Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 171514

July 18, 2012

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
DOMINGO ESPINOSA, Respondent.
DECISION
REYES, J.:
This is a petition for review on certiorari from the Decision 1 dated November 11,
2004 and Resolution2 dated February 13, 2006 of the Court of Appeals in CA-G.R.
CV No. 72456.
On March 3, 1999, respondent Domingo Espinosa (Espinosa) tiled with the
Municipal Trial Court (MTC) of Consolacion, Cebu an application 3 for land
registration covering a parcel of land with an area of 5,525 square meters and
situated in Barangay Cabangahan, Consolacion, Cebu. In support of his
application, which was docketed as LRC Case No. N-81, Espinosa alleged that: (a)
the property, which is more particularly known as Lot No. 8499 of Cad. 545-D
(New), is alienable and disposable; (b) he purchased the property from his
mother, Isabel Espinosa (Isabel), on July 4, 1970 and the latters other heirs had
waived their rights thereto; and (c) he and his predecessor-in-interest had been
in possession of the property in the concept of an owner for more than thirty (30)
years.
Espinosa submitted the blueprint of Advanced Survey Plan 07-000893 4 to prove
the identity of the land. As proof that the property is alienable and disposable, he
marked as evidence the annotation on the advance survey plan made by Cynthia
L. Ibaez, Chief of the Map Projection Section, stating that "CONFORMED PER L.C.
MAP NOTATION L.C. Map No. 2545 Project No. 28 certified on June 25, 1963,
verified to be within Alienable & Disposable Area". 5 Espinosa also presented two
(2) tax declarations for the years 1965 and 1974 in Isabels name Tax
Declaration Nos. 013516 and 06137 to prove that she had been in possession
of the property since 1965. To support his claim that he had been religiously
paying the taxes due on the property, Espinosa presented a Certification 6 dated
December 1, 1998 issued by the Office of the Treasurer of Consolacion, Cebu and
three (3) tax declarations for the years 1978, 1980 and 1985 Tax Declaration
Nos. 14010, 17681 and 010717.8
Petitioner opposed Espinosas application, claiming that: (a) Section 48(b) of
Commonwealth Act No. 141 otherwise known as the "Public Land Act" (PLA) had

not been complied with as Espinosas predecessor-in-interest possessed the

property only after June 12, 1945; and (b) the tax declarations do not prove that
his possession and that of his predecessor-in-interest are in the character and for
the length of time required by law.
On August 18, 2000, the MTC rendered a Judgment 9 granting Espinosas petition
for registration, the dispositive portion of which states:
WHEREFORE, and in view of all the foregoing, judgment is hereby rendered
ordering for the registration and the confirmation of title of Espinosa over Lot No.
8499, Cad 545-D (New), situated at Barangay Cabangahan, Consolacion, Cebu,
Philippines, containing an area of 5,525 square meters and that upon the finality
of this decision, let a corresponding decree of registration be issued in favor of
the herein applicant in accordance with Section 39, P.D. 1529.
SO ORDERED.10
According to the MTC, Espinosa was able to prove that the property is alienable
and disposable and that he complied with the requirements of Section 14(1) of
Presidential Decree (P.D.) No. 1529. Specifically:
After a careful consideration of the evidence presented in the above-entitled
case, the Court is convinced, and so holds, that Espinosa was able to establish
his ownership and possession over the subject lot which is within the area
considered by the Department of Environment and Natural Resources (DENR) as
alienable and disposable land of the public domain.
The Court is likewise convinced that the applicant and that of predecessor-ininterest have been in open, actual, public, continuous, adverse and under claim
of title thereto within the time prescribed by law (Sec. 14, sub-par. 1, P.D. 1529)
and/or in accordance with the Land Registration Act. 11
Petitioner appealed to the CA and pointed Espinosas failure to prove that his
possession and that of his predecessor-in-interest were for the period required by
law. As shown by Tax Declaration No. 013516, Isabels possession commenced
only in 1965 and not on June 12, 1945 or earlier as required by Section 48(b) of
the PLA. On the other hand, Espinosa came into possession of the property only
in 1970 following the sale that transpired between him and his mother and the
earliest tax declaration in his name was for the year 1978. According to
petitioner, that Espinosa and his predecessor-in-interest were supposedly in
possession for more than thirty (30) years is inconsequential absent proof that
such possession began on June 12, 1945 or earlier. 12
Petitioner also claimed that Espinosas failure to present the original tracing cloth
of the survey plan or a sepia copy thereof is fatal to his application. Citing Del
Rosario v. Republic of the Philippines 13 and Director of Lands v. Judge

Reyes,14 petitioner argued that the submission of the original tracing cloth is
mandatory in establishing the identity of the land subject of the application. 15
Further, petitioner claimed that the annotation on the advance survey plan is not
the evidence admissible to prove that the subject land is alienable and
disposable.16
By way of the assailed decision, the CA dismissed petitioners appeal and
affirmed the MTC Decision dated August 18, 2000. The CA ruled that possession
for at least thirty (30) years, despite the fact that it commenced after June 12,
1945, sufficed to convert the property to private. Thus:
The contention of petitioner is not meritorious on the following grounds:
a) The record of the case will show that Espinosa has successfully established
valid title over the subject land and that he and his predecessor-in-interest have
been in continuous, adverse, public and undisturbed possession of said land in
the concept of an owner for more than 30 years before the filing of the
application. Established jurisprudence has consistently pronounced that "open,
continuous and exclusive possession for at least 30 years of alienable public land
ipso jure converts the same into private property (Director of Lands vs.
Intermediate Appellate Court, 214 SCRA 604). This means that occupation and
cultivation for more than 30 years by applicant and his predecessor-in-interest
vests title on such applicant so as to segregate the land from the mass of public
land (National Power Corporation vs. Court of Appeals, 218 SCRA 41); and
b) It is true that the requirement of possession since June 12, 1945 is the latest
amendment of Section 48(b) of the Public Land Act (C.A. No. 141), but a strict
implementation of the law would in certain cases result in inequity and
unfairness to Espinosa. As wisely stated by the Supreme Court in the case of
Republic vs. Court of Appeals, 235 SCRA 567:
"Following the logic of the petitioner, any transferee is thus foreclosed to apply
for registration of title over a parcel of land notwithstanding the fact that the
transferor, or his predecessor-in-interest has been in open, notorious and
exclusive possession thereof for thirty (30) years or more." 17
The CA also ruled that registration can be based on other documentary evidence,
not necessarily the original tracing cloth plan, as the identity and location of the
property can be established by other competent evidence.
Again, the aforesaid contention of [the petitioner] is without merit. While the best
evidence to identify a piece of land for registration purposes may be the original
tracing cloth plan from the Land Registration Commission, the court may
sufficiently order the issuance of a decree of registration on the basis of the blue
print copies and other evidence (Republic of the Philippines vs. Intermediate

Appellate Court, G.R. No. L-70594, October 10, 1986). The said case provides
further:
"The fact that the lower court finds the evidence of the applicant sufficient to
justify the registration and confirmation of her titles and did not find it necessary
to avail of the original tracing cloth plan from the Land Registration Commission
for purposes of comparison, should not militate against the rights of the
applicant. Such is especially true in this case where no clear, strong, convincing
and more preponderant proof has been shown by the oppositor to overcome the
correctness of said plans which were found both by the lower court and the Court
of Appeals as conclusive proofs of the description and identities of the parcels of
land contained therein."
There is no dispute that, in case of Del Rosario vs. Republic, supra the Supreme
Court pronounced that the submission in evidence of the original tracing cloth
plan, duly approved by the Bureau of Lands, in cases for application of original
registration of land is a mandatory requirement, and that failure to comply with
such requirement is fatal to ones application for registration. However, such
pronouncement need not be taken as an iron clad rule nor to be applied strictly
in all cases without due regard to the rationale behind the submission of the
tracing cloth plan.
x x x:
xxxx
As long as the identity of and location of the lot can be established by other
competent evidence like a duly approved blueprint copy of the advance survey
plan of Lot 8499 and technical description of Lot 8499, containing and identifying
the boundaries, actual area and location of the lot, the presentation of the
original tracing cloth plan may be excused. 18
Moreover, the CA ruled that Espinosa had duly proven that the property is
alienable and disposable:
Espinosa has established that Lot 8499 is alienable and disposable. In the duly
approved Advance Survey Plan As-07-0000893 (sic) duly approved by the Land
Management Services, DENR, Region 7, Cebu City, it is certified/verified that the
subject lot is inside the alienable and disposable area of the disposable and
alienable land of the public domain.19
Petitioner moved for reconsideration but this was denied by the CA in its
Resolution20 dated February 13, 2006.
Petitioners Case
Petitioner entreats this Court to reverse and set aside the CAs assailed decision
and attributes the following errors: (a) Espinosa failed to prove by competent

evidence that the subject property is alienable and disposable; (b) jurisprudence
dictates that a survey plan identifies the property in preparation for a judicial
proceeding but does not convert the property into alienable, much less, private;
(c) under Section 17 of P.D. No. 1529, the submission of the original tracing cloth
plan is mandatory to determine the exact metes and bounds of the property; and
(d) a blueprint copy of the survey plan may be admitted as evidence of the
identity and location of the property only if it bears the approval of the Director
of Lands.
Issues
The resolution of the primordial question of whether Espinosa has acquired an
imperfect title over the subject property that is worthy of confirmation and
registration is hinged on the determination of the following issues:
a. whether the blueprint of the advanced survey plan substantially
complies with Section 17 of P.D. No. 1529; and
b. whether the notation on the blueprint copy of the plan made by the
geodetic engineer who conducted the survey sufficed to prove that the
land applied for is alienable and disposable.
Our Ruling
The lower courts were unanimous in holding that Espinosas application is
anchored on Section 14(1) of P.D. No. 1529 in relation to Section 48(b) of the PLA
and the grant thereof is warranted in view of evidence supposedly showing his
compliance with the requirements thereof.
This Court is of a different view.
Based on Espinosas allegations and his supporting documents, it is patent that
his claim of an imperfect title over the property in question is based on Section
14(2) and not Section 14(1) of P.D. No. 1529 in relation to Section 48(b) of the
PLA. Espinosa did not allege that his possession and that of his predecessor-ininterest commenced on June 12, 1945 or earlier as prescribed under the two (2)
latter provisions. On the contrary, Espinosa repeatedly alleged that he acquired
title thru his possession and that of his predecessor-in-interest, Isabel, of the
subject property for thirty (30) years, or through prescription. Therefore, the rule
that should have been applied is Section 14(2) of P.D. No. 1529, which states:
Sec. 14. Who may apply. The following persons may file in the proper Court of
First Instance an application for registration of title to land, whether personally or
through their duly authorized representatives:
xxxx

(2) Those who have acquired ownership of private lands by prescription under
the provision of existing laws.
Obviously, the confusion that attended the lower courts disposition of this case
stemmed from their failure to apprise themselves of the changes that Section
48(b) of the PLA underwent over the years. Section 48(b) of the PLA originally
states:
Sec. 48. The following described citizens of the Philippines, occupying lands of
the public domain or claiming to own any such lands or an interest therein, but
whose titles have not been perfected or completed, may apply to the Court of
First Instance of the province where the land is located for confirmation of their
claims and the issuance of a certificate of title therefor, under the Land
Registration Act, to wit:
xxxx
(b) Those who by themselves or through their predecessors-in-interest have been
in the open, continuous, exclusive and notorious possession and occupation of
agricultural lands of the public domain, under a bona fide claim of acquisition or
ownership, except as against the Government, since July twenty-sixth, eighteen
hundred and ninety-four, except when prevented by war or force majeure. These
shall be conclusively presumed to have performed all the conditions essential to
a Government grant and shall be entitled to a certificate of title under the
provisions of this chapter.
Thus, the required possession and occupation for judicial confirmation of
imperfect title was since July 26, 1894 or earlier.
On June 22, 1957, Republic Act (R.A.) No. 1942 amended Section 48(b) of the PLA
by providing a thirty (30)-year prescriptive period for judicial confirmation of
imperfect title. Thus:
(b) Those who by themselves or through their predecessors-in-interest have been
in the open, continuous, exclusive and notorious possession and occupation of
agricultural lands of the public domain, under a bona fide claim of acquisition or
ownership, for at least thirty years immediately preceding the filing of the
application for confirmation of title except when prevented by war or force
majeure. These shall be conclusively presumed to have performed all the
conditions essential to a Government grant and shall be entitled to a certificate
of title under the provisions of this chapter.
On January 25, 1977, P.D. No. 1073 was issued, changing the requirement for
possession and occupation for a period of thirty (30) years to possession and
occupation since June 12, 1945 or earlier. Section 4 of P.D. No. 1073 states:
Sec. 4. The provisions of Section 48(b) and Section 48(c), Chapter VIII of the
Public Land Act are hereby amended in the sense that these provisions shall

apply only to alienable and disposable lands of the public domain which have
been in open, continuous, exclusive and notorious possession and occupation by
the applicant himself or thru his predecessor-in-interest, under a bona fide claim
of acquisition of ownership, since June 12, 1945.
On June 11, 1978, P.D. No. 1529 was enacted. Notably, the requirement for
possession and occupation since June 12, 1945 or earlier was adopted under
Section 14(1) thereof.
P.D. No. 1073, in effect, repealed R.A. No. 1942 such that applications under
Section 48(b) of the PLA filed after the promulgation of P.D. No. 1073 should
allege and prove possession and occupation that dated back to June 12, 1945 or
earlier. However, vested rights may have been acquired under Section 48(b)
prior to its amendment by P.D. No. 1073. That is, should petitions for registration
filed by those who had already been in possession of alienable and disposable
lands of the public domain for thirty (30) years at the time P.D. No. 1073 was
promulgated be denied because their possession commenced after June 12,
1945? In Abejaron v. Nabasa, 21 this Court resolved this legal predicament as
follows:
However, as petitioner Abejarons 30-year period of possession and occupation
required by the Public Land Act, as amended by R.A. 1942 ran from 1945 to
1975, prior to the effectivity of P.D. No. 1073 in 1977, the requirement of said
P.D. that occupation and possession should have started on June 12, 1945 or
earlier, does not apply to him. As the Susi doctrine holds that the grant of title by
virtue of Sec. 48(b) takes place by operation of law, then upon Abejarons
satisfaction of the requirements of this law, he would have already gained title
over the disputed land in 1975. This follows the doctrine laid down in Director of
Lands v. Intermediate Appellate Court, et al., that the law cannot impair vested
rights such as a land grant. More clearly stated, "Filipino citizens who by
themselves or their predecessors-in-interest have been, prior to the effectivity of
P.D. 1073 on January 25, 1977, in open, continuous, exclusive and notorious
possession and occupation of agricultural lands of the public domain, under a
bona fide claim of acquisition of ownership, for at least 30 years, or at least since
January 24, 1947" may apply for judicial confirmation of their imperfect or
incomplete title under Sec. 48(b) of the Public Land Act. 22 (Citations omitted)
Consequently, for one to invoke Section 48(b) and claim an imperfect title over
an alienable and disposable land of the public domain on the basis of a thirty
(30)-year possession and occupation, it must be demonstrated that such
possession and occupation commenced on January 24, 1947 and the thirty (30)year period was completed prior to the effectivity of P.D. No. 1073.
There is nothing in Section 48(b) that would suggest that it provides for two (2)
modes of acquisition. It is not the case that there is an option between
possession and occupation for thirty (30) years and possession and occupation
since June 12, 1945 or earlier. It is neither contemplated under Section 48(b) that

if possession and occupation of an alienable and disposable public land started

after June 12, 1945, it is still possible to acquire an imperfect title if such
possession and occupation spanned for thirty (30) years at the time of the filing
of the application.
In this case, the lower courts concluded that Espinosa complied with the
requirements of Section 48(b) of the PLA in relation to Section 14(1) of P.D. No.
1529 based on supposed evidence that he and his predecessor-in-interest had
been in possession of the property for at least thirty (30) years prior to the time
he filed his application. However, there is nothing on record showing that as of
January 25, 1977 or prior to the effectivity of P.D. No. 1073, he or Isabel had
already acquired title by means of possession and occupation of the property for
thirty (30) years. On the contrary, the earliest tax declaration in Isabels name
was for the year 1965 indicating that as of January 25, 1977, only twelve (12)
years had lapsed from the time she first came supposedly into possession.
The CAs reliance on Director of Lands v. Intermediate Appellate Court 23 is
misplaced considering that the application therein was filed on October 20, 1975
or before the effectivity of P.D. No. 1073. The same can be said with respect to
National Power Corporation v. Court of Appeals. 24 The petition for registration
therein was filed on August 21, 1968 and at that time, the prevailing rule was
that provided under Section 48(b) as amended by R.A. No. 1942.
In Republic v. Court of Appeals, 25 the applicants therein entered into possession
of the property on June 17, 1978 and filed their application on February 5, 1987.
Nonetheless, there is evidence that the individuals from whom the applicant
purchased the property, or their predecessors-in-interest, had been in possession
since 1937. Thus, during the effectivity of Section 48(b) as amended by R.A. No.
1942, or while the prevailing rule was possession and occupation for thirty (30)
years, or prior to the issuance of P.D. No. 1073, the thirty (30)-year prescriptive
period was already completed.
Thus, assuming that it is Section 48(b) of the PLA in relation to Section 14(1) of
P.D. No. 1529 that should apply in this case, as the lower courts held, it was
incumbent upon Espinosa to prove, among other things, that Isabels possession
of the property dated back at least to June 12, 1945. That in view of the
established fact that Isabels alleged possession and occupation started much
later, the lower courts should have dismissed Espinosas application outright.
In sum, the CA, as well as the MTC, erred in not applying the present text of
Section 48(b) of the PLA. That there were instances wherein applications were
granted on the basis of possession and occupation for thirty (30) years was for
the sole reason discussed above. Regrettably, such reason does not obtain in this
case.
Being clear that it is Section 14(2) of P.D. No. 1529 that should apply, it follows
that the subject property being supposedly alienable and disposable will not

suffice. As Section 14(2) categorically provides, only private properties may be

acquired thru prescription and under Articles 420 and 421 of the Civil Code, only
those properties, which are not for public use, public service or intended for the
development of national wealth, are considered private. In Heirs of Mario
Malabanan v. Republic,26 this Court held that there must be an official declaration
to that effect before the property may be rendered susceptible to prescription:
Nonetheless, Article 422 of the Civil Code states that "property of public
dominion, when no longer intended for public use or for public service, shall form
part of the patrimonial property of the State." It is this provision that controls
how public dominion property may be converted into patrimonial property
susceptible to acquisition by prescription. After all, Article 420(2) makes clear
that those property "which belong to the State, without being for public use, and
are intended for some public service or for the development of the national
wealth" are public dominion property. For as long as the property belongs to the
State, although already classified as alienable or disposable, it remains property
of the public dominion if when it is "intended for some public service or for the
development of the national wealth." (Emphasis supplied)
Accordingly, there must be an express declaration by the State that the public
dominion property is no longer intended for public service or the development of
the national wealth or that the property has been converted into patrimonial.
Without such express declaration, the property, even if classified as alienable or
disposable, remains property of the public dominion, pursuant to Article 420(2),
and thus incapable of acquisition by prescription. It is only when such alienable
and disposable lands are expressly declared by the State to be no longer
intended for public service or for the development of the national wealth that the
period of acquisitive prescription can begin to run. Such declaration shall be in
the form of a law duly enacted by Congress or a Presidential Proclamation in
cases where the President is duly authorized by law. 27
Thus, granting that Isabel and, later, Espinosa possessed and occupied the
property for an aggregate period of thirty (30) years, this does not operate to
divest the State of its ownership. The property, albeit allegedly alienable and
disposable, is not patrimonial. As the property is not held by the State in its
private capacity, acquisition of title thereto necessitates observance of the
provisions of Section 48(b) of the PLA in relation to Section 14(1) of P.D. No. 1529
or possession and occupation since June 12, 1945. For prescription to run against
the State, there must be proof that there was an official declaration that the
subject property is no longer earmarked for public service or the development of
national wealth. Moreover, such official declaration should have been issued at
least ten (10) or thirty (30) years, as the case may be, prior to the filing of the
application for registration. The period of possession and occupation prior to the
conversion of the property to private or patrimonial shall not be considered in
determining completion of the prescriptive period. Indeed, while a piece of land
is still reserved for public service or the development of national wealth, even if
the same is alienable and disposable, possession and occupation no matter how

lengthy will not ripen to ownership or give rise to any title that would defeat that
of the States if such did not commence on June 12, 1945 or earlier.
At any rate, as petitioner correctly pointed out, the notation on the survey plan
does not constitute incontrovertible evidence that would overcome the
presumption that the property belongs to the inalienable public domain.
All lands of the public domain belong to the State, which is the source of any
asserted right to any ownership of land. All lands not appearing to be clearly
within private ownership are presumed to belong to the State. Accordingly,
public lands not shown to have been reclassified or released as alienable
agricultural land, or alienated to a private person by the State, remain part of the
inalienable public domain. The burden of proof in overcoming the presumption of
State ownership of the lands of the public domain is on the person applying for
registration (or claiming ownership), who must prove that the land subject of the
application is alienable or disposable. To overcome this presumption,
incontrovertible evidence must be established that the land subject of the
application (or claim) is alienable or disposable. 28
In Republic v. Sarmiento,29 this Court reiterated the earlier ruling in Menguito v.
Republic30 that the notation made by a surveyor-geodetic engineer that the
property surveyed is alienable and disposable is not the positive government act
that would remove the property from the inalienable domain. Neither it is the
evidence accepted as sufficient to controvert the presumption that the property
is inalienable:
To discharge the onus, respondent relies on the blue print copy of the conversion
and subdivision plan approved by the DENR Center which bears the notation of
the surveyor-geodetic engineer that "this survey is inside the alienable and
disposable area, Project No. 27-B. L.C. Map No. 2623, certified on January 3, 1968
by the Bureau of Forestry."
Menguito v. Republic teaches, however, that reliance on such a notation to prove
that the lot is alienable is insufficient and does not constitute incontrovertible
evidence to overcome the presumption that it remains part of the inalienable
public domain.
"To prove that the land in question formed part of the alienable and disposable
lands of the public domain, petitioners relied on the printed words which read:
"This survey plan is inside Alienable and Disposable Land Area, Project No. 27-B
as per L.C. Map No. 2623, certified by the Bureau of Forestry on January 3, 1968,"
appearing on Exhibit "E" (Survey Plan No. Swo-13-000227).
This proof is not sufficient. Section 2, Article XII of the 1987 Constitution,
provides: "All lands of the public domain, waters, minerals, coal, petroleum, and
other mineral oils, all forces of potential energy, fisheries, forests or timber,

wildlife, flora and fauna, and other natural resources are owned by the
State. . . ."
For the original registration of title, the applicant (petitioners in this case) must
overcome the presumption that the land sought to be registered forms part of
the public domain. Unless public land is shown to have been reclassified or
alienated to a private person by the State, it remains part of the inalienable
public domain. Indeed, "occupation thereof in the concept of owner, no matter
how long, cannot ripen into ownership and be registered as a title." To overcome
such presumption, incontrovertible evidence must be shown by the applicant.
Absent such evidence, the land sought to be registered remains inalienable.
In the present case, petitioners cite a surveyor geodetic engineers notation in
Exhibit "E" indicating that the survey was inside alienable and disposable land.
Such notation does not constitute a positive government act validly changing the
classification of the land in question.
Verily, a mere surveyor has no authority to reclassify lands of the public domain.
By relying solely on the said surveyors assertion, petitioners have not
sufficiently proven that the land in question has been declared
alienable."31 (Citations omitted and underscoring supplied)
Therefore, even if Espinosas application may not be dismissed due to his failure
to present the original tracing cloth of the survey plan, there are numerous
grounds for its denial. The blueprint copy of the advanced survey plan may be
admitted as evidence of the identity and location of the subject property if: (a) it
was duly executed by a licensed geodetic engineer; (b) it proceeded officially
from the Land Management Services (LMS) of the DENR; and (c) it is
accompanied by a technical description of the property which is certified as
correct by the geodetic surveyor who conducted the survey and the LMS of the
DENR. As ruled in Republic v. Guinto-Aldana, 32 the identity of the land, its
boundaries and location can be established by other competent evidence apart
from the original tracing cloth such as a duly executed blueprint of the survey
plan and technical description:
Yet if the reason for requiring an applicant to adduce in evidence the original
tracing cloth plan is merely to provide a convenient and necessary means to
afford certainty as to the exact identity of the property applied for registration
and to ensure that the same does not overlap with the boundaries of the
adjoining lots, there stands to be no reason why a registration application must
be denied for failure to present the original tracing cloth plan, especially where it
is accompanied by pieces of evidencesuch as a duly executed blueprint of the
survey plan and a duly executed technical description of the propertywhich
may likewise substantially and with as much certainty prove the limits and
extent of the property sought to be registered. 33

However, while such blueprint copy of the survey plan may be offered as
evidence of the identity, location and the boundaries of the property applied for,
the notation therein may not be admitted as evidence of alienability and
disposability. In Republic v. Heirs of Juan Fabio, 34 this Court enumerated the
documents that are deemed relevant and sufficient to prove that the property is
already outside the inalienable public domain as follows:
In Republic v. T.A.N. Properties, Inc., we ruled that it is not enough for the
Provincial Environment and Natural Resources Office (PENRO) or CENRO to certify
that a land is alienable and disposable. The applicant for land registration must
prove that the DENR Secretary had approved the land classification and released
the land of the public domain as alienable and disposable, and that the land
subject of the application for registration falls within the approved area per
verification through survey by the PENRO or CENRO. In addition, the applicant
must present a copy of the original classification of the land into alienable and
disposable, as declared by the DENR Secretary, or as proclaimed by the
President. Such copy of the DENR Secretarys declaration or the Presidents
proclamation must be certified as a true copy by the legal custodian of such
official record.1wphi1 These facts must be established to prove that the land is
alienable and disposable.35 (Citation omitted)
Based on the foregoing, it appears that Espinosa cannot avail the benefits of
either Section 14(1) of P.O. No. 1529 in relation to Section 48(b) of the PLA or
Section 14(2) of P.O. No. 1529. Applying Section 14(1) of P.O. No. 1529 and
Section 48(b) of the PLA, albeit improper, Espinosa failed to prove that: (a)
Isabel's possession of the property dated back to June 12, 1945 or earlier; and
(b) the property is alienable and disposable. On the other hand, applying Section
14(2) of P.O. No. 1529, Espinosa failed to prove that the property is patrimonial.
As to whether Espinosa was able to prove that his possession and occupation
and that of Isabel were of the character prescribed by law, the resolution of this
issue has been rendered unnecessary by the foregoing considerations.
WHEREFORE, premises considered, the petition is GIVEN DUE COURSE and
GRANTED. The Decision dated November 11, 2004 and Resolution dated
February 13, 2006 of the Court of Appeals in CA-G.R. CV No. 72456 are
REVERSED and SET ASIDE and Domingo Espinosa's application for registration of
title over Lot No. 8499 of Cad. 545-D (New) located at Barangay Cabangahan,
Consolacion, Cebu is hereby DENIED for lack of merit. No pronouncement as to
costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 197676

February 4, 2014

REMMAN ENTERPRISES, INC. and CHAMBER OF REAL ESTATE AND

BUILDERS'ASSOCIATION, Petitioners,
vs.
PROFESSIONAL REGULATORY BOARD OF REAL ESTATE SERVICE and
PROFESSIONAL REGULATION COMMISSION, Respondents.
DECISION
VILLARAMA, JR., J.:
Assailed in this petition for review under Rule 45 is the Decision 1 dated July 12,
2011 of the Regional Trial Court (RTC) of Manila, Branch 42 denying the petition
to declare as unconstitutional Sections 28(a), 29 and 32 of Republic Act (R.A.) No.
9646.
R.A. No. 9646, otherwise known as the "Real Estate Service Act of the
Philippines" was signed into law on June 29, 2009 by President Gloria MacapagalArroyo. It aims to professionalize the real estate service sector under a
regulatory scheme of licensing, registration and supervision of real estate service
practitioners (real estate brokers, appraisers, assessors, consultants and
salespersons) in the country. Prior to its enactment, real estate service
practitioners were under the supervision of the Department of Trade and Industry
(DTI) through the Bureau of Trade Regulation and Consumer Protection (BTRCP),
in the exercise of its consumer regulation functions. Such authority is now
transferred to the Professional Regulation Commission (PRC) through the
Professional Regulatory Board of Real Estate Service (PRBRES) created under the
new law.
The implementing rules and regulations (IRR) of R.A. No. 9646 were promulgated
on July 21, 2010 by the PRC and PRBRES under Resolution No. 02, Series of 2010.
On December 7, 2010, herein petitioners Remman Enterprises, Inc. (REI) and the
Chamber of Real Estate and Builders Association (CREBA) instituted Civil Case
No. 10-124776 in the Regional Trial Court of Manila, Branch 42. Petitioners sought
to declare as void and unconstitutional the following provisions of R.A. No. 9646:

SEC. 28. Exemptions from the Acts Constituting the Practice of Real Estate
Service. The provisions of this Act and its rules and regulations shall not apply
to the following:
(a) Any person, natural or juridical, who shall directly perform by himself/herself
the acts mentioned in Section 3 hereof with reference to his/her or its own
property, except real estate developers;
xxxx
SEC. 29. Prohibition Against the Unauthorized Practice of Real Estate Service.
No person shall practice or offer to practice real estate service in the Philippines
or offer himself/herself as real estate service practitioner, or use the title, word,
letter, figure or any sign tending to convey the impression that one is a real
estate service practitioner, or advertise or indicate in any manner whatsoever
that one is qualified to practice the profession, or be appointed as real property
appraiser or assessor in any national government entity or local government
unit, unless he/she has satisfactorily passed the licensure examination given by
the Board, except as otherwise provided in this Act, a holder of a valid certificate
of registration, and professional identification card or a valid special/temporary
permit duly issued to him/her by the Board and the Commission, and in the case
of real estate brokers and private appraisers, they have paid the required bond
as hereto provided.
xxxx
SEC. 32. Corporate Practice of the Real Estate Service. (a) No partnership or
corporation shall engage in the business of real estate service unless it is duly
registered with the Securities and Exchange Commission (SEC), and the persons
authorized to act for the partnership or corporation are all duly registered and
licensed real estate brokers, appraisers or consultants, as the case may be. The
partnership or corporation shall regularly submit a list of its real estate service
practitioners to the Commission and to the SEC as part of its annual reportorial
requirements. There shall at least be one (1) licensed real estate broker for every
twenty (20) accredited salespersons.
(b) Divisions or departments of partnerships and corporations engaged in
marketing or selling any real estate development project in the regular course of
business must be headed by full-time registered and licensed real estate brokers.
(c) Branch offices of real estate brokers, appraisers or consultants must be
manned by a duly licensed real estate broker, appraiser or consultant as the case
may be.
In case of resignation or termination from employment of a real estate service
practitioner, the same shall be reported by the employer to the Board within a

period not to exceed fifteen (15) days from the date of effectivity of the
resignation or termination.
Subject to the provisions of the Labor Code, a corporation or partnership may
hire the services of registered and licensed real estate brokers, appraisers or
consultants on commission basis to perform real estate services and the latter
shall be deemed independent contractors and not employees of such
corporations. (Emphasis and underscoring supplied.)
According to petitioners, the new law is constitutionally infirm because (1) it
violates Article VI, Section 26 (1) of the 1987 Philippine Constitution which
mandates that "[e]very bill passed by Congress shall embrace only one subject
which shall be expressed in the title thereof"; (2) it is in direct conflict with
Executive Order (E.O.) No. 648 which transferred the exclusive jurisdiction of the
National Housing Authority (NHA) to regulate the real estate trade and business
to the Human Settlements Commission, now the Housing and Land Use
Regulatory Board (HLURB), which authority includes the issuance of license to
sell of subdivision owners and developers pursuant to Presidential Decree (P.D.)
No. 957; (3) it violates the due process clause as it impinges on the real estate
developers most basic ownership rights, the right to use and dispose property,
which is enshrined in Article 428 of the Civil Code; and (4) Section 28(a) of R.A.
No. 9646 violates the equal protection clause as no substantial distinctions exist
between real estate developers and the exempted group mentioned since both
are property owners dealing with their own property.
Additionally, petitioners contended that the lofty goal of nurturing and
developing a "corps of technically competent, reasonable and respected
professional real estate service practitioners" is not served by curtailing the right
of real estate developers to conduct their business of selling properties. On the
contrary, these restrictions would have disastrous effects on the real estate
industry as the additional cost of commissions would affect the pricing and
affordability of real estate packages. When that happens, petitioners claimed
that the millions of jobs and billions in revenues that the real estate industry
generates for the government will be a thing of the past.
After a summary hearing, the trial court denied the prayer for issuance of a writ
of preliminary injunction.
On July 12, 2011, the trial court rendered its Decision 2 denying the petition. The
trial court held that the assailed provisions are relevant to the title of the law as
they are intended to regulate the practice of real estate service in the country by
ensuring that those who engage in it shall either be a licensed real estate broker,
or under the latters supervision. It likewise found no real discord between E.O.
No. 648 and R.A. No. 9646 as the latter does not render nugatory the license to
sell granted by the HLURB to real estate developers, which license would still
subsist. The only difference is that by virtue of the new law, real estate
developers will now be compelled to hire the services of one licensed real estate

broker for every twenty salespersons to guide and supervise the coterie of
salespersons under the employ of the real estate developers.
On the issue of due process, the trial court said that the questioned provisions do
not preclude property owners from using, enjoying, or disposing of their own
property because they can still develop and sell their properties except that they
have to secure the services of a licensed real estate broker who shall oversee the
actions of the unlicensed real estate practitioners under their employ. Since the
subject provisions merely prescribe the requirements for the regulation of the
practice of real estate services, these are consistent with a valid exercise of the
States police power. The trial court further ruled that Section 28(a) does not
violate the equal protection clause because the exemption of real estate
developers was anchored on reasonable classification aimed at protecting the
buying public from the rampant misrepresentations often committed by
unlicensed real estate practitioners, and to prevent unscrupulous and unethical
real estate practices from flourishing considering the large number of consumers
in the regular course of business compared to isolated sale transactions made by
private individuals selling their own property.
Hence, this appeal on the following questions of law:
1. Whether there is a justiciable controversy for this Honorable Court to
adjudicate;
2. Whether [R.A. No. 9646] is unconstitutional for violating the "one titleone subject" rule under Article VI, Section 26 (1) of the Philippine
Constitution;
3. Whether [R.A. No. 9646] is in conflict with PD 957, as amended by EO
648, with respect to the exclusive jurisdiction of the HLURB to regulate real
estate developers;
4. Whether Sections 28(a), 29, and 32 of [R.A. No. 9646], insofar as they
affect the rights of real estate developers, are unconstitutional for
violating substantive due process; and
5. Whether Section 28(a), which treats real estate developers differently
from other natural or juridical persons who directly perform acts of real
estate service with reference to their own property, is unconstitutional for
violating the equal protection clause.3
The Courts Ruling
The petition has no merit.
Justiciable Controversy

The Constitution4 requires as a condition precedent for the exercise of judicial

power the existence of an actual controversy between litigants. An actual case or
controversy involves a conflict of legal rights, an assertion of opposite legal
claims susceptible to judicial resolution. 5 The controversy must be justiciable
definite and concrete touching on the legal relations of parties having adverse
legal interests, which may be resolved by a court of law through the application
of a law.6 In other words, the pleadings must show an active antagonistic
assertion of a legal right, on the one hand, and a denial thereof on the other; that
is, it must concern a real and not a merely theoretical question or issue. There
ought to be an actual and substantial controversy admitting of specific relief
through a decree conclusive in nature, as distinguished from an opinion advising
what the law would be upon a hypothetical state of facts. 7 An actual case is ripe
for adjudication when the act being challenged has a direct adverse effect on the
individual challenging it.8
There is no question here that petitioners who are real estate developers are
entities directly affected by the prohibition on performing acts constituting
practice of real estate service without first complying with the registration and
licensing requirements for brokers and agents under R.A. No. 9646. The
possibility of criminal sanctions for disobeying the mandate of the new law is
likewise real. Asserting that the prohibition violates their rights as property
owners to dispose of their properties, petitioners challenged on constitutional
grounds the implementation of R.A. No. 9646 which the respondents defended as
a valid legislation pursuant to the States police power. The Court thus finds a
justiciable controversy that calls for immediate resolution.
No Violation of One-Title One-Subject Rule
Section 26(1), Article VI of the Constitution states:
SEC. 26 (1). Every bill passed by the Congress shall embrace only one subject
which shall be expressed in the title thereof.
In Farias v. The Executive Secretary, 9 the Court explained the provision as
follows:
The proscription is aimed against the evils of the so-called omnibus bills and logrolling legislation as well as surreptitious and/or unconsidered encroaches. The
provision merely calls for all parts of an act relating to its subject finding
expression in its title.
To determine whether there has been compliance with the constitutional
requirement that the subject of an act shall be expressed in its title, the Court
laid down the rule that
Constitutional provisions relating to the subject matter and titles of statutes
should not be so narrowly construed as to cripple or impede the power of

legislation. The requirement that the subject of an act shall be expressed in its
title should receive a reasonable and not a technical construction. It is sufficient
if the title be comprehensive enough reasonably to include the general object
which a statute seeks to effect, without expressing each and every end and
means necessary or convenient for the accomplishing of that object. Mere details
need not be set forth. The title need not be an abstract or index of the
Act.10 (Emphasis supplied.)
The Court has previously ruled that the one-subject requirement under the
Constitution is satisfied if all the parts of the statute are related, and are
germane to the subject matter expressed in the title, or as long as they are not
inconsistent with or foreign to the general subject and title. 11 An act having a
single general subject, indicated in the title, may contain any number of
provisions, no matter how diverse they may be, so long as they are not
inconsistent with or foreign to the general subject, and may be considered in
furtherance of such subject by providing for the method and means of carrying
out the general object.12
It is also well-settled that the "one title-one subject" rule does not require the
Congress to employ in the title of the enactment language of such precision as to
mirror, fully index or catalogue all the contents and the minute details therein.
The rule is sufficiently complied with if the title is comprehensive enough as to
include the general object which the statute seeks to effect. 13 Indeed, this Court
has invariably adopted a liberal rather than technical construction of the rule "so
as not to cripple or impede legislation." 14
R.A. No. 9646 is entitled "An Act Regulating the Practice of Real Estate Service in
the Philippines, Creating for the Purpose a Professional Regulatory Board of Real
Estate Service, Appropriating Funds Therefor and For Other Purposes." Aside
from provisions establishing a regulatory system for the professionalization of
the real estate service sector, the new law extended its coverage to real estate
developers with respect to their own properties. Henceforth, real estate
developers are prohibited from performing acts or transactions constituting real
estate service practice without first complying with registration and licensing
requirements for their business, brokers or agents, appraisers, consultants and
salespersons.
Petitioners point out that since partnerships or corporations engaged in
marketing or selling any real estate development project in the regular course of
business are now required to be headed by full-time, registered and licensed real
estate brokers, this requirement constitutes limitations on the property rights
and business prerogatives of real estate developers which are not all reflected in
the title of R.A. No. 9646. Neither are real estate developers, who are already
regulated under a different law, P.D. No. 957, included in the definition of real
estate service practitioners.
We hold that R.A. No. 9646 does not violate the one-title, one-subject rule.

The primary objective of R.A. No. 9646 is expressed as follows:

SEC. 2. Declaration of Policy. The State recognizes the vital role of real estate
service practitioners in the social, political, economic development and progress
of the country by promoting the real estate market, stimulating economic activity
and enhancing government income from real property-based transactions.
Hence, it shall develop and nurture through proper and effective regulation and
supervision a corps of technically competent, responsible and respected
professional real estate service practitioners whose standards of practice and
service shall be globally competitive and will promote the growth of the real
estate industry.
We find that the inclusion of real estate developers is germane to the laws
primary goal of developing "a corps of technically competent, responsible and
respected professional real estate service practitioners whose standards of
practice and service shall be globally competitive and will promote the growth of
the real estate industry." Since the marketing aspect of real estate development
projects entails the performance of those acts and transactions defined as real
estate service practices under Section 3(g) of R.A. No. 9646, it is logically
covered by the regulatory scheme to professionalize the entire real estate
service sector.
No
Conflict
Between
and P.D. No. 957, as amended by E.O. No. 648

R.A.

No.

9646

Petitioners argue that the assailed provisions still cannot be sustained because
they conflict with P.D. No. 957 which decreed that the NHA shall have "exclusive
jurisdiction to regulate the real estate trade and business." Such jurisdiction
includes the authority to issue a license to sell to real estate developers and to
register real estate dealers, brokers or salesmen upon their fulfillment of certain
requirements under the law. By imposing limitations on real estate developers
property rights, petitioners contend that R.A. No. 9646 undermines the licenses
to sell issued by the NHA (now the HLURB) to real estate developers allowing
them to sell subdivision lots or condominium units directly to the public. Because
the HLURB has been divested of its exclusive jurisdiction over real estate
developers, the result is an implied repeal of P.D. No. 957 as amended by E.O.
No. 648, which is not favored in law.
It is a well-settled rule of statutory construction that repeals by implication are
not favored. In order to effect a repeal by implication, the later statute must be
so irreconcilably inconsistent and repugnant with the existing law that they
cannot be made to reconcile and stand together. The clearest case possible must
be made before the inference of implied repeal may be drawn, for inconsistency
is never presumed. There must be a showing of repugnance clear and convincing
in character. The language used in the later statute must be such as to render it
irreconcilable with what had been formerly enacted. An inconsistency that falls
short of that standard does not suffice.15 Moreover, the failure to add a specific

repealing clause indicates that the intent was not to repeal any existing law,
unless an irreconcilable inconsistency and repugnancy exist in the terms of the
new and old laws.16
There is nothing in R.A. No. 9646 that repeals any provision of P.D. No. 957, as
amended by E.O. No. 648. P.D. No. 957, otherwise known as "The Subdivision and
Condominium Buyers Protective Decree,"17 vested the NHA with exclusive
jurisdiction to regulate the real estate trade and business in accordance with its
provisions. It empowered the NHA to register, approve and monitor real estate
development projects and issue licenses to sell to real estate owners and
developers. It further granted the NHA the authority to register and issue/revoke
licenses of brokers, dealers and salesmen engaged in the selling of subdivision
lots and condominium units.
E.O. No. 648, issued on February 7, 1981, reorganized the Human Settlements
Regulatory Commission (HSRC) and transferred the regulatory functions of the
NHA under P.D. 957 to the HSRC. Among these regulatory functions were the (1)
regulation of the real estate trade and business; (2) registration of subdivision
lots and condominium projects; (3) issuance of license to sell subdivision lots and
condominium units in the registered units; (4) approval of performance bond and
the suspension of license to sell; (5) registration of dealers, brokers and
salesman engaged in the business of selling subdivision lots or condominium
units; and (6) revocation of registration of dealers, brokers and salesmen. 18
E.O. No. 90, issued on December 17, 1986, renamed the HSRC as the Housing
and Land Use Regulatory Board (HLURB) and was designated as the regulatory
body for housing and land development under the Housing and Urban
Development Coordinating Council (HUDCC). To date, HLURB continues to carry
out its mandate to register real estate brokers and salesmen dealing in
condominium, memorial parks and subdivision projects pursuant to Section 11 of
P.D. No. 957, which reads:
SECTION 11. Registration of Dealers, Brokers and Salesmen. No real estate
dealer, broker or salesman shall engage in the business of selling subdivision lots
or condominium units unless he has registered himself with the Authority in
accordance with the provisions of this section.
If the Authority shall find that the applicant is of good repute and has complied
with the applicable rules of the Authority, including the payment of the
prescribed fee, he shall register such applicant as a dealer, broker or salesman
upon filing a bond, or other security in lieu thereof, in such sum as may be fixed
by the Authority conditioned upon his faithful compliance with the provisions of
this Decree: Provided, that the registration of a salesman shall cease upon the
termination of his employment with a dealer or broker.
Every registration under this section shall expire on the thirty-first day of
December of each year. Renewal of registration for the succeeding year shall be

granted upon written application therefore made not less than thirty nor more
than sixty days before the first day of the ensuing year and upon payment of the
prescribed fee, without the necessity of filing further statements or information,
unless specifically required by the Authority. All applications filed beyond said
period shall be treated as original applications.
The names and addresses of all persons registered as dealers, brokers, or
salesmen shall be recorded in a Register of Brokers, Dealers and Salesmen kept
in the Authority which shall be open to public inspection.
On the other hand, Section 29 of R.A. No. 9646 requires as a condition precedent
for all persons who will engage in acts constituting real estate service, including
advertising in any manner ones qualifications as a real estate service
practitioner, compliance with licensure examination and other registration
requirements including the filing of a bond for real estate brokers and private
appraisers. While Section 11 of P.D. No. 957 imposes registration requirements
for dealers, brokers and salespersons engaged in the selling of subdivision lots
and condominium units, Section 29 of R.A. No. 9646 regulates all real estate
service practitioners whether private or government. While P.D. No. 957 seeks to
supervise brokers and dealers who are engaged in the sale of subdivision lots
and condominium units, R.A. No. 9646 aims to regulate the real estate service
sector in general by professionalizing their ranks and raising the level of ethical
standards for licensed real estate professionals.
There is no conflict of jurisdiction because the HLURB supervises only those real
estate service practitioners engaged in the sale of subdivision lots and
condominium projects, specifically for violations of the provisions of P.D. No. 957,
and not the entire real estate service sector which is now under the regulatory
powers of the PRBRES. HLURBs supervision of brokers and dealers to effectively
implement the provisions of P.D. No. 957 does not foreclose regulation of the real
estate service as a profession. Real estate developers already regulated by the
HLURB are now further required to comply with the professional licensure
requirements under R.A. No. 9646, as provided in Sections 28, 29 and 32. Plainly,
there is no inconsistency or contradiction in the assailed provisions of R.A. No.
9646 and P.D. No. 957, as amended.
The rule is that every statute must be interpreted and brought into accord with
other laws in a way that will form a uniform system of jurisprudence. The
legislature is presumed to have known existing laws on the subject and not to
have enacted conflicting laws.19 Congress, therefore, could not be presumed to
have intended Sections 28, 29 and 32 of R.A. No. 9646 to run counter to P.D. No.
957.
No Violation of Due Process
Petitioners contend that the assailed provisions of R.A. No. 9646 are unduly
oppressive and infringe the constitutional rule against deprivation of property

without due process of law. They stress that real estate developers are now
burdened by law to employ licensed real estate brokers to sell, market and
dispose of their properties. Despite having invested a lot of money, time and
resources in their projects, petitioners aver that real estate developers will still
have less control in managing their business and will be burdened with additional
expenses.
The contention has no basis. There is no deprivation of property as no restriction
on their use and enjoyment of property is caused by the implementation of R.A.
No. 9646. If petitioners as property owners feel burdened by the new
requirement of engaging the services of only licensed real estate professionals in
the sale and marketing of their properties, such is an unavoidable consequence
of a reasonable regulatory measure.
Indeed, no right is absolute, and the proper regulation of a profession, calling,
business or trade has always been upheld as a legitimate subject of a valid
exercise of the police power of the State particularly when their conduct affects
the execution of legitimate governmental functions, the preservation of the
State, public health and welfare and public morals. 20 In any case, where the
liberty curtailed affects at most the rights of property, the permissible scope of
regulatory measures is certainly much wider. To pretend that licensing or
accreditation requirements violate the due process clause is to ignore the settled
practice, under the mantle of police power, of regulating entry to the practice of
various trades or professions.21
Here, the legislature recognized the importance of professionalizing the ranks of
real estate practitioners by increasing their competence and raising ethical
standards as real property transactions are "susceptible to manipulation and
corruption, especially if they are in the hands of unqualified persons working
under an ineffective regulatory system." The new regulatory regime aimed to
fully tap the vast potential of the real estate sector for greater contribution to our
gross domestic income, and real estate practitioners "serve a vital role in
spearheading the continuous flow of capital, in boosting investor confidence, and
in promoting overall national progress."22
We thus find R.A. No. 9646 a valid exercise of the States police power. As we
said in another case challenging the constitutionality of a law granting discounts
to senior citizens:
The law is a legitimate exercise of police power which, similar to the power of
eminent domain, has general welfare for its object. Police power is not capable of
an exact definition, but has been purposely veiled in general terms to underscore
its comprehensiveness to meet all exigencies and provide enough room for an
efficient and flexible response to conditions and circumstances, thus assuring the
greatest benefits. Accordingly, it has been described as "the most essential,
insistent and the least limitable of powers, extending as it does to all the great
public needs." It is "[t]he power vested in the legislature by the constitution to

make, ordain, and establish all manner of wholesome and reasonable laws,
statutes, and ordinances, either with penalties or without, not repugnant to the
constitution, as they shall judge to be for the good and welfare of the
commonwealth, and of the subjects of the same."
For this reason, when the conditions so demand as determined by the legislature,
property rights must bow to the primacy of police power because property rights,
though sheltered by due process, must yield to general welfare.
Police power as an attribute to promote the common good would be diluted
considerably if on the mere plea of petitioners that they will suffer loss of
earnings and capital, the questioned provision is invalidated. Moreover, in the
absence of evidence demonstrating the alleged confiscatory effect of the
provision in question, there is no basis for its nullification in view of the
presumption of validity which every law has in its favor. 23 (Emphasis supplied.)
No Violation of Equal Protection Clause
Section 28 of R.A. No. 9646 exempts from its coverage natural and juridical
persons dealing with their own property, and other persons such as receivers,
trustees or assignees in insolvency or bankruptcy proceedings. However, real
estate developers are specifically mentioned as an exception from those
enumerated therein. Petitioners argue that this provision violates the equal
protection clause because it unjustifiably treats real estate developers differently
from those exempted persons who also own properties and desire to sell them.
They insist that no substantial distinctions exist between ordinary property
owners and real estate developers as the latter, in fact, are more capable of
entering into real estate transactions and do not need the services of licensed
real estate brokers.1wphi1 They assail the RTC decision in citing the reported
fraudulent practices as basis for the exclusion of real estate developers from the
exempted group of persons under Section 28(a).
We sustain the trial courts ruling that R.A. No. 9646 does not violate the equal
protection clause.
In Ichong v. Hernandez,24 the concept of equal protection was explained as
follows:
The equal protection of the law clause is against undue favor and individual or
class privilege, as well as hostile discrimination or the oppression of inequality. It
is not intended to prohibit legislation, which is limited either in the object to
which it is directed or by territory within which it is to operate. It does not
demand absolute equality among residents; it merely requires that all persons
shall be treated alike, under like circumstances and conditions both as to
privileges conferred and liabilities enforced. The equal protection clause is not
infringed by legislation which applies only to those persons falling within such
class, and reasonable grounds exists for making a distinction between those who

fall within such class and those who do not. (2 Cooley, Constitutional Limitations,
824-825).25
Although the equal protection clause of the Constitution does not forbid
classification, it is imperative that the classification should be based on real and
substantial differences having a reasonable relation to the subject of the
particular legislation.26 If classification is germane to the purpose of the law,
concerns all members of the class, and applies equally to present and future
conditions, the classification does not violate the equal protection guarantee. 27
R.A. No. 9646 was intended to provide institutionalized government support for
the development of "a corps of highly respected, technically competent, and
disciplined real estate service practitioners, knowledgeable of internationally
accepted standards and practice of the profession." 28 Real estate developers at
present constitute a sector that hires or employs the largest number of brokers,
salespersons, appraisers and consultants due to the sheer number of products
(lots, houses and condominium units) they advertise and sell nationwide. As
early as in the 70s, there has been a proliferation of errant developers,
operators or sellers who have reneged on their representation and obligations to
comply with government regulations such as the provision and maintenance of
subdivision roads, drainage, sewerage, water system and other basic
requirements. To protect the interest of home and lot buyers from fraudulent acts
and manipulations perpetrated by these unscrupulous subdivision and
condominium sellers and operators, P.D. No. 957 was issued to strictly regulate
housing and real estate development projects. Hence, in approving R.A. No.
9646, the legislature rightfully recognized the necessity of imposing the new
licensure requirements to all real estate service practitioners, including and more
importantly, those real estate service practitioners working for real estate
developers. Unlike individuals or entities having isolated transactions over their
own property, real estate developers sell lots, houses and condominium units in
the ordinary course of business, a business which is highly regulated by the State
to ensure the health and safety of home and lot buyers.
The foregoing shows that substantial distinctions do exist between ordinary
property owners exempted under Section 28(a) and real estate developers like
petitioners, and the classification enshrined in R.A. No. 9646 is reasonable and
relevant to its legitimate purpose. The Court thus rules that R.A. No. 9646 is valid
and constitutional.
Since every law is presumed valid, the presumption of constitutionality can be
overcome only by the clearest showing that there was indeed an infraction of the
Constitution, and only when such a conclusion is reached by the required
majority may the Court pronounce, in the discharge of the duty it cannot escape,
that the challenged act must be struck down. 29
Indeed, "all presumptions are indulged in favor of constitutionality; one who
attacks a statute, alleging unconstitutionality must prove its invalidity beyond a

reasonable doubt; that a law may work hardship does not render it
unconstitutional; that if any reasonable basis may be conceived which supports
the statute, it will be upheld, and the challenger must negate all possible bases;
that the courts are not concerned with the wisdom, justice, policy, or expediency
of a statute; and that a liberal interpretation of the constitution in favor of the
constitutionality of legislation should be adopted." 30
WHEREFORE, the petition is DENIED. The Decision dated July 12, 2011 of the
Regional Trial Court of Manila, Branch 42 in Civil Case No. 10-124776 is hereby
AFFIRMED and UPHELD. No pronouncement as to costs.
SO ORDERED.
G.R. No. 204926, December 03, 2014
ANACLETO C. MANGASER, REPRESENTED BY HIS ATTORNEY-IN-FACT EUSTAQUIO
DUGENIA, Petitioner, v. DIONISIO UGAY, Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari seeking to reverse and set aside the
June 13, 2012 Decision1and the December 5, 2012 Resolution2 of the Court of
Appeals (CA) in CA-G.R. SP No. 122153, entitled "Dionisio Ugay v. Anacleto C.
Mangaser, represented by his Attorney-in-fact Eustaquio Dugenia," a case of
forcible entry and damages.
The Facts
On October 30, 2007, petitioner Anacleto Mangaser, represented by his attorneyin-fact, Eustaquio Dugenia (petitioner), tiled a complaint for Forcible Entry with
Damages against respondent Dionisio Ugay (respondent) before the Municipal
Trial Court of Caba, La Union (MTC). In his complaint, petitioner alleged that he
was the registered owner and possessor of a parcel of land situated in Santiago
Sur, Caba, La Union, with an area of 10,632 square meters and covered by OCT
No. RP-174 (FP-13787) and Tax Declaration No. 014-00707; that on October 31,
2006, petitioner, discovered that respondent stealthy intruded and occupied a
portion of his property by constructing a residential house thereon without his
knowledge and consent; that he referred the matter to the Office of Lupong
Tagapamayapa for conciliation, but no settlement was reached, hence, a
certification to file action was issued by the Lupon; and that demand letters were
sent to respondent but he still refused to vacate the premises, thus, he was
constrained to seek judicial remedy.
Respondent denied the material allegations of the complaint and put up the
following defenses, to wit: that he had been a resident of Samara, Aringay, La
Union, since birth and when he reached the age of reason, he started occupying
a parcel of land in that place then known as Sta. Lucia, Aringay, La Union; that
years later, this parcel of land was designated as part of Santiago Sur, Caba, La
Union due to a survey made by the government; that he introduced more
improvements on the property by cultivating the land, and in March 2006, he put
up a "bahay kubo"; that in October 2006, he installed a fence made of "bolo" to
secure the property; that in installing the fence, he was guided by the concrete

monuments which he knew to be indicators of the boundaries of petitioner's

property; that while he could not locate some of the monuments, he based the
boundaries on his recollection since he was around when these were installed;
that he knew the boundaries of petitioner's property because he knew the extent
of the "iron mining" activities done by a company on the said property; that
petitioner was never in actual possession of the property occupied by him, and it
was only on October 31, 2006 when he discovered the alleged intrusion; that it
was not correct to say that be refused to vacate and surrender the premises
despite receipt of the demand letters because in his letter-reply, he assured
petitioner that he would voluntarily vacate the premises if he would only be
shown to have intruded into petitioner's titled lot after the boundaries were
pointed out to him; and that instead of showing the boundaries to him, petitioner
filed an action for forcible entry before the MTC.
MTC Ruling
On April 26, 2011, the MTC ruled in favor of respondent5. It stated that petitioner
failed to adduce any evidence to prove that the lot occupied by respondent was
within his lot titled under OCT No. RP-174 ( 13789). The MTC opined that
petitioner could have presented a relocation survey, which would have
pinpointed the exact location of the house and fence put up by respondent, and
resolved the issue once and for all.6 It also explained that petitioner failed to
prove his prior physical possession of the subject property. The OCT No. RP174(13789) registered under petitioner's name and the Tax Declaration were not
proof of actual possession of the property. The dispositive portion of which reads:
WHEREFORE, the plaintiff (petitioner) having failed to establish his case by
preponderance of evidence, the complaint is hereby DISMISSED.7
RTC Ruling
Aggrieved, petitioner appealed to the Regional Trial Court of Bauang, La
Union (RTC) and the case was raffled to Branch 33.
In its August 23, 2011 Decision,8 the RTC reversed the MTC decision and ruled in
favor of petitioner. It relied on the cases of Barba v. Court of Appeals9 and Nunez
v. SLTEAS Phoenix Solutions, Inc.,10 which held that in ejectment cases,
possession of the land did not only mean actual or physical possession but also
included the subject of the thing to the action of one's will or by the proper acts
and legal formalities established for acquiring such right. The RTC stated that
petitioner had clearly shown his possession of the property as evidenced by his
OCT No. RP-174(13789) issued in March 1987 and tax declaration, dating back as
early as 1995.11 It added that the boundaries of the property were clearly
indicated in the title, thus, there was no need to conduct a survey. As the owner,
petitioner knew the exact metes and bounds of his property so that when
respondent intruded stealthily, he filed the subject suit.
The dispositive portion of the RTC decision reads:
WHEREFORE, after a thorough perusal of the facts and evidence in this case, this
Court reverses the decision of the MTC, Caba, La Union, dated April 26, 2011 and
rules in favor of plaintiff appellant (petitioner) and against defendant-appellee

(respondent), ordering the latter and all other persons claiming rights under him
to:
1. VACATE the portion of the subject property encroached by him;
2. SURRENDER actual physical possession of the subject portion
peacefully to plaintiff-appellant;
3. REMOVE all the improvements he introduced therein;
4. PAY attorney's fees in the amount Php20,000.00 to plaintiffappellant, and pay the cost of suit.
SO ORDERED.
Undaunted, respondent appealed to the CA.
CA Ruling
The CA reversed and set aside the decision of the RTC. Citing Quizon v. Juan,14 it
emphasized that petitioner must allege and prove that he was in prior physical
possession of the property in dispute. The word "possession," as used in forcible
entry and unlawful detainer cases, meant nothing more than physical
possession, not legal possession in the sense contemplated in civil law. The CA
wrote that petitioner was not in physical possession despite the presentation of
the OCT No. RP-174( 13789) and his tax declarations.15 It reiterated that when
the law would speak of possession in forcible entry cases, it is prior physical
possession or possession de facto, as distinguished from possession de jure.
What petitioner proved was legal possession, not his prior physical possession.
Furthermore, the CA stated that the RTC misquoted Nuez v. SLTEAS Pheonix
Solutions16 by giving the wrong notion of what kind of possession was
contemplated in forcible entry cases. In other words, physical possession was the
crux
in
forcible
entry,
not
possession
that
stemmed
upon
ownership.17chanRoblesvirtualLawlibrary
The dispositive portion of the assailed decision reads:
WHEREFORE, premises considered, the Petition for Review is GRANTED,
accordingly, the Decision dated August 23, 2011 and Order dated October 25,
2011, of the RTC Branch 33, Bauang, La Union in Civil Case No. 2029-BG are
REVERSED and SET ASIDE. The Decision of the MTC dated April 26, 2011 is
hereby REINSTATED.
SO ORDERED.
Petitioner filed a motion for reconsideration,19 dated July 6, 2012, but it was
subsequently denied by the CA in a Resolution,20 dated December 5, 2012. It
reads:
This Court, after a meticulous study of the arguments set forth in the Motion for
Reconsideration filed by respondent, finds no cogent reason to revise, amend,
much less reverse, the assailed Decision dated June 13, 2012. The Motion for
Reconsideration
is,
thus,
DENIED
SO ORDERED.

Hence, this petition, anchored on the following

STATEMENT OF ISSUES
I
WHETHER OR NOT THE COURT OF APPEALS FAILED TO CONSIDER THE EVIDENCE
OF 0WNERSHIP OF PETITIONER WHICH MAY ESTABLISH PRIOR POSSESSION OVER
THE PROPERTY BY HEREIN PETITIONER.
II
WHETHER OR NOT THE RESOLUTION DATED DECEMBER 5, 2012 OF THE COURT
OF APPEALS, FORMER SPECIAL FOURTH DIVISION, DENYING THE MOTION FOR
RECONSIDERATION IS VALID.22
Petitioner argues that in ejectment cases, possession of the land does not only
mean actual or physical possession or occupation but also by the fact that a land
is subject to the action of one's will or by proper acts and legal formalities
established for acquiring such right; that the CA should have considered OCT No.
RP-174(13789) his tax declaration as proofs of prior physical possession over the
property; and that the issuance of the same are considered to by law as proper
acts and legal formalities established for acquiring such right. Petitioner cited
Tolentino, as one of the authors and experts in Civil law, stating that the "proper
acts and formalities" refer to juridical acts, or the acquisition of possession by
sufficient title, inter vivos or mortis causa, onerous or lucrative. These are the
acts which the law gives the force of acts of possession.
Petitioner also avers that the December 5, 2012 CA Resolution was not valid as it
did not state the legal basis required by the Constitution.
On May 28, 2013, respondent filed his Comment23 before this Court. He stated
that the issues raised and the arguments presented by petitioner have been
thoroughly resolved and ruled upon by the CA. The appellate court did not err in
reversing the RTC decision because petitioner was never in prior physical
possession of the property in dispute. Respondent asserts that he has been in
prior, actual, continuous, public, notorious, exclusive and peaceful possession in
the concept of an owner of the property in dispute.
On March 28, 2014, petitioner filed his Reply,25 reiterating the case of Nunez v.
SLTEAS Phoenix Solutions, Inc.,26 where a party was able to demonstrate that it
had exercised acts of ownership over the property by having it titled in its name
and by paying real property taxes on it. Petitioner also laments the wrongful
insistence of respondent that his possession over the property was one in the
concept of an owner. To petitioner's mind, respondent failed to adequately
adduce evidence to show proof of his right to possess the property when his
possession came under attack with the filing of the subject case.
The Court's Ruling
The Court finds the petition meritorious.
For a forcible entry suit to prosper, the plaintiffs must allege and prove:

(a) that they have prior physical possession of the property;

(b) that they were deprived of possession either by force, intimidation, threat.
strategy or stealth; and,
(c) that the action was filed within one (1) year from the time the owners or legal
possessors learned of their deprivation of the physical possession of the property.
There is only one issue in ejectment proceedings: who is entitled to physical or
material possession of the premises, that is, to possession de facto, not
possession de jure? Issues as to the right of possession or ownership are not
involved in the action; evidence thereon is not admissible, except only for the
purpose of determining the issue of possession.
As a rule, the word "possession" in forcible entry suits indeed refers to nothing
more than prior physical possession or possession de facto, not possession de
jure or legal possession in the sense contemplated in civil law. Title is not the
issue, and the absence of it "is not a ground for the courts to withhold relief from
the parties in an ejectment case."
The Court, however, has consistently ruled in a number of cases31 that while
prior physical possession is an indispensable requirement in forcible entry cases,
the dearth of merit in respondent's position is evident from the principle that
possession can be acquired not only by material occupation, but also by the fact
that a thing is subject to the action of one's will or by the proper acts and legal
formalities established for acquiring such right. The case of Quizon v.
Juan,32 which surprisingly was relied on by the CA, also stressed this doctrine.
Possession can be acquired by juridical acts. These are acts to which the law
gives the force of acts of possession. Examples of these are donations,
succession, execution and registration of public instruments, inscription of
possessory information titles and the like.33 The reason for this exceptional rule
is that possession in the eyes of the law does not mean that a man has to have
his feet on every square meter of ground before it can be said that he is in
possession.34 It is sufficient that petitioner was able to subject the property to
the action of his will.35 Here, respondent failed to show that he falls under any of
these circumstances. He could not even say that the subject property was leased
to him except that he promised that he would vacate it if petitioner would be
able to show the boundaries of the titled lot.
In the case of Nuez v. SLTEAS Phoenix Solutions, inc.,36 the subject parcel was
acquired by the respondent by virtue of the June 4, 1999 Deed of Assignment
executed in its favor by Spouses Ong Tiko and Emerenciana Sylianteng. The
petitioner in the said case argued that, aside from the admission in the complaint
that the subject parcel was left idle and unguarded, the respondent's claim of
prior possession was clearly negated by the fact that he had been in occupancy
thereof since 1999. The Court disagreed with the petitioner and said:
Although it did not immediately put the same to active use, respondent appears
to have additionally caused the property to be registered in its name as of
February 27, 2002 and to have paid the real property taxes due
thereon alongside the sundry expenses incidental thereto. Viewed in the light of
the foregoing juridical acts, it consequently did not matter that, by the time
respondent conducted its ocular inspection in October 2003, petitioner had
already been occupying the land since 1999.
[Emphasis and underscoring supplied]

Hence, in that case, the Court ruled that such juridical acts were sufficient to
establish the respondent's prior possession of the subject property.
The case of Habagat Grill v. DMC-Urban Property Developer. lnc.,37 also involves
an action for forcible entry. On June 11, 1981, David M. Consunji, Inc. acquired a
residential lot situated in Matina, Davao City, which was covered by TCT No. T82338. On June 13, 1981, it transferred the said lot to respondent DMC. Alleging
that the petitioner forcibly entered the property in December 1993, the
respondent filed on March 28, 1994 a complaint for forcible entry. One of the
1ssues raised therein was whether respondent DMC had prior possession of the
subject property, to which the Court answered in the affirmative. It ruled
that:chanroblesvirtuallawlibrary
Prior possession of the lot by respondent's predecessor was sufficiently proven
by evidence of the execution and registration of public instruments and by the
fact that the lot was subject to its will from then until December 1, 1993, when
petitioner unlawfully entered the premises and deprived the former of possession
thereof.
[Emphasis and underscoring supplied]
In the case at bench, the Court finds that petitioner acquired possession of the
subject property by juridical act, specifically, through the issuance of a free
patent under Commonwealth Act No. 141 and its subsequent registration with
the Register of Deeds on March 18, 1987.38chanRoblesvirtualLawlibrary
Before the Court continues any further, it must be determined first whether the
issue of ownership is material and relevant in resolving the issue of possession.
The Rules of Court in fact expressly allow this: Section 16, Rule 70 of the Rules of
Court provides that the issue of ownership shall be resolved in deciding the issue
of possession if the question of possession is intertwined with the issue of
ownership. But this provision is only an exception and is allowed only in this
limited instance to determine the issue of possession and only if the question of
possession
cannot
be
resolved
without
deciding
the
issue
of
ownership.39chanRoblesvirtualLawlibrary
This Court is of the strong view that the issue of ownership should be
provisionally determined in this case. First, the juridical act from which the right
of ownership of petitioner arise would be the registration of the free patent and
the issuance of OCT No. RP-174(13789). Apparently, the Torrens title suggests
ownership over the land. Second, respondent also asserts ownership over the
land based on his prior, actual, continuous, public, notorious, exclusive and
peaceful possession in the concept of an owner of the property in
dispute.40 Because there are conflicting claims of ownership, then it is proper to
provisionally determine the issue of ownership to settle the issue of
possession de
facto.
Returning to the case, this Court cannot agree with the CA that petitioner's OCT
No. RP-174(13789) and his tax declarations should absolutely be disregarded.
The issuance of an original certificate of title to the petitioner evidences
ownership and from it, a right to the possession of the property flows. Wellentrenched is the rule that a person who has a Torrens title over the property is
entitled
to
the
possession
thereof.41chanRoblesvirtualLawlibrary
Moreover, his claim of possession is coupled with tax declarations. While tax

declarations are not conclusive proof of possession of a parcel of land, they are
good indicia of possession in the concept of an owner, for no one in his right
mind would be paying taxes for a property that is not in his actual or constructive
possession.42 Together with the Torrens title, the tax declarations dated 1995
onwards presented by petitioner strengthens his claim of possession over the
land before his dispossession on October 31, 2006 by respondent.
The CA was in error in citing the case of De Grano v. Lacaba43 to support its
ruling. In that case, the respondent tried to prove prior possession, by presenting
only his tax declarations, tax receipt and a certification tlom the municipal
assessor attesting that he had paid real property tax from previous years. The
Court did not give credence to his claim because tax declarations and realty tax
payments are not conclusive proof of possession. The situation in the present
case differs because aside from presenting his tax declarations, the petitioner
submitted OCT No. RP-174(13789) which is the best evidence of ownership from
where
his
right
to
possession
arises.
Against the Torrens title and tax declarations of petitioner, the bare allegations of
respondent that he had prior, actual, continuous, public, notorious, exclusive and
peaceful possession in the concept of an owner, has no leg to stand on. Thus, by
provisionally resolving the issue of ownership, the Court is satisfied that
petitioner
had
prior
possession
of
the
subject
property.
When petitioner discovered the stealthy intrusion of respondent over his
registered property, he immediately filed a complaint with the Lupong
Tagapamayapa and subsequently filed an action for forcible entry with the MTC.
Instead of taking the law into his own hands and forcefully expelling respondent
from his property, petitioner composed himself and followed the established
legal
procedure
to
regain
possession
of
his
land.
If the Court were to follow the ruling of the CA and disregard juridical acts to
obtain prior possession, then it would create an absurd situation. It would be
putting premium in favor of land intruders against Torrens title holders, who
spent months, or even years, in order to register their land, and who religiously
paid real property taxes thereon. They cannot immediately repossess their
properties simply because they have to prove their literal and physical
possession of their property prior to the controversy. The Torrens title holders
would have to resort to ordinary civil procedure by filing either an accion
publiciana or accion reinvidicatoria and undergo arduous and protracted
litigation while the intruders continuously enjoy and rip the benefits of another
man's land. It will defeat the very purpose of the summary procedure of an
action
for
forcible
entry.
The underlying philosophy behind ejectment suits is to prevent breach of the
peace and criminal disorder and to compel the party out of possession to respect
and resort to the law alone to obtain what he claims is his. Ejectment
proceedings are summary in nature so the authorities can speedily settle actions
to recover possession because of the overriding need to quell sociaI
disturbances.44chanRoblesvirtualLawlibrary
As to the other requirements of an action for forcible entry, the Court agrees with
the RTC that petitioner had sufficiently complied with them. Petitioner proved
that he was deprived of possession of the property by stealth. The complaint was
also filed on October 30, 2007, within the one year reglementary period counted

from the discovery of the stealthy entry by respondent to the property on

October 31, 2006.
The second issue raised is the validity of the CA Resolution dated December 5,
2012. Petitioner alleges that the CA denied his reconsideration without indicating
its legal basis in violation of the mandate of Section 14, Article VIII of the
Constitution, which provides that no petition for review or motion for
reconsideration of a decision of the court shall be refused due course or denied
without stating the legal basis therefor. This requirement, however, was complied
with when the CA, in its resolution denying petitioner's motion for
reconsideration, stated that it "finds no cogent reason to reverse, amend, much
less
reverse
the
assailed
Decision,
dated
June
13,
2012."45chanRoblesvirtualLawlibrarychanrobleslaw
WHEREFORE, the petition is GRANTED. The June 13, 2012 Decision and the
December 5, 2012 Resolution of the Court of Appeals in CA-G.R. SP No. 122153
are hereby REVERSED and SET ASIDE.The August 23, 2011 Decision of the
Regional Trial Court, Branch 33, Bauang, La Union, is hereby REINSTATED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-23072

November 29, 1968

SIMEON B. MIGUEL, ET AL., plaintiffs-appellants,

vs.
FLORENDO CATALINO, defendant-appellee.
Bienvenido L. Garcia for plaintiffs-appellants.
Moises P. Cating for defendant-appellee.
REYES, J.B.L., J.:
Direct appeal from the judgment in Civil Case No. 1090 of the Court of First
Instance of Baguio, dismissing the plaintiffs' complaint for recovery of possession
of a parcel of land, registered under Act 496, in the name of one Bacaquio, 1 a
long-deceased illiterate non-Christian resident of Mountain Province, and
declaring the defendant to be the true owner thereof.
On January 22, 1962, appellants Simeon, Emilia and Marcelina Miguel, and
appellant Grace Ventura brought suit in the Court below against Florendo

Catalino for the recovery of the land above-described, plaintiffs claiming to be

the children and heirs of the original registered owner, and averred that
defendant, without their knowledge or consent, had unlawfully taken possession
of the land, gathered its produce and unlawfully excluded plaintiffs therefrom.
Defendant answered pleading ownership and adverse possession for 30 years,
and counterclaimed for attorney's fees. After trial the Court dismissed the
complaint, declared defendant to be the rightful owner, and ordered the Register
of Deeds to issue a transfer certificate in lieu of the original. Plaintiffs appealed
directly to this Court, assailing the trial Court's findings of fact and law.
As found by the trial Court, the land in dispute is situated in the Barrio of San
Pascual, Municipality of Tuba, Benguet, Mountain Province and contains an area
of 39,446 square meters, more or less. It is covered by Original Certificate of Title
No. 31, which was issued on 28 December 1927 in the name of Bacaquio (or
Bakakew), a widower. No encumbrance or sale has ever been annotated in the
certificate of title.
The plaintiff-appellant Grace Ventura2 is the only child of Bacaquio by his first
wife, Debsay, and the other plaintiffs-appellants, Simeon, Emilia and Marcelina,
all surnamed "Miguel", are his children by his third wife, Cosamang. He begot no
issue with his second wife, Dobaney. The three successive wives have all died.
Bacaquio, who died in 1943, acquired the land when his second wife died and
sold it to Catalino Agyapao, father of the defendant Florendo Catalino, for
P300.00 in 1928. Of the purchase price P100.00 was paid and receipted for when
the land was surveyed, but the receipt was lost; the balance was paid after the
certificate of title was issued. No formal deed of sale was executed, but since the
sale in 1928, or for more than 30 years, vendee Catalino Agyapao and his son,
defendant-appellee Florendo Catalino, had been in possession of the land, in the
concept of owner, paying the taxes thereon and introducing improvements.
On 1 February 1949, Grace Ventura, by herself alone, "sold" (as per her
Transferor's Affidavit, Exhibit "6") anew the same land for P300.00 to defendant
Florendo Catalino.
In 1961, Catalino Agyapao in turn sold the land to his son, the defendant
Florendo Catalino.
This being a direct appeal from the trial court, where the value of the property
involved does not exceed P200,000.00, only the issues of law are reviewable by
the Supreme Court, the findings of fact of the court a quobeing deemed
conceded by the appellant (Jacinto v. Jacinto, 105 Phil. 1218; Del Castillo v.
Guerro, L-11994, 25 July 1960; Abuyo, et al. v. De Suazo, L-21202, 29 Oct. 1966;
18 SCRA 600, 601). We are thus constrained to discard appellant's second and
third assignments of error.

In their first assignment, appellants assail the admission in evidence over the
objection of the appellant of Exhibit "3". This exhibit is a decision in favor of the
defendant-appellee against herein plaintiff-appellant Grace Ventura, by the
council of Barrio of San Pascual, Tuba, Benguet, in its Administrative Case No. 4,
for the settlement of ownership and possession of the land. The decision is ultra
vires because barrio councils, which are not courts, have no judicial powers (Sec.
1, Art. VIII, Constitution; see Sec. 12, Rep. Act 2370, otherwise known as the
Barrio Charter). Therefore, as contended by appellants, the exhibit is not
admissible in a judicial proceeding as evidence for ascertaining the truth
respecting the fact of ownership and possession (Sec. 1, Rule 128, Rules of
Court).
Appellants are likewise correct in claiming that the sale of the land in 1928 by
Bacaquio to Catalino Agyapao, defendant's father, is null and void ab initio, for
lack of executive approval (Mangayao et al. vs. Lasud, et al., L-19252, 29 May
1964). However, it is not the provisions of the Public Land Act (particularly
Section 118 of Act 2874 and Section 120 of Commonwealth Act 141) that nullify
the transaction, for the reason that there is no finding, and the contending
parties have not shown, that the land titled in the name of Bacaquio was
acquired from the public domain (Palad vs. Saito, 55 Phil. 831). The laws
applicable to the said sale are: Section 145(b) of the Administrative Code of
Mindanao and Sulu, providing that no conveyance or encumbrance of real
property shall be made in that department by any non-christian inhabitant of the
same, unless, among other requirements, the deed shall bear indorsed upon it
the approval of the provincial governor or his representative duly authorized in
writing for the purpose; Section 146 of the same Code, declaring that every
contract or agreement made in violation of Section 145 "shall be null and void";
and Act 2798, as amended by Act 2913, extending the application of the above
provisions to Mountain Province and Nueva Vizcaya.
Since the 1928 sale is technically invalid, Bacaquio remained, in law, the owner
of the land until his death in 1943, when his title passed on, by the law on
succession, to his heirs, the plaintiffs-appellants.
Notwithstanding the errors aforementioned in the appealed decision, we are of
the opinion that the judgment in favor of defendant-appellee Florendo Catalino
must be sustained. For despite the invalidity of his sale to Catalino Agyapao,
father of defendant-appellee, the vendor Bacaquio suffered the latter to enter,
possess and enjoy the land in question without protest, from 1928 to 1943, when
the seller died; and the appellants, in turn, while succeeding the deceased, also
remained inactive, without taking any step to reivindicate the lot from 1944 to
1962, when the present suit was commenced in court. Even granting appellants'
proposition that no prescription lies against their father's recorded title, their
passivity and inaction for more than 34 years (1928-1962) justifies the
defendant-appellee in setting up the equitable defense of laches in his own
behalf. As a result, the action of plaintiffs-appellants must be considered barred
and the Court below correctly so held. Courts can not look with favor at parties

who, by their silence, delay and inaction, knowingly induce another to spend
time, effort and expense in cultivating the land, paying taxes and making
improvements thereon for 30 long years, only to spring from ambush and claim
title when the possessor's efforts and the rise of land values offer an opportunity
to make easy profit at his expense. In Mejia de Lucas vs. Gamponia, 100 Phil.
277, 281, this Court laid down a rule that is here squarely applicable:
Upon a careful consideration of the facts and circumstances, we are
constrained to find, however, that while no legal defense to the action lies,
an equitable one lies in favor of the defendant and that is, the equitable
defense of laches. We hold that the defense of prescription or adverse
possession in derogation of the title of the registered owner Domingo
Mejia does not lie, but that of the equitable defense of laches. Otherwise
stated, we hold that while defendant may not be considered as having
acquired title by virtue of his and his predecessors' long continued
possession for 37 years, the original owner's right to recover back the
possession of the property and title thereto from the defendant has, by the
long period of 37 years and by patentee's inaction and neglect, been
converted into a stale demand.
As in the Gamponia case, the four elements of laches are present in the case at
bar, namely: (a) conduct on the part of the defendant, or of one under whom he
claims, giving rise to the situation of which complaint is made and for which the
complaint seeks a remedy; (b) delay in asserting the complainant's rights, the
complainant having had knowledge or notice, of the defendant's conduct and
having been afforded an opportunity to institute a suit; (c) lack of knowledge or
notice on the part of the defendant that the complainant would assert the right
on which he bases his suit; and (d) injury or prejudice to the defendant in the
event relief is accorded to the complainant, or the suit is not held to be barred. In
the case at bar, Bacaquio sold the land in 1928 but the sale is void for lack of the
governor's approval. The vendor, and also his heirs after him, could have
instituted an action to annul the sale from that time, since they knew of the
invalidity of the sale, which is a matter of law; they did not have to wait for 34
years to institute suit. The defendant was made to feel secure in the belief that
no action would be filed against him by such passivity, and also because he
"bought" again the land in 1949 from Grace Ventura who alone tried to question
his ownership; so that the defendant will be plainly prejudiced in the event the
present action is not held to be barred.
The difference between prescription and laches was elaborated in Nielsen & Co.,
Inc. vs. Lepanto Consolidated Mining Co., L-21601, 17 December 1966, 18 SCRA
p. 1040, as follows:
Appellee is correct in its contention that the defense of laches applies
independently of prescription. Laches is different from the statute of
limitations. Prescription is concerned with the fact of delay, whereas
laches is concerned with the effect of delay. Prescription is a matter of

time; laches is principally a question of inequity of permitting a claim to be

enforced, this inequity being founded on some change in the condition of
the property or the relation of the parties. Prescription is statutory; laches
is not. Laches applies in equity, whereas prescription applies at law.
Prescription is based on fixed time laches is not, (30 C.J.S., p. 522. See
also Pomeroy's Equity Jurisprudence, Vol. 2, 5th ed., p. 177) (18 SCRA
1053).
With reference to appellant Grace Ventura, it is well to remark that her situation
is even worse than that of her co-heirs and co-plaintiffs, in view of her executing
an affidavit of transfer (Exh. 6) attesting under oath to her having sold the land
in controversy to herein defendant-appellee, and the lower Court's finding that in
1949 she was paid P300.00 for it, because she, "being a smart woman of
enterprise, threatened to cause trouble if the defendant failed to give her
P300.00 more, because her stand (of being the owner of the land) was
buttressed by the fact that Original Certificate of Title No. 31 is still in the name
of her father, Bacaquio" (Decision, Record on Appeal, p. 24). This sale, that was
in fact a quitclaim, may not be contested as needing executive approval; for it
has not been shown that Grace Ventura is a non-christian inhabitant like her
father, an essential fact that cannot be assumed (Sale de Porkan vs. Yatco, 70
Phil. 161, 175).
Since the plaintiffs-appellants are barred from recovery, their divestiture of all
the elements of ownership in the land is complete; and the Court a quo was
justified in ordering that Bacaquio's original certificate be cancelled, and a new
transfer certificate in the name of Florendo Catalino be issued in lieu thereof by
the Register of Deeds.
FOR THE FOREGOING REASONS, the appealed decision is hereby affirmed, with
costs against the plaintiffs-appellants.

THIRD DIVISION
[G.R. No. 133317. June 29, 1999]
ANTONIO R. AGRA, CAYETANO FERRERIA, NAPOLEON M. GAMO and
VICENTE O. NOVALES, petitioners, vs.PHILIPPINE NATIONAL
BANK, respondent.
DECISION
PANGANIBAN, J.:

Laches is a recourse in equity. Equity, however, is applied only in the

absence, never in contravention, of statutory law. Thus, laches cannot, as a rule,
abate a collection suit filed within the prescriptive period mandated by the Civil
Code.
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, assailing the November 26, 1997 Decision of the Court of Appeals, [1]which
disposed as follows:
IN VIEW OF THE FOREGOING, the decision of the lower court is hereby AFFIRMED,
with the modification that the award of attorneys fees is hereby DELETED and
the twelve percent (12%) interest on the P2,500,000.00 the defendant-appellants
are to pay PNB should start from August 30, 1976, the date when the complaint
was filed.[2]
The decretal portion of the aforementioned trial court ruling reads:
WHEREFORE, in view of the foregoing, in the interest of justice, judgment is
rendered in favor of the plaintiff ordering all the sureties jointly and severally, to
pay PNB as follows:
a) the amount of P2,500,000.00 plus twelve per centum (12%) accrued interest
from August 1, 1976;
b) ten percent (10%) of the total amount due as attorneys fees and cost of the
suit.
SO ORDERED.
Also assailed by petitioners is the April 2, 1998 Resolution of the Court of
Appeals, which denied their Motion for Reconsideration. [3]
The Facts
The facts are summarized by the Court of Appeals (CA) in this wise: [4]
On August 30, 1976, an action for collection of a sum of money was filed by
the Philippine National Bank (PNB, for brevity) against Fil-Eastern Wood
Industries, Inc. (Fil-Eastern, for short) in its capacity as principal debtor and
against Cayetano Ferreria, Pedro Atienza, Vicente O. Novales, Antonio R. Agra,
and Napoleon M. Gamo in their capacity as sureties.
In its complaint, plaintiff PNB alleged that on July 17, 1967 Fil-Eastern was
granted a loan in the amount of [t]wo [m]illion [f]ive [h]undred [t]housand
[p]esos (P2,500,000.00) with interest at twelve percent (12%) per
annum. Drawings from said demand loan were made on different dates as

evidenced by several promissory notes and were credited to the account of FilEastern. To secure the payment of the said loan Fil-Eastern as principal and
sureties Ferreria, Atienza, Novales, Agra, and Gamo executed a Surety
Agreement whereby the sureties, jointly and severally with the principal,
guaranteed and warranted to PNB, its successors or assigns, prompt payment of
subject obligation including notes, drafts, bills of exchange, overdrafts and other
obligations of every kind, on which Fil-Eastern was indebted or may thereafter
become indebted to PNB. It was further alleged that as of May 31, 1976 the total
indebtedness of Fil-Eastern and its sureties on subject loan amounted to [f]ive
[m]illion [t]wo [h]undred [n]inety-[s]even [t]housand, [n]ine [h]undred [s]eventy[s]ix [p]esos and [s]eventeen [c]entavos (P5,297,976.17), excluding attorneys
fees. Notwithstanding repeated demands, the defendants refused and failed to
pay their loans.
The defendants (herein sureties) filed separate answers (pp. 49, 68, 205, 208
and 231). Collating these, We drew the following: All of them claimed that they
only signed the Surety Agreement with the understanding that the same was a
mere formality required of the officers of the corporation. They did not in any
way or manner receive a single cent from the proceeds of said loan and/or derive
any profit therefrom. Neither did they receive any consideration valuable or
otherwise, from defendant Fil-Eastern. They further claim that the loan in
question was negotiated and approved under highly irregular, anomalous and
suspicious circumstances to the point that the Surety Agreement executed
thereafter is invalid, null and void and without force and effect. The extension of
time of payment of the loan in question released and discharged the answering
defendants from any liability under the Surety Agreement. The Surety Agreement
is null and void from the beginning due to a defect in the consent of the
defendants and that their liabilities under the Surety Agreement, if any, has been
extinguished by novation. The cause of action of the complainant is barred
by laches and estoppel in that the plaintiff with full knowledge of the
deteriorating financial condition of Fil-Eastern did not take steps to collect from
said defendant corporation while still solvent. They also maintained that if
anyone is liable for the payment of said loan, it is Felipe Ysmael, Jr. and not them
or it is only Fil-Eastern and the controlling officers who profited and made use of
the proceeds of the loan. Defendant Agra likewise said that he was made to sign
the Surety Agreement and he did it because of the moral influence and pressure
exerted upon him by Felipe Ysmael, Jr. (their employer at the time of signing),
thereby arousing strong fears of losing a much needed employment to support
his family should he refuse to sign as Surety.
In the order of the trial court dated October 30, 1978, defendant Fil-Eastern was
declared in default for its failure to answer the complaint within the reglementary
period and the case was scheduled for pre-trial conference. The individual
defendants with the courts approval thereafter filed an amended third-party
complaint against Felipe Ysmael, Jr.

The amended third-party complaint alleged that at the time of execution of the
alleged Surety Agreement subject matter of the principal complaint, third-party
plaintiffs were but employees of Ysmael Steel Manufacturing Co., owned by thirdparty-defendant. Third-party-plaintiffs were in no financial position to act as
sureties to a P2.5 million loan. They became incorporators of original defendant
Fil-Eastern because of fear of losing their employment brought about by the
tremendous pressure and moral influence exerted upon them by their employerthird-party-defendant. They signed the Surety Agreement upon the order of the
third-party-defendant. In signing the said document, the third-party-plaintiffs
were assured by the third-party-defendant that they had nothing to fear and
worry about because the latter will assume all liabilities as well as profits
therefrom and that the loan subject of the Surety Agreement was with the prior
approval and blessing of a high government official. They were likewise assured
that the surety agreement was but a formality and that because of such
pressure, influence as well as assurances, third-party-plaintiffs signed the Surety
Agreement.
Third-party-defendant Felipe Ysmael, Jr. in his answer alleged that the Surety
Agreement was freely and voluntarily signed and executed by third-partyplaintiffs
without
any
intimidation, undue,
improper
or
fraudulent
representations. Further, granting arguendo that the consent of third-party
plaintiffs in signing said Surety Agreement was vitiated with intimidation, undue
influence or fraudulent representation on the part of third-party-defendant, said
Surety Agreement is only voidable and therefore binding unless annulled by a
proper action in court. The third-party-plaintiffs did not file the proper court
action for the annulment of said agreement.They are now barred from filing an
action for annulment of said agreement, the prescriptive period therefor being
only four (4) years from the time the defect of the consent had ceased, and from
the discovery of the all[e]ged fraud. In addition, third-party plaintiffs had ratified
said agreement which they signed in July 1967 by signing their names on and
execution of several promissory thereafter.
At the pre-trial conference held on March 21, 1980, the parties failed to agree on
a possible amicable settlement hence the case was set for trial on the merits. On
July 5, 1984, during the pendency of the trial, third-party defendant Felipe
Ysmael, Jr. died. He was substituted by his legal heirs Patrick Ysmael and Jeanne
Ysmael as third-party defendants. Defendant Pedro Atienza died on January 4,
1987. It appearing that he has no legal heirs, the case against him was
dismissed.
After trial, the regional trial court (RTC) ruled against herein petitioners. On
appeal, the CA modified the RTC ruling by deleting the award of attorneys
fees.Hence, this recourse to this Court.
Ruling of the Court of Appeals

In ruling that petitioners were liable under the surety agreement, the Court of
Appeals rejected their defense of laches. It held that the lapse of seven years
and eight months from December 31, 1968 until the judicial demand on August
30, 1976 cannot be considered as unreasonable delay which would necessitate
the application of laches. The action filed by the plaintiff has not yet
prescribed. It is well within the ten-year prescriptive period provided for by law
wherein actions based on written contracts can be instituted. [5]
The Court of Appeals also noted that the prescriptive period did not begin to
run from December 31, 1968 as [herein petitioners] presupposed. It was only
from the time of the judicial demand on August 30, 1976 that the cause of action
accrued. Thus, [private respondent] was well within the prescriptive period of ten
years when it instituted the case in court. The Court of Appeals further ruled that
placing the blame on [PNB] for its failure to immediately pounce upon its debtors
the moment the loan matured is grossly unfair for xxx demand upon the sureties
to pay is not necessary.
The appellate court also held that petitioners proved only the first of the
following four essential elements of laches: (1) conduct on the part of the
defendant, or one under whom he claims, giving rise to the situation of which
complaint is made and for which the complainant seeks a remedy; (2) delay in
asserting the complainants rights, the complainant having had knowledge or
notice of the defendants conduct and having been afforded an opportunity to
institute a suit; (3) lack of knowledge or notice on the part of the defendant that
the complainant would assert the right on which he bases his suit; and (4) injury
or prejudice to the defendant in the event relief is accorded to the complainant,
or the suit is not held barred.
Issues
In their Memorandum, petitioners raise the following issues: [6]
1. WHETHER OR NOT THE CLAIM OF THE PNB AGAINST THE PETITIONERS IS
ALREADY BARRED BY THE EQUITABLE DEFENSE OF LACHES?
2. WHETHER OR NOT THE RESPECTIVE CONJUGAL PARTNERSHIPS OF THE
PETITIONERS COULD BE HELD LIABLE FOR ANY LIABILITY OF THE PETITIONERS
UNDER THE SURETY AGREEMENT IN FAVOR OF THE PNB?
Under the first issue, petitioners submit four other questions:
1-a WHETHER OR NOT THE EQUITABLE
INDEPENDENTLY OF PRESCRIPTION?

DEFENSE

OF

LACHES

APPLIES

1-b WHETHER OR NOT THE CAUSE OF ACTION OF THE PNB AGAINST THE
PETITIONERS ACCRUED ONLY FROM THE TIME OF THE JUDICIAL DEMAND ON
AUGUST 30, 1976?

1-c WHETHER OR NOT THE FOUR (4) WELL-SETTLED ELEMENTS OF LACHES ARE
PRESENT IN THIS CASE?
1-d WHETHER OR NOT THE RULING IN THE CASE OF PHILIPPINE NATIONAL BANK
VS. COURT OF APPEALS, 217 SCRA 347, IS APPLICABLE IN THIS INSTANT CASE?
In the main, the issue is whether petitioners may raise the defense of laches
in order to avoid their liability under the surety agreement. Preliminarily, we shall
also take up the question of petitioners liability as sureties.
The Courts Ruling
The appeal is not meritorious.
Preliminary Matter: Liability of Petitioners as Sureties
The present controversy began when the Philippine National Bank (PNB)
sought to enforce the Surety Agreement. The pertinent provisions of said
Agreement are as follows:
WHEREAS, FIL-EASTERN WOOD INDUSTRIES, INC. herein referred to as the
Principal, has obtained and/or desires to obtain certain credits, loans, overdrafts,
discounts, etc., from the Creditor, for all of which the Creditor requires security;
and the Surety, on account of valuable consideration received from the Principal,
has agreed and undertake to assist the principal by becoming such Surety.
NOW THEREFORE, for the purpose above mentioned, the Surety, jointly and
severally with the Principal, hereby guarantees and warrants to the Creditor, its
successors or assigns, the prompt payment at maturity of all the notes, drafts,
bills of exchange, overdrafts and other obligations of every kind, on which the
Principal may now be indebted or may hereafter become indebted to the
Creditor, but the liability of the Surety shall not at any time exceed the sum of
TWO MILLION FIVE HUNDRED THOUSAND ONLY (P2,500,000.00) (demand loan
of P2,500,000.00), Philippine Currency, plus the interest thereon at the rate of
(___%) per cent per annum, and the cost and expenses of the Creditor incurred in
connection with the granting of the credits, loans, overdrafts, etc., covered by
this surety agreement, including those for the custody, maintenance and
preservation of the securities given therefor and also for the collection thereof.
Both the Principal and the Surety shall be considered in default when they fail to
pay the obligation upon maturity with or without demand and in such case the
Surety agrees to pay to the creditor, its [successors] or assigns, all outstanding
obligations of the Principal, whether due or not due and whether held by the
Creditor as principal or agent, and it is agreed that a certified statement by the
Creditor as to the amount due from the Principal shall be accepted as correct by
the Surety without question.

The Surety expressly waives all rights to demand for payment and notice of nonpayment and protest, and agrees that the securities of every kind, that are now
and may hereafter be left with the Creditor, its successors, indorsees or assigns,
as collateral to any evidence of debt or obligations or upon which a lien may
exist thereon may be withdrawn or surrendered at any time, and the time of
payment thereof extended, without notice to, or consent by the Surety; and
that the liability on this guaranty shall be solidary, direct and immediate and not
contingent upon the pursuit by the Creditor, its successors, indorsees or assigns,
of whatever remedies it or they have against the Principal or the securities or
liens it or they may possess and the Surety will at any time, whether due or not
due, pay to the Creditor with or without demand upon the Principal, any
obligation or indebtedness of the Principal not in excess of the amount
abovementioned.
This instrument is intended to be a complete and perfect indemnity to the
Creditor to the extent above stated, for any indebtedness or liability of any kind
owing by the Principal to the Creditor from time to time, and to be valid and
continuous without further notice to the Surety, and may be revoked by the
Surety at any time, but only after forty-eight hours notice in writing to the
Creditor, and such revocation shall not operate to relieve the Surety from
responsibility for obligations incurred by the Principal prior to the termination of
such period. (Emphasis supplied.)
It
must
be
stressed
that
petitioners,
as
sureties,
bound
themselves solidarily for the obligation of Fil-Eastern to PNB. Petitioners admit
that they signed the Surety Agreement, but they challenge their liability thereon
on the ground that they were allegedly coerced by their employer into signing
the deed. The argument is too late at best.
As pointed out by the Court of Appeals, petitioners failed to challenge their
consent to the Agreement within the prescriptive period. Article 1391 of the Civil
Code provides that the action to annul a contract vitiated by intimidation,
violence or undue influence shall be filed within four years from the cessation of
such defects. In this case, Petitioners Agra, Gamo and Novales resigned from FilEastern in 1967, 1968 and 1969, respectively. It was only in 1976, when PNB
sought to enforce the contract, that they alleged a defect in their consent. By
their inaction, their alleged cause of action based on vitiated consent had
precribed. There was no question that petitioners, in their capacity as sureties,
were answerable for the obligations of Fil-Eastern to PNB.
We shall now go to the main issue of this case: Whether petitioners may
invoke the defense of laches, considering that PNBs claim had not yet prescribed.
Main Issue: Laches
Petitioners admit that PNBs claim, though filed more than seven years from
the maturity of the obligation, fell within the ten-year prescriptive period. They

argue, however, that the cause was already barred by laches, which is defined as
the failure or neglect for an unreasonable or unexplained length of time to do
that which by exercising due diligence, could or should have been done earlier
warranting a presumption that he has abandoned his right or declined to assert
it.[7] In arguing that the appellate court erred in rejecting the defense of laches,
petitioners cite four reasons: (1) the defense of laches applies independently of
prescription; (2) the cause of action against petitioners accrued from the
maturity of the obligation, not from the time of judicial demand; (3) the four wellsettled elements of laches were duly proven; and (4) PNB v. CA applies in the
instant case. As will be shown below, all these arguments are devoid of merit.
Application of Laches
Assailing the CA ruling that laches was inapplicable because the claim was
brought within the ten-year prescriptive period, petitioners stress that the
defense of laches differs from and is applied independently of prescription. In
support, they cite, among others, Nielson & Co., Inc. v. Lepanto Consolidated
Mining Co.,[8] in which the Supreme Court ruled:
[T]he defense of laches applies independently of prescription. Laches is different
from the statute of limitations. Prescription is concerned with the fact of delay,
whereas laches is concerned with the effect of delay. Prescription is a matter of
time; laches is principally a question of inequity of permitting a claim to be
enforced, this inequity being founded on some change in the condition of the
property or the relation of the parties. Prescription is statutory; laches is
not. Laches applies in equity; whereas prescription applies at law. Prescription is
based on fixed time, laches is not.
True, prescription is different from laches, but petitioners reliance
on Nielson is misplaced. As held in the aforecited case, laches is principally a
question of equity. Necessarily, there is no absolute rule as to what constitutes
laches or staleness of demand; each case is to be determined according to its
particular circumstances. The question of laches is addressed to the sound
discretion of the court and since laches is an equitable doctrine, its application is
controlled by equitable considerations. [9] Petitioners, however, failed to show that
the collection suit against herein sureties was inequitable. Remedies in equity
address only situations tainted with inequity, not those expressly governed by
statutes. Indeed, the petitioners failed to prove the presence of all the four
established requisites of laches, viz:
(1) conduct on the part of the defendant or one under whom he claims, giving
rise to the situation of which complaint is made and for which the complainant
seeks a remedy;
(2) delay in asserting the complainants right, the complainant having had
knowledge or notice of defendants conduct and having been afforded an
opportunity to institute a suit;

(3) lack of knowledge or notice on the part of the defendant that the complainant
would assert the right on which he bases his claim; and
(4) injury or prejudice to the defendant in the event relief is accorded to the
complainant, or the suit is not held barred. [10]
That the first element exists is undisputed. Neither Fil-Eastern nor the
sureties, herein petitioners, paid the obligation under the Surety Agreement.
The second element cannot be deemed to exist. Although the collection suit
was filed more than seven years after the obligation of the sureties became due,
the lapse was within the prescriptive period for filing an action. In this light, we
find immaterial petitioners insistence that the cause of action accrued on
December 31, 1968, when the obligation became due, and not on August 30,
1976, when the judicial demand was made. In either case, both submissions fell
within the ten-year prescriptive period. In any event, the fact of delay, standing
alone, is insufficient to constitute laches. [11]
Petitioners insist that the delay of seven years was unreasonable and
unexplained, because demand was not necessary. Again we point that, unless
reasons of inequitable proportions are adduced, a delay within the prescriptive
period is sanctioned by law and is not considered to be a delay that would bar
relief. In Chavez v. Bonto-Perez,[12] the Court reiterated an earlier holding, viz:
Laches is a doctrine in equity while prescription is based on law. Our courts are
basically courts of law and not courts of equity. Thus, laches cannot be invoked
to resist the enforcement of an existing legal right. We have ruled in Arsenal v.
Intermediate Appellate Court x x x that it is a long standing principle that equity
follows the law. Courts exercising equity jurisdiction are bound by rules of law
and have no arbitrary discretion to disregard them. In Zabat, Jr. v. Court of
Appeals x x x, this Court was more emphatic in upholding the rules of
procedure. We said therein:
As for equity, which has been aptly described as justice outside legality, this is
applied only in the absence of, and never against, statutory law or, as in this
case, judicial rules of procedure. Aequetas nunquam contravenit legis. This
pertinent positive rules being present here, they should preempt and prevail over
all abstract arguments based only on equity.
Thus, where the claim was filed within the three-year statutory period, recovery
therefore cannot be barred by laches.
Petitioners also failed to prove the third element of laches. It is absurd to
maintain that petitioners did not know that PNB would assert its right under the
Surety Agreement. It is unnatural, if not unheard of, for banks to condone debts
without adequate recompense in some other form. Petitioners have not given us

reason why they assumed that PNB would not enforce the Agreement against
them.
Finally, petitioners maintain that the fourth element is present because they
would suffer damage or injury as a result of PNBs claim. This is the crux of the
controversy. In addition to the payment of the amount stipulated in the
Agreement, other equitable grounds were enumerated by petitioners, viz:
1. Petitioners acted as sureties under pressure from Felipe Baby Ysmael, Jr., the
headman of the Ysmael Group of Companies where the petitioners were all
employed in various executive positions.
2. Petitioners did not receive a single centavo in consideration of their acting as
sureties.
3. The surety agreement was not really a requisite for the grant of the loan to
FIL-EASTERN because the first release on the loan was made on July 17, 1967, or
even before the Surety Agreement was executed by petitioners on July 21, 1967.
4. Petitioners were assured that the Surety Agreement was merely a formality,
and they had reason to believe that assurance because the loan was principally
secured by an assignment of 15% of the proceeds of the sale of logs of FILEASTERN to Iwai & Co., Ltd., and such assignment was clearly stated in PNB
Board Resolution No. 407. In fact, while it was expressly stated in all of the eight
(8) promissory notes covering the releases of the loan that the said loan was
secured by 15% of the contract of sale with Iwai & Co., Ltd., only three (3)
promissory notes stated that the loan was also secured by the joint and several
signatures of the officers of the corporation. It is to be noted that no mention
was even made of the joint and several signatures of petitioners as
sureties. In other words, the principal security was the assignment of 15% of
the contract for the sale of logs to Iwai & Co., Ltd.
5. For reasons not explained by PNB, PNB did not collect the 15% of the proceeds
of the sale of the logs to Iwai & Co., Ltd., and such failure resulted in the noncollection of the P2,500,000.00 demand loan, or at least a portion of it.
6. For reasons likewise unexplained by PNB, PNB did not make any demand upon
petitioners to pay the unpaid loan of FIL-EASTERN until after FIL-EASTERN had
become bankrupt, and PNB was aware of this fact because it foreclosed the
chattel mortgages on the other loans of FIL-EASTERN which were secured by said
chattel mortgages.[13] (Emphasis found in the original.)
These circumstances do not justify the application of laches. Rather, they
disclose petitioners failure to understand the language and the nature of the
Surety Arrangement. They cannot now argue that the Surety Agreement was
merely a formality, secondary to the assignment of 15 percent of the proceeds of
the sale of Fil-Easterns logs to Iwai and Co., Ltd. Neither can they rely on PNBs

failure to collect the assigned share in the sale of the logs or to make a demand
on petitioners until after Fil-Eastern had become bankrupt. The Court stresses
that the obligation of a surety is direct, primary and absolute. Thus, the Court
has held:
[A]lthough the contract of a surety is in essence secondary only to a valid
principal obligation, his liability to the creditor or promisee of the principal is said
to be direct, primary, and absolute; in other words, he is directly
and equally bound with the principal. The surety therefore becomes liable for the
debt or duty of another although he possesses no direct or personal interest over
the obligations nor does he receive any benefit therefrom. [14]
When petitioners signed as sureties, they expressly and unequivocally
agreed to the stipulation that the liability on this guaranty shall be solidary,
direct and immediate and not contingent upon the pursuit by the creditor, its
successors, indorsees or assigns, of whatever remedies it or they have against
the principal or the securities or liens it or they may possess.
If they had mistaken the import of the Surety Agreement, they could have
easily asked for its revocation. The Agreement stipulates that it may be revoked
by the Surety at any time, but only after forty-eight hours notice in writing to the
Creditor, and such revocation shall not operate to relieve the Surety from
responsibility for obligations incurred by the Principal prior to the termination of
such period. This they did not do.
Equally unavailing is petitioners allegation that the Surety Agreement was
not a requisite for the grant of the loan. Even if their assertion is true, the fact
remains that they signed the contract and voluntarily bound themselves to be
solidarily liable for the loan amounting to P2,500,000.
The other equitable circumstances above enumerated fail to support
petitioners cause. As earlier stated, petitioners are already barred from
questioning the voluntariness of their consent. Furthermore, this Court has
categorically ruled that a surety is liable for the debt of another, although he or
she received no benefit therefrom. [15]
Clearly, aside from the fact that the collection suit was filed only after the
lapse of seven years from the date the obligation became due and demandable,
petitioners failed to adduce any showing of inequity. Hence, the rules on equity
cannot protect them.
Applicability of PNB v. CA
Petitioners allege that the CA committed grave error in failing to apply PNB v.
Court of Appeals,[16] which they insist to be analogous to the present case. The
facts in said case are as follows:

Private Respondent B.P. Mata & Co. Inc. (Mata), is a private corporation engaged
in providing goods and services to shipping companies. Since 1966, it has acted
as a manning or crewing agent for several foreign firms, one of which is Star Kist
foods, Inc., USA (Star Kist). As part of their agreement, Mata makes advances for
thecrews basic personal needs. Subsequently, Mata sends monthly billings to its
foreign principal Star Kist, which in turn reimburses Mata by sending a
telegraphic transfer through banks for credit to the latters account.
Against this background, on February 21, 1975, Security Pacific National Bank
(SEPAC) of Los Angeles which had an agency arrangement with Philippine
National Bank (PNB), transmitted a cable message to the International
Department of PNB to pay the amount of US$14,000 to Mata by crediting the
latters account with the Insular Bank of Asia and America (IBAA), per order of
Star Kist. Upon receipt of this cabled message on February 24, 1975, PNBs
International Department noticed an error and sent a service message to SEPAC
Bank. The latter replied with the instructions that the amount of US$14,000
should only be for US$1,400.
On the basis of the cable message dated February 24, 1975, Cashiers Check No.
269522 in the amount of US$1,400 (P9,772.96) representing reimbursement
from Star Kist, was issued by the Star Kist for the account of Mata on February
25, 1975 through the Insular Bank of Asia and America (IBAA).
However, fourteen days after or on March 11, 1975, PNB effected another
payment through Cashiers Check No. 270271 in the amount of US$14,000
(P97,878.60) purporting to be another transmittal of reimbursement from Star
Kist, private respondents foreign principal.
Six years later, or more specifically, on May 13, 1981, PNB requested Mata for
refund of US$14,000 (P97,878.60) after it discovered its error in effecting the
second payment.
On February 4, 1982, PNB filed a civil case for collection and refund of US$14,000
against Mata arguing that based on a constructive trust under Article 1456 of the
Civil Code, it has a right to recover the said amount it erroneously credited to
respondent Mata.[17]
On the ground of laches, the Court decided against the claim of PNB, stating
that:
[i]t is amazing that it took petitioner almost seven years before it discovered that
it had erroneously paid private respondent. Petitioner would attribute its mistake
to the heavy volume of international transactions handled by the Cable and
Remittance Division of the International Department of PNB. Such specious
reasoning is not persuasive. It is unbelievable for a bank, and a government bank
at that, which regularly publishes its balanced financial statements annually or
more frequently, by the quarter, to notice its error only seven years later. As a

universal bank with worldwide operations, PNB cannot afford to commit such
costly mistakes.Moreover, as between parties where negligence is imputable to
one and not to the other, the former must perforce bear the consequences of its
neglect. Hence, petitioner should bear the cost of its own negligence.
Petitioners maintain that the delay in PNB v. CA was even shorter than that in
the present case. If the bank in the aforesaid case was negligent in not
discovering the overpayment, herein petitioners assert that the negligence was
even more culpable in the present case. They add that, given the standard
practice of banks to flag delinquent accounts, the inaction for almost seven years
of herein respondent bank was gross and inexcusable.
We are not persuaded. There are no absolute rules in the application of
equity, and each case must be examined in the light of its peculiar facts. In PNB
v. CA,there was a mistake, an inexcusable one, on the part of petitioner bank in
making an overpayment and repeating the same error fourteen days later. If the
bank could not immediately discover the mistake despite all its agents and
employees, the beneficiary of the amount could not be expected to do so. It is,
thus, inequitable to allow PNB to collect the amount, after such a long delay,
from the beneficiary who had assumed, after all those years, that the amount
really belonged to it.
In the present case, there is no showing of any mistake or any inequity. The
fact alone that seven years had lapsed before PNB filed the collection suit does
not mean that it discovered the obligation of the sureties only then. There was a
Surety Arrangement, and the law says that the said contract can be enforced by
action within ten years. The bank and the sureties all knew that the action to
enforce the contract did not have to be filed immediately. In other words, the
bank committed no mistake or inequitable conduct that needed correction, and
the sureties had no misconception about their liabilities under the contract.
Clearly, petitioners have no recourse in equity, because they failed to show
any inequity on the part of PNB.
Additional Issue: Liability of Conjugal Assets
In their Memorandum, petitioners belatedly ask the Court to rule that, in case
of a court ruling adverse to them, the conjugal properties would not be liable for
the husbands debts that did not redound to the benefit of the conjugal
partnership.[18]
This issue cannot be allowed, for it is being raised for the first time only in
petitioners Memorandum. Issues, arguments, theories and causes of action not
raised below may no longer be posed on appeal. [19] Furthermore, petitioners are
asking the Court to issue a ruling on a hypothetical situation. In effect, they are
asking the Court to render an advisory opinion, a task which is beyond its
constitutional mandate.

WHEREFORE, the petition is hereby DENIED and the assailed Decision of the
Court of Appeals is AFFIRMED. Costs against petitioners.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 167995

September 11, 2009

JULITA V. IMUAN, RODOLFO VELASQUEZ, ARTURO VELASQUEZ, ARCADIO

VELASQUEZ, BETTY VELASQUEZ, ROSA V. PETUYA, FELICIDAD
VELASQUEZ, RAYMUNDO IMUAN, GERARDO IMUAN, JR., and ANDONG
VELASQUEZ, Petitioners,
vs.
JUANITO CERENO, FEBELINDA G. CERENO, GEMMA C. GABARDA,
LEDESMA G. CERENO, BLECERIA C. SULA and SALLY G.
CERENO, Respondents.
DECISION
PERALTA, J.:
Before us is a petition for review on certiorari which seeks to set aside the
Decision1 dated August 24, 2004 of the Court of Appeals (CA) in CA-G.R. CV No.
69446, which reversed the Decision of the Regional Trial Court (RTC), Branch 41,
Dagupan City, in Civil Case No. 99-02910-D. Also assailed is the CA
Resolution2 dated April 29, 2005 denying petitioners' motion for reconsideration.
The facts are as follows:
During his lifetime, Pablo de Guzman (Pablo) contracted two marriages. His first
marriage was with Teodora Soriano (Teodora), with whom he had three children,
namely, Alfredo de Guzman (Alfredo), Cristita G. Velasquez (Cristita), and Inday
G. Soriano (Inday). His second marriage was in 1919 with Juana Velasquez
(Juana), with whom he also had three children, namely: Nena De Guzman (Nena),
Teodora de Guzman (Teodora), and Soledad G. Cereno (Soledad). All these
children are now dead.

Petitioners are Pablo's grandchildren by his first marriage, while respondent

Juanito Cereno (Juanito) is Soledad's husband and the other respondents are their
children.
On July 15, 1936, Pablo died intestate leaving two parcels of land, to wit: (1) a
parcel of coconut land located at Salaan Mangaldan, Pangasinan, containing an
area of nine hundred eighty-six (986) square meters, more or less, declared
under Tax Declaration No. 8032; and (2) a parcel of cornland located at (Inlambo)
Palua, Mangaldan, Pangasinan, containing an area of three thousand three
hundred thirty-four (3,334) square meters, more or less, declared under Tax
Declaration No. 5155.
After Pablo's death in 1936, his second wife Juana and their children continued to
be in possession of the parcel of land located at Salaan, Mangaldan, Pangasinan
(the disputed property), where they lived since they were married in 1919.
On January 24, 1970, Juana executed a Deed of Absolute Sale 3 in favor of
respondents-spouses, Soledad, Juana and Pablo's daughter, and her husband
Juanito conveying the subject property. The deed was duly registered with the
Register of Deeds of Lingayen, Pangasinan.
On January 26, 1970, a Joint Affidavit 4 was executed by Alfredo de Guzman and
Teofilo Cendana attesting to the fact that Pablo ceded the property in favor of
Juana on the occasion of their marriage, but the document was lost.
Subsequently, Tax Declaration No. 238035 was issued in the names of
respondents-spouses who religiously paid the taxes due on the property. Since
then respondents-spouses enjoyed exclusive, open and uninterrupted possession
of the property. Later, the disputed property which originally consisted of one
whole lot was traversed by a barangay road dividing it into two (2) lots, namely,
Lot 3533, with an area of 690 square meters covered by Tax Declaration No.
212686; and Lot 3559, with an area of 560 square meters covered by Tax
declaration No. 21269.7Respondents-spouses Cereno built their house on Lot
3559 and had planted fruit-bearing trees on Lot 3533. Meanwhile, the parcel of
cornland in Palua, Mangaldan, Pangasinan has never been in possession of any of
the parties since it eroded and was submerged under water, eventually forming
part of the riverbed.
Sometime in January 1999, petitioners entered and took possession of Lot 3533
by building a small nipa hut thereon. Respondents then filed before the Municipal
Trial Court (MTC) of Mangaldan, Pangasinan an ejectment case against
petitioners. In an Order8 dated December 9, 1999, the MTC dismissed the case as
both parties prayed for its dismissal considering that petitioners had already left
Lot 3533 immediately after the filing of the complaint.
On April 5, 1999, petitioners filed with the RTC of Dagupan City a Complaint for
annulment of document, reconveyance and damages against respondents

alleging that: (1) the estate of their grandfather Pablo has not yet been settled or
partitioned among his heirs nor had Pablo made disposition of his properties
during his lifetime; (2) it was only through their tolerance that Juana and his
children constructed their house on Lot 3559; (3) the sale of the disputed
property made by Juana to respondents-spouses Cereno and the issuance of tax
declarations in the latter's names are null and void. Petitioners prayed for the
annulment of the deed of sale, cancellation of Tax Declaration Nos. 21268 and
21269, the reconveyance of the property to them and damages.
In their Answer, respondents claimed that after the death of Pablo's first wife,
Pablo partitioned his property among his children and that spouses Nicomedes
and Cristita Velasquez acquired most of the properties as they were more
financially capable; that at the time Pablo married Juana, the properties he had
were his exclusive share in the partition; that of the two parcels of land Pablo had
at that time, he donated the subject property to Juana in a donation propter
nuptias when they married; that the deed of donation was lost during the
Japanese occupation and such loss was evidenced by the Joint Affidavit executed
by Alfredo de Guzman and Teofilo Cendana attesting to such donation; that Juana
could validly convey the property to the Spouses Cereno at the time of the sale
because she was the owner; and that they have been in public and uninterrupted
possession of the disputed lot since its acquisition and have been paying the
realty taxes due thereon. As affirmative defense, respondents contended that
petitioners' rights over the property were already barred by the statute of
limitations.
After trial, the RTC rendered its Decision 9 dated November 10, 2000, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against
the defendants:
(a) Declaring as null and void the Deed of Absolute Sale; Tax Declaration
Nos. 21268 for Lot 3533 & 21269 for Lot 3559 in the names of Juanito
Cereno and Soledad de Guzman;
(b) Ordering the defendants (1) to reconvey the property in question to the
plaintiffs and to peacefully surrender the possession of the premises to the
plaintiffs; and (2) to pay plaintiffs litigation expenses in the amount
of P10,000.00.
SO ORDERED.10
The RTC found that Juana and her children of the second nuptial built their house
on the disputed property by tolerance of Pablos children of the first marriage;
that Juana alone sold the property to respondents Spouses Cereno and such sale
was not valid because she was not the owner of the property at the time she sold
the same; that the estate of Pablo has not been settled among the heirs since

the property was still in the name of Pablo at the time Juana sold the same; that
respondents Spouses Cerenos claim that the property was donated to Juana by
Pablo by way of donation propter nuptias was not supported by evidence; that
Pablo could not have donated the property to Juana because Pablos children
were the legal heirs of his first wife, and have rights and interests over the
property. The RTC found the Joint Affidavit dated January 26, 1970 executed by
Alfredo, Pablos son by first marriage, and Teofilo Cendana, a former Chief of
Police of Mangaldan, Pangasinan, attesting that the donation propter
nuptias executed by Pablo in favor of Juana was lost during the Japanese
occupation was inconsequential, since it cannot substitute for the donation which
validity was highly questionable; that petitioners were able to prove that the
property was the conjugal property of Pablo and his first wife which has not been
divided between Pablo and his children of the first nuptial.
On appeal, the CA rendered its assailed Decision, the dispositive portion of which
reads as follows:
WHEREFORE, premises considered, we hereby GRANT the appeal. The assailed
decision dated November 10, 2000, of the Regional Trial Court (RTC), Branch 41,
Dagupan City, in Civil Case No. 99-02910-D is consequently REVERSED and SET
ASIDE. Costs against the plaintiffs-appellees.
SO ORDERED.11
While the CA agreed with the findings of the RTC that there was no evidence that
Pablo undertook a partition of the properties of his first marriage before he
contracted his second marriage and that the Joint Affidavit dated January 26,
1970 could not be considered as conclusive proof of the transfer of the property
by Pablo to Juana, it was not a sufficient basis for Juana to validly transfer the
property to respondent Spouses Cereno, however, the CA gave probative value
to the joint affidavit as it was executed long before the present controversy
arose. The CA found that the joint affidavit was executed by Alfredo, one of
Pablos children by his first marriage who was necessarily affected by the
claimed donation propter nuptias and who ought to know the facts attested to;
that the affidavit was evidence of the basis of Juana's own good faith belief that
the property was hers to dispose of when she sold it to respondents Spouses
Cereno; that the same affidavit can also be the basis of respondents Spouses
Cereno's good faith belief that Juana, who had undisputably been in possession
of the disputed property at the time of the sale, was the owner and could
transfer the property to them by sale.
The CA also gave probative value to the deed of sale executed by Juana in favor
of respondents Spouses Cereno as it is still an evidence of the fact of transaction
between Juana and respondents Spouses Cereno for the
sale of the disputed property. The CA found that the deed of sale and the joint
affidavit assumed great importance on the issue of prescription.

The CA found that Juana possessed the property in the concept of an owner,
which is a sufficient basis for the belief that Juana was the owner of the property
she conveyed by sale and respondents Spouses Cereno had the good faith that
acquisition by prescription requires when they became the purchasers in the
contract of sale with her . The CA further stated that a sale, coupled with the
delivery of the property sold, is one of the recognized modes of acquiring
ownership of real property and that respondents Spouses Cereno immediately
took possession of the property which showed that respondent Spouses Cereno
have just title to the property.
The CA further found that respondents Spouses Cereno are in peaceful
possession of the property for 29 years and, thus, have satisfied the ten-year
period of open, public and adverse possession in the concept of an owner that
the law on prescription requires. The CA added that petitioners are now barred
by laches from claiming ownership of the disputed property as they have been
negligent in asserting their rights.
Petitioners motion for reconsideration was denied in a Resolution dated April 29,
2005.
Petitioners raise the following issues for our consideration:
WHETHER THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE
REGIONAL TRIAL COURT, BRANCH 41, DAGUPAN CITY.
WHETHER THE COURT OF APPEALS ERRED IN DISREGARDING THE NATURE OF
THE PROPERTY IN ISSUE WHEN IT RENDERED ITS DECISION.
WHETHER LACHES/PRESCRIPTION BARRED HEREIN PETITIONERS FROM CLAIMING
THEIR RIGHTFUL SHARE IN THE PROPERTY IN ISSUE.12
Petitioners contend that since the CA and the RTC found that there was no
partition of the property and no valid donation propter nuptias was made by
Pablo to Juana, the rule on co-ownership among Pablos heirs should govern the
property; that when Juana sold the property to respondents Cerenos, the rights of
petitioners as co-owners should not have been affected; that the CAs finding
that the joint affidavit attesting to the donation propter nuptiascan be the basis
of a belief in good faith that Juana was the owner of the disputed property is
erroneous, since Juana had knowledge from the time she got married to Pablo
that the property was acquired during the latter's first marriage; that
respondents Spouses Cereno could not be considered in good faith since Soledad
is the daughter of Juana with her marriage to Pablo and could not be considered
a third party to the dispute without knowledge of the nature of the property; that
being co-owners, neither prescription nor laches can be used against them to
divest them of their property rights.

In their Comment, respondents argue that Juana in her own right had acquired
the property by prescription; that the CA correctly considered respondents 29
years of actual and peaceful possession of the property aside from their
purchase of the property from Juana in finding them as the true owners.
Petitioners and respondents submitted their respective memoranda.
The petition has no merit.
We agree with the CA that respondents have acquired the disputed property by
acquisitive prescription.
Prescription is another mode of acquiring ownership and other real rights over
immovable property.13 It is concerned with lapse of time in the manner and under
conditions laid down by law, namely, that the possession should be in the
concept of an owner, public, peaceful, uninterrupted and adverse. 14 Possession is
open when it is patent, visible, apparent, notorious and not clandestine. 15 It is
continuous when uninterrupted, unbroken and not intermittent or
occasional;16 exclusive when the adverse possessor can show exclusive dominion
over the land and an appropriation of it to his own use and benefit; and notorious
when it is so conspicuous that it is generally known and talked of by the public or
the people in the neighborhood.17 The party who asserts ownership by adverse
possession must prove the presence of the essential elements of acquisitive
prescription.18
Acquisitive prescription of real rights may be ordinary or extraordinary. 19 Ordinary
acquisitive prescription requires possession in good faith and with just title for
ten years.20 In extraordinary prescription, ownership and other real rights over
immovable property are acquired through uninterrupted adverse possession for
thirty years without need of title or of good faith. 21
The good faith of the possessor consists in the reasonable belief that the person
from whom he received the thing was the owner thereof, and could transmit his
ownership.22 For purposes of prescription, there is just title when the adverse
claimant came into possession of the property through one of the modes
recognized by law for the acquisition of ownership or other real rights, but the
grantor was not the owner or could not transmit any right. 23
Records show that as early as 1970, when the property was sold by Juana to
respondents Spouses Cereno, the latter immediately took possession of the
property. Since then, respondents possessed the property continuously, openly,
peacefully, in the concept of an owner, exclusively and in good faith with just
title, to the exclusion of the petitioners and their predecessors-in-interest until
the filing of the complaint in 1999 which is the subject of this present petition.
Notably, the property was traversed by a barangay road, thus, it was divided into
two lots. The house of respondents is located on the eastern part of the road,

while the lot on the western part of the road was planted to fruit- bearing trees
by respondents.24 It was admitted by petitioners that they saw the house of
respondents constructed on the lot and yet never questioned the same. 25 It was
also established that respondents are the ones gathering the fruits of the land
and enjoying the same26 to the exclusion of petitioners and yet the latter never
prevented them from doing so. In fact, while petitioners learned of the sale of the
property by Juana to the Spouses Cereno in 1980, they never took any action to
protect whatever rights they have over the property nor raised any objection on
respondents' possession of the property. Petitioners' inaction is aggravated by
the fact that petitioners just live a mere 100 meters away from the property. 27
Moreover, immediately after the sale of the property to the Spouses Cereno, they
declared the property in their names for taxation purposes 28 and since then
religiously paid the taxes29 due on the property. Petitioners admitted that they
knew that the Spouses Cerenos are the ones paying the taxes; 30 yet, they never
challenged the same for a long period of time which clearly establishes
respondents' claim as owners of the property. Jurisprudence is clear that
although tax declarations or realty tax payments of property are not conclusive
evidence of ownership, nevertheless, they are good indicia of possession in the
concept of owner, for no one in his right mind would be paying taxes for a
property that is not in his actual or at least constructive possession. 31 They
constitute at least proof that the holder has a claim of title over the property. 32 As
is well known, the payment of taxes, coupled with actual possession of the land
covered by the tax declaration, strongly supports a claim of ownership. 33
Respondent Juanito also exercised dominion over the property by mortgaging the
same to Manaoag Rural Bank in 1994 34 and the mortgage was cancelled only in
January 1999.351avvphi1
While there is a question regarding the alleged donation propter nuptias at the
time Juana executed the deed of sale in favor of the Spouses Cereno in 1970,
however, the requirement of just title and good faith are still satisfied in this
case. As the CA said:
x x x [T]he joint affidavit that the defendants-appellants presented, attesting to
the donation propter nuptias of the disputed property by Pablo to Juana, can be
the basis of the belief in good faith that Juana was the owner of the disputed
property. Related to this, it is undisputed that Pablo and Juana had lived in the
disputed property from the time of their marriage in 1919, and Juana continued
to live and to possess this property in the concept of an owner from the time of
Pablo's death in 1936 up to the time she sold it to spouses Cereno in 1970. These
circumstances, in our view, are sufficient bases for the belief that Juana was the
owner of the property she conveyed by sale, and leave us convinced that the
spouses Cereno had the "good faith" that acquisition by prescription requires
when they became the purchasers in the contract of sale with Juana. 36

Notably, one of the affiants in the joint affidavit which was executed in 1970 was
Alfredo, Pablo's son by his first marriage, where he attested that the property
was given by his father Pablo to Juana by donation propter nuptias. Not one
among Alfredo's children had ever come out to assail the validity of the affidavit
executed by their father. In fact, not one of Alfredo's heirs joined petitioners in
this case.37 Moreover, not one among the children of the first marriage when they
were still alive ever made a claim on their successional rights over the property
by asking for its partition. Such joint affidavit could constitute a legal basis for
Juana's adverse and exclusive character of the possession of the property 38 and
would show the Spouses Cereno's good faith belief that Juana was the owner of
the property. Thus, when petitioners filed the instant case, more than 29 years
had already elapsed, thus, the ten-year period for acquisitive prescription has
already been satisfied.
We likewise agree with the CA when it found that petitioners are guilty of laches
that would bar them from belatedly asserting their claim.
Laches is defined as the failure to assert a right for an unreasonable and
unexplained length of time, warranting a presumption that the party entitled to
assert it has either abandoned or declined to assert it. This equitable defense is
based upon grounds of public policy, which requires the discouragement of stale
claims for the peace of society. 39
Juana sold the property to the Spouses Cereno in 1970 and since then have
possessed the property peacefully and publicly without any opposition from
petitioners. While petitioners claim that they knew about the sale only in 1980
yet they did not take any action to recover the same and waited until 1999 to file
a suit without offering any excuse for such delay. Records do not show any
justifiable reason for petitioners' inaction for a long time in asserting whatever
rights they have over the property given the publicity of respondents' conduct as
owners of the property.
WHEREFORE, the petition is DENIED. The Decision dated August 24, 2004 and
the Resolution dated April 29, 2005 of the Court of Appeals in CA-G.R. CV No.
69446 are AFFIRMED.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION
HEIRS OF POLICRONIO M. URETA,
SR., namely: CONRADO B. URETA,
MACARIO B. URETA, GLORIA
URETA-GONZALES, ROMEO B.
URETA, RITA URETA-SOLANO, NENA
URETA-TONGCUA, VENANCIO B.
URETA, LILIA URETA-TAYCO, and
HEIRS OF POLICRONIO B. URETA,
JR., namely: MIGUEL T. URETA,
RAMON POLICRONIO T. URETA,
EMMANUEL T. URETA, and
BERNADETTE T. URETA,
Petitioners,

G.R. No. 165748

- versus HEIRS OF LIBERATO M. URETA,

namely: TERESA F. URETA,
AMPARO URETA-CASTILLO,
IGNACIO F. URETA, SR., EMIRITO F.
URETA, WILKIE F. URETA, LIBERATO
F. URETA, JR., RAY F. URETA, ZALDY
F. URETA, and MILA JEAN URETA
CIPRIANO;
HEIRS OF PRUDENCIA URETA
PARADERO, namely: WILLIAM U.
PARADERO, WARLITO U.
PARADERO, CARMENCITA P.
PERLAS, CRISTINA P. CORDOVA,
EDNA P. GALLARDO, LETICIA P.
REYES; NARCISO M. URETA;
VICENTE M. URETA;
HEIRS OF FRANCISCO M. URETA,
namely: EDITA T. URETA-REYES and
LOLLIE T. URETA-VILLARUEL;
ROQUE M. URETA; ADELA URETAGONZALES; HEIRS OF INOCENCIO
M. URETA, namely: BENILDA V.
URETA, ALFONSO V. URETA II, DICK
RICARDO V. URETA, and ENRIQUE
V. URETA; MERLINDA U. RIVERA;
JORGE URETA; ANDRES URETA,
WENEFREDA U. TARAN; and
BENEDICT URETA,
Respondents.
x--------------------------------------------------x
HEIRS OF LIBERATO M. URETA,
G.R. No. 165930

namely: TERESA F. URETA,

AMPARO URETA-CASTILLO,
IGNACIO F. URETA, SR., EMIRITO F.
URETA, WILKIE F. URETA, LIBERATO
F. URETA, JR., RAY F. URETA, ZALDY
F. URETA, and MILA JEAN URETA
CIPRIANO;
HEIRS OF PRUDENCIA URETA
PARADERO, namely: WILLIAM U.
PARADERO, WARLITO U.
PARADERO, CARMENCITA P.
PERLAS, CRISTINA P. CORDOVA,
EDNA P. GALLARDO, LETICIA P.
REYES; NARCISO M. URETA;
VICENTE M. URETA;
HEIRS OF FRANCISCO M. URETA,
namely: EDITA T. URETA-REYES and
LOLLIE T. URETA-VILLARUEL;
ROQUE M. URETA; ADELA URETAGONZALES; HEIRS OF INOCENCIO
M. URETA, namely: BENILDA V.
URETA, ALFONSO V. URETA II, DICK
RICARDO V. URETA, and ENRIQUE
V. URETA; MERLINDA U. RIVERA;
JORGE URETA; ANDRES URETA,
WENEFREDA U. TARAN; and
BENEDICT URETA,
Petitioners,
- versus
HEIRS OF POLICRONIO M. URETA,
SR., namely: CONRADO B. URETA,
MACARIO B. URETA, GLORIA
URETA-GONZALES, ROMEO B.
URETA, RITA URETA-SOLANO, NENA
URETA-TONGCUA, VENANCIO B.
URETA, LILIA URETA-TAYCO, and
HEIRS OF POLICRONIO B. URETA,
JR., namely: MIGUEL T. URETA,
RAMON POLICRONIO T. URETA,
EMMANUEL T. URETA, and
BERNADETTE T. URETA,
Respondents.

Present:
VELASCO, JR., J., Chairperson,
PERALTA,
ABAD,
MENDOZA, and
SERENO,* JJ.

Promulgated:
September 14, 2011

x--------------------------------------------------x
DECISION

MENDOZA, J.:
These consolidated petitions for review on certiorari under Rule 45 of
1997 Revised Rules of Civil Procedure assail the April 20, 2004 Decision[1] of
Court of Appeals (CA), and its October 14, 2004 Resolution [2] in C.A.-G.R. CV
71399, which affirmed with modification the April 26, 2001 Decision [3] of
Regional Trial Court, Branch 9, Kalibo, Aklan (RTC) in Civil Case No. 5026.

the
the
No.
the

The Facts
In his lifetime, Alfonso Ureta (Alfonso) begot 14 children, namely, Policronio,
Liberato, Narciso, Prudencia, Vicente, Francisco, Inocensio, Roque, Adela,
Wenefreda, Merlinda, Benedicto, Jorge, and Andres. The children of
Policronio (Heirs of Policronio), are opposed to the rest of Alfonsos children and
their descendants (Heirs of Alfonso).
Alfonso was financially well-off during his lifetime. He owned several fishpens, a
fishpond, a sari-sari store, a passenger jeep, and was engaged in the buying and
selling of copra. Policronio, the eldest, was the only child of Alfonso who failed to
finish schooling and instead worked on his fathers lands.
Sometime in October 1969, Alfonso and four of his children, namely, Policronio,
Liberato, Prudencia, and Francisco, met at the house of Liberato. Francisco, who
was then a municipal judge, suggested that in order to reduce the inheritance
taxes, their father should make it appear that he had sold some of his lands to his
children. Accordingly, Alfonso executed four (4) Deeds of Sale covering several
parcels of land in favor of Policronio, [4] Liberato,[5] Prudencia,[6] and his commonlaw wife, Valeriana Dela Cruz. [7] The Deed of Sale executed on October 25, 1969,
in favor of Policronio, covered six parcels of land, which are the properties in
dispute in this case.
Since the sales were only made for taxation purposes and no monetary
consideration was given, Alfonso continued to own, possess and enjoy the lands
and their produce.
When Alfonso died on October 11, 1972, Liberato acted as the administrator of
his fathers estate. He was later succeeded by his sister Prudencia, and then by
her daughter, Carmencita Perlas. Except for a portion of parcel 5, the rest of the
parcels transferred to Policronio were tenanted by the Fernandez Family. These
tenants never turned over the produce of the lands to Policronio or any of his
heirs, but to Alfonso and, later, to the administrators of his estate.
Policronio died on November 22, 1974. Except for the said portion of parcel
5, neither Policronio nor his heirs ever took possession of the subject lands.
On April 19, 1989, Alfonsos heirs executed a Deed of Extra-Judicial
Partition,[8] which included all the lands that were covered by the four (4) deeds of
sale that were previously executed by Alfonso for taxation purposes. Conrado,
Policronios eldest son, representing the Heirs of Policronio, signed the Deed of
Extra-Judicial Partition in behalf of his co-heirs.
After their fathers death, the Heirs of Policronio found tax declarations in his
name covering the six parcels of land. On June 15, 1995, they obtained a copy of
the Deed of Sale executed on October 25, 1969 by Alfonso in favor of Policronio.

Not long after, on July 30, 1995, the Heirs of Policronio allegedly learned about
the Deed of Extra-Judicial Partition involving Alfonsos estate when it was
published in the July 19, 1995 issue of the Aklan Reporter.
Believing that the six parcels of land belonged to their late father, and as
such, excluded from the Deed of Extra-Judicial Partition, the Heirs of Policronio
sought to amicably settle the matter with the Heirs of Alfonso. Earnest efforts
proving futile, the Heirs of Policronio filed a Complaint for Declaration of
Ownership, Recovery of Possession, Annulment of Documents, Partition, and
Damages[9] against the Heirs of Alfonso before the RTC on November 17, 1995
where the following issues were submitted: (1) whether or not the Deed of Sale
was valid; (2) whether or not the Deed of Extra-Judicial Partition was valid; and
(3) who between the parties was entitled to damages.
The Ruling of the RTC
On April 26, 2001, the RTC dismissed the Complaint of the Heirs of Policronio and
ruled in favor of the Heirs of Alfonso in a decision, the dispositive portion of which
reads:
WHEREFORE, the Court finds that the preponderance of
evidence tilts in favor of the defendants, hence the instant case is
hereby DISMISSED.
The counterclaims are likewise DISMISSED.
With costs against plaintiffs.
SO ORDERED.
The RTC found that the Heirs of Alfonso clearly established that the Deed
of Sale was null and void. It held that the Heirs of Policronio failed to rebut the
evidence of the Heirs of Alfonso, which proved that the Deed of Sale in the
possession of the former was one of the four (4) Deeds of Sale executed by
Alfonso in favor of his 3 children and second wife for taxation purposes; that
although tax declarations were issued in the name of Policronio, he or his heirs
never took possession of the subject lands except a portion of parcel 5; and
that all the produce were turned over by the tenants to Alfonso and the
administrators of his estate and never to Policronio or his heirs.
The RTC further found that there was no money involved in the sale. Even
granting that there was, as claimed by the Heirs of Policronio, 2,000.00 for six
parcels of land, the amount was grossly inadequate. It was also noted that the
aggregate area of the subject lands was more than double the average share
adjudicated to each of the other children in the Deed of Extra-Judicial Partition;
that the siblings of Policronio were the ones who shared in the produce of the
land; and that the Heirs of Policronio only paid real estate taxes in 1996 and
1997.The RTC opined that Policronio must have been aware that the transfer was
merely for taxation purposes because he did not subsequently take possession of
the properties even after the death of his father.
The Deed of Extra-Judicial Partition, on the other hand, was declared valid
by the RTC as all the heirs of Alfonso were represented and received equal shares

and all the requirements of a valid extra-judicial partition were met. The RTC
considered Conrados claim that he did not understand the full significance of his
signature when he signed in behalf of his co-heirs, as a gratutitous assertion. The
RTC was of the view that when he admitted to have signed all the pages and
personally appeared before the notary public, he was presumed to have
understood their contents.
Lastly, neither party was entitled to damages. The Heirs of Alfonso failed to
present testimony to serve as factual basis for moral damages, no document was
presented to prove actual damages, and the Heirs of Policronio were found to
have filed the case in good faith.
The Ruling of the CA
Aggrieved, the Heirs of Policronio appealed before the CA, which rendered
a decision on April 20, 2004, the dispositive portion of which reads as follows:
WHEREFORE, the appeal is PARTIALLY GRANTED. The
appealed Decision, dated 26 April 2001, rendered by Hon. Judge
Dean R. Telan of the Regional Trial Court of Kalibo, Aklan, Branch 9,
is hereby AFFIRMED with MODIFICATION:
1.) The Deed of Sale in favor of Policronio Ureta, Sr., dated 25
October 1969, covering six (6) parcels of land is hereby
declaredVOID for being ABSOLUTELY SIMULATED;
2.) The Deed of Extra-Judicial Partition, dated 19 April 1989,
is ANNULLED;
3.) The claim for actual and exemplary
are DISMISSED for lack of factual and legal basis.

damages

The case is hereby REMANDED to the court of origin for the

proper partition of ALFONSO URETAS Estate in accordance with Rule
69 of the 1997 Rules of Civil Procedure. No costs at this instance.
SO ORDERED.
The CA affirmed the finding of the RTC that the Deed of Sale was void. It found
the Deed of Sale to be absolutely simulated as the parties did not intend to be
legally bound by it. As such, it produced no legal effects and did not alter the
juridical situation of the parties. The CA also noted that Alfonso continued to
exercise all the rights of an owner even after the execution of the Deed of Sale,
as it was undisputed that he remained in possession of the subject parcels of land
and enjoyed their produce until his death.
Policronio, on the other hand, never exercised any rights pertaining to an
owner over the subject lands from the time they were sold to him up until his
death. He never took or attempted to take possession of the land even after his
fathers death, never demanded delivery of the produce from the tenants, and
never paid realty taxes on the properties. It was also noted that Policronio never
disclosed the existence of the Deed of Sale to his children, as they were, in fact,

surprised to discover its existence. The CA, thus, concluded that Policronio must
have been aware that the transfer was only made for taxation purposes.
The testimony of Amparo Castillo, as to the circumstances surrounding the
actual arrangement and agreement between the parties prior to the execution of
the four (4) Deeds of Sale, was found by the CA to be unrebutted. The RTCs
assessment of the credibility of her testimony was accorded respect, and the
intention of the parties was given the primary consideration in determining the
true nature of the contract.
Contrary to the finding of the RTC though, the CA annulled the Deed of
Extra-Judicial Partition due to the incapacity of one of the parties to give his
consent to the contract. It held that before Conrado could validly bind his co-heirs
to the Deed of Extra-Judicial Partition, it was necessary that he be clothed with
the proper authority. The CA ruled that a special power of attorney was required
under Article 1878 (5) and (15) of the Civil Code. Without a special power of
attorney, it was held that Conrado lacked the legal capactiy to give the consent
of his co-heirs, thus, rendering the Deed of Extra-Judicial Partition voidable under
Article 1390 (1) of the Civil Code.
As a consequence, the CA ordered the remand of the case to the RTC for the
proper partition of the estate, with the option that the parties may still voluntarily
effect the partition by executing another agreement or by adopting the assailed
Deed of Partition with the RTCs approval in either case. Otherwise, the RTC may
proceed with the compulsory partition of the estate in accordance with the Rules.
With regard to the claim for damages, the CA agreed with the RTC and
dismissed the claim for actual and compensatory damages for lack of factual and
legal basis.
Both parties filed their respective Motions for Reconsideration, which were
denied by the CA for lack of merit in a Resolution dated October 14, 2004.
In their Motion for Reconsideration, the Heirs of Policronio argued that the RTC
violated the best evidence rule in giving credence to the testimony of Amparo
Castillo with regard to the simulation of the Deed of Sale, and that prescription
had set in precluding any question on the validity of the contract.
The CA held that the oral testimony was admissible under Rule 130,
Section 9 (b) and (c), which provides that evidence aliunde may be allowed to
explain the terms of the written agreement if the same failed to express the true
intent and agreement of the parties thereto, or when the validity of the written
agreement was put in issue. Furthermore, the CA found that the Heirs of
Policronio waived their right to object to evidence aliunde having failed to do so
during trial and for raising such only for the first time on appeal. With regard to
prescription, the CA ruled that the action or defense for the declaration of the
inexistence of a contract did not prescribe under Article 1410 of the Civil Code.
On the other hand, the Heirs of Alfonso argued that the Deed of ExtraJudicial Partition should not have been annulled, and instead the preterited heirs
should be given their share. The CA reiterated that Conrados lack of capacity to
give his co-heirs consent to the extra-judicial settlement rendered the same
voidable.

Hence, the present Petitions for Review on Certiorari.

The Issues
The issues presented for resolution by the Heirs of Policronio in G.R. No.
165748 are as follows:
I.
Whether the Court of Appeals is correct in ruling that the
Deed of Absolute Sale of 25 October 1969 is void for being
absolutely fictitious and in relation therewith, may parol
evidence be entertained to thwart its binding effect after
the parties have both died?
Assuming that indeed the said document is simulated,
whether or not the parties thereto including their
successors in interest are estopped to question its validity,
they being bound by Articles 1412 and 1421 of the Civil
Code?
II.
Whether prescription applies to bar any question respecting
the validity of the Deed of Absolute Sale dated 25 October
1969? Whether prescription applies to bar any collateral
attack on the validity of the deed of absolute sale executed
21 years earlier?
III.
Whether the Court of Appeals correctly ruled in nullifying
the Deed of Extrajudicial Partition because Conrado Ureta
signed the same without the written authority from his
siblings in contravention of Article 1878 in relation to Article
1390 of the Civil Code and in relation therewith, whether the
defense of ratification and/or preterition raised for the first
time on appeal may be entertained?
The issues presented for resolution by the Heirs of Alfonso in G.R. No.
165930 are as follows:
I.
Whether or not grave error was committed by the Trial Court
and Court of Appeals in declaring the Deed of Sale of
subject properties as absolutely simulated and null and void
thru parol evidence based on their factual findings as to its
fictitious nature, and there being waiver of any objection
based on violation of the parol evidence rule.
II.
Whether or not the Court of Appeals was correct in holding
that Conrado Uretas lack of capacity to give his co-heirs

consent to the Extra-Judicial Partition rendered the same

voidable.
III.
Granting arguendo that Conrado Ureta was not authorized
to represent his co-heirs and there was no ratification,
whether or not the Court of Appeals was correct in ordering
the remand of the case to the Regional Trial Court for
partition of the estate of Alfonso Ureta.
IV.
Since the sale in favor of Policronio Ureta Sr. was null and
void ab initio, the properties covered therein formed part of
the estate of the late Alfonso Ureta and was correctly
included in the Deed of Extrajudicial Partition even if no
prior action for nullification of the sale was filed by the heirs
of Liberato Ureta.
V.
Whether or not the heirs of Policronio Ureta Sr. can claim
that estoppel based on Article 1412 of the Civil Code as well
as the issue of prescription can still be raised on appeal.
These various contentions revolve around two major issues, to wit: (1)
whether the Deed of Sale is valid, and (2) whether the Deed of Extra-Judicial
Partition is valid. Thus, the assigned errors shall be discussed jointly and
in seriatim.
The Ruling of the Court
Validity of the Deed of Sale
Two veritable legal presumptions bear on the validity of the Deed of Sale:
(1) that there was sufficient consideration for the contract; and (2) that it was the
result of a fair and regular private transaction. If shown to hold, these
presumptions infer prima facie the transactions validity, except that it must yield
to the evidence adduced.[10]
As will
presumptions.

be

discussed

below,

the

evidence

overcomes

these

two

Absolute Simulation
First, the Deed of Sale was not the result of a fair and regular private transaction
because it was absolutely simulated.
The Heirs of Policronio argued that the land had been validly sold to
Policronio as the Deed of Sale contained all the essential elements of a valid
contract of sale, by virtue of which, the subject properties were transferred in his
name as evidenced by the tax declaration. There being no invalidation prior to
the execution of the Deed of Extra-Judicial Partition, the probity and integrity of

the Deed of Sale should remain undiminished and accorded respect as it was a
duly notarized public instrument.
The Heirs of Policronio posited that his loyal services to his father and his being
the eldest among Alfonsos children, might have prompted the old man to sell the
subject lands to him at a very low price as an advance inheritance. They
explained that Policronios failure to take possession of the subject lands and to
claim their produce manifests a Filipino family practice wherein a child would
take possession and enjoy the fruits of the land sold by a parent only after the
latters death. Policronio simply treated the lands the same way his father Alfonso
treated them - where his children enjoyed usufructuary rights over the
properties, as opposed to appropriating them exclusively to himself. They
contended that Policronios failure to take actual possession of the lands did not
prove that he was not the owner as he was merely exercising his right to dispose
of them. They argue that it was an error on the part of the CA to conclude that
ownership by Policronio was not established by his failure to possess the
properties sold. Instead, emphasis should be made on the fact that the tax
declarations, being indicia of possession, were in Policronios name.
They further argued that the Heirs of Alfonso failed to appreciate that the
Deed of Sale was clear enough to convey the subject parcels of land. Citing
jurisprudence, they contend that there is a presumption that an instrument sets
out the true agreement of the parties thereto and that it was executed for
valuable consideration,[11] and where there is no doubt as to the intention of the
parties to a contract, the literal meaning of the stipulation shall control.
[12]
Nowhere in the Deed of Sale is it indicated that the transfer was only for
taxation purposes. On the contrary, the document clearly indicates that the lands
were sold. Therefore, they averred that the literal meaning of the stipulation
should control.
The Court disagrees.
The Court finds no cogent reason to deviate from the finding of the CA that
the Deed of Sale is null and void for being absolutely simulated. The Civil Code
provides:
Art. 1345. Simulation of a contract may be absolute or relative. The
former takes place when the parties do not intend to be bound at
all; the latter, when the parties conceal their true agreement.
Art. 1346. An absolutely simulated or fictitious contract is void. A
relative simulation, when it does not prejudice a third person and is
not intended for any purpose contrary to law, morals, good
customs, public order or public policy binds the parties to their real
agreement.
Valerio v. Refresca[13] is instructive on the matter of simulation of
contracts:
In absolute simulation, there is a colorable contract but it has
no substance as the parties have no intention to be bound by it. The
main characteristic of an absolute simulation is that the apparent
contract is not really desired or intended to produce legal effect or

in any way alter the juridical situation of the parties. As a result, an

absolutely simulated or fictitious contract is void, and the parties
may recover from each other what they may have given under the
contract. However, if the parties state a false cause in the contract
to conceal their real agreement, the contract is relatively simulated
and the parties are still bound by their real agreement. Hence,
where the essential requisites of a contract are present and the
simulation refers only to the content or terms of the contract, the
agreement is absolutely binding and enforceable between the
parties and their successors in interest.
Lacking, therefore, in an absolutely simulated contract is consent which is
essential to a valid and enforceable contract. [14] Thus, where a person, in order to
place his property beyond the reach of his creditors, simulates a transfer of it to
another, he does not really intend to divest himself of his title and control of the
property; hence, the deed of transfer is but a sham. [15] Similarly, in this case,
Alfonso simulated a transfer to Policronio purely for taxation purposes, without
intending to transfer ownership over the subject lands.
The primary consideration in determining the true nature of a contract is
the intention of the parties. If the words of a contract appear to contravene the
evident intention of the parties, the latter shall prevail. Such intention is
determined not only from the express terms of their agreement, but also from
the contemporaneous and subsequent acts of the parties. [16] The true intention of
the parties in this case was sufficiently proven by the Heirs of Alfonso.
The Heirs of Alfonso established by a preponderance of evidence [17] that
the Deed of Sale was one of the four (4) absolutely simulated Deeds of Sale
which involved no actual monetary consideration, executed by Alfonso in favor of
his children, Policronio, Liberato, and Prudencia, and his second wife, Valeriana,
for taxation purposes.
Amparo Castillo, the daughter of Liberato, testified, to wit:
Q: Now sometime in the year 1969 can you recall if your
grandfather and his children [met] in your house?
A: Yes sir, that was sometime in October 1969 when they [met] in
our house, my grandfather, my late uncle Policronio Ureta, my late
uncle Liberato Ureta, my uncle Francisco Ureta, and then my auntie
Prudencia Ureta they talk[ed] about, that idea came from my uncle
Francisco Ureta to [sell] some parcels of land to his children to
lessen the inheritance tax whatever happened to my grandfather,
actually no money involved in this sale.
Q: Now you said there was that agreement, verbal agreement.
[W]here were you when this Alfonso Ureta and his children
gather[ed] in your house?
A: I was near them in fact I heard everything they were talking
[about]
xxx

Q: Were there documents of sale executed by Alfonso Ureta in

furtherance of their verbal agreement?
A: Yes sir.
Q: To whom in particular did your grandfather Alfonso Ureta execute
this deed of sale without money consideration according to you?
A: To my uncle Policronio Ureta and to Prudencia Ureta Panadero.
Q: And who else?
A: To Valeriana dela Cruz.
Q: How about your father?
A: He has.[18]
The other Deeds of Sale executed by Alfonso in favor of his children
Prudencia and Liberato, and second wife Valeriana, all bearing the same date of
execution, were duly presented in evidence by the Heirs of Alfonso, and were
uncontested by the Heirs of Policronio. The lands which were the subject of these
Deeds of Sale were in fact included in the Deed of Extra-Judicial Partition
executed by all the heirs of Alfonso, where it was expressly stipulated:
That the above-named Amparo U. Castillo, Prudencia U.
Paradero, Conrado B. Ureta and Merlinda U. Rivera do hereby
recognize and acknowledge as a fact that the properties presently
declared in their respective names or in the names of their
respective parents and are included in the foregoing instrument are
actually the properties of the deceased Alfonso Ureta and were
transferred only for the purpose of effective administration and
development and convenience in the payment of taxes and,
therefore, all instruments conveying or affecting the transfer of said
properties are null and void from the beginning. [19]
As found by the CA, Alfonso continued to exercise all the rights of an owner
even after the execution of the Deeds of Sale. It was undisputed that Alfonso
remained in possession of the subject lands and enjoyed their produce until his
death. No credence can be given to the contention of the Heirs of Policrionio that
their father did not take possession of the subject lands or enjoyed the fruits
thereof in deference to a Filipino family practice. Had this been true, Policronio
should have taken possession of the subject lands after his father died. On the
contrary, it was admitted that neither Policronio nor his heirs ever took
possession of the subject lands from the time they were sold to him, and even
after the death of both Alfonso and Policronio.
It was also admitted by the Heirs of Policronio that the tenants of the
subject lands never turned over the produce of the properties to Policronio or his
heirs but only to Alfonso and the administrators of his estate. Neither was there a
demand for their delivery to Policronio or his heirs. Neither did Policronio ever pay
real estate taxes on the properties, the only payment on record being those
made by his heirs in 1996 and 1997 ten years after his death. In sum, Policronio
never exercised any rights pertaining to an owner over the subject lands.

The most protuberant index of simulation of contract is the complete

absence of an attempt in any manner on the part of the ostensible buyer to
assert rights of ownership over the subject properties. Policronios failure to take
exclusive possession of the subject properties or, in the alternative, to collect
rentals, is contrary to the principle of ownership. Such failure is a clear badge of
simulation that renders the whole transaction void. [20]
It is further telling that Policronio never disclosed the existence of the Deed
of Sale to his children. This, coupled with Policronios failure to exercise any rights
pertaining to an owner of the subject lands, leads to the conclusion that he was
aware that the transfer was only made for taxation purposes and never intended
to bind the parties thereto.
As the above factual circumstances remain unrebutted by the Heirs of Policronio,
the factual findings of the RTC, which were affirmed by the CA, remain binding
and conclusive upon this Court.[21]
It is clear that the parties did not intend to be bound at all, and as such,
the Deed of Sale produced no legal effects and did not alter the juridical situation
of the parties. The Deed of Sale is, therefore, void for being absolutely simulated
pursuant to Article 1409 (2) of the Civil Code which provides:
Art. 1409. The following contracts are inexistent and void from the
beginning:
xxx
(2) Those which are absolutely simulated or fictitious;
xxx
For guidance, the following are the most fundamental characteristics of
void or inexistent contracts:
1) As a general rule, they produce no legal effects whatsoever in
accordance with the principle "quod nullum est nullum producit
effectum."
2) They are not susceptible of ratification.
3) The right to set up the defense of inexistence or absolute nullity
cannot be waived or renounced.
4) The action or defense for the declaration of their inexistence or
absolute nullity is imprescriptible.
5) The inexistence or absolute nullity of a contract cannot be
invoked by a person whose interests are not directly affected. [22]
Since the Deed of Sale is void, the subject properties were properly
included in the Deed of Extra-Judicial Partition of the estate of Alfonso.
Absence and Inadequacy of Consideration

The second presumption is rebutted by the lack of consideration for the

Deed of Sale.
In their Answer,[23] the Heirs of Alfonso initially argued that the Deed of
Sale was void for lack of consideration, and even granting that there was
consideration, such was inadequate. The Heirs of Policronio counter that the
defenses of absence or inadequacy of consideration are not grounds to render a
contract void.
The Heirs of Policronio contended that under Article 1470 of the Civil
Code, gross inadequacy of the price does not affect a contract of sale, except as
it may indicate a defect in the consent, or that the parties really intended a
donation or some other act or contract. Citing jurisprudence, they argued that
inadequacy of monetary consideration does not render a conveyance inexistent
as liberality may be sufficient cause for a valid contract, whereas fraud or bad
faith may render it either rescissible or voidable, although valid until annulled.
[24]
Thus, they argued that if the contract suffers from inadequate consideration,
it remains valid until annulled, and the remedy of rescission calls for judicial
intervention, which remedy the Heirs of Alfonso failed to take.
It is further argued that even granting that the sale of the subject lands for
a consideration of 2,000.00 was inadequate, absent any evidence of the fair
market value of the land at the time of its sale, it cannot be concluded that the
price at which it was sold was inadequate. [25] As there is nothing in the records to
show that the Heirs of Alfonso supplied the true value of the land in 1969, the
amount of 2,000.00 must thus stand as its saleable value.
On this issue, the Court finds for the Heirs of Alfonso.
For lack of consideration, the Deed of Sale is once again found to be void.
It states that Policronio paid, and Alfonso received, the 2,000.00 purchase price
on the date of the signing of the contract:
That I, ALFONSO F. URETA, x x x for and in consideration of
the sum of TWO THOUSAND (2,000.00) PESOS, Philippine
Currency, to me in hand paid by POLICRONIO M. URETA, x x x, do
hereby CEDE, TRANSFER, and CONVEY, by way of absolute sale, x x
x six (6) parcels of land x x x.[26] [Emphasis ours]
Although, on its face, the Deed of Sale appears to be supported by valuable
consideration, the RTC found that there was no money involved in the sale.
[27]
This finding was affirmed by the CA in ruling that the sale is void for being
absolutely simulated. Considering that there is no cogent reason to deviate from
such factual findings, they are binding on this Court.
It is well-settled in a long line of cases that where a deed of sale states that the
purchase price has been paid but in fact has never been paid, the deed of sale is
null and void for lack of consideration.[28] Thus, although the contract states that
the purchase price of 2,000.00 was paid by Policronio to Alfonso for the subject
properties, it has been proven that such was never in fact paid as there was no
money involved. It must, therefore, follow that the Deed of Sale is void for lack of
consideration.

Given that the Deed of Sale is void, it is unnecessary to discuss the issue
on the inadequacy of consideration.
Parol Evidence and Hearsay
The Heirs of Policronio aver that the rules on parol evidence and hearsay
were violated by the CA in ruling that the Deed of Sale was void.
They argued that based on the parol evidence rule, the Heirs of Alfonso
and, specifically, Amparo Castillo, were not in a position to prove the terms
outside of the contract because they were not parties nor successors-in-interest
in the Deed of Sale in question. Thus, it is argued that the testimony of Amparo
Castillo violates the parol evidence rule.
Stemming from the presumption that the Heirs of Alfonso were not parties
to the contract, it is also argued that the parol evidence rule may not be properly
invoked by either party in the litigation against the other, where at least one of
the parties to the suit is not a party or a privy of a party to the written
instrument in question and does not base a claim on the instrument or assert a
right originating in the instrument or the relation established thereby. [29]
Their arguments are untenable.
The objection against the admission of any evidence must be made at the
proper time, as soon as the grounds therefor become reasonably apparent, and if
not so made, it will be understood to have been waived. In the case of
testimonial evidence, the objection must be made when the objectionable
question is asked or after the answer is given if the objectionable features
become apparent only by reason of such answer. [30] In this case, the Heirs of
Policronio failed to timely object to the testimony of Amparo Castillo and they
are, thus, deemed to have waived the benefit of the parol evidence rule.
Granting that the Heirs of Policronio timely objected to the testimony of
Amparo Castillo, their argument would still fail.
Section 9 of Rule 130 of the Rules of Court provides:
Section 9. Evidence of written agreements. When the terms of an
agreement have been reduced to writing, it is considered as
containing all the terms agreed upon and there can be, between the
parties and their successors in interest, no evidence of such terms
other than the contents of the written agreement.
However, a party may present evidence to modify, explain or add to
the terms of written agreement if he puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written
agreement;
(b) The failure of the written agreement to express the true intent
and agreement of the parties thereto;
(c) The validity of the written agreement; or

(d) The existence of other terms agreed to by the parties or their

successors in interest after the execution of the written agreement.
The term "agreement" includes wills.
[Emphasis ours]
Paragraphs (b) and (c) are applicable in the case at bench.
The failure of the Deed of Sale to express the true intent and agreement of
the parties was clearly put in issue in the Answer [31] of the Heirs of Alfonso to the
Complaint. It was alleged that the Deed of Sale was only made to lessen the
payment of estate and inheritance taxes and not meant to transfer ownership.
The exception in paragraph (b) is allowed to enable the court to ascertain the
true intent of the parties, and once the intent is clear, it shall prevail over what
the document appears to be on its face. [32] As the true intent of the parties was
duly proven in the present case, it now prevails over what appears on the Deed
of Sale.
The validity of the Deed of Sale was also put in issue in the Answer, and
was precisely one of the issues submitted to the RTC for resolution. [33] The
operation of the parol evidence rule requires the existence of a valid written
agreement. It is, thus, not applicable in a proceeding where the validity of such
agreement is the fact in dispute, such as when a contract may be void for lack of
consideration.[34]Considering that the Deed of Sale has been shown to be void for
being absolutely simulated and for lack of consideration, the Heirs of Alfonso are
not precluded from presenting evidence to modify, explain or add to the terms of
the written agreement.
The Heirs of Policronio must be in a state of confusion in arguing that the
Heirs of Alfonso may not question the Deed of Sale for not being parties or
successors-in-interest therein on the basis that the parol evidence rule may not
be properly invoked in a proceeding or litigation where at least one of the parties
to the suit is not a party or a privy of a party to the written instrument in
question and does not base a claim on the instrument or assert a right
originating in the instrument or the relation established thereby. If their
argument was to be accepted, then the Heirs of Policronio would themselves be
precluded from invoking the parol evidence rule to exclude the evidence of the
Heirs of Alfonso.
Indeed, the applicability of the parol evidence rule requires that the case
be between parties and their successors-in-interest. [35] In this case, both the
Heirs of Alfonso and the Heirs of Policronio are successors-in-interest of the
parties to the Deed of Sale as they claim rights under Alfonso and Policronio,
respectively. The parol evidence rule excluding evidence aliunde, however, still
cannot apply because the present case falls under two exceptions to the rule, as
discussed above.
With respect to hearsay, the Heirs of Policronio contended that the rule on
hearsay was violated when the testimony of Amparo Castillo was given weight in
proving that the subject lands were only sold for taxation purposes as she was a
person alien to the contract. Even granting that they did not object to her
testimony during trial, they argued that it should not have been appreciated by
the CA because it had no probative value whatsoever. [36]

The Court disagrees.

It has indeed been held that hearsay evidence whether objected to or not
cannot be given credence for having no probative value. [37]This principle,
however, has been relaxed in cases where, in addition to the failure to object to
the admissibility of the subject evidence, there were other pieces of evidence
presented or there were other circumstances prevailing to support the fact in
issue. In Top-Weld Manufacturing, Inc. v. ECED S.A., [38] this Court held:
Hearsay evidence alone may be insufficient to establish a
fact in an injunction suit (Parker v. Furlong, 62 P. 490) but, when no
objection is made thereto, it is, like any other evidence, to be
considered and given the importance it deserves. (Smith v.
Delaware & Atlantic Telegraph & Telephone Co., 51 A 464). Although
we should warn of the undesirability of issuing judgments solely on
the basis of the affidavits submitted, where as here, said affidavits
are overwhelming, uncontroverted by competent evidence and not
inherently improbable, we are constrained to uphold the allegations
of the respondents regarding the multifarious violations of the
contracts made by the petitioner.
In the case at bench, there were other prevailing circumstances which
corroborate the testimony of Amparo Castillo. First, the other Deeds of Sale
which were executed in favor of Liberato, Prudencia, and Valeriana on the same
day as that of Policronios were all presented in evidence. Second, all the
properties subject therein were included in the Deed of Extra-Judicial Partition of
the estate of Alfonso. Third, Policronio, during his lifetime, never exercised acts of
ownership over the subject properties (as he never demanded or took possession
of them, never demanded or received the produce thereof, and never paid real
estate taxes thereon). Fourth, Policronio never informed his children of the sale.
As the Heirs of Policronio failed to controvert the evidence presented, and
to timely object to the testimony of Amparo Castillo, both the RTC and the CA
correctly accorded probative weight to her testimony.
Prior Action Unnecessary
The Heirs of Policronio averred that the Heirs of Alfonso should have filed
an action to declare the sale void prior to executing the Deed of Extra-Judicial
Partition. They argued that the sale should enjoy the presumption of regularity,
and until overturned by a court, the Heirs of Alfonso had no authority to include
the land in the inventory of properties of Alfonsos estate. By doing so,
they arrogated upon themselves the power of invalidating the Deed of Sale
which is exclusively vested in a court of law which, in turn, can rule only upon the
observance of due process. Thus, they contended that prescription, laches, or
estoppel have set in to militate against assailing the validity of the sale.
The Heirs of Policronio are mistaken.
A simulated contract of sale is without any cause or consideration, and is,
therefore, null and void; in such case, no independent action to rescind or annul
the contract is necessary, and it may be treated as non-existent for all purposes.
[39]
A void or inexistent contract is one which has no force and effect from the

beginning, as if it has never been entered into, and which cannot be validated
either by time or ratification. A void contract produces no effect whatsoever
either against or in favor of anyone; it does not create, modify or extinguish the
juridical relation to which it refers. [40] Therefore, it was not necessary for the Heirs
of Alfonso to first file an action to declare the nullity of the Deed of Sale prior to
executing the Deed of Extra-Judicial Partition.
Personality to Question Sale
The Heirs of Policronio contended that the Heirs of Alfonso are not parties,
heirs, or successors-in-interest under the contemplation of law to clothe them
with the personality to question the Deed of Sale. They argued that under Article
1311 of the Civil Code, contracts take effect only between the parties, their
assigns and heirs. Thus, the genuine character of a contract which personally
binds the parties cannot be put in issue by a person who is not a party thereto.
They posited that the Heirs of Alfonso were not parties to the contract; neither
did they appear to be beneficiaries by way of assignment or inheritance. Unlike
themselves who are direct heirs of Policronio, the Heirs of Alfonso are not
Alfonsos direct heirs. For the Heirs of Alfonso to qualify as parties, under Article
1311 of the Civil Code, they must first prove that they are either heirs or
assignees. Being neither, they have no legal standing to question the Deed of
Sale.
They further argued that the sale cannot be assailed for being barred
under Article 1421 of the Civil Code which provides that the defense of illegality
of a contract is not available to third persons whose interests are not directly
affected.
Again, the Court disagrees.
Article 1311 and Article 1421 of the Civil Code provide:
Art. 1311. Contracts take effect only between the parties, their
assigns and heirs, x x x
Art. 1421. The defense of illegality of contracts is not available to
third persons whose interests are not directly affected.
The right to set up the nullity of a void or non-existent contract is not
limited to the parties, as in the case of annullable or voidable contracts; it is
extended to third persons who are directly affected by the contract. Thus, where
a contract is absolutely simulated, even third persons who may be prejudiced
thereby may set up its inexistence. [41] The Heirs of Alfonso are the children of
Alfonso, with his deceased children represented by their children (Alfonsos
grandchildren). The Heirs of Alfonso are clearly his heirs and successors-ininterest and, as such, their interests are directly affected, thereby giving them
the right to question the legality of the Deed of Sale.
Inapplicability of Article 842
The Heirs of Policronio further argued that even assuming that the Heirs of
Alfonso have an interest in the Deed of Sale, they would still be precluded from
questioning its validity. They posited that the Heirs of Alfonso must first prove
that the sale of Alfonsos properties to Policronio substantially diminished their
successional rights or that their legitimes would be unduly prejudiced,

considering that under Article 842 of the Civil Code, one who has compulsory
heirs may dispose of his estate provided that he does not contravene the
provisions of the Civil Code with regard to the legitime of said heirs. Having failed
to do so, they argued that the Heirs of Alfonso should be precluded from
questioning the validity of the Deed of Sale.
Still, the Court disagrees.
Article 842 of the Civil Code provides:
Art. 842. One who has no compulsory heirs may dispose by will of
all his estate or any part of it in favor of any person having capacity
to succeed.
One who has compulsory heirs may dispose of his estate provided
he does not contravene the provisions of this Code with regard to
the legitime of said heirs.
This article refers to the principle of freedom of disposition by will. What is
involved in the case at bench is not a disposition by will but by Deed of Sale.
Hence, the Heirs of Alfonso need not first prove that the disposition substantially
diminished their successional rights or unduly prejudiced their legitimes.
Inapplicability of Article 1412
The Heirs of Policronio contended that even assuming that the contract
was simulated, the Heirs of Alfonso would still be barred from recovering the
properties by reason of Article 1412 of the Civil Code, which provides that if the
act in which the unlawful or forbidden cause does not constitute a criminal
offense, and the fault is both on the contracting parties, neither may recover
what he has given by virtue of the contract or demand the performance of the
others undertaking. As the Heirs of Alfonso alleged that the purpose of the sale
was to avoid the payment of inheritance taxes, they cannot take from the Heirs
of Policronio what had been given to their father.
On this point, the Court again disagrees.
Article 1412 of the Civil Code is as follows:
Art. 1412. If the act in which the unlawful or forbidden cause
consists does not constitute a criminal offense, the following rules
shall be observed:
(1) When the fault is on the part of both contracting parties,
neither may recover what he has given by virtue of the contract,
or demand the performance of the others undertaking;
(2) When only one of the contracting parties is at fault, he cannot
recover what he has given by reason of the contract, or ask for
the fulfillment of what has been promised him. The other, who is
not at fault, may demand the return of what he has given
without any obligation to comply with his promise.

Article 1412 is not applicable to fictitious or simulated contracts, because

they refer to contracts with an illegal cause or subject-matter. [42] This article
presupposes the existence of a cause, it cannot refer to fictitious or simulated
contracts which are in reality non-existent. [43]As it has been determined that the
Deed of Sale is a simulated contract, the provision cannot apply to it.
Granting that the Deed of Sale was not simulated, the provision would still
not apply. Since the subject properties were included as properties of Alfonso in
the Deed of Extra-Judicial Partition, they are covered by corresponding
inheritance and estate taxes. Therefore, tax evasion, if at all present, would not
arise, and Article 1412 would again be inapplicable.
Prescription
From the position that the Deed of Sale is valid and not void, the Heirs of
Policronio argued that any question regarding its validity should have been
initiated through judicial process within 10 years from its notarization in
accordance with Article 1144 of the Civil Code. Since 21 years had already
elapsed when the Heirs of Alfonso assailed the validity of the Deed of Sale in
1996, prescription had set in.Furthermore, since the Heirs of Alfonso did not seek
to nullify the tax declarations of Policronio, they had impliedly acquiesced and
given due recognition to the Heirs of Policronio as the rightful inheritors and
should, thus, be barred from laying claim on the land.
The Heirs of Policronio are mistaken.
Article 1410 of the Civil Code provides:
Art. 1410. The action for the declaration of the inexistence of a
contract does not prescribe.
This is one of the most fundamental characteristics of void or inexistent
contracts.[44]
As the Deed of Sale is a void contract, the action for the declaration of its nullity,
even if filed 21 years after its execution, cannot be barred by prescription for it is
imprescriptible. Furthermore, the right to set up the defense of inexistence or
absolute nullity cannot be waived or renounced. [45] Therefore, the Heirs of Alfonso
cannot be precluded from setting up the defense of its inexistence.
Validity of the Deed of Extra-Judicial Partition
The Court now resolves the issue of the validity of the Deed of Extra-Judicial
Partition.
Unenforceability
The Heirs of Alfonso argued that the CA was mistaken in annulling the Deed of
Extra-Judicial Partition due to the incapacity of Conrado to give the consent of his
co-heirs for lack of a special power of attorney. They contended that what was
involved was not the capacity to give consent in behalf of the co-heirs but the
authority to represent them. They argue that the Deed of Extra-Judicial Partition
is not a voidable or an annullable contract under Article 1390 of the Civil Code,
but rather, it is an unenforceable or, more specifically, an unauthorized contract

under Articles 1403 (1) and 1317 of the Civil Code. As such, the Deed of ExtraJudicial Partition should not be annulled but only be rendered unenforceable
against the siblings of Conrado.
They further argued that under Article 1317 of the Civil Code, when the
persons represented without authority have ratified the unauthorized acts, the
contract becomes enforceable and binding. They contended that the Heirs of
Policronio ratified the Deed of Extra-Judicial Partition when Conrado took
possession of one of the parcels of land adjudicated to him and his siblings, and
when another parcel was used as collateral for a loan entered into by some of
the Heirs of Policronio. The Deed of Extra-Judicial Partition having been ratified
and its benefits accepted, the same thus became enforceable and binding upon
them.
The Heirs of Alfonso averred that granting arguendo that Conrado was not
authorized to represent his co-heirs and there was no ratification, the CA should
not have remanded the case to the RTC for partition of Alfonsos estate. They
argued that the CA should not have applied the Civil Code general provision on
contracts, but the special provisions dealing with succession and partition. They
contended thatcontrary to the ruling of the CA, the extra-judicial parition was not
an act of strict dominion, as it has been ruled that partition of inherited land is
not a conveyance but a confirmation or ratification of title or right to the land.
[46]
Therefore, the law requiring a special power of attorney should not be applied
to partitions.
On the other hand, the Heirs of Policronio insisted that the CA
pronouncement on the invalidity of the Deed of Extra-Judicial Partition should not
be disturbed because the subject properties should not have been included in
the estate of Alfonso, and because Conrado lacked the written authority to
represent his siblings. They argued with the CA in ruling that a special power of
attorney was required before Conrado could sign in behalf of his co-heirs.
The Heirs of Policronio denied that they ratified the Deed of Extra-Judicial
Partition. They claimed that there is nothing on record that establishes that they
ratified the partition. Far from doing so, they precisely questioned its execution
by filing a complaint. They further argued that under Article 1409 (3) of the Civil
Code, ratification cannot be invoked to validate the illegal act of including in the
partition those properties which do not belong to the estate as it provides
another mode of acquiring ownership not sanctioned by law.
Furthermore, the Heirs of Policronio contended that the defenses of
unenforceability, ratification, and preterition are being raised for the first time on
appeal by the Heirs of Alfonso. For having failed to raise them during the trial,
the Heirs of Alfonso should be deemed to have waived their right to do so.
The Court agrees in part with the Heirs of Alfonso.
To begin, although the defenses of unenforceability, ratification and
preterition were raised by the Heirs of Alfonso for the first time on appeal, they
are concomitant matters which may be taken up. As long as the questioned
items bear relevance and close relation to those specifically raised, the interest
of justice would dictate that they, too, must be considered and resolved. The rule
that only theories raised in the initial proceedings may be taken up by a party

thereto on appeal should refer to independent, not concomitant matters, to

support or oppose the cause of action.[47]
In the RTC, the Heirs of Policronio alleged that Conrados consent was
vitiated by mistake and undue influence, and that he signed the Deed of ExtraJudicial Partition without the authority or consent of his co-heirs.
The RTC found that Conrados credibility had faltered, and his claims were
rejected by the RTC as gratuitous assertions. On the basis of such, the RTC ruled
that Conrado duly represented his siblings in the Deed of Extra-Judicial Partition.
On the other hand, the CA annulled the Deed of Extra-Judicial Partition
under Article 1390 (1) of the Civil Code, holding that a special power of attorney
was lacking as required under Article 1878 (5) and (15) of the Civil Code. These
articles are as follows:
Art. 1878. Special powers of attorney are necessary in the following
cases:
xxx
(5) To enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a
valuable consideration;
xxx
(15) Any other act of strict dominion.
Art. 1390. The following contracts are voidable or annullable, even
though there may have been no damage to the contracting parties:
(1) Those where one of the parties is incapable of giving consent to
a contract;
(2) Those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by a proper
action in court. They are susceptible of ratification.
This Court finds that Article 1878 (5) and (15) is inapplicable to the case at
bench. It has been held in several cases [48] that partition among heirs is not
legally deemed a conveyance of real property resulting in change of ownership. It
is not a transfer of property from one to the other, but rather, it is a confirmation
or ratification of title or right of property that an heir is renouncing in favor of
another heir who accepts and receives the inheritance. It is merely a designation
and segregation of that part which belongs to each heir. The Deed of ExtraJudicial Partition cannot, therefore, be considered as an act of strict dominion.
Hence, a special power of attorney is not necessary.
In fact, as between the parties, even an oral partition by the heirs is valid if
no creditors are affected. The requirement of a written memorandum under the
statute of frauds does not apply to partitions effected by the heirs where no
creditors are involved considering that such transaction is not a conveyance of
property resulting in change of ownership but merely a designation and
segregation of that part which belongs to each heir. [49]

Neither is Article 1390 (1) applicable. Article 1390 (1) contemplates the
incapacity of a party to give consent to a contract. What is involved in the case at
bench though is not Conrados incapacity to give consent to the contract, but
rather his lack of authority to do so. Instead, Articles 1403 (1), 1404, and 1317 of
the Civil Code find application to the circumstances prevailing in this case. They
are as follows:
Art. 1403. The following contracts are unenforceable, unless they
are ratified:
(1) Those entered into in the name of another person by one who
has been given no authority or legal representation, or who has
acted beyond his powers;
Art. 1404. Unauthorized contracts are governed by Article 1317 and
the principles of agency in Title X of this Book.
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.
Such was similarly held in the case of Badillo v. Ferrer:
The Deed of Extrajudicial Partition and Sale is not a voidable
or an annullable contract under Article 1390 of the New Civil Code.
Article 1390 renders a contract voidable if one of the parties is
incapable of giving consent to the contract or if the contracting
partys consent is vitiated by mistake, violence, intimidation, undue
influence or fraud. x x x
The deed of extrajudicial parition and sale is an
unenforceable or, more specifically, an unauthorized contract under
Articles 1403(1) and 1317 of the New Civil Code. [50]
Therefore, Conrados failure to obtain authority from his co-heirs to sign the
Deed of Extra-Judicial Partition in their behalf did not result in his incapacity to
give consent so as to render the contract voidable, but rather, it rendered the
contract valid but unenforceable against Conrados co-heirs for having been
entered into without their authority.
A closer review of the evidence on record, however, will show that the
Deed of Extra-Judicial Partition is not unenforceable but, in fact, valid, binding
and enforceable against all the Heirs of Policronio for having given their consent
to the contract. Their consent to the Deed of Extra-Judicial Partition has been
proven by a preponderance of evidence.

Regarding his alleged vitiated consent due to mistake and undue influence
to the Deed of Extra-Judicial Partition, Conrado testified, to wit:
Q: Mr. Ureta you remember having signed a document entitled deed
of extra judicial partition consisting of 11 pages and which have
previously [been] marked as Exhibit I for the plaintiffs?
A: Yes sir.
Q: Can you recall where did you sign this document?
A: The way I remember I signed that in our house.
Q: And who requested or required you to sign this document?
A: My aunties.
Q: Who in particular if you can recall?
A: Nay Pruding Panadero.
Q: You mean that this document that you signed was brought to
your house by your Auntie Pruding Pa[r]adero [who] requested you
to sign that document?
A: When she first brought that document I did not sign that said
document because I [did] no[t] know the contents of that document.
Q: How many times did she bring this document to you [until] you
finally signed the document?
A: Perhaps 3 times.
Q: Can you tell the court why you finally signed it?
A: Because the way she explained it to me that the land of my
grandfather will be partitioned.
Q: When you signed this document were your brothers and sisters
who are your co-plaintiffs in this case aware of your act to sign this
document?
A: They do not know.
xxx
Q: After you have signed this document did you inform your
brothers and sisters that you have signed this document?
A: No I did not. [51]
xxx

Q: Now you read the document when it was allegedly brought to

your house by your aunt Pruding Pa[r]adero?
A: I did not read it because as I told her I still want to ask the advise
of my brothers and sisters.
Q: So do I get from you that you have never read the document
itself or any part thereof?
A: I have read the heading.
xxx
Q: And why is it that you did not read all the pages of this document
because I understand that you know also how to read in English?
A: Because the way Nay Pruding explained to me is that the
property of my grandfather will be partitioned that is why I am so
happy.
xxx
Q: You mean to say that after you signed this deed of extra judicial
partition up to the present you never informed them?
A: Perhaps they know already that I have signed and they read
already the document and they have read the document.
Q: My question is different, did you inform them?
A: The document sir? I did not tell them.
Q: Even until now?
A: Until now I did not inform them.[52]
This Court finds no cogent reason to reverse the finding of the RTC that
Conrados explanations were mere gratuitous assertions not entitled to any
probative weight. The RTC found Conrados credibility to have faltered when he
testified that perhaps his siblings were already aware of the Deed of ExtraJudicial Partition. The RTC was in the best position to judge the credibility of the
witness testimony. The CA also recognized that Conrados consent was not
vitiated by mistake and undue influence as it required a special power of
attorney in order to bind his co-heirs and, as such, the CA thereby recognized
that his signature was binding to him but not with respect to his co-heirs.
Findings of fact of the trial court, particularly when affirmed by the CA, are
binding to this Court.[53]
Furthermore, this Court notes other peculiarities in Conrados testimony.
Despite claims of undue influence, there is no indication that Conrado was forced
to sign by his aunt, Prudencia Paradero. In fact, he testified that he was happy to
sign because his grandfathers estate would be partitioned. Conrado, thus, clearly
understood the document he signed. It is also worth noting that despite the

document being brought to him on three separate occasions and indicating his
intention to inform his siblings about it, Conrado failed to do so, and still
neglected to inform them even after he had signed the partition. All these
circumstances negate his claim of vitiated consent. Having duly signed the Deed
of Extra-Judicial Partition, Conrado is bound to it. Thus, it is enforceable against
him.
Although Conrados co-heirs claimed that they did not authorize Conrado to sign
the Deed of Extra-Judicial Partition in their behalf, several circumstances militate
against their contention.
First, the Deed of Extra-Judicial Partition was executed on April 19, 1989, and the
Heirs of Policronio claim that they only came to know of its existence on July 30,
1995 through an issue of the Aklan Reporter. It is difficult to believe that Conrado
did not inform his siblings about the Deed of Extra-Judicial Partition or at least
broach its subject with them for more than five years from the time he signed it,
especially after indicating in his testimony that he had intended to do so.
Second, Conrado retained possession of one of the parcels of land
adjudicated to him and his co-heirs in the Deed of Extra-Judicial Partition.
Third, after the execution of the partition on April 19, 1989 and more than
a year before they claimed to have discovered the existence of the Deed of
Extra-Judicial Partition on July 30, 1995, some of the Heirs of Policronio, namely,
Rita Solano, Macario Ureta, Lilia Tayco, and Venancio Ureta executed on June 1,
1994, a Special Power of Attorney[54] in favor of their sister Gloria Gonzales,
authorizing her to obtain a loan from a bank and to mortgage one of the parcels
of land adjudicated to them in the Deed of Extra-Judicial Partition to secure
payment of the loan. They were able to obtain the loan using the land as
collateral, over which a Real Estate Mortgage [55] was constituted. Both the Special
Power of Attorney and the Real Estate Mortgage were presented in evidence in
the RTC, and were not controverted or denied by the Heirs of Policronio.
Fourth, in the letter dated August 15, 1995, sent by the counsel of the
Heirs of Policronio to the Heirs of Alfonso requesting for amicable settlement,
there was no mention that Conrados consent to the Deed of Extra-Judicial
Partition was vitiated by mistake and undue influence or that they had never
authorized Conrado to represent them or sign the document on their behalf. It is
questionable for such a pertinent detail to have been omitted. The body of said
letter is reproduced hereunder as follows:
Greetings:
Your nephews and nieces, children of your deceased brother
Policronio Ureta, has referred to me for appropriate legal action the
property they inherited from their father consisting of six (6) parcels
of land which is covered by a Deed of Absolute Sale dated October
25, 1969. These properties ha[ve] already been transferred to the
name of their deceased father immediately after the sale, machine
copy of the said Deed of Sale is hereto attached for your ready
reference.
Lately, however, there was published an Extra-judicial Partition of
the estate of Alfonso Ureta, which to the surprise of my clients

included the properties already sold to their father before the death
of said Alfonso Ureta. This inclusion of their property is erroneous
and illegal because these properties were covered by the Deed of
Absolute Sale in favor of their father Policronio Ureta no longer form
part of the estate of Alfonso Ureta. Since Policronio Ureta has [sic]
died in 1974 yet, these properties have passed by hereditary
succession to his children who are now the true and lawful owners
of the said properties.
My clients are still entitled to a share in the estate of Alfonso Ureta
who is also their grandfather as they have stepped into the shoes of
their deceased father Policronio Ureta. But this estate of Alfonso
Ureta should already exclude the six (6) parcels of land covered by
the Deed of Absolute Sale in favor of Policronio Ureta.
My clients cannot understand why the properties of their late
father [should] be included in the estate of their grandfather and be
divided among his brothers and sisters when said properties should
only be divided among themselves as children of Policronio Ureta.
Since this matter involves very close members of the same family, I
have counseled my clients that an earnest effort towards a
compromise or amicable settlement be first explored before resort
to judicial remedy is pursued. And a compromise or amicable
settlement can only be reached if all the parties meet and discuss
the problem with an open mind. To this end, I am suggesting a
meeting of the parties on September 16, 1995 at 2:00 P.M. at B
Place Restaurant at C. Laserna St., Kalibo, Aklan. It would be best if
the parties can come or be represented by their duly designated
attorney-in-fact together with their lawyers if they so desire so that
the problem can be discussed unemotionally and intelligently.
I would, however, interpret the failure to come to the said meeting
as an indication that the parties are not willing to or interested in
amicable settlement of this matter and as a go signal for me to
resort to legal and/or judicial remedies to protest the rights of my
clients.
Thank you very much.[56]
Based on the foregoing, this Court concludes that the allegation of
Conrados vitiated consent and lack of authority to sign in behalf of his co-heirs
was a mere afterthought on the part of the Heirs of Policronio. It appears that the
Heirs of Policronio were not only aware of the existence of the Deed of ExtraJudicial Partition prior to June 30, 1995 but had, in fact, given Conrado authority
to sign in their behalf. They are now estopped from questioning its legality, and
the Deed of Extra-Judicial Partition is valid, binding, and enforceable against
them.
In view of the foregoing, there is no longer a need to discuss the issue of
ratification.
Preterition

The Heirs of Alfonso were of the position that the absence of the Heirs of
Policronio in the partition or the lack of authority of their representative results,
at the very least, in their preterition and not in the invalidity of the entire deed of
partition. Assuming there was actual preterition, it did not render the Deed of
Extra-Judicial Partition voidable. Citing Article 1104 of the Civil Code, they aver
that a partition made with preterition of any of the compulsory heirs shall not be
rescinded, but the heirs shall be proportionately obliged to pay the share of the
person omitted. Thus, the Deed of Extra-Judicial Partition should not have been
annulled by the CA. Instead, it should have ordered the share of the heirs
omitted to be given to them.
The Heirs of Alfonso also argued that all that remains to be adjudged is the
right of the preterited heirs to represent their father, Policronio, and be declared
entitled to his share. They contend that remand to the RTC is no longer
necessary as the issue is purely legal and can be resolved by the provisions of
the Civil Code for there is no dispute that each of Alfonsos heirs received their
rightful share. Conrado, who received Policronios share, should then fully account
for what he had received to his other co-heirs and be directed to deliver their
share in the inheritance.
These arguments cannot be given credence.
Their posited theory on preterition is no longer viable. It has already been
determined that the Heirs of Policronio gave their consent to the Deed of ExtraJudicial Partition and they have not been excluded from it. Nonetheless, even
granting that the Heirs of Policronio were denied their lawful participation in the
partition, the argument of the Heirs of Alfonso would still fail.
Preterition under Article 854 of the Civil Code is as follows:
Art. 854. The preterition or omission of one, some, or all of the
compulsory heirs in the direct line, whether living at the time of the
execution of the will or born after the death of the testator, shall
annul the institution of heir; but the devises and legacies shall be
valid insofar as they are not inofficious.
If the omitted compulsory heirs should die before the testator, the
institution shall be effectual, without prejudice to the right of
representation.
Preterition has been defined as the total omission of a compulsory heir
from the inheritance. It consists in the silence of the testator with regard to a
compulsory heir, omitting him in the testament, either by not mentioning him at
all, or by not giving him anything in the hereditary property but without
expressly disinheriting him, even if he is mentioned in the will in the latter case.
[57]
Preterition is thus a concept of testamentary succession and requires a will. In
the case at bench, there is no will involved. Therefore, preterition cannot apply.
Remand Unnecessary
The Deed of Extra-Judicial Partition is in itself valid for complying with all
the legal requisites, as found by the RTC, to wit:

A persual of the Deed of Extra-judicial Partition would reveal

that all the heirs and children of Alfonso Ureta were represented
therein; that nobody was left out; that all of them received as much
as the others as their shares; that it distributed all the properties of
Alfonso Ureta except a portion of parcel 29 containing an area of
14,000 square meters, more or less, which was expressly reserved;
that Alfonso Ureta, at the time of his death, left no debts; that the
heirs of Policronio Ureta, Sr. were represented by Conrado B. Ureta;
all the parties signed the document, was witnessed and duly
acknowledged before Notary Public Adolfo M. Iligan of Kalibo, Aklan;
that the document expressly stipulated that the heirs to whom
some of the properties were transferred before for taxation
purposes or their children, expressly recognize and acknowledge as
a fact that the properties were transferred only for the purpose of
effective administration and development convenience in the
payment of taxes and, therefore, all instruments conveying or
effecting the transfer of said properties are null and void from the
beginning (Exhs. 1-4, 7-d).[58]
Considering that the Deed of Sale has been found void and the Deed of
Extra-Judicial Partition valid, with the consent of all the Heirs of Policronio duly
given, there is no need to remand the case to the court of origin for partition.
WHEREFORE, the petition in G.R. No. 165748 is DENIED. The petition in
G.R. No. 165930 is GRANTED. The assailed April 20, 2004 Decision and October
14, 2004 Resolution of the Court of Appeals in CA-G.R. CV No. 71399, are
hereby MODIFIED in this wise:
(1)
The Deed of Extra-Judicial Partition, dated April 19, 1989, is
VALID, and
(2)

The order to remand the case to the court of origin is

hereby DELETED.

SO ORDERED.

Republic of the Philippines

Supreme Court
Manila
SECOND DIVISION
RAMON B. BRITO, SR.,
Petitioner,
- versus -

G.R. No. 171717

Present:

CARPIO, J., Chairperson,

NACHURA,
PERALTA,
SEVERINO D. DIANALA, VIOLETA ABAD, and
DIANALA SALES, JOVITA DIANALA MENDOZA, JJ.
DEQUINTO,
ROSITA
DIANALA,
CONCHITA
DIANALA
and
JOEL
Promulgated:

DEQUINTO,
Respondents.
December 15, 2010
x--------------------------------------------------x
D E CI S I O N
PERALTA, J.
Before the Court is a petition for review on certiorari seeking to annul and set
aside the Decision[1] dated January 12, 2005 and Resolution[2] dated February 13,
2006 of the Court of Appeals (CA) in CA-G.R. CV No. 70009. The assailed Decision
set aside the Joint Orders[3] dated June 29, 2000 of the Regional Trial Court (RTC)
of Negros Occidental, Branch 60, Cadiz City, while the questioned Resolution
denied petitioner's Motion for Reconsideration.
The factual and procedural antecedents of the case are as follows:
Subject of the present petition is a parcel of land located at Barrio Sicaba, Cadiz
City, Negros Occidental. The said tract of land is a portion of Lot No. 1536-B,
formerly known as Lot No. 591-B, originally owned by a certain Esteban Dichimo
and his wife, Eufemia Dianala, both of whom are already deceased.
On September 27, 1976, Margarita Dichimo, assisted by her husband, Ramon
Brito, Sr., together with Bienvenido Dichimo, Francisco Dichimo, Edito Dichimo,
Maria Dichimo, Herminia Dichimo, assisted by her husband, Angelino Mission,
Leonora Dechimo, assisted by her husband, Igmedio Mission, Felicito, and
Merlinda Dechimo, assisted by her husband, Fausto Dolleno, filed a Complaint for
Recovery of Possession and Damages with the then Court of First Instance (now
Regional Trial Court) of Negros Occidental, against a certain Jose Maria
Golez. The case was docketed as Civil Case No. 12887.
Petitioner's wife, Margarita, together with Bienvenido and Francisco, alleged that
they are the heirs of a certain Vicente Dichimo, while Edito, Maria, Herminia,
Leonora, Felicito and Merlinda claimed to be the heirs of one Eusebio Dichimo;
that Vicente and Eusebio are the only heirs of Esteban and Eufemia; that Esteban
and Eufemia died intestate and upon their death Vicente and Eusebio, as
compulsory heirs, inherited Lot No. 1536-B; that, in turn, Vicente and Eusebio,
and their respective spouses, also died intestate leaving their pro indiviso shares
of Lot No. 1536-B as part of the inheritance of the complainants in Civil Case No.
12887.
On July 29, 1983, herein respondents filed an Answer-in-Intervention claiming
that prior to his marriage to Eufemia, Esteban was married to a certain Francisca
Dumalagan; that Esteban and Francisca bore five children, all of whom are
already deceased; that herein respondents are the heirs of Esteban and
Francisca's children; that they are in open, actual, public and uninterrupted
possession of a portion of Lot No. 1536-B for more than 30 years; that their legal
interests over the subject lot prevails over those of petitioner and his co-heirs;
that, in fact, petitioner and his co-heirs have already disposed of their shares in
the said property a long time ago.

On November 26, 1986, the trial court issued an Order dismissing without
prejudice respondents' Answer-in-Intervention for their failure to secure the
services of a counsel despite ample opportunity given them.
Civil Case No. 12887 then went to trial.
Subsequently, the parties in Civil Case No. 12887 agreed to enter into a
Compromise Agreement wherein Lot No. 1536-B was divided between Jose Maria
Golez, on one hand, and the heirs of Vicente, namely: Margarita, Bienvenido, and
Francisco, on the other. It was stated in the said agreement that the heirs of
Eusebio had sold their share in the said lot to the mother of Golez. Thus, on
September 9, 1998, the Regional Trial Court (RTC) of Bacolod City, Branch 45
rendered a decision approving the said Compromise Agreement.
Thereafter, TCT No. T-12561 was issued by the Register of Deeds of Cadiz City in
the name of Margarita, Bienvenido and Francisco.
On January 18, 1999, herein petitioner and his co-heirs filed another Complaint
for Recovery of Possession and Damages, this time against herein respondents.
The case, filed with the RTC of Cadiz City, Branch 60, was docketed as Civil Case
No. 548-C. Herein respondents, on the other hand, filed with the same court, on
August 18, 1999, a Complaint for Reconveyance and Damages against petitioner
and his co-heirs. The case was docketed as Civil Case No. 588-C.
The parties filed their respective Motions to Dismiss. Thereafter, the cases were
consolidated.
On June 29, 2000, the RTC issued Joint Orders, disposing as follows:
WHEREFORE, in view of the foregoing, this Court hereby orders the
following:
1.
The Motion to Dismiss Civil Case No. 548-C is
hereby GRANTED and Civil Case No. 548[-C] is hereby ordered
DISMISSED for violation of the rule on forum shopping;
2. The Motion to Dismiss Civil Case No. 588-C is likewise hereby
GRANTED and the Complaint dated August 13, 1999 is hereby
DISMISSED for want of jurisdiction.
3. All counterclaims in both cases, Civil Case No. 548-C and 588-C
are likewise ordered DISMISSED.
SO ORDERED.[4]
The parties filed their respective motions for reconsideration, but both were
denied by the RTC in an Order dated October 5, 2000.
Herein respondents then appealed the case to the CA praying that the portion of
the RTC Joint Orders dismissing Civil Case No. 588-C be declared null and void
and that the case be decided on the merits.

On January 12, 2005, the CA rendered judgment disposing as follows:

WHEREFORE, in view of the foregoing premises, judgment is
hereby rendered by us GRANTING the appeal filed in this case
and SETTING ASIDE, as we hereby set aside, the Joint Order[s]
dated June 29, 2000 of the RTC of Cadiz City, Branch 60, dismissing
Civil Case No. 588-C. Further, let the entire records of this case be
remanded to the court a quo for the trial and hearing on the merits
of Civil Case No. 588-C.
SO ORDERED.[5]
Petitioner filed a Motion for Reconsideration, but the CA denied it in a Resolution
dated February 13, 2006.
Hence, the instant petition with the following assigned errors:
I.

THE HONORABLE COURT OF APPEALS ERRED WHEN IT

RULED THAT THE LOWER COURT HAS THE JURISDICTION TO
HEAR THE RECONVEYANCE CASE OF THE HEREIN PLAINTIFFSAPPELLANTS BEFORE THE REGIONAL TRIAL COURT OF NEGROS
OCCIDENTAL, BRANCH 60, CADIZ CITY.

II.

THE HONORABLE COURT OF APPEALS ERRED IN FINDING

THAT THE AMENDMENT OF THE DECISION IN CIVIL CASE NO.
12887 IS NOT TANTAMOUNT TO ANNULMENT OF THE SAID
DECISION. THE HONORABLE COURT IS WITHOUT JURISDICTION
TO TAKE COGNIZANCE OF THIS CASE.[6]

In his first assigned error, petitioner claims that the CA erred in holding that
respondents are not parties in Civil Case No. 12887 contending that, since their
Answer-in-Intervention was admitted, respondents should be considered parties
in the said case. Petitioner also avers that, being parties in Civil Case No. 12887,
respondents are bound by the judgment rendered therein.
The Court is not persuaded.
It is true that the filing of motions seeking affirmative relief, such as, to admit
answer, for additional time to file answer, for reconsideration of a default
judgment, and to lift order of default with motion for reconsideration, are
considered voluntary submission to the jurisdiction of the court. [7] In the present
case, when respondents filed their Answer-in-Intervention they submitted
themselves to the jurisdiction of the court and the court, in turn, acquired
jurisdiction over their persons. Respondents, thus, became parties to the action.
Subsequently, however, respondents' Answer-in-Intervention was dismissed
without prejudice. From then on, they ceased to be parties in the case so much
so that they did not have the opportunity to present evidence to support their
claims, much less participate in the compromise agreement entered into by and
between herein petitioner and his co-heirs on one hand and the defendant in
Civil Case No. 12887 on the other. Stated differently, when their Answer-in-

Intervention was dismissed, herein respondents lost their standing in court and,
consequently, became strangers to Civil Case No. 12887. It is basic that no man
shall be affected by any proceeding to which he is a stranger, and strangers to a
case are not bound by judgment rendered by the court. [8] Thus, being strangers
to Civil Case No. 12887, respondents are not bound by the judgment rendered
therein.
Neither does the Court concur with petitioner's argument that respondents are
barred by prescription for having filed their complaint for reconveyance only
after more than eight years from the discovery of the fraud allegedly committed
by petitioner and his co-heirs, arguing that under the law an action for
reconveyance of real property resulting from fraud prescribes in four years,
which period is reckoned from the discovery of the fraud.
In their complaint for reconveyance and damages, respondents alleged that
petitioner and his co-heirs acquired the subject property by means of fraud.
Article 1456 of the Civil Code provides that a person acquiring property through
fraud becomes, by operation of law, a trustee of an implied trust for the benefit
of the real owner of the property. An action for reconveyance based on an
implied trust prescribes in ten years, the reckoning point of which is the date of
registration of the deed or the date of issuance of the certificate of title over the
property.[9] Thus, inCaro v. Court of Appeals,[10] this Court held as follows:
x x x The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R.
No. L-33261, September 30, 1987,154 SCRA 396, illuminated what
used to be a gray area on the prescriptive period for an action to
reconvey the title to real property and, corollarily, its point of
reference:
x x x It must be remembered that before August 30,
1950, the date of the effectivity of the new Civil Code,
the old Code of Civil Procedure (Act No. 190) governed
prescription. It provided:
SEC. 43. Other civil actions; how limited.- Civil actions
other than for the recovery of real property can only be
brought within the following periods after the right of
action accrues:
xxxxxxxxx
3.
Within four years: xxx An action for relief
on the ground of fraud, but the right of action in such
case shall not be deemed to have accrued until the
discovery of the fraud;
xxxxxxxxx
In contrast, under the present Civil Code, we find that just as an
implied or constructive trust is an offspring of the law (Art. 1456,
Civil Code), so is the corresponding obligation to reconvey the
property and the title thereto in favor of the true owner. In this

context, and vis-a-vis prescription, Article 1144 of the Civil Code is

applicable.
Article 1144. The following actions must be brought
within ten years from the time the right of action
accrues:
(1)
Upon a written contract;
(2)

Upon an obligation created by law;

(3)

Upon a judgment.

x x x x x x x x x. (Italics supplied.)
An action for reconveyance based on an implied or constructive
trust must perforce prescribe in ten years and not otherwise. A long
line of decisions of this Court, and of very recent vintage at that,
illustrates this rule. Undoubtedly, it is now well settled that an
action for reconveyance based on an implied or constructive trust
prescribes in ten years from the issuance of the Torrens title over
the property. The only discordant note, it seems, is Balbin vs.
Medalla, which states that the prescriptive period for a
reconveyance action is four years. However, this variance can be
explained by the erroneous reliance on Gerona vs. de Guzman. But
in Gerona, the fraud was discovered on June 25, 1948, hence
Section 43(3) of Act No. 190, was applied, the new Civil Code not
coming into effect until August 30, 1950 as mentioned earlier. It
must be stressed, at this juncture, that article 1144 and article
1456, are new provisions. They have no counterparts in the old Civil
Code or in the old Code of Civil Procedure, the latter being then
resorted to as legal basis of the four-year prescriptive period for an
action for reconveyance of title of real property acquired under false
pretenses.
An action for reconveyance has its basis in Section 53, paragraph 3
of Presidential Decree No. 1529, which provides:
In all cases of registration procured by fraud, the owner
may pursue all his legal and equitable remedies
against the parties to such fraud without prejudice,
however, to the rights of any innocent holder of the
decree of registration on the original petition or
application, x x x.
This provision should be read in conjunction with Article 1456 of the
Civil Code, x x x
xxxx
The law thereby creates the obligation of the trustee to reconvey
the property and the title thereto in favor of the true owner.
Correlating Section 53, paragraph 3 of Presidential Decree No. 1529
and Article 1456 of the Civil Code with Article 1144(2) of the Civil
Code, supra, the prescriptive period for the reconveyance of

fraudulently registered real property is ten (10) years reckoned from

the date of the issuance of the certificate of title. x x x [11]
In the instant case, TCT No. T-12561 was obtained by petitioner and his co-heirs
on September 28, 1990, while respondents filed their complaint for
reconveyance on August 18, 1999. Hence, it is clear that the ten-year
prescriptive period has not yet expired.
The Court, likewise, does not agree with petitioner's contention that respondents
are guilty of laches and are already estopped from questioning the decision of
the RTC in Civil Case No. 12887 on the ground that they slept on their rights and
allowed the said decision to become final.
In the first place, respondents cannot be faulted for not appealing the decision of
the RTC in Civil Case No. 12887 simply because they are no longer parties to the
case and, as such, have no personality to assail the said judgment.
Secondly, respondents' act of filing their action for reconveyance within the tenyear prescriptive period does not constitute an unreasonable delay in asserting
their right. The Court has ruled that, unless reasons of inequitable proportions
are adduced, a delay within the prescriptive period is sanctioned by law and is
not considered to be a delay that would bar relief. [12] Laches is recourse in equity.
[13]
Equity, however, is applied only in the absence, never in contravention, of
statutory law.[14]
Moreover, the prescriptive period applies only if there is an actual need to
reconvey the property as when the plaintiff is not in possession thereof.
[15]
Otherwise, if the plaintiff is in possession of the property, prescription does
not commence to run against him.[16] Thus, when an action for reconveyance is
nonetheless filed, it would be in the nature of a suit for quieting of title, an action
that is imprescriptible.[17] The reason for this is that one who is in actual
possession of a piece of land claiming to be the owner thereof may wait until his
possession is disturbed or his title is attacked before taking steps to vindicate his
right, the rationale for the rule being, that his undisturbed possession provides
him a continuing right to seek the aid of a court of equity to ascertain and
determine the nature of the adverse claim of a third party and its effect on his
own title, which right can be claimed only by the one who is in possession. [18]
In the present case, there is no dispute that respondents are in possession of the
subject property as evidenced by the fact that petitioner and his co-heirs filed a
separate action against respondents for recovery of possession thereof. Thus,
owing to respondents' possession of the disputed property, it follows that their
complaint for reconveyance is, in fact, imprescriptible. As such, with more reason
should respondents not be held guilty of laches as the said doctrine, which is one
in equity, cannot be set up to resist the enforcement of an imprescriptible legal
right.
In his second assignment of error, petitioner argues that the objective of
respondents in filing Civil Case No. 588-C with the RTC of Cadiz City was to have
the decision of the RTC of Bacolod City in Civil Case No. 12887 amended, which is
tantamount to having the same annulled. Petitioner avers that the RTC of Cadiz

City has no jurisdiction to act on Civil Case No. 588-C, because it cannot annul
the decision of the RTC of Bacolod City which is a co-equal court.
The Court does not agree.
The action filed by respondents with the RTC of Cadiz City is for reconveyance
and damages. They are not seeking the amendment nor the annulment of the
Decision of the RTC of Bacolod City in Civil Case No. 12887. They are simply after
the recovery of what they claim as their rightful share in the subject lot as heirs
of Esteban Dichimo.
As earlier discussed, respondents' Answer-in-Intervention was dismissed by the
RTC of Bacolod City without prejudice. This leaves them with no other
option but to institute a separate action for the protection and enforcement of
their rights and interests. It will be the height of inequity to declare herein
petitioner and his co-heirs as exclusive owners of the disputed lot without giving
respondents the opportunity to prove their claims that they have legal interest
over the subject parcel of land, that it forms part of the estate of their deceased
predecessor and that they are in open, and uninterrupted possession of the same
for more than 30 years. Much more, it would be tantamount to a violation of the
constitutional guarantee that no person shall be deprived of property without
due process of law.[19]
WHEREFORE, the instant petition is DENIED. The assailed Decision dated
January 12, 2005 and Resolution dated February 13, 2006 of the Court of Appeals
in CA-G.R. CV No. 70009 are AFFIRMED.
SO ORDERED.

DIOSDADO M. PER