaid account with the MORTGAGEE in
the amount of FOUR HUNDRED FIFTY THOUSAND
(P450,000.00), representing the balance of his/her ticket
accountabilities for all draws."
xxxx
Upon full payment of the principal obligation, which from the
testimonies of the officers of the PCSO had been paid as early
as 1990, the subsidiary contract of guaranty was automatically
terminated. The parties have not executed another contract of
guaranty to secure the subsequent obligations of Galang for
the tickets issued thereafter. It must be noted that a contract
of guaranty is not presumed; it must be express and cannot
extend to more than what is stipulated therein.
xxxx
The arguments of PCSO fail to persuade us. The phrase "for all draws"
is limited to the draws covered by the original transaction. In its
pleadings, the PCSO asserted that the contract of undertaking was
renewed and the collateral was re-used by Galang to obtain again tickets
from the PCSO after she had settled her account under the original
contract. From such admission, it is thus clear that the contract is not in
the nature of a continuing guaranty. For a contract of continuing
guaranty is not renewed as it is understood to be of a continuing nature
without the necessity of renewing the same every time a new transaction
contemplated under the original contract is entered into. x x
x 24 (Citations omitted)
In this petition, PCSO claims that the CA erred in holding that the subject
mortgage had been extinguished by Galangs payment of P450,000.00,
representing the amount of the sweepstakes tickets she purchased in
1989. According to PCSO, the said amount is actually the credit line
granted to Galang and the phrase "all draws" refers to her ticket
purchases for subsequent years drawn against such credit line.
Consequently, PCSO posits, the subject mortgage had not been
extinguished by Peraltas payment of her ticket purchases in 1989 and
its coverage extends to her purchases after 1989, which she made
against the credit line that was granted to her. That when Galang failed
to pay her ticket purchases in 1992, PCSOs right to foreclose the
subject mortgage arose.
PCSO also maintains that its rights over the subject property are
superior to those of New Dagupan. Considering that the contract
between New Dagupan is a conditional sale, there was no conveyance
of ownership at the time of the execution thereof on July 31, 1989. It was
only on January 21, 1994, or when the RTC Branch 43 approved the
compromise agreement, that a supposed transfer of title between
Peralta and New Dagupan took place. However, since PCSO had earlier
foreclosed the subject mortgage and obtained title to the subject
property as evidenced by the certificate of sale dated June 15, 1993,
Peralta had nothing to cede or assign to New Dagupan.
PCSO likewise attributes bad faith to New Dagupan, claiming that
Peraltas presentation of a mere photocopy of TCT No. 52135, albeit
without any annotation of a lien or encumbrance, sufficed to raise
reasonable suspicions against Peraltas claim of a clean title and should
have prompted it to conduct an investigation that went beyond the face
of TCT No. 52135.
PCSO even assails the validity of the subject sale for being against the
prohibition contained in the Deed of Undertaking with First Real Estate
Mortgage.
New Dagupan, in its Comment,25 avers that it was a purchaser in good
faith and it has a superior right to the subject property, considering that
PCSOs mortgage lien was annotated only on May 20, 1992 or long after
the execution of the conditional sale on July 31, 1990 and the annotation
of New Dagupans adverse claim on October 1, 1991. While the subject
mortgage antedated the subject sale, PCSO was already aware
of the latter at the time of its belated registration of its mortgage
lien. PCSOs registration was therefore in bad faith, rendering its
claim over the subject property defeasible by New Dagupans
adverse claim.
New Dagupan also claims that the subject property had already
been discharged from the mortgage, hence, PCSO had nothing to
foreclose when it filed its application for extra-judicial foreclosure
on February 10, 1993. The subject mortgage was intended to
secure Galangs ticket purchases that were outstanding at the
time of the execution of the same, the amount of which has been
specified to be P450,000.00 and does not extend to Galangs
future purchases. Thus, upon Galangs full payment of
P450,000.00, which PCSO admits, the subject mortgage had
been automatically terminated as expressly provided under
Section 15 of the Deed of Undertaking with First Real Estate
Mortgage quoted above.
Issue
The rise and fall of this recourse is dependent on the resolution of
the issue who between New Dagupan and PCSO has a better
right to the property in question.
Our Ruling
PCSO is undeterred by the denial of its appeal to the CA and now
seeks to convince this Court that it has a superior right over the
subject property. However, PCSOs resolve fails to move this
Court and the ineluctability of the denial of this petition is owing to
the following:
a. At the time of PCSOs registration of its mortgage lien
on May 20, 1992, the subject mortgage had already been
discharged by Galangs full payment of P450,000.00, the
amount specified in the Deed of Undertaking with First
Real Estate Mortgage;
b. There is nothing in the Deed of Undertaking with First
Real Estate Mortgage that would indicate that it is a
continuing security or that there is an intent to secure
Galangs future debts;
c. Assuming the contrary, New Dagupan is not bound by
PCSOs mortgage lien and was a purchaser in good faith
and for value; and
d. While the subject mortgage predated the sale of the
subject property to New Dagupan, the absence of any
evidence that the latter had knowledge of PCSOs
mortgage lien at the time of the sale and its prior
registration of an adverse claim created a preference in
its favor.
I
As a general rule, a mortgage liability is usually limited to the
amount mentioned in the contract. However, the amounts
named as consideration in a contract of mortgage do not limit
the amount for which the mortgage may stand as security if
from the four corners of the instrument the intent to secure
future and other indebtedness can be gathered.26
Alternatively, while a real estate mortgage may exceptionally
secure future loans or advancements, these future debts must
be specifically described in the mortgage contract. An
obligation is not secured by a mortgage unless it comes fairly
within the terms of the mortgage contract.27
The stipulation extending the coverage of a mortgage to
advances or loans other than those already obtained or
specified in the contract is valid and has been commonly
referred to as a "blanket mortgage" or "dragnet" clause. In
Prudential Bank v. Alviar,28 this Court elucidated on the
nature and purpose of such a clause as follows:
A "blanket mortgage clause," also known as a "dragnet
clause" in American jurisprudence, is one which is specifically
phrased to subsume all debts of past or future origins. Such
clauses are "carefully scrutinized and strictly construed."
Mortgages of this character enable the parties to provide
continuous dealings, the nature or extent of which may not be
known or anticipated at the time, and they avoid the expense
and inconvenience of executing a new security on each new
transaction. A "dragnet clause" operates as a convenience
and accommodation to the borrowers as it makes available
additional funds without their having to execute additional
security documents, thereby saving time, travel, loan closing
costs, costs of extra legal services, recording fees, et cetera.
x x x.29(Citations omitted)
A mortgage that provides for a dragnet clause is in the nature
of a continuing guaranty and constitutes an exception to the
rule than an action to foreclose a mortgage must be limited to
the amount mentioned in the mortgage contract. Its validity is
anchored on Article 2053 of the Civil Code and is not limited
to a single transaction, but contemplates a future course of
dealing, covering a series of transactions, generally for an
indefinite time or until revoked. It is prospective in its operation
and is generally intended to provide security with respect to
future transactions within certain limits, and contemplates a
succession of liabilities, for which, as they accrue, the
guarantor becomes liable. In other words, a continuing
guaranty is one that covers all transactions, including those
arising in the future, which are within the description or
contemplation of the contract of guaranty, until the expiration
or termination thereof.30
In this case, PCSO claims the subject mortgage is a
continuing guaranty. According to PCSO, the intent was to
secure Galangs ticket purchases other than those outstanding at the
time of the execution of the Deed of Undertaking with First Real Estate
Mortgage on March 8, 1989 such that it can foreclose the subject
mortgage for Galangs non-payment of her ticket purchases in 1992.
PCSO does not deny and even admits that Galang had already settled
the amount of P450,000.00. However, PCSO refuses to concede that
the subject mortgage had already been discharged, claiming that
Galang had unpaid ticket purchases in 1992 and these are likewise
secured as evidenced by the following clause in the Deed of Undertaking
with First Real Estate Mortgage:
WHEREAS, the PRINCIPAL agrees to liquidate or pay said account ten
(10) days after each draw with interest at the rate of 14% per annum;31
This Court has to disagree with PCSO in view of the principles quoted
above. A reading of the other pertinent clauses of the subject mortgage,
not only of the provision invoked by PCSO, does not show that the
security provided in the subject mortgage is continuing in nature. That
the subject mortgage shall only secure Galangs liability in the amount
of P450,000.00 is evident from the following:
WHEREAS, the PRINCIPAL acknowledges that he/she has an
outstanding and unpaid account with the MORTGAGEE in the amount
of FOUR HUNDRED FIFTY THOUSAND (P450,000.00), representing
the balance of his/her ticket accountabilities for all draws;
xxxx
The PRINCIPAL shall settle or pay his/her account of FOUR HUNDRED
FIFTY THOUSAND PESOS (P450,000.00) PESOS with the
MORTGAGEE, provided that the said balance shall bear interest
thereon at the rate of 14% per annum;
To secure the faithful compliance and as security to the obligation of the
PRINCIPAL stated in the next preceding paragraph hereof, the
MORTGAGOR hereby convey unto and in favor of the MORTGAGEE,
its successor and assigns by way of its first real estate mortgage, a
parcel/s of land together with all the improvements now or hereafter
existing thereon, located at BOQUIG, DAGUPAN CITY, covered by TCT
No. 52135, of the Register of Deeds of DAGUPAN CITY, and more
particularly described as follows:32
As the CA correctly observed, the use of the terms "outstanding" and
"unpaid" militates against PCSOs claim that future ticket purchases are
likewise secured. That there is a seeming ambiguity between the
provision relied upon by PCSO containing the phrase "after each draw"
and the other provisions, which mention with particularity the amount of
P450,000.00 as Galangs unpaid and outstanding account and secured
by the subject mortgage, should be construed against PCSO. The
subject mortgage is a contract of adhesion as it was prepared solely by
PCSO and the only participation of Galang and Peralta was the act of
affixing their signatures thereto.
Considering that the debt secured had already been fully paid, the
subject mortgage had already been discharged and there is no
necessity for any act or document to be executed for the purpose.
As provided in the Deed of Undertaking with First Real Estate
Mortgage:
15. Upon payment of the principal amount together with interest
and other expenses legally incurred by the MORTGAGEE, the
above-undertaking is considered terminated.33
Section 6234 of Presidential Decree (P.D.) No. 1529 appears to
require the execution of an instrument in order for a mortgage to
be cancelled or discharged. However, this rule presupposes that
there has been a prior registration of the mortgage lien prior to its
discharge. In this case, the subject mortgage had already been
cancelled or terminated upon Galangs full payment before PCSO
availed of registration in 1992. As the subject mortgage was not
annotated on TCT No. 52135 at the time it was terminated, there
was no need for Peralta to secure a deed of cancellation in order
for such discharge to be fully effective and duly reflected on the
face of her title.
Therefore, since the subject mortgage is not in the nature of a
continuing guaranty and given the automatic termination thereof,
PCSO cannot claim that Galangs ticket purchases in 1992 are
also secured. From the time the amount of P450,000.00 was fully
settled, the subject mortgage had already been cancelled such
that Galangs subsequent ticket purchases are unsecured. Simply
put, PCSO had nothing to register, much less, foreclose.
Consequently, PCSOs registration of its non-existent mortgage
lien and subsequent foreclosure of a mortgage that was no longer
extant cannot defeat New Dagupans title over the subject
property.
II
Sections 51 and 53 of P.D. No. 1529 provide:
Section 51. Conveyance and other dealings by registered owner.
An owner of registered land may convey, mortgage, lease, charge
or otherwise deal with the same in accordance with existing laws.
He may use such forms of deeds, mortgages, leases or other
voluntary instrument, except a will purporting to convey or affect
registered land, but shall operate only as a contract between the
parties and as evidence of authority to the Register of Deeds to
make registration.
The act of registration shall be the operative act to convey or affect
the land insofar as third persons are concerned, and in all cases
under this Decree, the registration shall be made in the office of
the Register of Deeds for the province or city where the land lies.
Section 52. Constructive notice upon registration. Every
conveyance, mortgage, lease, lien, attachment, order, judgment,
instrument or entry affecting registered land shall, if registered,
filed or entered in the office of the Register of Deeds for the
province or city where the land to which it relates lies, be
constructive notice to all persons from the time of such
registering, filing or entering.
On the other hand, Article 2125 of the Civil Code states:
Article 2125. In addition to the requisites stated in Article 2085,
it is indispensable, in order that a mortgage may be validly
constituted, that the document in which it appears be recorded
in the Registry of Property. If the instrument is not recorded,
the mortgage is nevertheless binding between the parties.
The persons in whose favor the law establishes a mortgage
have no other right than to demand the execution and the
recording of the document in which the mortgage is
formalized.
Construing the foregoing conjunctively, as to third persons, a
property registered under the Torrens system is, for all legal
purposes, unencumbered or remains to be the property of the
person in whose name it is registered, notwithstanding the
execution of any conveyance, mortgage, lease, lien, order or
judgment unless the corresponding deed is registered.
The law does not require a person dealing with the owner of
registered land to go beyond the certificate of title as he may
rely on the notices of the encumbrances on the property
annotated on the certificate of title or absence of any
annotation.35 Registration affords legal protection such that
the claim of an innocent purchaser for value is recognized as
valid despite a defect in the title of the vendor.36
In Cruz v. Bancom Finance Corporation,37 the foregoing
principle was applied as follows:
Second, respondent was already aware that there was an
adverse claim and notice of lis pendens annotated on the
Certificate of Title when it registered the mortgage on March
14, 1980. Unless duly registered, a mortgage does not affect
third parties like herein petitioners, as provided under Section
51 of PD NO. 1529, which we reproduce hereunder:
xxxx
True, registration is not the operative act for a mortgage to be
binding between the parties. But to third persons, it is
indispensible. In the present case, the adverse claim and the
notice of lis pendens were annotated on the title on October
30, 1979 and December 10, 1979, respectively; the real estate
mortgage over the subject property was registered by
respondent only on March 14, 1980. Settled in this jurisdiction
is the doctrine that a prior registration of a lien creates a
preference. Even a subsequent registration of the prior
mortgage will not diminish this preference, which retroacts to
the date of the annotation of the notice of lis pendens and the
adverse claim. Thus, respondents failure to register the real estate
mortgage prior to these annotations, resulted in the mortgage being
binding only between it and the mortgagor, Sulit. Petitioners, being third
parties to the mortgage, were not bound by it. Contrary to respondents
claim that petitioners were in bad faith because they already had
knowledge of the existence of the mortgage in favor of respondent when
they caused the aforesaid annotations, petitioner Edilberto Cruz said
that they only knew of this mortgage when respondent intervened in the
RTC proceedings.38 (Citations omitted)
It is undisputed that it was only on May 20, 1992 that PCSO registered
its mortgage lien. By that time, New Dagupan had already purchased
the subject property, albeit under a conditional sale. In fact, PCSOs
mortgage lien was yet to be registered at the time New Dagupan filed its
adverse claim on October 1, 1991 and its complaint against Peralta for
the surrender of the owners duplicate of TCT No. 52135 on February
28, 1992. It was only during the pendency of Civil Case No. D-10160, or
sometime in 1993, that New Dagupan was informed of PCSOs
mortgage lien. On the other hand, PCSO was already charged with
knowledge of New Dagupans adverse claim at the time of the
annotation of the subject mortgage. PCSOs attempt to conceal these
damning facts is palpable. However, they are patent from the records
such that there is no gainsaying that New Dagupan is a purchaser in
good faith and for value and is not bound by PCSOs mortgage lien.
A purchaser in good faith and for value is one who buys property of
another, without notice that some other person has a right to, or interest
in, such property, and pays a full and fair price for the same, at the time
of such purchase, or before he has notice of the claim or interest of some
other person in the property.39 Good faith is the opposite of fraud and
of bad faith, and its non-existence must be established by competent
proof.40 Sans such proof, a buyer is deemed to be in good faith and his
interest in the subject property will not be disturbed. A purchaser of a
registered property can rely on the guarantee afforded by pertinent laws
on registration that he can take and hold it free from any and all prior
liens and claims except those set forth in or preserved against the
certificate of title.41
This Court cannot give credence to PCSOs claim to the contrary. PCSO
did not present evidence, showing that New Dagupan had knowledge of
the mortgage despite its being unregistered at the time the subject sale
was entered into. Peralta, in the compromise agreement, even admitted
that she did not inform New Dagupan of the subject
mortgage.42 PCSOs only basis for claiming that New Dagupan was a
buyer in bad faith was the latters reliance on a mere photocopy of TCT
No. 52135. However, apart from the fact that the facsimile bore no
annotation of a lien or encumbrance, PCSO failed to refute the testimony
of Cua that his verification of TCT No. 52135 with the Register of Deeds
of Dagupan City confirmed Peraltas claim of a clean title.
Since PCSO had notice of New Dagupans adverse claim prior to the
registration of its mortgage lien, it is bound thereby and thus legally
compelled to respect the proceedings on the validity of such adverse
claim. It is therefore of no moment if PCSOs foreclosure of the
subject mortgage and purchase of the subject property at the
auction sale took place prior to New Dagupans acquisition of title
as decreed in the Decision dated January 21, 1994 of RTC Branch
43. The effects of a foreclosure sale retroact to the date the
mortgage was registered.43 Hence, while PCSO may be deemed
to have acquired title over the subject property on May 20, 1992,
such title is rendered inferior by New Dagupans adverse claim,
the validity of which was confirmed per the Decision dated January
21, 1994 of RTC Branch 43.
Otherwise, if PCSOs mortgage lien is allowed to prevail by the
mere expediency of registration over an adverse claim that was
registered ahead of time, the object of an adverse claim to
apprise third persons that any transaction regarding the disputed
property is subject to the outcome of the dispute would be
rendered naught. A different conclusion would remove the primary
motivation for the public to rely on and respect the Torrens system
of registration. Such would be inconsistent with the well-settled,
even axiomatic, rule that a person dealing with registered property
need not go beyond the title and is not required to explore outside
the four (4) corners thereof in search for any hidden defect or
inchoate right that may turn out to be superior.
Worthy of extrapolation is the fact that there is no conflict between
the disposition of this case and Garbin v. CA44where this Court
decided the controversy between a buyer with an earlier
registered adverse claim and a subsequent buyer, who is charged
with notice of such adverse claim at the time of the registration of
her title, in favor of the latter. As to why the adverse claim cannot
prevail against the rights of the later buyer notwithstanding its prior
registration was discussed by this Court in this wise:
It is undisputed that the adverse claim of private respondents was
registered pursuant to Sec. 110 of Act No. 496, the same having
been accomplished by the filing of a sworn statement with the
Register of Deeds of the province where the property was located.
However, what was registered was merely the adverse claim and
not the Deed of Sale, which supposedly conveyed the northern
half portion of the subject property. Therefore, there is still need to
resolve the validity of the adverse claim in separate proceedings,
as there is an absence of registration of the actual conveyance of
the portion of land herein claimed by private respondents.
From the provisions of the law, it is clear that mere registration of
an adverse claim does not make such claim valid, nor is it
permanent in character. More importantly, such registration does
not confer instant title of ownership since judicial determination on
the issue of the ownership is still necessary.45 (Citation omitted)
Apart from the foregoing, the more important consideration was
the improper resort to an adverse claim.1wphi1 In L.P. Leviste &
Co. v. Noblejas,46 this Court emphasized that the availability of
the special remedy of an adverse claim is subject to the absence
of any other statutory provision for the registration of the
claimants alleged right or interest in the property. That if the
claimants interest is based on a perfected contract of sale or
any voluntary instrument executed by the registered owner of
the land, the procedure that should be followed is that
prescribed under Section 51 in relation to Section 52 of P.D.
No. 1529. Specifically, the owners duplicate certificate must
be presented to the Register of Deeds for the inscription of the
corresponding memorandum thereon and in the entry day
book. It is only when the owner refuses or fails to surrender
the duplicate certificate for annotation that a statement setting
forth an adverse claim may be filed with the Register of Deeds.
Otherwise, the adverse claim filed will not have the effect of a
conveyance of any right or interest on the disputed property
that could prejudice the rights that have been subsequently
acquired by third persons.
What transpired in Gabin is similar to that in Leviste. In Gabin,
the basis of the claim on the property is a deed of absolute
sale. In Leviste, what is involved is a contract to sell. Both are
voluntary instruments that should have been registered in
accordance with Sections 51 and 52 of P.D. No. 1529 as there
was no showing of an inability to present the owners duplicate
of title.
It is patent that the contrary appears in this case. Indeed, New
Dagupans claim over the subject property is based on a
conditional sale, which is likewise a voluntary instrument.
However, New Dagupans use of the adverse claim to protect
its rights is far from being incongruent in view of the
undisputed fact that Peralta failed to surrender the owners
duplicate of TCT No. 52135 despite demands.
Moreover, while the validity of the adverse claim in Gabin is
not established as there was no separate proceeding
instituted that would determine the existence and due
execution of the deed of sale upon which it is founded, the
same does not obtain in this case. The existence and due
execution of the conditional sale and Peraltas absolute and
complete cession of her title over the subject property to New
Dagupan are undisputed. These are matters covered by the
Decision dated January 21, 1994 of RTC Branch 43, which
had long become final and executory.
At any rate, in Sajonas v.CA,47 this Court clarified that there
is no necessity for a prior judicial determination of the validity
of an adverse claim for it to be considered a flaw in the
vendors title as that would be repugnant to the very purpose
thereof.48
WHEREFORE, premises considered, the petition is
DISMISSED and the Decision dated September 29, 2005 and
Resolution dated June9, 2006 of the Court of Appeals in CA-
G.R. CV No. 59590 are hereby AFFIRMED.
SO ORDERED.
G.R. No. 190071 August 15, 2012
UNION BANK OF THE PHILIPPINES, Petitioner,
vs.
MAUNLAD HOMES, INC. and all other persons or entities claiming
rights under it, Respondents.
VILLARAMA, JR.,*
DECISION
BRION, J.:
Before the Court is the petition for review on certiorari1 under Rule 45
of the Rules of Court filed by petitioner Union Bank of the Philippines
(Union Bank), assailing the decision dated October 28, 20092 of the
Court of Appeals (CA) in CA-G.R. SP No. 107772.
THE FACTS
Union Bank is the owner of a commercial complex located in Malolos,
Bulacan, known as the Maunlad Shopping Mall.
Sometime in August 2002, Union Bank, as seller, and respondent
Maunlad Homes, Inc. (Maunlad Homes), as buyer, entered into a
contract to sell3 involving the Maunlad Shopping Mall. The contract set
the purchase price at P151 million, P 2.4 million of which was to be paid
by Maunlad Homes as down payment payable on or before July 5, 2002,
with the balance to be amortized over the succeeding 180-month
period.4 Under the contract, Union Bank authorized Maunlad Homes to
take possession of the property and to build or introduce improvements
thereon. The parties also agreed that if Maunlad Homes violates any of
the provisions of the contract, all payments made will be applied as
rentals for the use and possession of the property, and all improvements
introduced on the land will accrue in favor of Union Bank.5 In the event
of rescission due to failure to pay or to comply with the terms of the
contract, Maunlad Homes will be required to immediately vacate the
property and must voluntarily turn possession over to Union Bank.6
When Maunlad Homes failed to pay the monthly amortization, Union
Bank sent the former a Notice of Rescission of Contract7 dated
February 5, 2003, demanding payment of the installments due within 30
days from receipt; otherwise, it shall consider the contract automatically
rescinded. Maunlad Homes failed to comply. Hence, on November 19,
2003, Union Bank sent Maunlad Homes a letter demanding payment of
the rentals due and requiring that the subject property be vacated and
its possession turned over to the bank. When Maunlad Homes
continued to refuse, Union Bank instituted an ejectment suit before the
Metropolitan Trial Court (MeTC) of Makati City, Branch 64, on February
19, 2004. Maunlad Homes resisted the suit by claiming, among others,
that it is the owner of the property as Union Bank did not reserve
ownership of the property under the terms of the contract.8 By virtue of
its ownership, Maunlad Homes claimed that it has the right to possess
the property.
On May 18, 2005, the MeTC dismissed Union Banks ejectment
complaint.9 It found that Union Banks cause of action was based
on a breach of contract and that both parties are claiming a better
right to possess the property based on their respective claims of
ownership of the property.
The MeTC ruled that the appropriate action to resolve these
conflicting claims was an accion reivindicatoria, over which it had
no jurisdiction.
On appeal, the Regional Trial Court (RTC) of Makati City, Branch
139, affirmed the MeTC in its decision dated July 17, 2008;10 it
agreed with the MeTC that the issues raised in the complaint
extend beyond those commonly involved in an unlawful detainer
suit. The RTC declared that the case involved a determination of
the rights of the parties under the contract. Additionally, the RTC
noted that the property is located in Malolos, Bulacan, but the
ejectment suit was filed by Union Bank in Makati City, based on
the contract stipulation that "the venue of all suits and actions
arising out or in connection with the Contract to Sell shall be in
Makati City."11 The RTC ruled that the proper venue for the
ejectment action is in Malolos, Bulacan, pursuant to the second
paragraph of Section 1, Rule 4 of the Rules of Court, which states:
Section 1. Venue of real actions. - Actions affecting title to or
possession of real property, or interest therein, shall be
commenced and tried in the proper court which has jurisdiction
over the area wherein the real property involved, or a portion
thereof, is situated.
Forcible entry and detainer actions shall be commenced and tried
in the municipal trial court of the municipality or city wherein the
real property involved, or a portion thereof, is situated. [emphasis
ours]
The RTC declared that Union Bank cannot rely on the waiver of
venue provision in the contract because ejectment is not an action
arising out of or connected with the contract.
Union Bank appealed the RTC decision to the CA through a
petition for review under Rule 42 of the Rules of Court. The CA
affirmed the RTC decision in its October 28, 2009
decision,12 ruling that Union Banks claim of possession is based
on its claim of ownership which in turn is based on its interpretation
of the terms and conditions of the contract, particularly, the
provision on the consequences of Maunlad Homes breach of
contract. The CA determined that Union Banks cause of action is
premised on the interpretation and enforcement of the contract
and the determination of the validity of the rescission, both of
which are matters beyond the jurisdiction of the MeTC. Therefore,
it ruled that the dismissal of the ejectment suit was proper. The
CA, however, made no further ruling on the issue of venue of the
action.
From the CAs judgment, Union Bank appealed to the Court
by filing the present petition for review on certiorariunder Rule
45 of the Rules of Court.
THE PARTIES ARGUMENTS
Union Bank disagreed with the CAs finding that it is claiming
ownership over the property through the ejectment action. It
claimed that it never lost ownership over the property despite
the execution of the contract, since only the right to possess
was conceded to Maunlad Homes under the contract; Union
Bank never transferred ownership of the property to Maunlad
Homes. Because of Maunlad Homes failure to comply with
the terms of the contract, Union Bank believes that it rightfully
rescinded the sale, which rescission terminated Maunlad
Homes right to possess the subject property. Since Maunlad
Homes failed to turn over the possession of the subject
property, Union Bank believes that it correctly instituted the
ejectment suit.
The Court initially denied Union Banks petition in its
Resolution dated March 17, 2010.13 Upon motion for
reconsideration filed by Union Bank, the Court set aside its
Resolution of March 17, 2010 (in a Resolution dated May 30,
201114) and required Maunlad Homes to comment on the
petition.
Maunlad Homes contested Union Banks arguments, invoking
the rulings of the lower courts. It considered Union Banks
action as based on the propriety of the rescission of the
contract, which, in turn, is based on a determination of
whether Maunlad Homes indeed failed to comply with the
terms of the contract; the propriety of the rescission, however,
is a question that is within the RTCs jurisdiction. Hence,
Maunlad Homes contended that the dismissal of the
ejectment action was proper.
THE COURTS RULING
We find the petition meritorious.
The authority of the MeTC to
interpret contracts in an unlawful
detainer action
In any case involving the question of jurisdiction, the Court is
guided by the settled doctrine that the jurisdiction of a court is
determined by the nature of the action pleaded by the litigant
through the allegations in his complaint.15
Unlawful detainer is an action to recover possession of real
property from one who unlawfully withholds possession after
the expiration or termination of his right to hold possession
under any contract, express or implied. The possession of the
defendant in unlawful detainer is originally legal but became
illegal due to expiration or termination of the right to possess.16 Under
Section 1, Rule 70 of the Rules of Court, the action must be filed "within
one (1) year after the unlawful deprivation or withholding of possession."
Thus, to fall within the jurisdiction of the MeTC, the complaint must
allege that
1. the defendant originally had lawful possession of the
property, either by virtue of a contract or by tolerance of the
plaintiff; 2. eventually, the defendants possession of the
property becameillegal or unlawful upon notice by the plaintiff
to defendant of the expiration or the termination of the
defendants right of possession;
3. thereafter, the defendant remained in possession of the
property and deprived the plaintiff the enjoyment thereof; and
4. within one year from the unlawful deprivation or withholding
of possession, the plaintiff instituted the complaint for
ejectment.17
Contrary to the findings of the lower courts, all four requirements were
alleged in Union Banks Complaint. Union Bank alleged that Maunlad
Homes "maintained possession of the subject properties" pursuant to
the Contract to Sell.18 Maunlad Homes, however, "failed to faithfully
comply with the terms of payment," prompting Union Bank to "rescind
the Contract to Sell in a Notice of Rescission dated February 5,
2003."19 When Maunlad Homes "refused to turn over and vacate the
subject premises,"20 Union Bank sent another Demand Letter on
November 19, 2003 to Maunlad Homes requiring it (1) "[t]o pay the
equivalent rentals-in-arrears as of October 2003 in the amount
of P15,554,777.01 and monthly thereafter until the premises are fully
vacated and turned over" to Union Bank, and (2) to vacate the property
peacefully and turn over possession to Union Bank.21 As the demand
went unheeded, Union Bank instituted an action for unlawful detainer
before the MeTC on February 19, 2004, within one year from the date
of the last demand. These allegations clearly demonstrate a cause of
action for unlawful detainer and vested the MeTC jurisdiction over Union
Banks action.
Maunlad Homes denied Union Banks claim that its possession of the
property had become unlawful. It argued that its failure to make
payments did not terminate its right to possess the property because it
already acquired ownership when Union Bank failed to reserve
ownership of the property under the contract. Despite Maunlad Homes
claim of ownership of the property, the Court rules that the MeTC
retained its jurisdiction over the action; a defendant may not divest the
MeTC of its jurisdiction by merely claiming ownership of the
property.22 Under Section 16, Rule 70 of the Rules of Court, "when the
defendant raises the defense of ownership in his pleadings and the
question of possession cannot be resolved without deciding the issue of
ownership, the issue of ownership shall be resolved only to determine
the issue of possession." Section 18, Rule 70 of the Rules of Court,
however, states that "the judgment x x x shall be conclusive with respect
to the possession only and shall in no wise bind the title or affect
the ownership of the land or building."
The authority granted to the MeTC to preliminarily resolve the
issue of ownership to determine the issue of possession ultimately
allows it to interpret and enforce the contract or agreement
between the plaintiff and the defendant. To deny the MeTC
jurisdiction over a complaint merely because the issue of
possession requires the interpretation of a contract will effectively
rule out unlawful detainer as a remedy. As stated, in an action for
unlawful detainer, the defendants right to possess the property
may be by virtue of a contract, express or implied; corollarily, the
termination of the defendants right to possess would be governed
by the terms of the same contract. Interpretation of the contract
between the plaintiff and the defendant is inevitable because it is
the contract that initially granted the defendant the right to possess
the property; it is this same contract that the plaintiff subsequently
claims was violated or extinguished, terminating the defendants
right to possess. We ruled in Sps. Refugia v. CA23that
where the resolution of the issue of possession hinges on a
determination of the validity and interpretation of the document of
title or any other contract on which the claim of possession is
premised, the inferior court may likewise pass upon these issues.
The MeTCs ruling on the rights of the parties based on its
interpretation of their contract is, of course, not conclusive, but is
merely provisional and is binding only with respect to the issue of
possession.
Thus, despite the CAs opinion that Union Banks "case involves
a determination of the rights of the parties under the Contract to
Sell,"24 it is not precluded from resolving this issue. Having
acquired jurisdiction over Union Banks action, the MeTC can
resolve the conflicting claims of the parties based on the facts
presented and proved.
The right to possess the property was
extinguished when the contract to
sell failed to materialize
Maunlad Homes acquired possession of the property based on its
contract with Union Bank. While admitting that it suspended
payment of the installments,25 Maunlad Homes contended that
the suspension of payment did not affect its right to possess the
property because its contract with Union Bank was one of sale and
not to sell; hence, ownership of the
property has been transferred to it, allowing it to retain possession
notwithstanding nonpayment of installments. The terms of the
contract, however, do not support this conclusion.
Section 11 of the contract between Union Bank and Maunlad
Homes provides that "upon payment in full of the Purchase Price
of the Property x x x, the SELLER shall execute and deliver a Deed
of Absolute Sale conveying the Property to the
BUYER."26 "Jurisprudence has established that where the
seller promises to execute a deed of absolute sale upon the
completion by the buyer of the payment of the price, the
contract is only a contract to sell."27The presence of this
provision generally identifies the contract as being a mere
contract to sell.28 After reviewing the terms of the contract
between Union Bank and Maunlad Homes, we find no
reasonable ground to exempt the present case from the
general rule; the contract between Union Bank and Maunlad
Homes is a contract to sell.
In a contract to sell, the full payment of the purchase price is
a positive suspensive condition whose non-fulfillment is not a
breach of contract, but merely an event that prevents the
seller from conveying title to the purchaser. "The non-payment
of the purchase price renders the contract to sell ineffective
and without force and effect."29 Maunlad Homes act of
withholding the installment payments rendered the contract
ineffective and without force and effect, and ultimately
deprived itself of the right to continue possessing Maunlad
Shopping Mall.
The propriety of filing the unlawful
detainer action in Makati City
pursuant to the venue stipulation in
the contract
Maunlad Homes questioned the venue of Union Banks
unlawful detainer action which was filed in Makati City while
the contested property is located in Malolos, Bulacan. Citing
Section 1, Rule 4 of the Rules of Court, Maunlad Homes
claimed that the unlawful detainer action should have been
filed with the municipal trial court of the municipality or city
where the real property involved is situated. Union Bank, on
the other hand, justified the filing of the complaint with the
MeTC of Makati City on the venue stipulation in the contract
which states that "the venue of all suits and actions arising out
of or in connection with this Contract to Sell shall be at Makati
City."30
While Section 1, Rule 4 of the Rules of Court states that
ejectment actions shall be filed in "the municipal trial court of
the municipality or city wherein the real property involved x x
x is situated," Section 4 of the same Rule provides that the
rule shall not apply "where the parties have validly agreed in
writing before the filing of the action on the exclusive venue
thereof." Precisely, in this case, the parties provided for a
different venue. In Villanueva v. Judge Mosqueda, etc., et
al.,31 the Court upheld the validity of a stipulation in a contract
providing for a venue for ejectment actions other than that
stated in the Rules of Court. Since the unlawful detainer action
is connected with the contract, Union Bank rightfully filed the complaint
with the MeTC of Makati City.
WHEREFORE, we hereby GRANT the petition and SET ASIDE the
decision dated October 28, 2009 of the Court of Appeals in CA-G.R. SP
No. 107772. Respondent Maunlad Homes, Inc. is ORDERED TO
VACATE the Maunlad Shopping Mall, the property subject of the case,
immediately upon the finality of this Decision. Respondent Maunlad
Homes, Inc. is further ORDERED TO PAY the rentals-in-arrears, as well
as rentals accruing in the interim until it vacates the property.
The case is REMANDED to the Metropolitan Trial Court of Makati City,
Branch 64, to determine the amount of rentals due. In addition to the
amount determined as unpaid rent, respondent Maunlad Homes, Inc.
is ORDERED TO PAY legal interest of six percent (6o/o) per annum,
from November 19, 2003, when the demand to pay and to vacate was
made, up to the finality of this Decision. Thereafter, an interest of twelve
percent ( 12%) per annum shall be imposed on the total amount due
until full payment is made.
SO ORDERED.
G.R. No. 194366 October 10, 2012
NAPOLEON D. NERI, ALICIA D. NERI-MONDEJAR, VISMINDA D.
NERI-CHAMBERS, ROSA D. NERI-MILLAN, DOUGLAS D. NERI,
EUTROPIA D. ILLUT-COCKINOS AND VICTORIA D. ILLUT-
PIALA, Petitioners,
vs.
HEIRS OF HADJI YUSOP UY AND JULPHA* IBRAHIM
UY, Respondents.
DECISION
PERLAS-BERNABE, J.:
In this Petition for Review on Certiorari1 under Rule 45 of the Rules of
Court, petitioners Napoleon D. Neri (Napoleon), Alicia D. Neri-Mondejar
(Alicia), Visminda D. Neri-Chambers (Visminda), Rosa D. Neri-Millan
(Rosa), Douglas D. Neri (Douglas), Eutropia D. Illut-Cockinos (Eutropia),
and Victoria D. Illut-Piala (Victoria) seek to reverse and set aside the
April 27, 2010 Decision2 and October 18, 2010 Resolution3 of the Court
of Appeals (CA) in CA-G.R. CV No. 01031-MIN which annulled the
October 25, 2004 Decision4 of the Regional Trial Court (RTC) of
Panabo City, Davao del Norte and instead, entered a new one
dismissing petitioners complaint for annulment of sale, damages and
attorneys feesagainst herein respondents heirs of spouses Hadji Yusop
Uy and Julpha Ibrahim Uy (heirs of Uy).
The Facts
During her lifetime, Anunciacion Neri (Anunciacion) had seven children,
two (2) from her first marriage with Gonzalo Illut (Gonzalo), namely:
Eutropia and Victoria, and five (5) from her second marriage with
Enrique Neri (Enrique), namely: Napoleon, Alicia, Visminda,
Douglas and Rosa. Throughout the marriage of spouses Enrique
and Anunciacion, they acquired several homestead properties
with a total area of 296,555 square meters located in Samal,
Davao del Norte, embraced by Original Certificate of Title (OCT)
Nos. (P-7998) P-21285, (P-14608) P-51536and P-20551 (P-
8348)7issued on February 15, 1957, August 27, 1962 and July 7,
1967, respectively.
On September 21, 1977, Anunciacion died intestate. Her
husband, Enrique, in his personal capacity and as natural
guardian of his minor children Rosa and Douglas, together with
Napoleon, Alicia, and Vismindaexecuted an Extra-Judicial
Settlement of the Estate with Absolute Deed of Sale8 on July 7,
1979, adjudicating among themselves the said homestead
properties, and thereafter, conveying themto the late spouses
Hadji Yusop Uy and Julpha Ibrahim Uy (spouses Uy)for a
consideration of P 80,000.00.
On June 11, 1996, the children of Enrique filed a complaint for
annulment of saleof the said homestead properties against
spouses Uy (later substituted by their heirs)before the RTC,
docketed as Civil Case No.96-28, assailing the validity of the sale
for having been sold within the prohibited period. Thecomplaint
was later amended to include Eutropia and Victoriaas additional
plaintiffs for having been excluded and deprived of their legitimes
as childrenof Anunciacion from her first marriage.
In their amended answer with counterclaim, the heirs of Uy
countered that the sale took place beyond the 5-year prohibitory
period from the issuance of the homestead patents. They also
denied knowledge of Eutropia and Victorias exclusionfrom the
extrajudicial settlement and sale of the subject properties, and
interposed further the defenses of prescription and laches.
The RTC Ruling
On October 25, 2004, the RTC rendered a decision ordering,
among others, the annulment of the Extra-Judicial Settlement of
the Estate with Absolute Deed of Sale. It ruled that while the sale
occurred beyond the 5-year prohibitory period, the sale is still void
because Eutropia and Victoria were deprived of their hereditary
rights and that Enrique had no judicial authority to sell the shares
of his minor children, Rosa and Douglas.
Consequently, it rejected the defenses of laches and prescription
raised by spouses Uy, who claimed possession of the subject
properties for 17 years, holding that co-ownership rights are
imprescriptible.
The CA Ruling
On appeal, the CAreversed and set aside the ruling of the RTC in
its April 27, 2010 Decision and dismissed the complaint of the
petitioners. It held that, while Eutropia and Victoria had no
knowledge of the extrajudicial settlement and sale of the
subject properties and as such, were not bound by it, the CA
found it unconscionable to permit the annulment of the sale
considering spouses Uys possession thereof for 17 years,
and thatEutropia and Victoriabelatedlyfiled their actionin
1997, ormore than two years fromknowledge of their exclusion
as heirs in 1994 when their stepfather died. It, however, did
not preclude the excluded heirs from recovering their legitimes
from their co-heirs.
Similarly, the CA declared the extrajudicial settlement and the
subsequent saleas valid and binding with respect to Enrique
and hischildren, holding that as co-owners, they have the right
to dispose of their respective shares as they consider
necessary or fit.While recognizing Rosa and Douglas to be
minors at that time, they were deemed to have ratified the sale
whenthey failed to question it upon reaching the age of
majority.Italso found laches to have set in because of their
inaction for a long period of time.
The Issues
In this petition, petitioners imputeto the CA the following
errors:
I. WHEN IT UPHELDTHE VALIDITY OF THE "EXTRA
JUDICIAL SETTLEMENT OF THE ESTATE WITH
ABSOLUTE DEED OF SALE" AS FAR AS THE SHARES OF
EUTROPIA AND VICTORIA WERE CONCERNED,
THEREBY DEPRIVING THEM OF THEIR INHERITANCE;
II. WHEN IT DID NOT NULLIFY OR ANNUL THE "EXTRA
JUDICIAL SETTLEMENT OF THE ESTATE WITH
ABSOLUTE DEED OF SALE" WITH RESPECT TO THE
SHARESOF ROSA AND DOUGLAS, THEREBY DEPRIVING
THEM OF THEIR INHERITANCE; and
III. WHEN IT FOUND THAT LACHES OR PRESCRIPTION
HAS SET IN.
The Ruling of the Court
The petitionis meritorious.
It bears to stress that all the petitioners herein are indisputably
legitimate children of Anunciacion from her first and second
marriages with Gonzalo and Enrique, respectively, and
consequently, are entitled to inherit from her in equal shares,
pursuant to Articles 979 and 980 of the Civil Code which read:
ART. 979. Legitimate children and their descendants succeed
the parents and other ascendants, without distinction as to sex
or age, and even if they should come from different marriages.
xxx
ART. 980. The children of the deceased shall always inherit from him in
their own right, dividing the inheritance in equal shares.
As such, upon the death of Anunciacion on September 21, 1977, her
children and Enrique acquired their respective inheritances,9 entitling
them to their pro indiviso shares in her whole estate, as follows:
Enrique 9/16 (1/2 of the conjugal assets + 1/16)
Eutropia 1/16
Victoria 1/16
Napoleon 1/16
Alicia 1/16
Visminda 1/16
Rosa 1/16
Douglas 1/16
Hence, in the execution of the Extra-Judicial Settlement of the Estate
with Absolute Deed of Sale in favor of spouses Uy, all the heirs of
Anunciacionshould have participated. Considering that Eutropia and
Victoria were admittedly excluded and that then minors Rosa and
Douglas were not properly represented therein, the settlement was not
valid and binding uponthem and consequently, a total nullity.
Section 1, Rule 74 of the Rules of Court provides:
SECTION 1. Extrajudicial settlement by agreement between heirs. x x
x SEC. 7. Parents as Guardians. When the property of the child
The fact of the extrajudicial settlement or administration shall be
published in a newspaper of general circulation in the manner provided
in the next succeeding section; but no extrajudicial settlement shall be
binding upon any person who has not participated therein or had no
notice thereof. (Underscoring added)
The effect of excluding the heirs in the settlement of estate was further
elucidated in Segura v. Segura,10 thus:
It is clear that Section 1 of Rule 74 does not apply to the partition in
question which was null and void as far as the plaintiffs were concerned.
The rule covers only valid partitions. The partition in the present case
was invalid because it excluded six of the nine heirs who were entitled
to equal shares in the partitioned property. Under the rule "no
extrajudicial settlement shall be binding upon any person who has not
participated therein or had no notice thereof." As the partition was a total
nullity and did not affect the excluded heirs, it was not correct for the trial
court to hold that their right to challenge the partition had prescribed after
two years from its execution
However, while the settlement of the estate is null and void, the
subsequent sale of the subject propertiesmade by Enrique and his
children, Napoleon, Alicia and Visminda, in favor of the respondents
isvalid but only with respect to their proportionate shares therein.It
cannot be denied that these heirs have acquired their respective
shares in the properties of Anunciacion from the moment of her
death11and that, as owners thereof, they can very well sell their
undivided share in the estate.12
With respect to Rosa and Douglas who were minors at the time of
the execution of the settlement and sale, their natural guardian
and father, Enrique, represented them in the transaction.
However, on the basis of the laws prevailing at that time, Enrique
was merely clothed with powers of administration and bereft of any
authority to dispose of their 2/16 shares in the estate of their
mother, Anunciacion.
Articles 320 and 326 of the Civil Code, the laws in force at the time
of the execution of the settlement and sale, provide:
ART. 320. The father, or in his absence the mother, is the legal
administrator of the property pertaining to the child under parental
authority. If the property is worth more than two thousand pesos,
the father or mother shall give a bond subject to the approval of
the Court of First Instance.
ART. 326. When the property of the child is worth more than two
thousand pesos, the father or mother shall be considered a
guardian of the childs property, subject to the duties and
obligations of guardians under the Rules of Court.
Corollarily, Section 7, Rule 93 of the Rules of Court also
provides:
under parental authority is worth two thousand pesos or less, the
father or the mother, without the necessity of court appointment,
shall be his legal guardian. When the property of the child is worth
more than two thousand pesos, the father or the mother shall be
considered guardian of the childs property, with the duties and
obligations of guardians under these Rules, and shall file the
petition required by Section 2 hereof. For good reasons, the court
may, however, appoint another suitable persons.
Administration includes all acts for the preservation of the property
and the receipt of fruits according to the natural purpose of the
thing. Any act of disposition or alienation, or any reduction in the
substance of the patrimony of child, exceeds the limits of
administration.13 Thus, a father or mother, as the natural
guardian of the minor under parental authority, does not have the
power to dispose or encumber the property of the latter. Such
power is granted by law only to a judicial guardian of the wards
property and even then only with courts prior approval secured in
accordance with the proceedings set forth by the Rules of
Court.14
Consequently, the disputed sale entered into by Enrique in behalf
of his minor children without the proper judicial authority, unless
ratified by them upon reaching the age of majority,15 is
unenforceable in accordance with Articles 1317 and 1403(1)
of the Civil Code which provide:
ART. 1317. No one may contract in the name of another
without being authorized by the latter or unless he has by law
a right to represent him.
A contract entered into in the name of another by one who has
no authority or legal representation, or who has acted beyond
his powers, shall be unenforceable, unless it is ratified,
expressly or impliedly, by the person on whose behalf it has
been executed, before it is revoked by the other contracting
party.
ART. 1403. The following contracts are unenforceable, unless
they are ratified:
(1) Those entered into the name of another person by one
who has been given no authority or legal representation, or
who has acted beyond his powers;
xxx
Ratification means that one under no disability voluntarily
adopts and gives sanction to some unauthorized act or
defective proceeding, which without his sanction would not be
binding on him. It is this voluntary choice, knowingly made,
which amounts to a ratification of what was theretofore
unauthorized, and becomes the authorized act of the party so
making the ratification.16 Once ratified, expressly or impliedly
such as when the person knowingly received benefits from it,
the contract is cleansed from all its defects from the moment
it was constituted,17 as it has a retroactive effect.
Records, however, show that Rosa had ratified the
extrajudicial settlement of the estate with absolute deed of
sale. In Napoleon and Rosas Manifestation18 before the RTC
dated July 11, 1997,they stated:
"Concerning the sale of our parcel of land executed by our
father, Enrique Neri concurred in and conformed to by us and
our other two sisters and brother (the other plaintiffs), in favor
of Hadji Yusop Uy and his spouse Hadja Julpa Uy on July 7,
1979, we both confirmed that the same was voluntary and
freely made by all of us and therefore the sale was absolutely
valid and enforceable as far as we all plaintiffs in this case are
concerned;" (Underscoring supplied)
In their June 30, 1997 Joint-Affidavit,19 Napoleon and Rosa
also alleged:
"That we are surprised that our names are included in this
case since we do not have any intention to file a case against
Hadji Yusop Uy and Julpha Ibrahim Uy and their family
and we respect and acknowledge the validity of the Extra-
Judicial Settlement of the Estate with Absolute Deed of Sale dated July
7, 1979;" (Underscoring supplied)
Clearly, the foregoing statements constitutedratification of the
settlement of the estate and the subsequent sale, thus, purging all the
defects existing at the time of its execution and legitimizing the
conveyance of Rosas 1/16 share in the estate of Anunciacion to
spouses Uy. The same, however, is not true with respect to Douglas for
lack of evidence showing ratification.
Considering, thus, that the extrajudicial settlement with sale is invalid
and therefore, not binding on Eutropia, Victoria and Douglas, only the
shares ofEnrique, Napoleon, Alicia, Visminda and Rosa in the
homestead properties have effectivelybeen disposed in favor of spouses
Uy. "A person can only sell what he owns, or is authorized to sell and
the buyer can as a consequence acquire no more than what the
sellercan legally transfer."20 On this score, Article 493 of the Civil
Codeis relevant, which provides:
Each co-owner shall have the full ownership of his part and of the fruits
and benefits pertaining thereto, and he may therefore alienate, assign
or mortgage it, and even substitute another person in its enjoyment,
except when personal rights are involved. But the effect of the alienation
or the mortgage, with respect to the co-owners, shall be limited to the
portion which may be allotted to him in the division upon the termination
of the co-ownership.
Consequently, spouses Uy or their substituted heirs became pro indiviso
co-owners of the homestead properties with Eutropia, Victoria and
Douglas, who retained title to their respective 1/16 shares. They were
deemed to be holding the 3/16 shares of Eutropia, Victoria and Douglas
under an implied constructive trust for the latters benefit, conformably
with Article 1456 of the Civil Code which states:"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." As such, it is only fair, just and equitable that
the amount paid for their shares equivalent to P 5,000.0021 each or a
total of P 15,000.00 be returned to spouses Uy with legal interest.
On the issue of prescription, the Court agrees with petitioners that the
present action has not prescribed in so far as it seeks to annul the
extrajudicial settlement of the estate. Contrary to the ruling of the CA,
the prescriptive period of 2 years provided in Section 1 Rule 74 of the
Rules of
Court reckoned from the execution of the extrajudicial settlement finds
no application to petitioners Eutropia, Victoria and Douglas, who were
deprived of their lawful participation in the subject estate. Besides, an
"action or defense for the declaration of the inexistence of a contract
does not prescribe" in accordance with Article 1410 of the Civil Code.
However, the action to recover property held in trust prescribes after 10
years from the time the cause of action accrues,22 which is from the
time of actual notice in case of unregistered deed.23 In this case,
Eutropia, Victoria and Douglas claimed to have knowledge of the
extrajudicial settlement with sale after the death of their father,
Enrique, in 1994 which spouses Uy failed to refute. Hence, the
complaint filed in 1997 was well within the prescriptive period of
10 years.
WHEREFORE, the instant petition is GRANTED. The April 27,
2010 Decision and October 18, 2010 Resolution of the Court of
Appeals are REVERSED and SET ASIDE and a new judgment is
entered:
1. Declaring the Extra-Judicial Settlement of the Estate
of Anunciacion Neri NULL and VOID;
2. Declaring the Absolute Deed of Sale in favor of the late
spouses Hadji Yusop Uy and Julpha Ibrahim Uy as
regards the 13/16 total shares of the late Enrique Neri,
Napoleon Neri, Alicia D. Neri-Mondejar, Visminda D.
Neri-Chambers and Rosa D. Neri-Millan VALID;
3. Declaring Eutropia D. Illut-Cockinos, Victoria D. Illut-
Piala and Douglas D. Neri as the LAWFUL OWNERSof
the 3/16 portions of the subject homestead properties,
covered by Original Certificate of Title Nos. (P-7998) P-
2128, (P-14608) P-5153 and P-20551 (P-8348); and
4. Ordering the estate of the late Enrique Neri, as well as
Napoleon Neri, Alicia D. Neri-Mondejar, Visminda D.
Neri-Chambers and Rosa D. Neri-Millan to return to the
respondents jointly and solidarily the amount paid
corresponding to the 3/16 shares of Eutropia, Victoria
and Douglas in the total amount of P 15,000.00, with
legal interest at 6% per annum computed from the time
of payment until finality of this decision and 12% per
annum thereafter until fully paid.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 192486 November 21, 2012
RUPERTA CANO VDA. DE VIRAY and JESUS CARLO
GERARD VIRAY, Petitioners,
vs.
SPOUSES JOSE USI and AMELITA USI, Respondents.
DECISION
VELASCO, JR., J.:
The Case
Petitioners have availed of Rule 45 to assail and nullify the
Decision1 dated July 24, 2009, as effectively reiterated in a
Resolution2 of June 2, 2010, both rendered by the Court of
Appeals (CA) in CA-G.R. CV No. 90344, setting aside the
Decision3 dated June 21, 2007 of the Regional Trial Court (RTC),
 Branch 55 in Macabebe, Pampanga, in Civil Case No. 01-
Lot 733-D
1118(M), an accion publiciana/reivindicatoria, which
respondents commenced with, but eventually dismissed by,
that court. Lot 733-E
The Facts Lot 733-F
At the core of the present controversy are several parcels of
land which form part of what was once Lot No. 733, Cad-305-
D, Masantol Cadastre (Lot 733 hereinafter), registered in the
name of Ellen P. Mendoza (Mendoza), married to Moses
Mendoza, under Transfer Certificate of Title No. (TCT) 141-
RP of the Registry of Deeds of Pampanga. With an area of
9,137 square meters, more or less, Lot 733 is located in Brgy.
Bebe Anac, Masantol, Pampanga.
On April 28, 1986, Geodetic Engineer Abdon G. Fajardo
prepared a subdivision plan4 (Fajardo Plan, for short) for Lot
733, in which Lot 733 was divided into six (6) smaller parcels
of differing size dimensions, designated as: Lot 733-A, Lot
733-B, Lot 733-C, Lot 733-D, Lot 733-E, and Lot 733-F
consisting of 336, 465, 3,445, 683, 677 and 3,501 square
meters, respectively.
The following day, April 29, 1986, Mendoza executed two
separate deeds of absolute sale, the first, transferring Lot 733-
F to Jesus Carlo Gerard Viray (Jesus Viray),5 and the second
deed conveying Lot 733-A to spouses Avelino Viray and
Margarita Masangcay (Sps. Viray).6 The names McDwight
Mendoza, Mendozas son, and one Ernesto Bustos appear in
both notarized deeds as instrumental witnesses. As of that
time, the Fajardo Plan has not been officially approved by the
Land Management Bureau (LMB), formerly the Bureau of
Lands. And at no time in the course of the controversy did the
spouses Viray and Jesus Viray, as purchasers of Lots 733-A
and 733-F, respectively, cause the annotations of the
conveying deeds of sale on TCT 141-RP.
Herein petitioner, Ruperta Cano Vda. de Viray (Vda. de Viray),
is the surviving spouse of Jesus Viray, who died in April 1992.
As of April 29, 1986, the dispositions made on and/or the
ownership profile of the subdivided lots appearing under the
Fajardo Plan are as follows:
o. Area Conveyances by Mendoza
366 square meters Sold to Sps. Avelino andLacap
Viray
465 square meters Unsold
3,445 square meters Unsold
The subdivision plan11 for Lot 733-C, as likewise prepared by
683 square meters Proposed Road Engr. Galang on October 13, 1990, was officially approved by the
LMB on March 1, 1991.
677 square meters Unsold
The 2nd SA partly reads:
3,501 square meters Sold to Jesus Viray 1. That we are the sole and exclusive undivided co-owners of a
parcel of land situated at Barrio Putat and Arabia, Bebe Anac,
Masantol, Pampanga, identified as Lot No. 733-C of Psd-No. 03-
The aforementioned conveyances notwithstanding, Mendoza, 041669, containing an area of 8,148 sq. meters and covered by
Emerenciana M. Vda. de Mallari (Vda. de Mallari) and respondent T.C.T. No. 1586 R.P. of the
spouses Jose Usi and Amelita T. Usi (Sps. Usi or the Usis), as purported
co-owners of Lot 733, executed on August 20, 1990 a Subdivision Register of Deeds of Pampanga;
Agreement,7 or the 2. That it is for the benefit and best interest of the parties herein
1st subdivision agreement (1st SA). Pursuant to this agreement which that the [sic] their co-ownership relation over the above-mentioned
adopted, as base of reference, the LMB-approved subdivision plan parcel of land be terminated and their respective share over the
prepared by Geodetic Engineer Alfeo S. Galang (Galang Plan), Lot 733 co-ownership be allotted [sic] to them;
was subdivided into three lots, i.e., Lots A to C, with the following area Wherefore, by virtue of the foregoing premises, we have agreed,
coverage: Lots 733-A, 465 square meters, 733-B, 494 square meters, as we hereby agree to subdivide our said parcel of land x x
and 733-C, 6,838 square meters. In its pertinent parts, the 1st SA reads: x.12 (Emphasis added.)
That the above-parties are the sole and exclusive owners of a certain
Consequent to the subdivision of Lot 733-C in line with the Galang
parcel of land situated in the Bo. of Bebe Anac, Masantol, Pampanga, Plan and its subsequent partition and distribution to the respective
which is known as Lot No. 733 under TCT No. 141 R.P. of the Registry allotees pursuant to the 2nd SA, the following individuals
of Deeds of Pampanga, under Psd-No. 03-10-025242; appeared as owners of the subdivided units as indicated in the
That for the convenience of the parties hereto that the existing table below:
community of the said Lot be terminated and their respective share be
determined by proper adjudication;
Lot No.
That the parties hereto agreed to subdivided (sic) the above-mentioned Land Area Partitioned to:
property by Geodetic Engineer Alfeo S. Galang, as per tracing cloth and
blue print copy of plan Psd-03-025242 and technical description
Lot 733-C-1
duly 200 square meters Sps. Jose and Amelita Usi
approved by the Bureau of Lands, hereto Attached and made internal
part of this instrument in the following manner: Lot 733-C-2 1,000 square meters Sps. Alejandro & Juanita La
Lot 733-A - - - - - - - To Emerencia M. Vda. Mallari;
Lot 733-C-3 300 square meters Sps. Nestor & Herminia Cor
Lot 733-B - - - - - - - To Sps. Jose B. Usi and Amelita B. Usi;
Lot 733-C-4
Lot 733-C - - - - - - - To Ellen P. Mendoza8 (Emphasis added.) 500 square meters Sps. Nestor & Herminia Co
Sps. Bacani & Martha Baling
TCT 141-RP would eventually be canceled and, in lieu thereof, three
derivative titles were issued to the following, as indicated: TCT 1584-RP
Lot 733-C-5 400 square meters Sps. Ruperto & Josefina Jor
for Lot 733-A to Mallari; TCT 1585-RP9 for Lot 733-B to Sps. Usi; and
TCT 1586-RP for Lot 733-C to Mendoza. Lot 733-C-6 500 square meters Ellen, McDwight, Bismark
On April 5, 1991, Mendoza, McDwight P. Mendoza, Bismark P. and Georgenia Mendoza
Mendoza, Beverly P. Mendoza, Georgenia P. Mendoza, Sps. Alejandro
Margarita
and Juanita U. Lacap, Sps. Nestor Coronel and HerminiaLotBalingit,
733-C-7 220 square meters Ellen, McDwight, Bismark
Sps. Bacani and Martha Balingit, Sps. Ruperto and Josefina Jordan, and and Georgenia Mendoza
Sps.
Lot 733-C-8 1,000 square meters Ellen, McDwight, Bismark
Jose and Amelita Usi executed another Subdivision Agreement10 (2nd and Georgenia Mendoza
SA) covering and under which the 8,148-sq. m. Lot 733-C was further
subdivided into 13 smaller lots (Lot 733-C-1 to Lot 733-C-13 inclusive).

-9 500 square meters Ellen, McDwight, Bismark,
and Georgenia Mendoza
-10 1,000 square meters
Sps. Jose and Amelita Usi
-11 668 square meters
Ellen, McDwight, Bismark,
and Georgenia Mendoza
-12 550 square meters Ellen, McDwight, Bismark,
and Georgenia Mendoza
C-13] [1,310 square meters] [Allotted for a proposedand
In net effect, the two subdivision agreements paved the way
for the issuance, under the Sps. Usis name, of TCT Nos.
1585-RP,13 2092-RP,14 and 2101-RP,15 covering Lots 733-
B, 733-C-1 and 733-C-10, respectively.
On the other hand, the subdivision of Lot 733, per the Galang
Plan, and the two subdivision agreements concluded based
on that plan, virtually resulted in the loss of the identity of what
under the Fajardo Plan were Lot 733-A and Lot 733-F. The
Sps. Viray and the late Jesus Viray, to recall, purchased Lot
733-A and Lot 733-F, respectively, from Mendoza.
Then came the ocular inspection and survey16 conducted on
Lot 733, as an undivided whole, by Geodetic Engr. Angelito
Nicdao of the LMB. Some highlights of his findings:
(a) Lot 733-A of the Fajardo Plan with an area of 336
square meters that Sps. Viray bought is within Lot
733-B (Galang Plan) allotted under 1st SA to Sps.
Jose and Amelita Usi; and
(b) Lot 733-F of the Fajardo Plan with an area of
3,501 square meters is almost identical to the
combined area of Lots 733-C-8 to 733-C-12 awarded
to Ellen Mendoza and her childrenMcDwight,
Bismark, Beverly and Georgenia, and a portion
(1,000 square meters) of Lot 733-C-10 of the Galang
Plan awarded to Sps. Jose and Amelita Usi.
As to be expected, the foregoing overlapping transactions
involving the same property or portions thereof spawned
several suits and counter- suits featuring, in particular, herein
petitioners and respondents, viz:
(a) A suit for Annulment of Deed of Absolute Sale filed before
the RTC, Branch 55 in Macabebe, Pampanga, docketed as
Civil Case No. 88-0265-M, in which the Usis and Mendoza, as
plaintiffs, assailed the validity and sought the annulment of the
deed of absolute sale executed by Mendoza on April 29, 1986 conveying
Beverly
Lot 733-A (Fajardo Plan) to defendants Sps. Viray.
(b) A similar suit for Annulment of Deed of Absolute Sale commenced
by Mendoza against Jesus Viray before RTC-Br. 55 in Macabebe,
Pampanga, docketed as Civil Case No. 88-0283-M, entitled Ellen P.
Mendoza
v. Jesus Carlo Gerard Viray, also seeking to nullify the April
Beverly
29, 1986 Deed of Absolute Sale conveying Lot 733-F (Fajardo Plan) to
Jesus Viray and to declare the plaintiff as entitled to its possession.
BeverlyCivil Case Nos. 88-0265-M and 88-0283-M were jointly
The adverted
tried by RTC-Br. 55, which, on August 1, 1989, rendered a Joint
Decision17 finding for the Sps. Viray and Jesus Viray, as defendants,
road]
accordingly dismissing the separate complaints to annul the deeds
of sale subject of the joint cases.
On appeal, the CA, in CA-G.R. CV Nos. 24981-82, and later this Court,
in its Decision of December 11, 1995, in G.R. No. 122287 in effect
affirmed in toto the RTC dismissal decision.18 The Court, via its
Resolution of April 17, 1998, would eventually deny with
finality19 Mendoza and the Usis motion for reconsideration of the
aforesaid December 11, 1995 Decision.
(c) A forcible entry case filed on November 19, 1991 by the late Jesus
Viray against the Sps. Usi before the Municipal Circuit Trial Court
(MCTC) in Macabebe, Pampanga, docketed as Civil Case No. 91 (13),
entitled Jesus Carlo Gerard Viray v. Spouses Jose Usi and Emelita
Tolentino, to eject the Usis from Lot 733-F (Fajardo Plan).
On July 29, 1998, the MCTC rendered a Decision20 in favor of Jesus
Viray, the dispositive portion of which pertinently reads:
WHEREFORE, premises considered, judgment is hereby rendered for
the plaintiff the late petitioner Jesus Viray, and accordingly, the
defendants Sps. Usi and any other persons claiming under them are
hereby ordered to vacate the subject premises, Lot 733-F embraced in
T.C.T. No. 141-R.P., Register of Deeds Pampanga, and Lot 733-A, both
situated at Bebe Anac, Masantol, Pampanga and to remove at their own
expense, all structures or improvements they built and introduced
thereon.
Defendants are likewise sentenced to pay plaintiff the amount of THREE
HUNDRED (P300.00) PESOS per month from November 19, 1991, until
they vacate the premises, as reasonable compensation for the use and
occupation thereof x x x.
xxxx
SO ORDERED.21
The Decision eventually became final and executory, the Usis having
opted not to appeal it.
(d) A Petition for Annulment of the MCTCs July 29, 1998 Decision filed
by the Sps. Usi before the RTC, docketed as Civil Case No. 99-0914M,
entitled Sps. Jose & Amelita Usi v. Hon. Pres. Judge MCTC,
Macabebe, Pampanga, the Court Sheriff, MCTC, Macabebe,
Pampanga and
Ruperta Cano Vda. de Viray, which decision placed Jesus Virays
widow, Ruperta, in possession of Lot 733-F of the Fajardo Plan.
As may be noted, the spouses Usi, instead of appealing from the
July 29, 1998 MCTC Decision in Civil Case No. 91 (13), sought,
after its finality, its annulment before the RTC. By
Decision22 dated June 29, 2000, the RTC dismissed the petition
to annul. The Usis appeal to the CA, docketed as CA-G.R. CV
No. 67945, merited the same dismissal action.23 And finally, in
G.R. No. 154538 (Spouses Jose and Amelita Usi v. Ruperta Cano
Vda. de Viray), the Court denied, on February 12, 2003, Sps. Usis
petition for review of the CAs Decision. The denial became final
on April 8, 2003 and an Entry of Judgment24 issued in due course.
(e) A Petition for Accion Publiciana/ Reivindicatoria 25 instituted
on December 12, 2001 by Sps. Usi against the late Jesus Viray,
as substituted by Vda. de Viray, et al., before the RTC in
Macabebe, Pampanga, docketed as Civil Case No. 01-1118(M),
involving Lots 733-B, 733-C-1 and 733-C-10 (Galang Plan)
covered by TCT Nos. 1585-RP, 2092-RP and 2101-RP.
The execution of the July 29, 1998 MCTC Decision in Civil Case
No. 91 (13), as the Sps. Usi asserted in their petition, would oust
them from their own in fee simple lots even though the dispositive
portion of said forcible entry Decision mentioned Lots 733-A and
733-F (Fajardo Plan) and not Lots 733-B, 733-C-1 and 733-C-10
(Galang Plan) which are registered in their names per TCT Nos.
1585-RP, 2092-RP and 2101-RP.
In time, Vda. de Viray moved for the dismissal26 of these
publiciana/ reivindicatoria actions on grounds, among others, of
litis pendentia and res judicata, on account of (1) the Sps. Usis
appeal, then pending before the CA, from the dismissal by the
RTC of Civil Case No. 99-0914M;27 and (2) the August 1, 1989
RTC Decision in Civil Case Nos. 88-0265-M and 88-0283-M, as
effectively affirmed by the CA, and finally by the Court in G.R. No.
122287. This motion to dismiss would, however, be denied by the
RTC through an Order28 of March 8, 2002, compelling Vda. de
Viray to file an answer,29 again invoking in defense the doctrine
of res judicata. Sps. Usis Reply to Answer30contained an
averment that their titles over the subject lots are the best
evidence of their ownership.
(f) An action for Cancellation of Titles or Surrender of Original
Titles with Damages31 commenced by Vda. de Viray, et al.,
against the Sps. Usi, Mendoza and eight others before the RTC,
Branch 54 in Macabebe, Pampanga, docketed as Civil Case No.
(02)-1164(M), seeking the cancellation of TCT Nos. 3614-R.P.,
2099-R.P., 2101-R.P., 7502-R.P. and 2103-R.P. covering Lots
733-C-8 to 733-C-12 as subdivided under the 2nd SA of April 5,
1991 which taken together is basically identical to Lot 733-F a contentious issue by force of the Courts Decision in G.R. No. 122287 The CA predicated its ruling on the interplay of the following
(Fajardo Plan) sold to Jesus Viray. effectively upholding the dismissal of the twin complaints to nullify the premises and findings: (a) the validity of the two (2) duly
deeds aforementioned. Likewise, the issue of who has the better notarized subdivision agreements, or the 1st SA and 2nd SA,
To recap, the six (6) cases thus filed involving portions of Lot
possessory right independent of title over the disputed lots has been which the LMB later approved; (b) the subdivisions of Lot 733 on
733 and their status are:
resolved in favor of Vda. de Viray and the Sps. Viray and against the the basis of the Galang Plan actually partook the nature of the
Usis and veritably put to rest by virtue of the Courts final, affirmatory partition of the shares of its co-owners; (c) what Mendoza
Civil The Action/Suit for Subject Disposition
Decision in G.R. No. 154538. conveyed through the April 29, 1986 deeds of absolute sale is
Case Parties Lot(s) only her ideal, abstract or pro-indiviso share of Lot 733 of which
No. Only two cases of the original six revolving around Lot 733 remained
she had full ownership, the conveyance or sale subject to the
unresolved. The first refers to the petition for review of the decision of
eventual delineation and partition of her share; (d) Vda. de Viray
88- Sps. Usi Annulment of Deed 733-A the CAininfavor
Decision CA-G.R. CVViray.
of Sps. No. 90344
Decisionwhich,
is in turn, is an appeal from the has not shown that fraud surrounded the execution of the
0265-M v. Sps. of Absolute Sale (Fajardo nowdecision
final. of the RTC in Civil Case No. 01-1118(M), a Petition for Accion partition of Lot 733 through the subdivision agreements of
Viray Plan) Publiciana/ Reivindicatoria and Damages, and the second is Civil Case
August 20, 1990 and April 5, 1991; (e) the certificates of title of
No. (02)-1164(M) for Cancellation of Titles or Surrender of Original Titles
the Sps. Usi constitute indefeasible proof of their ownership of
88- Mendoza Annulment of Deed 733-F with Damages.
Decision in favor ofThe
Sps.first case is subject of the present recourse, while
Viray. Lots 733-B, 733-C-1 and 733-C-10; (f) said certificate entitled the
0283-M v. Jesus of Absolute Sale (Fajardo the second
Subject is, per
of CA-G.R. CVrecords, still pending
Nos. 24981-82 before the RTC, Branch 54 in Sps. Usi to take possession thereof, the right to possess being
Viray Plan) Macabebe, Pampanga, its
denied. Subject of G.R. No. 122287 resolution doubtless on hold in light of the
merely an attribute of ownership; (g) Vda. de Viray can only go
instant
petition petition.
denied. after the partitioned shares of Mendoza in Lot 733; and (h) the
In the meantime, the Sps. Usi have remained in possession of what in issue of possessory right has been mooted by the judgment of
91 (13) Jesus Forcible Entry 733-F Judgment in favor
the Galang Planofare
Viray. No appeal.
designated as Lots 733-B, 733-C-1 and 733-C-10. ownership in favor of the Sps. Usi over Lots 733-B, 733-C-1 and
Viray v. (Fajardo 733-C-10.
Sps. Usi Plan) The Ruling of the RTC in Civil Case No. 01-1118(M)
Vda. de Viray sought but was denied reconsideration per the
As may be recalled, on June 21, 2007 in Civil Case No. 01-1118(M), the assailed June 2, 2010 CA Resolution.
90- Sps. Usi Petition for 733-F RTC dismissedPampanga
Macabebe, petition. RTC rendered judgment dismissing the petition
0914M v. Vda. Annulment of (Fajardo CA-G.R.
of the CV
Sps.No. for Accion
67945
Usi32 appealPubliciana/Reivindicatoria. In its dismissal Hence, We have this petition.
de Viray MCTC Plan) dismissed. G.R. RTC
action, the No. 154538 petition
held that the Sps. Usi failed to establish by
Decision in CC No. denied. The Issue
preponderance of evidence to support their claim of title, possession and
91 (13) ownership over the lots subject of their petition. WHETHER OR NOT THE COURT A QUO GRAVELY AND
SERIOUSLY ERRED IN REVERSING AND SETTING ASIDE
Following thethe
denial
RTC.of their motion for reconsideration per the RTCs
(02)- Vda. de Cancellation of Lots 733- Pending before THE DECISION OF THE RTC DISMISSING RESPONDENTS
1164(M) Viray v. Titles before RTC, C-8 Order33 of September 25, 2007, the Sps. Usi interposed an appeal
PETITION.34
Mendoza, Br. 55, Pampanga To 733- before the CA, docketed as CA-G.R. CV No. 90344.
et al. C-12 The Courts Ruling
The Ruling of the CA
(Lot 733- In the main, the issue tendered in this proceeding boils down to
F On July 24, 2009, the CA rendered the assailed decision, reversing and
the question of whether the two (2) subdivision agreements dated
(Fajardo setting aside the appealed June 21, 2007 RTC decision. The fallo of the
August 20, 1990 and April 5, 1991, respectively, partake of a bona
Plan) CA decision reads:
fide and legally binding partition contracts or arrangements among
WHEREFORE, the instant appeal is GRANTED and the assailed co-owners that validly effectuated the transfer of the subject lots
01- Sps. Usi Petition for 733-B, Petition dismissed.
Decision of the Regional Trial Court, REVERSED and SET ASIDE. to respondent spouses Usi. Intertwined with the main issue is the
1118(M) v. Vda. Accion Publiciana 733-C- CA-G.R.
JudgmentCV No. reversed
90344 rendered
is hereby RTC
declaring as legal and valid, the right of correlative question bearing on the validity of the deeds of
de Viray and Reivindicatoria 1 and Decision.
ownershipSubject of instant case, G.R.
of petitioner-appellant No.
respondents herein spouses Jose Usi absolute sale upon which the petitioners hinged their claim of
before RTC, Br. 55, 733-C- 192486
and Amelita T. Usi over Lot Nos. 733-B, 733-C-1 and 733-C-10 covered ownership and right of possession over said lots.
Pampanga 10 by TCT Nos. 1585-R.P., 2092-R.P, and 2101-R.P., respectively.
(Galang The Court rules in favor of petitioners.
Consequently, respondents-appellees herein petitioners are hereby
Plan) ordered to cease and desist from further committing acts of Petitioners contend first off that the CA erred in its holding that the
In sum, of the six (6) cases referred to above, the first four (4) dispossession or from disturbing possession and ownership of partitions of Lot 733 and later of the divided unit Lot 733-C
have been terminated and the main issue/s therein petitioners-appellants of the said property as herein described and following the Galang Plan were actually the partitions of the pro-
peremptorily resolved. To a precise point, the matter of the specified. Claims for damages, however, are hereby denied x x x. indiviso shares of its co-owners effectively conveying to them their
validity of the April 29, 1986 deeds of absolute sale conveying respective specific shares in the property.
SO ORDERED.
Lots 733-A and 733-F under the Fajardo Plan to Sps. Viray We agree with petitioners.
and Vda. de Viray (vice Jesus Viray), respectively, is no longer
First, the CAs holding aforestated is neither supported by, nor
deducible from, the evidentiary facts on record. He who
alleges must prove it. Respondents have the burden to
substantiate the factum probandum of their complaint or the
ultimate fact which is their claimed ownership over the lots in
question. They were, however, unsuccessful in adducing the
factum probans or the evidentiary facts by which the factum
probandum or ultimate fact can be established. As shall be
discussed shortly, facts and circumstances obtain arguing
against the claimed co-ownership over Lot 733.
Second, the earlier sale of Lot 733-A and Lot 733-F (Fajardo
Plan) on April 29, 1986 was valid and effective conveyances
of said portions of Lot 733. The subsequent transfers to the
Sps. Usi of substantially the same portions of Lot 733
accomplished through the subdivision agreements constitute
in effect double sales of those portions. This aberration was
brought to light by the results of the adverted survey
conducted sometime in June 22, 1999 of Engr. Nicdao of the
LMB.
Third, even granting arguendo that the subject subdivision
agreements were in fact but partitions of the pro-indiviso
shares of co-owners, said agreements would still be infirm, for
the Sps. Viray and Vda. de Viray (vice Jesus Viray) were
excluded from the transaction. Like Vda. de Mallari, Sps. Viray
and Jesus Viray had validly acquired and, hence, owned
portions of Lot 733 and are themselves co-owners of Lot 733.
And last, over and above the foregoing considerations, the
instant petition must be resolved in favor of petitioners, the
underlying reinvindicatory and possessory actions in Civil
Case No. 01-1118 (M) being barred by the application of the
res judicata principle. What is more, the issue of superior
possessory rights of petitioner Vda. de Viray over Lot 733-F
(Fajardo Plan) has been laid to rest with finality in Civil Case
No. 91 (13). Besides, Sps. Usis action to assail the final and
executory July 29, 1998 MCTC Decision in Civil Case No. 91
(13) has been denied with finality in G.R. No. 154538.
The subdivision agreements not partition of co-owners
Partition, in general, is the separation, division, and
assignment of a thing held in common by those to whom it
may belong.35
Contrary to the finding of the CA, the subdivision agreements
forged by Mendoza and her alleged co-owners were not for
the partition of pro-indiviso shares of co-owners of Lot 733 but
were actually conveyances, disguised as partitions, of
portions of Lot 733 specifically Lots 733-A and 733-B, and
portions of the subsequent subdivision of Lot 733-C.
Notably, after a full-blown trial in Civil Case No. 01-1118 (M)
wherein the spouses Usi merged an accion publiciana with an
accion reinvindicatoria in one petition, the RTC held that Sps. Usi failed petition for accion publicana/reivindicatoria. Said Joint Decision
to prove their case. However, in CA G.R. CV No. 90344, an appeal from amply shows, in gist, the allegations39 of both the Sps. Usi and
said RTC decision, the CA, while acknowledging the existence of the Mendoza in Civil Case Nos. 88-0265-M and 88-0283-M asserting
April 29, 1986 deeds of absolute sale, nonetheless accorded validity to said facts. And these assertions, made in their complaints, are
the August 20, 1990 and April 5, 1991 subdivision agreements. This is judicial admissions under Sec. 4,40 Rule 129 of the Rules of
incorrect. The CA held that the two (2) subdivision agreements, as Court.
notarized, enjoy the presumption of regularity and effectuated the
Unlike Vda. de Mallari who, per Vda. de Virays own admission,
property transfers covered thereby, obviously glossing over the mala
purchased the 416-square meter portion of Lot 733 on February
fides attendant the execution of the two subdivision agreements. It
14, 1984, thus constituting her (Vda. de Mallari) as co-owner of
cannot be overemphasized enough that the two (2) deeds of absolute
Mendoza to the extent of said area purchased,41 the Sps. Usi
sale over portions of substantially the same parcel of land antedated the
have not been shown to be co-owners with Mendoza. There is
subdivision agreements in question and their execution acknowledged
simply nothing in the records to demonstrate how the Sps. Usi
too before a notary public.
became co-owners of Lot 733 before or after the death of Moses
The appellate court found and so declared the subdivision agreements Mendoza. Elsewise put, no evidence had been adduced to show
valid without so much as explaining, let alone substantiating, its how the alleged interest of the Sps. Usi, as co-owner, came about,
determination. The CA never elucidated how the Sps. Usi became, in except for the bare assertions in the 1st and 2nd SAs that they co-
the first place co-owners, with Mendoza over Lot 733. On its face, TCT owned Lot 733 and Lot 733-C (Galang Plan).
141-RP covering Lot 733 was in the name of spouses Ellen and Moses
It is fairly clear that Lot 733, even from the fact alone of its being
Mendoza only. Then too, the CA did not explain how under the 2nd SA
registered under the name of the late Moses Mendoza and Ellen
the Sps. Usi, the Sps. Lacap, the Sps. Balingit and the Sps. Jordan
Mendoza, formed part of the couples conjugal property at the time
became co-owners with Mendoza over Lot 733-C, when Mendoza,
Moses demise on April 5, 1986. Equally clear, too, is that Vda. de
under the 1st SA, virtually represented herself as the sole owner of Lot
Mallari became a co-owner of Lot 733 by virtue of the purchase of
733-C.
its 416-square meter portion on February 14, 1984, during the
A scrutiny of the records with a fine-tooth comb likewise fails to lifetime of Moses. Be that as it may and given that the Sps. Usi
substantially show a partition of Lot 733 by its co-owners. While the 1st have not been shown to be co-owners of Mendoza and Vda. de
and 2nd SAs purport to be deeds of partition by and among co-owners Mallari prior to the sale by Mendoza on April 29, 1986 of Lots 733-
of the lot/s covered thereby, partition as a fact is belied by the evidence A and 733-F (Fajardo Plan) to the Sps. Viray and Jesus Viray,
extant on record. Consider: respectively, then the execution of the 1st SA on August 20, 1990
could not have been a partition by co-owners of Lot 733. The same
It is undisputed that TCT 141 RP covering Lot 733 was originally in the
could be said of the 2nd SA of April 5, 1991 vis--vis Lot 733-C,
name of Ellen P. Mendoza and husband, Moses.36 The joint decision of
for the records are similarly completely bereft of any evidence to
the RTC in Civil Case Nos. 88-0265 and 88-0283-M narrated how the
show on how the purported participating co-owners, namely Sps.
couple came to own Lot 733, thus: "Lot 733 was acquired by Spouses
Usi, the Sps. Lacap, the Sps. Balingit and the Sps. Jordan became
Moses Mendoza and Ellen Mendoza and Spouses Pacifico Bustos and
co-owners with Mendoza and her children, i.e., McDwight,
Maria Roman from Donato Lacap for P5,000.00 (Exh. "1") in 1977. After
Bismark, Beverly and Georgenia.
two years, Spouses Pacifico Bustos and Maria Roman sold one-half pro-
indiviso portion of Lot 733 to spouses Moses Mendoza and Ellen The April 29, 1986 Deeds of Absolute Sale
Mendoza for P6,000.00 (Exh. "2") and the acquisition cost of the whole
of Lot 733-A and Lot 733-F are Valid
lot is only P8,500.00 and x x x."37
It must be noted that the RTC, in its decision in Civil Case Nos.
Mendoza and the Sps. Usi, in their separate complaints for annulment
88-0265-M and 88-0283-M, upheld the validity of the separate
of deeds of sale, docketed as Civil Case Nos. 88-0265 and 88-0283-M
April 29, 1986 deeds of absolute sale of Lots 733-A and 733-F
of the Macabebe, Pampanga RTC, alleged that Moses Mendoza
(Fajardo Plan). The combined area of Lot 733-A (366 sq. m.) and
authorized Atty. Venancio Viray to sell the subject lot for at least PhP
Lot 733-F (3,501) is less than one half of the total area coverage
200 per square meter, and that after his (Moses) death on April 5, 1986,
of Lot 733 (9,137). The sale of one-half portion of the conjugal
Lot 733 was included in the proceedings for the settlement of his estate
property is valid as a sale. It cannot be gainsaid then that the
docketed as Sp. Proc. Case No. 86-0040-M of the RTC, Branch 55 in
deeds, executed as they were by the property owner, were
Macabebe, Pampanga, The events thus alleged by Mendoza and the
sufficient to transfer title and ownership over the portions covered
Usis can be gleaned from the final and executory joint decision in Civil
thereby. And the aforesaid RTC decision had become final and
Case Nos. 88-0265-M and 88-0283-M which petitioner Vda. de Viray
executory as far back as December 11, 1995 when the Court, in
attached as Annex "5" in her Answer with Counterclaim38 to the Usis
G.R. No. 122287, in effect, affirmed the RTC decision. Likewise,
the MCTCs decision in Civil Case No. 91 (13) for forcible
entry, declaring Vda. de Viray, as successor-in-interest of
Jesus Viray, as entitled to the physical possession, or
possession de facto, of Lot 733-F (Fajardo Plan), and the
RTCs decision in Civil Case No. 99-0914M, disposing of the
belated appeal of the MCTC decision in the forcible entry
case, have become final and executory on February 12, 2003
under G.R. No. 154538.
In light of the convergence of the foregoing disposed-of cases,
there can be no question as to the ownership of the Sps. Viray
and Vda. de Viray (vice Jesus Viray) over the specified and
delineated portions of Lot 733 which they purchased for value
from Mendoza. And Mendoza, as vendor, was bound to
transfer the ownership of and deliver, as well as warrant, the
thing which is the object of the sale.42
In the instant case, the April 29, 1986 deeds of absolute sale
indeed included the technical description of that part of Lot
733 subject of the transactions, thus clearly identifying the
portions (Lots 733-A and 733-F under the Fajardo Plan) sold
by Mendoza to the Sps. Viray and Vda. de Viray (vice Jesus
Viray). Hence, there can be no mistaking as to the identity of
said lots.
The deeds in question were, to reiterate, not only valid but
constitute prior conveyances of the disputed portions of Lot
733. Accordingly, the subsequent conveyances in 1990 and
1991 to the Sps. Usi through transfer contracts, styled as
subdivision agreements, resulted, in effect, in a double sale
situation involving substantially the same portions of Lot 733.
The survey report of LMB surveyor, Engr. Nicdao, would
support a finding of double sale. His report, as earlier
indicated, contained the following key findings: (1) Lot 733-A
(Fajardo Plan) with an area of 336 square meters thus sold to
the Sps. Viray is within Lot 733-B (Galang Plan), the part
assigned to Sps. Usi under the division; and (2) Lot 733-F
(Fajardo Plan) with an area of 3,501 square meters is almost
identical to the combined area of Lots 733-C-8 to 733-C-12
awarded to Ellen Mendoza and her children, McDwight,
Bismark, Beverly and Georgenia, and a portion (1,000 square
meters) of Lot 733-C-10 (Galang Plan) adjudicated to Sps.
Usi.
A double sale situation, which would call, if necessary, the
application of Art. 1544 of the Civil Code, arises when, as
jurisprudence teaches, the following requisites concur:
(a) The two (or more) sales transactions must
constitute valid sales;
(b) The two (or more) sales transactions must pertain
to exactly the same subject matter;
(c) The two (or more) buyers at odds over the rightful ownership
of the subject matter must each represent conflicting interests;
and
(d) The two (or more) buyers at odds over the rightful ownership
reivindicatoria is an action to recover ownership which necessarily
of the subject matter must each have bought from the very
same seller.43
From the facts, there is no valid sale from Mendoza to respondents Usi.
The parties did not execute a valid deed of sale conveying and
transferring the lots in question to respondents. What they rely on are
two subdivision agreements which do not explicitly chronicle the transfer
of said lots to them. Under the 1st SA, all that can be read is the
declaration that respondents, together with others, are the "sole and
exclusive owners" of the lots subject of said agreement. Per the 2nd SA,
it simply replicates the statement in the 1st SA that respondents are
"sole and exclusive undivided co-owners" with the other parties. While
respondents may claim that the SAs of 1990 and 1991 are convenient
conveying vehicles Mendoza resorted to in disposing portions of Lot 733
under the Galang Plan, the Court finds that said SAs are not valid legal
conveyances of the subject lots due to non-existent prestations pursuant
to Article 1305 which prescribes "a meeting of minds between two
persons whereby one binds himself, with respect to the other, to give
something or to render some service." The third element of cause of the
obligation which is established under Art. 1318 of the Civil Code is
likewise visibly absent from the two SAs. The transfer of title to
respondents based on said SAs is flawed, irregular, null and void. Thus
the two SAs are not "sales transactions" nor "valid sales" under Art. 1544
of the Civil Code and, hence, the first essential element under said legal
provision was not satisfied.1wphi1
Given the above perspective, the Sps. Viray and Vda. de Viray (vice
Jesus Viray) have, as against the Sps. Usi, superior rights over Lot 733-
A and Lot 733-F (Fajardo Plan) or portions thereof.
Res Judicata Applies
Notably, the Sps. Viray and Vda. de Viray, after peremptorily prevailing
in their cases supportive of their claim of ownership and possession of
Lots 733-A and 733-F (Fajardo Plan), cannot now be deprived of their
rights by the expediency of the Sps. Usi maintaining, as here, an accion
publiciana and/or accion reivindicatoria, two of the three kinds of actions
to recover possession of real property. The third, accion interdictal,
comprises two distinct causes of action, namely forcible entry and
unlawful detainer,44 the issue in both cases being limited to the right to
physical possession or possession de facto, independently of any claim
of ownership that either party may set forth in his or her
pleadings,45 albeit the court has the competence to delve into and
resolve the issue of ownership but only to address the issue of priority
of possession.46 Both actions must be brought within one year from the
date of actual entry on the land, in case of forcible entry, and from the
date of last demand to vacate following the expiration of the right to
possess, in case of unlawful detainer.47
When the dispossession or unlawful deprivation has lasted more
than one year, one may avail himself of accion publiciana to
determine the better right of possession, or possession de jure, of
realty independently of title. On the other hand, accion
includes recovery of possession.48
Now then, it is a hornbook rule that once a judgment becomes final
and executory, it may no longer be modified in any respect, even
if the modification is meant to correct an erroneous conclusion of
fact or law, and regardless of whether the modification is
attempted to be made by the court rendering it or by the highest
court of the land, as what remains to be done is the purely
ministerial enforcement or execution of the judgment.49 Any
attempt to reopen a close case would offend the principle of res
judicata.
Res judicata embraces two concepts or principles, the first is
designated as "bar by prior judgment" and the other,
"conclusiveness of judgment." Tiongson v. Court of
Appeals50 describes the effects of res judicata, as a bar by prior
judgment, in the following manner:
There is no question that where as between the first case where
the judgment is rendered and the second where such judgment is
invoked, there is identity of parties, subject matter and cause of
action, the judgment on the merits in the first case constitutes an
absolute bar to the subsequent action not only as to every matter
which was offered and received to sustain or defeat the claim or
demand, but also as to any other admissible matter which might
have been offered for that purpose and to all matters that could
have been adjudged in that case. x x x
Res judicata operates as bar by prior judgment if the following
requisites concur: (1) the former judgment or order must be final;
(2) the judgment or order must be on the merits; (3) the decision
must have been rendered by a court having jurisdiction over the
subject matter and the parties; and (4) there must be, between the
first and second action, identity of parties, of subject matter and of
causes of action.51 All the requisites are present in the instant
case.
The better right to possess and the right of ownership of Vda. de
Viray (vice Jose Viray) and the Sps. Viray over the disputed
parcels of land cannot, by force of the res judicata doctrine, be re-
litigated thru actions to recover possession and vindicate
ownership filed by the Sps. Usi. The Court, in G.R. No. 122287
(Ellen P. Mendoza and Jose and Amelita Usi v. Spouses Avelino
Viray and Margarita Masangcay and Jesus Carlo Gerard Viray),
has in effect determined that the conveyances and necessarily the
transfers of ownership made to the Sps. Viray and Vda. de Viray
(vice Jose Viray) on April 29, 1986 were valid. This determination
operates as a bar to the Usis reivindicatory action to assail the
April 29, 1986 conveyances and precludes the relitigation
between the same parties of the settled issue of ownership
and possession arising from ownership. It may be that the
spouses Usi did not directly seek the recovery of title or
possession of the property in question in their action for
annulment of the deed sale of sale. But it cannot be gainsaid
that said action is closely intertwined with the issue of
ownership, and affects the title, of the lot covered by the deed.
The prevalent doctrine, to borrow from Fortune Motors,
(Phils.), Inc. v. Court of Appeals,52 "is that an action for the
annulment or rescission of a sale of real property does not
operate to efface the fundamental and prime objective and
nature of the case, which is to recover said real property."
And lest it be overlooked, the Court, in G.R. No. 154538
(Spouses Jose and Amelita Usi v. Ruperta Cano Vda. de
Viray), again in effect ruled with finality that petitioner Vda. de
Viray has a better possessory right over Lot 733-F (Fajardo
Plan). Thus, the Courts decision in G.R. No. 122287
juxtaposed with that in G.R. No. 154538 would suffice to bar
the Sps. Usis accion publiciana, as the spouses had invoked
all along their ownership over the disputed Lot 733-F as basis
to defeat any claim of the right of possessiOn. While an accion
reivindicatoria is not barred by a judgment in an ejectment
case, such judgment constitutes a bar to the institution of the
accion publiciana, because the matter of possessioq between
the same parties has become res judicata and cannot be
delved into in a new action.53
The doctrine of res judicata is a basic postulate to the end that
controversies and issues once decided on the merits by a
court of competent jurisdiction shall remain in repose. It is
simply unfortunate that the RTC, in Civil Case No. 01-
1118(M), did not apply the doctrine of res judicata to the
instant case, despite petitioners, as respondents below, had
raised that ground both in their motion to dismiss and answer
to the underlying petition.
WHEREFORE, the instant petition is GRANTED. The
assailed Decision dated July 24, 2009 and Resolution dated
June 2, 2010 of the Court of Appeals in CA-G.R. CV No.
90344 are REVERSED and SET ASIDE. The Decision dated
June 21, 2007 in Civil Case No. 01-1118(M) of the RTC,
Branch 55 in Macabebe, Pampanga is accordingly
REINSTATED.
Costs against respondents.
SO ORDERED.