ART.

1106
G.R. No. L-59879 May 13, 1985
PATRICIO SINAON and MARIA, FRANCISCA and JOSE, all surnamed
SINAON, petitioners,
vs.
ANDRES SOROÑGON, ANASTACIA PARREÑO, SOLEDAD PARREÑO,
ANA PARREÑO, MARCELINA, CLARITA, RUFINO and MANUEL, all
surnamed ARELLANO, SIMPLICIO SOMBLINGO and BRIGIDA
SOMBLINGO and COURT OF APPEALS, respondents.
Neil D. Hechanova for petitioners.
Canuta was one of the five children of Domingo Somblingo, the alleged
original owner of the lot when it was not yet registered. His other four
children were Felipe, Juan, Esteban and Santiago. The theory of
respondents Soroñgon, et al.,
which they adopted in their 1968 second amended complaint (they filed the
action in 1964) is that Canuta and the Sinaons were trustees of the lot and
that the heirs of Domingo's four children are entitled to a 4/5 share thereof.
That theory was sustained by the trial court and the Appellate Court. The trial
court ordered the Sinaons to convey 4/5 of Lot No. 4781 to respondents
Soroñgon, et al. It decreed partition of the lot in five equal parts. The Sinaons
appealed to this Court. The respondents did not file any brief.

Benjamin P. Sorongon for respondents.
AQUINO, J.:
The issue in this case is whether an action for reconveyance of a registered
five-hectare land, based on implied trust, would lie after the supposed
trustees had held the land for more than forty years.
According to the documentary evidence consisting of public documents and
tax records, Judge (later Justice) Carlos A. Imperial in a decree dated March
4, 1916 adjudicated to Canuta Soblingo (Somblingo), a widow, Lot No. 4781
of the Sta. Barbara, Iloilo cadastre with an area of 5.5 hectares. OCT No.
6178-A was issued in 1917 to Canuta (Exh. 6 and 7 or B).
In 1923 Canuta sold the lot to the spouses Patricio Sinaon and Julia Sualibio
for P2,000 (Exh. 8). TCT No. 2542 was issued to the Sinaon spouses (Exh.
9 or C). It is still existing and uncancelled up to this time, Julia was the
granddaughter of Canuta.
The lot was declared for tax purposes in Sinaon's name (Exh. 3). The
Sinaon spouses and their children paid the realty taxes due thereon (Exh. 1
to 5-C). They have possessed the land as owners from 1923 up to this time
or for more than half a century.
We hold that after the Sinaons had appeared to be the registered owners of
the lot for more than forty years and had possessed it during that period,
their title had become indefeasible and their possession could not be
disturbed. Any pretension as to the existence of an implied trust should not
be countenanced.
The trustors. who created the alleged trust, died a long time ago. An attempt
to prove the trust was made by unreliable oral evidence. The title and
possession of the Sinaons cannot be defeated by oral evidence which can
be easily fabricated and contradicted. The contradictory oral evidence leaves
the court sometimes bothered and bewildered.
There was no express trust in this case. Express trusts concerning real
property cannot be proven by parol evidence (Art. 1443, Civil Code). An
implied trust "cannot be established, contrary to the recitals of a Torrens title,
upon vague and inconclusive proof" (Suarez vs. Tirambulo, 59 Phil. 303;
Salao vs. Salao, L-26699, March 16,1976, 70 SCRA 65, 83).
Even assuming that there was an implied trust, plaintiffs' action was clearly
barred by prescription (Salao vs. Salao,supra, p. 84).
Prescription is rightly regarded as a statute of repose whose object is to
suppress fraudulent and stale claims from springing up at great distances of
time and surprising the parties or their representatives when the facts have
become obscure from the lapse of time or the defective memory or death or
removal of witnesses (53 C.J.S. 903). See Teves Vda. de Bacong vs.
Teves and CA, G.R. No. 50143, October 24, 1983, 125 SCRA 137; Ramos
vs. Ramos, L-19872, December 3, 1974, 61 SCRA 284; Gallanosa vs.
Arcangel, L-29300, June 21, 1978, 83 SCRA 676 and Sinco vs. Longa 51
Phil. 507.

It was not necessary for the Sinaons to plead prescription as a defense

because there is no dispute as to the dates. There was no factual issue as to
prescription (Chua Lamko vs. Dioso, 97 Phil. 821, 824; Ferrer vs. Ericta, L-
41767, August 23, 1978, 84 SCRA 705).

At any rate, the Sinaons invoked in the lower court the ruling laid down
in Gerona vs. De Guzman, 120 Phil. 149, 153 that an action for
reconveyance of realty, based upon a constructive or implied trust resulting
from fraud, may be barred by prescription. The prescriptive period is
reckoned from the issuance of the title which operates as a constructive
notice (Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266-267; J.M. Tuason
& Co., Inc. vs. Magdangal, 114 Phil. 42, 46-47; Lopez vs. Gonzaga, 119 Phil.
424, 437).

The supposed trust in this case, which is neither an express nor a resulting
trust, is a constructive trust arising by operation of law (Art. 1456, Civil
Code). It is not a trust in the technical sense (Gayondato vs. Treasurer of the
P.I., 49 Phil. 244). *

WHEREFORE, the judgment of the Court of Appeals is reversed and the

complaint is dismissed. The receivership is terminated. The receiver is
directed to wind up his accounts. No costs.

SO ORDERED.
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.
 [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
Fil-Eastern. 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 third-party-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 employer-third-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-
party-plaintiffs 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 DEFENSE OF LACHES
APPLIES INDEPENDENTLY OF PRESCRIPTION?
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
non-payment 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 Fil-Eastern 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 well-settled 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 FIL-EASTERN 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 non-collection 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.

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 Affidavit4 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 Decision9 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 ₱10,000.00.
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 Cereno’s 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 Pablo’s 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, Pablo’s 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 Pablo’s 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 Pablo’s 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 CA’s finding that the joint affidavit attesting to the
donation propter nuptias can 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 199434 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 property38 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.

G.R. No. 187451 August 29, 2012
JESUS VIRTUCIO, represented by ABDON VIRTUCIO, Petitioner,
vs.
JOSE ALEGARBES, Respondent.
PERALTA, J., Acting Chairperson,*
VILLARAMA, JR.,**
PEREZ,***
DECISION
MENDOZA, J.:
This petition for review on certiorari under Rule 45 seeks to reverse and set
aside the February 25, 2009 Decision1of the Court of Appeals (CA), in CA-
G.R. CV No. 72613, reversing and setting aside the February 19, 2001
Decision2 of the Regional Trial Court, Branch 1, Isabela, Basi Ian (RTC), in
Civil Case No. 685-627, an action for "Recovery of Possession and
Ownership with Preliminary Injunction."
The Facts
Respondent Jose Alegarbes (Alegarbes) filed Homestead Application No. V-
33203 (E-V-49150) for a 24-hectare tract of unsurveyed land situated in
Bañas, Lantawan, Basilan in 1949. His application was approved on January
23, 1952.3 In 1955, however, the land was subdivided into three (3) lots – Lot
Nos. 138,139 and 140, Pls-19 - as a consequence of a public land
subdivision. Lot 139 was allocated to Ulpiano Custodio (Custodio), who filed
Homestead Application No. 18-4493 (E-18-2958). Lot 140 was allocated to
petitioner Jesus Virtucio (Virtucio), who filed Homestead Application No. 18-
4421 (E-18-2924).4
Alegarbes opposed the homestead applications filed by Custodio and
Virtucio, claiming that his approved application covered the whole area,
including Lot Nos. 139 and 140.5
On October 30, 1961, the Director of Lands rendered a decision denying
Alegarbes' protest and amending the latter's application to exclude Lots 139
and 140. Only Lot 138 was given due course. The applications of Custodio
and Virtucio for Lots 139 and 140, respectively, were likewise given due
course.6
Alegarbes then appealed to the Secretary of Agriculture and Natural
Resources, who dismissed his appeal on July 28, 1967. He then sought
relief from the Office of the President (OP), which, however, affirmed the
dismissal order of the Secretary of Agriculture and Natural Resources in a
decision, dated October 25, 1974. Alegarbes moved for a reconsideration,
but the motion was subsequently denied.7
On May 11, 1989, an order of execution8 was issued by the Lands
Management Bureau of the Department of Environment and Natural
Resources to enforce the decision of the OP. It ordered Alegarbes and all
those acting in his behalf to vacate the subject lot, but he refused.
On September 26, 1997, Virtucio then filed a complaint9 for "Recovery of
Possession and Ownership with Preliminary Injunction" before the RTC.
In his Answer,10 Alegarbes claimed that the decision of the Bureau of Lands
was void ab initio considering that the Acting Director of Lands acted without
jurisdiction and in violation of the provisions of the Public Land Act.
Alegarbes argued that the said decision conferred no rights and imposed no
duties and left the parties in the same position as they were before its
issuance. He further alleged that the patent issued in favor of Virtucio was
procured through fraud and deceit, thus, void ab initio.
Alegarbes further argued, by way of special and/or affirmative defenses, that
the approval of his homestead application on January 23, 1952 by the
Bureau of Lands had already attained finality and could not be reversed,
modified or set aside. His possession of Lot Nos. 138, 139 and 140 had
been open, continuous, peaceful and uninterrupted in the concept of an
owner for more than 30 years and had acquired such lots by acquisitive
prescription.
In his Amended and Supplemental Answer,11 Alegarbes also averred that his
now deceased brother, Alejandro Alegarbes, and the latter's family helped
him develop Lot 140 in 1955. Alejandro and his family, as well as Alegarbes'
wife and children, had been permanently occupying the said lot and,
introducing permanent improvements thereon since 1960.
The RTC Ruling
The RTC rendered its decision on February 19, 2001, favoring Virtucio. The
decretal portion of which reads:
WHEREFORE, upon the merit of this case, this court finds for the plaintiff
and against the defendant by:
1. Ordering the defendant and all those acting in his behalf to vacate Lot No.
140, Pls-19, located at Lower Bañas, Lantawan, Basilan and surrender the
possession and ownership thereof to plaintiff;
2. Ordering the defendant to pay the plaintiff the amount of Fifteen Thousand
Pesos (₱ 15,000.00) as attorney's fees and another Ten Thousand Pesos (₱
10,000.00) as expenses for litigation; and
3. To pay the cost of the suit in the amount of Five Hundred Pesos
(₱500.00).
SO ORDERED.12
Not in conformity, Alegarbes appealed his case before the CA.
The CA Ruling
On February 25, 2009, the CA promulgated its decision declaring Alegarbes
as the owner of Lot No. 140, Pls-19, thereby reversing and setting aside the
decision of the RTC. The CA ruled that Alegarbes became ipso jure owner of
Lot 140 and, therefore, entitled to retain possession of it.
Consequently, the awards of attorney's fees, litigation expenses and costs of
suit were deleted.
In so ruling, the CA explained that even if the decision to approve Virtucio's
homestead application over Lot 140 had become final, Alegarbes could still
acquire the said lot by acquisitive prescription. The decisions on the issues
of the approval of Virtucio's homestead application and its validity were
impertinent as Alegarbes had earlier put in issue the matter of ownership of
Lot 140 which he claimed by virtue of adverse possession.
The CA also found reversible error on the part of the RTC in disregarding the
evidence before it and relying entirely upon the decisions of the
administrative bodies, none of which touched upon the issue of Alegarbes'
open, continuous and exclusive possession of over thirty (30) years of an
alienable land. The CA held that the Director of Lands, the Secretary of
Agriculture and Natural Resources and the OP did not determine whether
Alegarbes' possession of the subject property had ipso jure segregated Lot
140 from the mass of public land and, thus, was beyond their jurisdiction.
Aggrieved, Virtucio filed this petition.
ISSUES
Virtucio assigned the following errors in seeking the reversal of the assailed
decision of the CA, to wit:
1. The Court of Appeals erred in setting aside the judgment of the trial
court, which awarded the lot in question to the respondent by virtue of
acquisitive prescription and ordered herein petitioner to surrender the
ownership and possession of the same to them.13
2. The Court of Appeals gravely erred in disregarding the decision in
CA-G.R. CV-26286 for Recovery of Possession and Ownership,
Custodio vs. Alegarbes which contains same factual circumstances as
in this case and ruled against JOSE ALEGARBES.14
3. The Court of Appeals erred in deleting the award of attorney's fees to
the petitioner.15
The lone issue in this case is whether or not Alegarbes acquired ownership
over the subject property by acquisitive prescription.
Ruling of the Court
The petition must fail.
Indeed, it is fundamental that questions of fact are not reviewable in petitions
for review on certiorari under Rule 45 of the Rules of Court. Only questions
of law distinctly set forth shall be raised in the petition. 16
Here, the main issue is the alleged acquisition of ownership by Alegarbes
through acquisitive prescription and the character and length of possession
of a party over a parcel of land subject of controversy is a factual
issue.17 The Court, however, is not precluded from reviewing facts when the
case falls within the recognized exceptions, to wit:
(a) When the findings are grounded entirely on speculation, surmises, or
conjectures;
(b) When the inference made is manifestly mistaken, absurd, or impossible;
(c) When there is grave abuse of discretion;
(d) When the judgment is based on a misapprehension of facts;
(e) When the findings of facts are conflicting;
(f) When in making its findings the CA went beyond the issues of the case,
or its findings are contrary to the admissions of both the appellant and the
appellee;
(g) When the CA’s findings are contrary to those by the trial court;
(h) When the findings are conclusions without citation of specific evidence on
which they are based;
(i) When the facts set forth in the petition as well as in the petitioner’s main
and reply briefs are not disputed by the respondent;
(j) When the findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record; or
(k) When the CA manifestly overlooked certain relevant facts not disputed by
the parties, which, if properly considered, would justify a different
conclusion.18 [Emphasis supplied]
In the case at bench, the findings and conclusions of the CA are apparently
contrary to those of the RTC, hence, the need to review the facts in order to
arrive at the proper conclusion.
On Acquisitive Prescription
Virtucio insists that the period of acquisitive prescription was interrupted on
October 30, 1961 (or in 1954 when Alegarbes filed the protest) when the
Director of Lands rendered a decision giving due course to his homestead
application and that of Ulpiano Custodio. Virtucio further claims that since
1954, several extrajudicial demands were also made upon Alegarbes
demanding that he vacate said lot. Those demands constitute the
"extrajudicial demand" contemplated in Article 1155, thus, tolling the period
of acquisitive prescription.19
Article 1106 of the New Civil Code, in relation to its Article 712, provides that
prescription is a mode of acquiring ownership through the lapse of time in
the manner and under the conditions laid down by law. Under the same law,
it states that acquisitive prescription may either be ordinary or
extraordinary.20 Ordinary acquisitive prescription requires possession of
things in good faith and with just title for a period of ten years, 21 while
extraordinary acquisitive prescription requires uninterrupted adverse
possession of thirty years, without need of title or of good faith. 22
There are two kinds of prescription provided in the Civil Code. One is
acquisitive, that is, the acquisition of a right by the lapse of time as
expounded in par. 1, Article 1106. Other names for acquisitive prescription
are adverse possession and usucapcion. The other kind is extinctive
prescription whereby rights and actions are lost by the lapse of time as
defined in Article 1106 and par. 2, Article 1139. Another name for extinctive
prescription is litigation of action.23 These two kinds of prescription should
not be interchanged.
Article 1155 of the New Civil Code refers to the interruption of prescription of
actions. Interruption of acquisitive prescription, on the other hand, is found in
Articles 1120-1125 of the same Code. Thus, Virtucio’s reliance on Article
1155 for purposes of tolling the period of acquisitive prescription is
misplaced. The only kinds of interruption that effectively toll the period of
acquisitive prescription are natural and civil interruption. 24
Civil interruption takes place with the service of judicial summons to the
possessor.25 When no action is filed, then there is no occasion to issue a
judicial summons against the respondents. The period of acquisitive
prescription continues to run.
In this case, Virtucio claims that the protest filed by Alegarbes against his
homestead application interrupted the thirty (30)-year period of acquisitive
prescription. The law, as well as jurisprudence, however, dictates that only a
judicial summons can effectively toll the said period.
In the case of Heirs of Marcelina Azardon-Crisologo v. Rañon,26 the Court
ruled that a mere Notice of Adverse Claim did not constitute an effective
interruption of possession. In the case of Heirs of Bienvenido and Araceli
Tanyag v. Gabriel,27 which also cited the Rañon Case, the Court stated that
the acts of declaring again the property for tax purposes and obtaining a
Torrens certificate of title in one's name cannot defeat another's right of
ownership acquired through acquisitive prescription. 28
In the same vein, a protest filed before an administrative agency and even
the decision resulting from it cannot effectively toll the running of the period
of acquisitive prescription. In such an instance, no civil interruption can take
place. Only in cases filed before the courts may judicial summons be issued
and, thus, interrupt possession. Records show that it was only in 1997 when
Virtucio filed a case before the RTC. The CA was, therefore, correct in ruling
that Alegarbesbecame ipso jure owner of Lot 140 entitling him to retain
possession of it because he was in open, continuous and exclusive
possession for over thirty (30) years of alienable public land.Virtucio
emphasizes that the CA erred in disregarding the decisions of the
administrative agencies which amended Alegarbes' homestead application
excluding Lot 140 and gave due course to his own application for the said
lot, which decisions were affirmed by the RTC.
Well-settled is the rule that factual findings of the lower courts are entitled to
great weight and respect on appeal and, in fact, are accorded finality when
supported by substantial evidence on the record.29 It appears, however, that
the conclusion made by the RTC was not substantially supported. Even the
RTC itself noted in its decision:
The approval of a Homestead Application merely authorizes the applicant to
take possession of the land so that he could comply with the requirements
prescribed by law before a final patent could be issued in his favor – what
divests the government of title to the land is the issuance of a patent and its
subsequent registration with the Register of Deeds.30
A perusal of the records would reveal that there was no issuance of any
patent in favor of either parties. This simply means that the land subject of
the controversy remains to be in the name of the State. Hence, neither
Virtucio nor Alegarbes can claim ownership. There was, therefore, no
substantial and legal basis for the RTC to declare that Virtucio was entitled
to possession and ownership of Lot 140.
It can be argued that the lower court had the decisions of the administrative
agencies, which ultimately attained finality, as legal bases in ruling that
Virtucio had the right of possession and ownership. In fact, the Department
of Environment and Natural Resources (DENR) even issued the Order of
Execution31 on May 11, 1989 ordering Alegarbes to vacate Lot 140 and
place Virtucio in peaceful possession of it. The CA, however, was correct in
finding that:
But appellant had earlier put in issue the matter of ownership of Lot 140
which he claims by virtue of adverse possession. On this issue, the cited
decisions are impertinent. Even if the decision to approve appellee's
homestead application over Lot 140 had become final, appellant could still
acquire the said lot by acquisitive prescription.32
In the case of Heirs of Gamos v. Heirs of Frando,33 the Court ruled that the
mere application for a patent, coupled with the fact of exclusive, open,
continuous and notorious possession for the required period, is sufficient to
vest in the applicant the grant applied for.34 It likewise cited the cases of Susi
v. Razon35 and Pineda v. CA,36 where the Court ruled that the possession of
a parcel of agricultural land of the public domain for the prescribed period of
30 years ipso jure converts the lot into private property. 37
In this case, Alegarbes had applied for homestead patent as early as 1949.
He had been in exclusive, open, continuous and notorious possession of Lot
140 for at least 30 years. By the time the DENR issued its order of execution
in 1989, Alegarbes had Lot 140 in his possession for more than 30 years.
Even more so when Virtucio filed the complaint before the RTC in 1997,
Alegarbes was already in possession of the subject property for forty-eight
(48) years.
The CA correctly observed that the RTC erred in disregarding the evidence
before it and relying entirely upon the decisions of the Director of Lands, the
Secretary of Agriculture and Natural Resources and the OP, which never
touched the issue of whether Alegarbes’ open, continuous and exclusive
possession of over thirty (30) years of alienable land had ipso jure
segregated Lot 140 from the mass of public land and beyond the jurisdiction
of these agencies.38
When the CA ruled that the RTC was correct in relying on the
abovementioned decisions, it merely recognized the primary jurisdiction of
these administrative agencies. It was of the view that the RTC was not
correct in the other aspects of the case. Thus, it declared Alegarbes as
owner ipso jure of Lot 140 and entitled to retain possession of it. There is no
reason for the Court to disturb these findings of the CA as they were
supported by substantial evidence, hence, are conclusive and binding upon
this Court.39

On the CA Decision involving a similar case

Virtucio insists that the CA gravely erred in disregarding its decision

in Custodio v. Alegarbes, CA-G.R. CV 26286, for Recovery of Possession
and Ownership, which involved the same factual circumstances and ruled
against Alegarbes.

It must be noted that the subject property in the said case was Lot 139
allocated to Custodio and that Virtucio was not a party to that case. The
latter cannot enjoy whatever benefits said favorable judgment may have had
just because it involved similar factual circumstances. The Court also found
from the records that the period of acquisitive prescription in that case was
effectively interrupted by Custodio's filing of a complaint, which is wanting in
this case.

Moreover, it is settled that a decision of the CA does not establish judicial

precedent.40 "The principle of stare decisisenjoins adherence by lower courts
to doctrinal rules established by this Court in its final decisions. It is based
on the principle that once a question of law has been examined and decided,
it should be deemed settled and closed to further argument. "41

The Court agrees with the position of Alegarbes that by Virtucio's insistence
that it was erroneous for the CA to disregard its earlier decision in CA-G.R.
CV 26286, he, in effect, calls upon this Court to adhere to that decision by
invoking the stare decisis principle, which is not legally possible because
only final decisions of this Court are considered precedents.42

In view of the foregoing, the Court need not dwell on the complaint of
Virtucio with regard to the deletion of the award of attorney's fees in his
favor. It is ludicrous for the CA to order Alegarbes to pay attorney's fees, as
a measure of damages, and costs, after finding him to have acquired
ownership over the property by acquisitive prescription.

WHEREFORE, the petition is DENIED.

ART. 1112
G.R. No. L-48889 May 11, 1989
DEVELOPMENT BANK OF THE PHILIPPINES (DBP), petitioner,
vs.
THE HONORABLE MIDPAINTAO L. ADIL, Judge of the Second Branch
of the Court of First Instance of Iloilo and SPOUSES PATRICIO
CONFESOR and JOVITA VILLAFUERTE, respondents.
GANCAYCO, J.:
The issue posed in this petition for review on certiorari is the validity of a
promissory note which was executed in consideration of a previous
promissory note the enforcement of which had been barred by prescription.
On February 10, 1940 spouses Patricio Confesor and Jovita Villafuerte
obtained an agricultural loan from the Agricultural and Industrial Bank (AIB),
now the Development of the Philippines (DBP), in the sum of P2,000.00,
Philippine Currency, as evidenced by a promissory note of said date
whereby they bound themselves jointly and severally to pay the account in
ten (10) equal yearly amortizations. As the obligation remained outstanding
and unpaid even after the lapse of the aforesaid ten-year period, Confesor,
who was by then a member of the Congress of the Philippines, executed a
second promissory note on April 11, 1961 expressly acknowledging said
loan and promising to pay the same on or before June 15, 1961. The new
promissory note reads as follows —
I hereby promise to pay the amount covered by my
promissory note on or before June 15, 1961. Upon my
failure to do so, I hereby agree to the foreclosure of my
mortgage. It is understood that if I can secure a certificate
of indebtedness from the government of my back pay I will
be allowed to pay the amount out of it.
Said spouses not having paid the obligation on the specified date, the DBP
filed a complaint dated September 11, 1970 in the City Court of Iloilo City
against the spouses for the payment of the loan.
After trial on the merits a decision was rendered by the inferior court on
December 27, 1976, the dispositive part of which reads as follows:
WHEREFORE, premises considered, this Court renders
judgment, ordering the defendants Patricio Confesor and
Jovita Villafuerte Confesor to pay the plaintiff Development
Bank of the Philippines, jointly and severally, (a) the sum
of P5,760.96 plus additional daily interest of P l.04 from
September 17, 1970, the date Complaint was filed, until
said amount is paid; (b) the sum of P576.00 equivalent to
ten (10%) of the total claim by way of attorney's fees and
incidental expenses plus interest at the legal rate as of
September 17,1970, until fully paid; and (c) the costs of
the suit.
Defendants-spouses appealed therefrom to the Court of First Instance of
Iloilo wherein in due course a decision was rendered on April 28, 1978
reversing the appealed decision and dismissing the complaint and counter-
claim with costs against the plaintiff.
A motion for reconsideration of said decision filed by plaintiff was denied in
an order of August 10, 1978. Hence this petition wherein petitioner alleges
that the decision of respondent judge is contrary to law and runs counter to
decisions of this Court when respondent judge (a) refused to recognize the
law that the right to prescription may be renounced or waived; and (b) that in
signing the second promissory note respondent Patricio Confesor can bind
the conjugal partnership; or otherwise said respondent became liable in his
personal capacity. The petition is impressed with merit. The right to
prescription may be waived or renounced. Article 1112 of Civil Code
provides:
Art. 1112. Persons with capacity to alienate property may
renounce prescription already obtained, but not the right to
prescribe in the future.
Prescription is deemed to have been tacitly renounced
when the renunciation results from acts which imply the
abandonment of the right acquired.
There is no doubt that prescription has set in as to the first promissory note
of February 10, 1940. However, when respondent Confesor executed the
second promissory note on April 11, 1961 whereby he promised to pay the
amount covered by the previous promissory note on or before June 15,
1961, and upon failure to do so, agreed to the foreclosure of the mortgage,
said respondent thereby effectively and expressly renounced and waived his
right to the prescription of the action covering the first promissory note.
This Court had ruled in a similar case that –
... when a debt is already barred by prescription, it cannot
be enforced by the creditor. But a new contract
recognizing and assuming the prescribed debt would be
valid and enforceable ... . 1
Thus, it has been held —
Where, therefore, a party acknowledges the correctness of
a debt and promises to pay it after the same has
prescribed and with full knowledge of the prescription he
thereby waives the benefit of prescription. 2
This is not a mere case of acknowledgment of a debt that has prescribed but
a new promise to pay the debt. The consideration of the new promissory
note is the pre-existing obligation under the first promissory note. The
statutory limitation bars the remedy but does not discharge the debt.
A new express promise to pay a debt barred ... will take
the case from the operation of the statute of limitations as
this proceeds upon the ground that as a statutory limitation
merely bars the remedy and does not discharge the debt,
there is something more than a mere moral obligation to
support a promise, to wit a – pre-existing debt which is a
sufficient consideration for the new the new promise; upon
this sufficient consideration constitutes, in fact, a new
cause of action. 3
... It is this new promise, either made in express terms or
deduced from an acknowledgement as a legal implication,
which is to be regarded as reanimating the old promise, or
as imparting vitality to the remedy (which by lapse of time
had become extinct) and thus enabling the creditor to
recover upon his original contract. 4
However, the court a quo held that in signing the promissory note alone,
respondent Confesor cannot thereby bind his wife, respondent Jovita
Villafuerte, citing Article 166 of the New Civil Code which provides:
Art. 166. Unless the wife has been declared a non compos
mentis or a spend thrift, or is under civil interdiction or is
confined in a leprosarium, the husband cannot alienate or
encumber any real property of the conjugal partnership
without, the wife's consent. If she ay compel her to refuses
unreasonably to give her consent, the court m grant the
same.
We disagree. Under Article 165 of the Civil Code, the husband is the
administrator of the conjugal partnership. As such administrator, all debts
and obligations contracted by the husband for the benefit of the conjugal
partnership, are chargeable to the conjugal partnership. 5 No doubt, in this
case, respondent Confesor signed the second promissory note for the
benefit of the conjugal partnership. Hence the conjugal partnership is liable
for this obligation.
WHEREFORE, the decision subject of the petition is reversed and set aside
and another decision is hereby rendered reinstating the decision of the City
Court of Iloilo City of December 27, 1976, without pronouncement as to
costs in this instance. This decision is immediately executory and no motion
for extension of time to file motion for reconsideration shall be granted.
SO ORDERED.
ART. 1115
G.R. No. 70615 October 28, 1986
VIRGILIO CALLANTA, petitioner,
vs.
CARNATION PHILIPPINES, INC., and NATIONAL LABOR RELATIONS
COMMISSION [NLRC], respondents.
Danilo L. Pilapil for petitioner.
FERNAN, J.:
The issue raised in this petition for certiorari is whether or not an action for
illegal dismissal prescribes in three [3] years pursuant to Articles 291 and
292 of the Labor Code which provide:
Art. 291. Offenses.— Offenses penalized under this Code
and the rules and regulations issued pursuant thereto shall
prescribe in three [3] years.
xxx xxx xxx
Art. 292. Money Claims. — All money claims arising from
employer-employee relations accruing during the
effectivity of this Code shall be filed within three [3] years
from the time the cause of action accrued; otherwise, they
shall be forever barred.
xxx xxx xxx
Petitioner Virgilio Callanta was employed by private respondent Carnation
Philippines, Inc. [Carnation, for brevity] in January 1974 as a salesman in the
Agusan del Sur area. Five [51 years later or on June 1, 1979, respondent
Carnation filed with the Regional Office No. X of the Ministry of Labor and
Employment [MOLE], an application for clearance to terminate the
employment of Virgilio Callanta on the alleged grounds of serious
misconduct and misappropriation of company funds amounting to
P12,000.00, more or less.
Upon approval on June 26, 1979 by MOLE Regional Director Felizardo G.
Baterbonia, of said clearance application, petitioner Virgilio Callanta's
employment with Carnation was terminated effective June 1, 1979.
On July 5, 1982, Virgilio Callanta filed with the MOLE, Regional Office No. X,
a complaint for illegal dismissal with claims for reinstatement, backwages,
and damages against respondent Carnation.
In its position paper dated October 5, 1982, respondent Carnation put in
issue the timeliness of petitioner's complaint alleging that the same is barred
by prescription for having been filed more than three [3] years after the date
of Callanta's dismissal.
On March 24, 1983, Labor Arbiter Pedro C. Ramos rendered a decision
finding the termination of Callanta's employment to be without valid cause.
Respondent Carnation was therefore ordered to reinstate Virgilio Callanta to
his former position with backwages of one [1] year without qualification
including all fringe benefits provided for by law and company policy, within
ten [10] days from receipt of the decision. It was likewise provided that failure
on the part of respondent to comply with the decision shall entitle
complainant to full backwages and all fringe benefits without loss of seniority
rights.
On April 18, 1983, respondent Carnation appealed to respondent National
Labor Relations Commission [NLRC] which in a decision dated February 25,
1985, 1 set aside the decision of the Labor Arbiter. It declared the complaint
for illegal dismissal filed by Virgilio Callanta to have already prescribed.
Thus:
Records show that Virgilio Callanta was dismissed from
his employment with respondent company effective June
1, 1979; and that on 5 July 1982, he filed the instant
complaint against respondent for: Unlawful Dismissal with
Backwages, etc.
The provisions of the Labor Code applicable are:
 Art. 291. Offenses. — Offenses penalized under this Code
and the rules and regulations issued pursuant thereto shall
prescribe in three [3] years.
Art. 292. Money claims. — All money claims arising from
employer-employee relations accruing during the
effectivity of this Code shall be filed within three [3] years
from the time the cause of action accrued; otherwise, they
shall be forever barred.
Obviously, therefore, the causes of action, i.e., "Unlawful
Dismissal" and "Backwages, etc." have already
prescribed, the complaint therefore having been filed
beyond the three-year period from accrual date.
With this finding, there is no need to discuss the other
issues raised in the appeal.
WHEREFORE, in view of the foregoing, the Decision
appealed from is hereby SET ASIDE and another one
entered, dismissing the complaint.
SO ORDERED.
Hence, this petition, which We gave due course in the resolution dated
September 18, 1985.2
Petitioner contends that since the Labor Code is silent as to the prescriptive
period of an action for illegal dismissal with claims for reinstatement,
backwages and damages, the applicable law, by way of supplement, is
Article 1146 of the New Civil Code which provides a four [4]-year prescriptive
period for an action predicated upon "an injury to the rights of the plaintiff"
considering that an action for illegal dismissal is neither a "penal offense" nor
a mere "money claim," as contemplated under Articles 291 and 292,
respectively, of the Labor Code. Petitioner further claims that an action for
illegal dismissal is a more serious violation of the rights of an employee as it
deprives him of his means of livelihood; thus, it should correspondingly have
a prescriptive period longer than the three 13] years provided for in "money
claims."
Public respondent, on the other hand, counters with the arguments that a
case for illegal dismissal falls under the general category of "offenses
penalized under this Code and the rules and regulations pursuant thereto"
provided under Article 291 or a money claim under Article 292, so that
petitioner's complaint for illegal dismissal filed on July 5, 1982, or three [3]
years, one [1] month and five [5] days after his alleged dismissal on June 1,
1979, was filed beyond the three-year prescriptive period as provided under
Articles 291 and 292 of the Labor Code, hence, barred by prescription; that
while it is admittedly a more serious offense as it involves an employee's
means of livelihood, there is no logic in assuming that it has a longer
prescriptive period, as naturally, one who is truly aggrieved would
immediately seek the redress of his grievance; that assuming arguendo that
the law does not provide for a prescriptive period for the enforcement of
petitioner's right, it is nevertheless beyond dispute that the said right has
already lapsed into a stale demand; and that considering the seriousness of
the act committed by petitioner, private respondent was justified in
terminating the employment.
We find for petitioner.
Verily, the dismissal without just cause of an employee from his employment
constitutes a violation of the Labor Code and its implementing rules and
regulations. Such violation, however, does not amount to an "offense" as
understood under Article 291 of the Labor Code. In its broad sense, an
offense is an illegal act which does not amount to a crime as defined in the
penal law, but which by statute carries with it a penalty similar to those
imposed by law for the punishment of a crime. 3 It is in this sense that a
general penalty clause is provided under Article 289 of the Labor Code
which provides that "... any violation of the provisions of this code declared
to be unlawful or penal in nature shall be punished with a fine of not less
than One Thousand Pesos [P1,000.00] nor more than Ten Thousand Pesos
[10,000.00], or imprisonment of not less than three [3] months nor more than
three [3] years, or both such fine and imprisonment at the discretion of the
court." [Emphasis supplied.]
The confusion arises over the use of the term "illegal dismissal" which
creates the impression that termination of an employment without just cause
constitutes an offense. It must be noted, however that unlike in cases of
commission of any of the probihited activities during strikes or lockouts under
Article 265, unfair labor practices under Article 248, 249 and 250 and illegal
recruitment activities under Article 38, among others, which the Code itself
declares to be unlawful, termination of an employment without just or valid
cause is not categorized as an unlawful practice.
Besides, the reliefs principally sought by an employee who was illegally
dismissed from his employment are reinstatement to his former position
without loss of seniority rights and privileges, if any, backwages and
damages, in case there is bad faith in his dismissal. As an affirmative relief,
reinstatement may be ordered, with or without backwages. While ordinarily,
reinstatement is a concomitant of backwages, the two are not necessarily
complements, nor is the award of one a condition precedent to an award of
the other. 4 And, in proper cases, backwages may be awarded without
ordering reinstatement . In either case, no penalty of fine nor improsonment
is imposed on the employer upon a finding of illegality in the dismissal. By
the very nature of the reliefs sought, therefore, an action for illegal dismissal
cannot be generally categorized as an "offense" as used under Article 291 of
the Labor Code, which according to public respondent, must be brought
within the period of three[3] years from the time the cause of action accrued,
otherwise, the same is forever barred.
It is true that the "backwwages" sought by an illegally dismissed employee
may be considered, by reason of its practical effect, as a "money claim."
However, it is not the principal cause of action in an illegal dismissal case
but the unlawful deprivation of the one's employment committed by the
employer in violation of the right of an employee. Backwages is merely one
of the reliefs which an illegally dismissed employee prays the labor arbiter
and the NLRC to render in his favor as a consequence of the unlawful act
committed by the employer. The award thereof is not private compensation
or damages 5 but is in furtherance and effectuation of the public objectives of
the Labor Code. 6 even though the practical effect is the enrichment of the
individual, the award of backwages is not inredness of a private right, but,
rather, is in the nature of a command upon the employer to make public
reparation for his violation of the Labor Code. 7
The case of Valencia vs. Cebu Portland Cement, et al., 106 Phil. 732, a
1959 case cited by petitioner, is applicable in the instant case insofar as it
concerns the issue of prescription of actions. In said case, this Court had
occasion to hold that an action for damages involving a plaintiff seperated
from his employment for alleged unjustifiable causes is one for " injury to the
rights of the plaintiff, and must be brought within four [4] years. 8
In Santos vs. Court of Appeals, 96 SCRA 448 [1980], this Court, thru then
Chief Justice Enrique M. Fernando, sustained the sand of the Solicitor
General that the period of prescription mentioned under Article 281, now
Article 292, of the Labor Code, refers to and "is limited to money claims, an
other cases of injury to rights of a workingman being governed by the Civil
Code." Accordingly, this Court ruled that petitioner Marciana Santos, who
sought reinstatement, had four [4] years within which to file her complaint for
the injury to her rights as provided under Article 1146 of the Civil Code.
Indeed there is, merit in the contention of petitioner that the four [4]-year
prescriptive period under Article 1146 of the New Civil Code, applies by way
of supplement, in the instant case, to wit:
Art. 1146. The following actions must be instituted within
four years.
[1] Upon an injury to the lights of the plaintiff.
xxx xxx xxx
[Emphasis supplied]
As this Court stated in Bondoc us. People's Bank and Trust Co.,9 when a
person has no property, his job may possibly be his only possession or
means of livelihood, hence, he should be protected against any arbitrary and
unjust deprivation of his job. Unemployment, said the Court in Almira vs. B.F.
Goodrich Philippines, 10 brings "untold hardships and sorrows on those
dependent on the wage earners. The misery and pain attendant on the loss
of jobs thus could be avoided if there be acceptance of the view that under
all the circumstances of this case, petitioners should not be deprived of their
means of livelihood."
It is a principle in American jurisprudence which, undoubtedly, is well-
recognized in this jurisdiction that one's employment, profession, trade or
calling is a "property right," and the wrongful interference therewith is an
actionable wrong. 11 The right is considered to be property within the
protection of a constitutional guaranty of due process of law. 12 Clearly then,
when one is arbitrarily and unjustly deprived of his job or means of livelihood,
the action instituted to contest the legality of one's dismissal from
employment constitutes, in essence, an action predicated "upon an injury to
the rights of the plaintiff," as contemplated under Art. 1146 of the New Civil
Code, which must be brought within four [4] years.
In the instant case, the action for illegal dismissal was filed by petitioners on
July 5, 1982, or three [3] years, one [1] month and five [5] days after the
alleged effectivity date of his dismissal on June 1, 1979 which is well within
the four [4]-year prescriptive period under Article 1146 of the New Civil
Code.
Even on the assumption that an action for illegal dismissal falls under the
category of "offenses" or "money claims" under Articles 291 and 292, Labor
Code, which provide for a three-year prescriptive period, still, a strict
application of said provisions will not destroy the enforcement of
fundamental rights of the employees. As a statutory provision on limitations
of actions, Articles 291 and 292 go to matters of remedy and not to the
destruction of fundamental rights.13 As a general rule, a statute of limitation
extinguishes the remedy only. Although the remedy to enforce a right may
be barred, that right may be enforced by some other available remedy which
is not barred. 14
More so, in the instant case, where the delay in filing the case was with
justifiable cause. The threat to petitioner that he would be charged with
estafa if he filed a complaint for illegal dismissal, which private respondent
did after all on June 22, 1981, justifies, the delayed filing of the action for
illegal dismissal with the Regional Office No. X, MOLE on July 5, 1982.
Laches will not in that sense strengthen the cause of public respondent.
Besides, it is deemed waived as it was never alleged before the Labor
Arbiter nor the NLRC.
Public respondent dismissed the action for illegal dismissal on the sole issue
of prescription of actions. It did not resolve the case of illegal dismissal on
the merits. Nonetheless, to resolve once and for all the issue of the legality
of the dismissal, We find that petitioner, who has continuously served
respondent Carnation for five [5] years was, under the attendant
circumstances, arbitrarily dismissed from his employment. The alleged
shortage in his accountabilities should have been impartially investigated
with all due regard for due process in view of the admitted enmity between
petitioner and E.L. Corsino, respondent's auditor. 15 Absent such an impartial
investigation, the alleged shortage should not have been attended with such
a drastic consequence as termination of the employment relationship.
Outright dismissal was too severe a penalty for a first offense, considering
that the alleged shortage was explained to respondent's Auditor, E.L.
Corsino, in accordance with respondent's accounting and auditing policies.
the dismissal of the criminal case. 16 However, it must not be indiscriminately
used as a shield to dismiss an employee arbitrarily. 17For, who can stop the
employer from filing all the charges in the books for the simple exercise of it,
and then hide behind the pretext of loss of confidence which can be proved
by mere preponderance of evidence.
We grant the petition and the decision of the NLRC is hereby reversed and
set aside. Although We are strongly inclined to affirm that part of the decision
of the Labor Arbiter ordering the reinstatement of petitioner to his former
position without loss of seniority rights and privileges, a supervening event,
which petitioner mentioned in his motion for early decision dated January 6,
1986 18 that is, FILIPRO, Inc.'s taking over the business of Carnation, has
legally rendered the order of reinstatement difficult to enforce, unless there is
an express agreement on assumption of liabilities 19 by the purchasing
corporation, FILIPRO, Inc. Besides, there is no law requiring that the
purchasing corporation should absorb the employees of the selling
corporation. 20 In any case, the very concept of social justice dictates that
petitioner shall be entitled to backwages of three [3] years. 21
WHEREFORE, respondent Carnation Philippines, Inc. is hereby ordered to
pay petitioner Virgilio Callanta backwages for three [3] years without
qualification and deduction. This decision is immediately executory. No
costs.
SO ORDERED.

The indecent haste of his dismissal from employment was, in fact,

aggravated by the filing of the estafa charge against petitioner with the City
Fiscal of Butuan City on June 22, 1981, or two [2] years after his questioned
dismissal. After the case had remained pending for five [5] years, the
Regional Trial Court of Agusan del Norte and Butuan City, Branch V finally
dismissed the same provisionally in an order dated February 21, 1986 for
failure of the prosecution's principal witness to appear in court. Admittedly,
loss of trust and confidence arising from the same alleged misconduct is
sufficient ground for dismissing an employee from his employment despite
ART. 1126
SECOND DIVISION
G.R. No. 198356, April 20, 2015
ESPERANZA SUPAPO AND THE HEIRS OF ROMEO SUPAPO,
NAMELY: ESPERANZA, REX EDWARD, RONALD TROY, ROMEO, JR.,
SHEILA LORENCE, ALL SURNAMED SUPAPO, AND SHERYL
FORTUNE SUPAPO-SANDIGAN, Petitioners, v. SPOUSES ROBERTO
AND SUSAN DE JESUS, MACARIO BERNARDO, AND THOSE
PERSONS CLAIMING RIGHTS UNDER THEM, Respondent.
DECISION
BRION, J.:
We resolve the petition for review on certiorari1 filed by petitioners
Esperanza Supapo and Romeo Supapo2 (Spouses Supapo) to assail the
February 25, 2011 decision3 and August 25, 2011 resolution4 of the Court of
Appeals (CA) in CA-G.R. SP No. 111674.
Factual Antecedents
The Spouses Supapo filed a complaint5 for accion publiciana against
Roberto and Susan de Jesus (Spouses de Jesus), Macario Bernardo
(Macario), and persons claiming rights under them (collectively,
the respondents), with the Metropolitan Trial Court (MeTC) of Caloocan City.
The complaint sought to compel the respondents to vacate a piece of land
located in Novaliches, Quezon City, described as Lot 40, Block 5 (subject
lot). The subject lot is covered by Transfer Certificate of Title (TCT) No. C-
284416 registered and titled under the Spouses Supapo's names. The land
has an assessed value of thirty-nine thousand nine hundred eighty pesos
(39,980.00) as shown in the Declaration of Real Property Value (tax
declaration) issued by the Office of the City Assessor of Caloocan.7
The Spouses Supapo did not reside on the subject lot. They also did not
employ an overseer but they made sure to visit at least twice a year. 8 During
one of their visits in 1992, they saw two (2) houses built on the subject lot.
The houses were built without their knowledge and permission. They later
learned that the Spouses de Jesus occupied one house while Macario
occupied the other one.9
The Spouses Supapo demanded from the respondents the immediate
surrender of the subject lot by bringing the dispute before the
appropriate Lupong Tagapamayapa. The Lupon issued a Katibayan Upang
Makadulog sa Hukuman (certificate to file action) for failure of the parties to
settle amicably.10
The Spouses Supapo then filed a criminal case11 against the respondents
for violation of Presidential Decree No. 772 or the Anti-Squatting Law.12 The
trial court convicted the respondents. The dispositive portion of the decision
reads:
WHEREFORE, in view of all the foregoing, this Court finds accused
ROBERTO DE JESUS, SUSAN DE JESUS and MACARIO BERNARDO,
GUILTY beyond reasonable doubt for Violation of Presidential Decree No.
772, and each accused is hereby ordered to pay a fine of ONE THOUSAND
PESOS (P1,000.00), and to vacate the subject premises.
SO ORDERED.13 (Emphasis supplied.)
The respondents appealed their conviction to the CA.14 While the appeal
was pending, Congress enacted Republic Act (RA) No. 8368, otherwise
known as "An Act Repealing Presidential Decree No. 772," which resulted to
the dismissal of the criminal case.15
On April 30, 1999, the CA's dismissal of the criminal case became final. 16
Notwithstanding the dismissal, the Spouses Supapo moved for the execution
of the respondents' civil liability, praying that the latter vacate the subject lot.
The Regional Trial Court (RTC) granted the motion and issued the writ of
execution. The respondents moved for the quashal of the writ but the RTC
denied the same. The RTC also denied the respondents' motion for
reconsideration.
The respondents thus filed with the CA a petition for certiorari to challenge
the RTC's orders denying the quashal of the writ and the respondent's
motion for reconsideration.17 The CA granted the petition and held that with
the repeal of the Anti-Squatting Law, the respondents' criminal and civil
liabilities were extinguished.18 The dispositive portion of the decision reads:
WHEREFORE, premises considered, the petition for certiorari with prayer for
injunction is GRANTED. The orders dated June 5, 2003 and July 24, 2003 of
Branch 131 of the Regional Trial Court of Caloocan City in Criminal Case
No. C-45610 are REVERSED and SET ASIDE. Said court is hereby
permanently ENJOINED from further executing or implementing its decision
dated March 18, 1996.
SO ORDERED.
The CA, however, underscored that the repeal of the Anti-Squatting
Law does not mean that people now have unbridled license to illegally
occupy lands they do not own, and that it was not intended to compromise
the property rights of legitimate landowners.19 In cases of violation of their
property rights, the CA noted that recourse may be had in court by filing the
proper action for recovery of possession.
The Spouses Supapo thus filed the complaint for action publiciana.20
After filing their Answer,21 the respondents moved to set their affirmative
defenses for preliminary hearing22 and argued that: (1) there is another
action pending between the same parties; (2) the complaint for accion
publiciana is barred by statute of limitations; and (3) the Spouses Supapo's
cause of action is barred by prior judgment.
The MeTC Ruling23
The MeTC denied the motion to set the affirmative defenses for preliminary
hearing. It ruled that the arguments advanced by the respondents are
evidentiary in nature, which at best can be utilized in the course of the trial.
The MeTC likewise denied the respondents' motion for reconsideration.
From the MeTC's ruling, the respondents filed a petition for certiorari with the
RTC.24
The RTC Ruling25
The RTC granted the petition for certiorari on two grounds, viz.: (i) the action
has prescribed; and (ii) accion publiciana falls within the exclusive
jurisdiction of the RTC.
It held that in cases where the only issue involved is possession, the MeTC
has jurisdiction if the action for forcible entry or unlawful detainer is filed
within one (1) year from the time to demand to vacate was made. Otherwise,
the complaint for recovery of possession should be filed before the RTC.
The dispositive portion of the RTC decision reads:
WHEREFORE, premises considered, the instant petition is
hereby GRANTED.
The Orders dated October 24, 2008 and February 23, 2009 are hereby
declared NULL and VOID.
The Public Respondent is hereby directed to DISMISS Civil Case No. 08-
29245 for lack of jurisdiction.
SO ORDERED.26
In their motion for reconsideration,27 the Spouses Supapo emphasized that
the court's jurisdiction over an action involving title to or possession of land is
determined by its assessed value; that the RTC does not have an exclusive
jurisdiction on all complaints for accion publiciana; and that the assessed
value of the subject lot falls within MeTC's jurisdiction.
The RTC denied the petitioners' motion for reconsideration.
It held that although the MeTC had jurisdiction based on the assessed value
of the subject lot, the Spouses Supapos' cause of action had already
prescribed, the action having been filed beyond the ten (l0)-year prescriptive
period under Article 555 of the Civil Code.28 As it was not proven when the
actual demand to vacate was made, the RTC ruled that the reckoning period
by which the ejectment suit should have been filed is counted from the time
the certificate to file action was issued. The certificate to file action was
issued on November 25, 1992, while the complaint for accion publiciana was
filed only on March 7, 2008, or more than ten (10) years thereafter.
Dissatisfied with the RTC ruling, the Spouses Supapo appealed to the CA. 29
The CA Ruling30
The CA dismissed the appeal and held that the complaint for accion
publiciana should have been lodged before the RTC and that the period to
file the action had prescribed.
The dispositive portion of the CA decision reads:
WHEREFORE, the appeal is DENIED. The Decision dated June 30, 2009
and Order dated October 19, 2009 are AFFIRMED.
SO ORDERED

The Spouses Supapo moved31 but failed32 to secure a reconsideration of the
CA decision; hence, they came to us through the present petition.
The Petition
In seeking reversal of the CA's ruling, the Spouses Supapo essentially argue
that:
(1) the MeTC exercises exclusive original jurisdiction over accion
publiciana where the assessed value of the property does not
exceed P20,000.00, or P50,000.00 if the property is located in Metro
Manila; and that
(2) prescription had not yet set in because their cause of action is
imprescriptible under the Torrens system.
The Respondents' Case33
The respondents argue that the complaint for accion publiciana was (1) filed
in the wrong court; (2) barred by prescription; and (3) barred by res judicata.
Issues
The issues for resolution are:
after the expiration of one year from the accrual of the cause of action or
from the unlawful withholding of possession of the realty.34
In the present case, the Spouses Supapo filed an action for the recovery of
possession of the subject lot but they based their better right of possession
on a claim of ownership.
This Court has held that the objective of the plaintiffs in accion publiciana is
to recover possession only, not ownership. However, where the parties raise
the issue of ownership, the courts may pass upon the issue to determine
who between the parties has the right to possess the property.35
This adjudication is not a final determination of the issue of ownership; it is
only for the purpose of resolving the issue of possession, where the issue of
ownership is inseparably linked to the issue of possession. The adjudication
of the issue of ownership, being provisional, is not a bar to an action
between the same parties involving title to the property. The adjudication, in
short, is not conclusive on the issue of ownership.36
Thus, while we will dissect the Spouses Supapo's claim of ownership over
the subject property, we will only do so to determine if they or the
respondents should have the right of possession.
Having thus determined that the dispute involves possession over a real
property, we now resolve which court has the jurisdiction to hear the case.

I. Whether the MeTC properly acquired jurisdiction; Under Batas Pambansa Bilang 129,37 the jurisdiction of the RTC over
II. Whether the cause of action has prescribed; and actions involving title to or possession of real property is plenary. 38
III. Whether the complaint for accion publiciana is barred by res
judicata. RA No. 7691,39 however, divested the RTC of a portion of its jurisdiction and
granted the Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts the exclusive and original jurisdiction to hear actions
Our Ruling where the assessed value of the property does not exceed Twenty
Thousand Pesos (P20,000.00), or Fifty Thousand Pesos (P50,000.00), if the
The petition is meritorious. property is located in Metro Manila.

We hold that: (1) the MeTC properly acquired jurisdiction; (2) the cause of
action has not prescribed; and (3) the complaint is not barred by res judicata.
Accion Publiciana and
the Jurisdiction of the
MeTC
Accion publiciana is an ordinary civil proceeding to determine the better right
of possession of realty independent of title. It refers to an ejectment suit filed
Section 1 of RA No. 7691 states:
Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the
"Judiciary Reorganization Act of 1980," is hereby amended to read as
follows:
Section. 19. Jurisdiction in civil cases. - Regional Trial Courts shall
exercise exclusive original jurisdiction:
(2) In all civil actions which involve the title to, or possession of, real
property, or any interest therein, where the assessed value of the property
involved exceeds Twenty thousand pesos (P20,000.00) or, for civil
actions in Metro Manila, where such value exceeds Fifty thousand
pesos (P50,000.00) x x x. (Emphasis supplied.)
Section 3 of the same law provides:
Section. 3. Section 33 of the same law is hereby amended to read as
follows:
Section. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts
and Municipal Circuit Trial Courts in Civil Cases. - Metropolitan Trial
Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts shall
exercise:
xxxx
(3) Exclusive original jurisdiction in all civil actions which involve title to,
or possession of, real property, or any interest therein where the assessed
value of the property or interest therein does not exceed Twenty
thousand pesos (P20,000.00) or, in civil actions in Metro Manila, where
such assessed value does not exceed Fifty thousand pesos
(P50,000.00) exclusive of interest, damages of whatever kind, attorney's
fees, litigation expenses and costs x x x. (Emphasis supplied.)
In view of these amendments, jurisdiction over actions involving title to or
possession of real property is now determined by its assessed
value.40 The assessed value of real property is its fair market value
multiplied by the assessment level. It is synonymous to taxable value.41
In Quinagoran v. Court of Appeals,42 we explained:
[D]oes the RTC have jurisdiction over all cases of recovery of possession
regardless of the value of the property involved?
The answer is no. The doctrine on which the RTC anchored its denial of
petitioner's Motion to Dismiss, as affirmed by the CA — that all cases of
recovery of possession or accion publiciana lies with the regional trial courts
regardless of the value of the property — no longer holds true. As tilings now
stand, a distinction must be made between those properties the
assessed value of which is below P20,000.00, if outside Metro Manila;
and P50,000.00, if within.43 (Emphasis supplied.)
In this regard, the complaint must allege the assessed value of the real
property subject of the complaint or the interest thereon to determine which
court has jurisdiction over the action. This is required because the nature of
the action and the court with original and exclusive jurisdiction over the same
is determined by the material allegations of the complaint, the type of relief
prayed for by the plaintiff, and the law in effect when the action is filed,
irrespective of whether the plaintiffs are entitled to some or all of the claims
asserted therein.44
In the present case, the Spouses Supapo alleged that the assessed value of
the subject lot, located in Metro Manila, is P39,980.00. This is proven by the
tax declaration45 issued by the Office of the City Assessor of Caloocan. The
respondents do not deny the genuineness and authenticity of this tax
declaration.
Given that the Spouses Supapo duly complied with the jurisdictional
requirements, we hold that the MeTC of Caloocan properly acquired
jurisdiction over the complaint for accion publiciana.
The cause of action
has not prescribed
The respondents argue that the complaint for accion publiciana is
dismissible for being filed out of time.
They invoke Article 555 of the Civil Code, which states: Art. 555. A
possessor may lose his possession:
xxxx
(4) By the possession of another, subject to the provisions of Article 537, if
the new possession has lasted longer than one year. But the real right
of possession is not lost till after the lapse of ten years. (Emphasis
supplied.)
The respondents point out that the Spouses Supapo filed the complaint
for accion publiciana on March 7, 2008 or more than ten (10) years after the
certificate to file action was issued on November 25, 1992. The respondents
contend that the Spouses Supapo may no longer recover possession of the
subject property, the complaint having been filed beyond the period provided
by law.
Further, while the respondents concede that the Spouses Supapo hold a
TCT over the subject property, and assuming a Torrens title is
imprescriptible and indefeasible, they posit that the latter have lost their right
to recover possession because of laches.

On their part, the Spouses Supapo admit that they filed the complaint
for accion publiciana more than ten (10) years after the certificate to file
action was issued. Nonetheless, they argue that their cause of action is
imprescriptible since the subject property is registered and titled under the
Torrens system.
We rule that the Spouses Supapo's position is legally correct.
At the core of this controversy is a parcel of land registered under the
Torrens system. The Spouses Supapo acquired the TCT on the subject lot in
1979.46 Interestingly, the respondents do not challenge the existence,
authenticity and genuineness of the Supapo's TCT.47
In defense, the respondents rest their entire case on the fact that they have
allegedly been in actual, public, peaceful and uninterrupted possession of
the subject property in the concept of an owner since 1992. The respondents
contend that they built their houses on the subject lot in good faith. Having
possessed the subject lot for more than ten (10) years, they claim that they
can no longer be disturbed in their possession. 48
Under the undisputed facts of this case, we find that the respondents'
contentions have no legal basis.
In a long line of cases, we have consistently ruled that lands covered by a
title cannot be acquired by prescription or adverse possession. We
have also held that a claim of acquisitive prescription is baseless when the
land involved is a registered land because of Article 112649 of the Civil Code
in relation to Act 496 [now, Section 47 of Presidential Decree (PD) No.
152950].51
The Spouses Supapo (as holders of the TCT) enjoy a panoply of benefits
under the Torrens system. The most essential insofar as the present case is
concerned is Section 47 of PD No. 1529 which states:
Section 47. Registered land not subject to prescriptions. No title to registered
land in derogation of the title of the registered owner shall be acquired by
prescription or adverse possession.
In addition to the imprescriptibility, the person who holds a Torrens Title over
a land is also entitled to the possession thereof. 52 The right to possess and
occupy the land is an attribute and a logical consequence of
ownership.53 Corollary to this rule is the right of the holder of the Torrens
Title to eject any person illegally occupying their property. Again, this right is
imprescriptible.54
In Bishop v. CA,55 we held that even if it be supposed that the holders of the
Torrens Title were aware of the other persons' occupation of the
property, regardless of the length of that possession, the lawful owners
have a right to demand the return of their property at any time as long as the
possession was unauthorized or merely tolerated, if at all.56
Even if the defendant attacks the Torrens Title because of a purported sale
or transfer of the property, we still rule in favor of the holder of the Torrens
Title if the defendant cannot adduce, in addition to the deed of sale, a duly-
registered certificate of title proving the alleged transfer or sale.
A case in point is Umpoc v. Mercado57 in which we gave greater probative
weight to the plaintiffs TCT vis-a-vis the contested unregistered deed of sale
of the defendants. Unlike the defendants in Umpoc, however, the
respondents did not adduce a single evidence to refute the Spouses
Supapo's TCT. With more reason therefore that we uphold the indefeasibility
and imprescriptibility of the Spouses Supapo's title.
By respecting the imprescriptibility and indefeasibility of the Spouses
Supapo's TCT, this Court merely recognizes the value of the Torrens
System in ensuring the stability of real estate transactions and integrity of
land registration.
We reiterate for the record the policy behind the Torrens System, viz.:
The Government has adopted the Torrens system due to its being the most
effective measure to guarantee the integrity of land titles and to protect their
indefeasibility once the claim of ownership is established and recognized. If
a person purchases a piece of land on the assurance that the seller's title
thereto is valid, he should not run the risk of being told later that his
acquisition was ineffectual after all, which will not only be unfair to him as the
purchaser, but will also erode public confidence in the system and will force
land transactions to be attended by complicated and not necessarily
conclusive investigations and proof of ownership. The further consequence
will be that land conflicts can be even more abrasive, if not even violent.58
With respect to the respondents' defense59 of laches, suffice it to say that the
same is evidentiary in nature and cannot be established by mere allegations
in the pleadings.60 In other words, the party alleging laches must adduce in
court evidence proving such allegation. This Court not being a trier of facts
cannot rule on this issue; especially so since the lower courts did not pass
upon the same.
 (2) It must be a judgment on the merits;
Thus, without solid evidentiary basis, laches cannot be a valid ground to
deny the Spouses Supapo's petition.61 On the contrary, the facts as culled (3) It must have been rendered by a court having jurisdiction over the subject
from the records show the clear intent of the Spouses Supapo to exercise matter and the parties; and
their right over and recover possession of the subject lot, viz.: (1) they
brought the dispute to the appropriate Lupon; (2) they initiated the criminal (4) There must be between the first and second actions, identity of
complaint for squatting; and (3) finally, they filed the action publiciana. To our parties, subject matter, and cause of action.
mind, these acts negate the allegation of laches.
Res judicata is not present in this case.
With these as premises, we cannot but rule that the Spouses Supapo's right
to recover possession of the subject lot is not barred by prescription.
While requisites one to three may be present, it is obvious that the there is
no identity of subject matter, parties and causes of action between
The action is not barred
the criminal case prosecuted under the Anti-Squatting Law and the civil
by prior judgment
action for the recovery of the subject property.
As a last-ditch effort to save their case, the respondents invoke res
First, there is no identity of parties. The criminal complaint, although
judicata. They contend that the decision of the CA in CA-G.R. SP No. 78649
initiated by the Spouses Supapo, was prosecuted in the name of the people
barred the filing of the action publiciana.
of the Philippines. The accion publiciana, on the other hand, was filed by and
in the name of the Spouses Supapo.
To recall, CA-G.R. SP No. 78649 is the petition for certiorari filed by the
respondents to challenge the RTC's issuance of the writ enforcing their civil
Second, there is no identity of subject matter. The criminal case involves
liability (i.e., to vacate the subject property) arising from their conviction
the prosecution of a crime under the Anti-Squatting Law while the accion
under the Anti-Squatting Law. The CA granted the petition and permanently
publiciana is an action to recover possession of the subject property.
enjoined the execution of the respondents' conviction because their criminal
liability had been extinguished by the repeal of the law under which they
And third, there is no identity of causes of action. The people of the
were tried and convicted. It follows that their civil liability arising from the
Philippines filed the criminal case to protect and preserve governmental
crime had also been erased.
interests by prosecuting persons who violated the statute. The Spouses
Supapo filed the accion publiciana to protect their proprietary interests over
The respondents' reliance on the principle of res judicata is misplaced.
the subject property and recover its possession.
Res judicata embraces two concepts: (1) bar by prior judgment as
Even casting aside the requirement of identity of causes of action, the
enunciated in Rule 39, Section 47(b) of the Rules of Civil Procedure; and
defense of res judicata has still no basis.
(2) conclusiveness of judgment in Rule 39, Section 47(c).62
The concept of "conclusiveness of judgment" does not require that there is
"Bar by prior judgment" means that when a right or fact had already been
identity of causes of action provided that there is identity of issue and identity
judicially tried on the merits and determined by a court of competent
of parties.65
jurisdiction, the final judgment or order shall be conclusive upon the parties
and those in privity with them and constitutes an absolute bar to subsequent
Under this particular concept of res judicata, any right, fact, or matter in issue
actions involving the same claim, demand or cause of action.63
directly adjudicated or necessarily involved in the determination of an action
before a competent court in which judgment is rendered on the merits is
The requisites64 for res judicata under the concept of bar by prior judgment
conclusively settled by the judgment therein and cannot again be litigated
are:
between the parties and their privies, whether or not the claim, demand,
purpose, or subject matter of the two actions is the same.66
(1) The former judgment or order must be final;
As already explained, there is no identity of parties between the criminal
complaint under the Anti-Squatting law and the civil action for accion
publiciana. For this reason alone, "collusiveness of judgment" does not
apply.

Even if we assume, for the sake of argument, that there is identity of parties,
"conclusiveness of judgment" still does not apply because there is no identity
of issues. The issue in the criminal case is whether the respondents
(accused therein) committed the crime alleged in the information, while the
only issue in accion publiciana is whether the Spouses Supapo have a better
right than the respondents to possess and occupy the subject property.

For all these reasons, the defense of res judicata is baseless.

Final Note

As a final note, we stress that our ruling in this case is limited only to the
issue of determining who between the parties has a better right to
possession. This adjudication is not a final and binding determination of the
issue of ownership. As such, this is not a bar for the parties or even third
persons to file an action for the determination of the issue of ownership.

WHEREFORE, premises considered, we GRANT the petition, and

consequently REVERSE and SET ASIDE the February 25, 2011 decision
and August 25, 2011 resolution of the Court of Appeals in CA-G.R. SP No.
111674.

SO ORDERED.
ART. 1127
G.R. No. 175444 December 14, 2011
JAIME ABALOS and SPOUSES FELIX SALAZAR and CONSUELO
SALAZAR, GLICERIO ABALOS, HEIRS OF AQUILINO ABALOS, namely:
SEGUNDA BAUTISTA, ROGELIO ABALOS, DOLORES A. ROSARIO,
FELICIDAD ABALOS, ROBERTO ABALOS, JUANITO ABALOS, TITA
ABALOS, LITA A. DELA CRUZ AND HEIRS OF AQUILINA ABALOS,
namely: ARTURO BRAVO, PURITA B. MENDOZA, LOURDES B.
AGANON, CONSUELO B. SALAZAR, PRIMA B. DELOS SANTOS,
THELMA APOSTOL and GLECERIO ABALOS,Petitioners,
vs.
HEIRS OF VICENTE TORIO, namely: PUBLIO TORIO, LIBORIO TORIO,
VICTORINA TORIO, ANGEL TORIO, LADISLAO TORIO, PRIMO TORIO
and NORBERTO TORIO, Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari seeking to set aside the
Decision1 dated June 30, 2006 and Resolution2 dated November 13, 2006
by the Court of Appeals (CA) in CA-G.R. SP No. 91887. The assailed
Decision reversed and set aside the Decision3 dated June 14, 2005 of the
Regional Trial Court (RTC) of Lingayen, Pangasinan, Branch 69, while the
questioned Resolution denied petitioners' Motion for Reconsideration.
The factual and procedural antecedents of the case are as follows:
On July 24, 1996, herein respondents filed a Complaint for Recovery of
Possession and Damages with the Municipal Trial Court (MTC) of Binmaley,
Pangasinan against Jaime Abalos (Jaime) and the spouses Felix and
Consuelo Salazar. Respondents contended that: they are the children and
heirs of one Vicente Torio (Vicente) who died intestate on September 11,
1973; at the time of the death of Vicente, he left behind a parcel of land
measuring 2,950 square meters, more or less, which is located at San Isidro
Norte, Binmaley, Pangasinan; during the lifetime of Vicente and through his
tolerance, Jaime and the Spouses Salazar were allowed to stay and build
their respective houses on the subject parcel of land; even after the death of
Vicente, herein respondents allowed Jaime and the Spouses Salazar to
remain on the disputed lot; however, in 1985, respondents asked Jaime and
the Spouses Salazar to vacate the subject lot, but they refused to heed the
demand of respondents forcing respondents to file the complaint. 4
Jaime and the Spouses Salazar filed their Answer with Counterclaim,
denying the material allegations in the Complaint and asserting in their
Special and Affirmative Defenses that: respondents' cause of action is
barred by acquisitive prescription; the court a quo has no jurisdiction over the
nature of the action and the persons of the defendants; the absolute and
exclusive owners and possessors of the disputed lot are the deceased
predecessors of defendants; defendants and their predecessors-in-interest
had been in actual, continuous and peaceful possession of the subject lot as
owners since time immemorial; defendants are faithfully and religiously
paying real property taxes on the disputed lot as evidenced by Real Property
Tax Receipts; they have continuously introduced improvements on the said
land, such as houses, trees and other kinds of ornamental plants which are
in existence up to the time of the filing of their Answer.5
On the same date as the filing of defendants' Answer with Counterclaim,
herein petitioners filed their Answer in Intervention with Counterclaim. Like
the defendants, herein petitioners claimed that their predecessors-in-interest
were the absolute and exclusive owners of the land in question; that
petitioners and their predecessors had been in possession of the subject lot
since time immemorial up to the present; they have paid real property taxes
and introduced improvements thereon.6
After the issues were joined, trial ensued.
On December 10, 2003, the MTC issued a Decision, the dispositive portion
of which reads as follows:
WHEREFORE, in view of the foregoing consideration[s], the Court adjudged
the case in favor of the plaintiffs and against the defendants and defendants-
intervenors are ordered to turn over the land in question to the plaintiffs (Lot
Nos. 869 and 870, Cad. 467-D. Binmaley Cadastre located in Brgy. San
Isidro Norte, Binmaley, Pangasinan with an area of 2,950 sq. m., more or
less, bounded and described in paragraph 3 of the Complaint[)]; ordering the
defendants and defendants-intervenors to remove their respective houses
standing on the land in dispute; further ordering the defendants and
defendants-intervenors, either singly or jointly to pay the plaintiffs land rent in
the amount of ₱12,000.00 per year to be reckoned starting the year 1996
until defendants and defendants-intervenors will finally vacate the premises;
furthermore, defendants and defendants-intervenors are also ordered to pay,
either singly or jointly, the amount of ₱10,000.00 as and by way of attorney's
fees and costs of suit.
SO ORDERED.7
Jaime and the Spouses Salazar appealed the Decision of the MTC with the
RTC of Lingayen, Pangasinan.8 Herein petitioners, who were intervenors,
did not file an appeal.
In its Decision dated June 14, 2005, the RTC ruled in favor of Jaime and the
Spouses Salazar, holding that they have acquired the subject property
through prescription. Accordingly, the RTC dismissed herein respondents'
complaint.
Aggrieved, herein respondents filed a petition for review with the CA
assailing the Decision of the RTC.
On June 30, 2006, the CA promulgated its questioned Decision, the
dispositive portion of which reads, thus:
WHEREFORE, the petition is GRANTED. The Decision dated June 14, 2005
of the Regional Trial Court, Branch 69, Lingayen, Pangasinan is hereby
REVERSED and SET ASIDE. In its stead, a new one is entered reinstating
the Decision dated December 10, 2003 of the Municipal Trial Court of
Binmaley, Pangasinan.
SO ORDERED.9
Jaime and the Spouses Salazar filed a Motion for Reconsideration, but the
same was denied by the CA in its Resolution dated November 13, 2006.
Hence, the instant petition based on a sole assignment of error, to wit:
THE COURT OF APPEALS ERRED IN NOT APPRECIATING THAT THE
PETITIONERS HEREIN ARE NOW THE ABSOLUTE AND EXCLUSIVE
OWNERS OF THE LAND IN QUESTION BY VIRTUE OF ACQUISITIVE
PRESCRIPTION.10
The main issue raised by petitioners is whether they and their predecessors-
in-interest possessed the disputed lot in the concept of an owner, or whether
their possession is by mere tolerance of respondents and their
predecessors-in-interest. Corollarily, petitioners claim that the due execution
and authenticity of the deed of sale upon which respondents' predecessors-
in-interest derived their ownership were not proven during trial.
The petition lacks merit.
Preliminarily, the Court agrees with the observation of respondents that
some of the petitioners in the instant petition were the intervenors 11 when the
case was filed with the MTC. Records would show that they did not appeal
the Decision of the MTC.12 The settled rule is that failure to perfect an appeal
renders the judgment final and executory.13 Hence, insofar as the
intervenors in the MTC are concerned, the judgment of the MTC had already
become final and executory.
It also bears to point out that the main issue raised in the instant petition,
which is the character or nature of petitioners' possession of the subject
parcel of land, is factual in nature.
Settled is the rule that questions of fact are not reviewable in petitions for
review on certiorari under Rule 45 of the Rules of Court.14 Section 1 of Rule
45 states that petitions for review on certiorari "shall raise only questions of
law which must be distinctly set forth."
Doubtless, the issue of whether petitioners possess the subject property as
owners, or whether they occupy the same by mere tolerance of respondents,
is a question of fact. Thus, it is not reviewable.
Nonetheless, the Court has, at times, allowed exceptions from the
abovementioned restriction. Among the recognized exceptions are the
following:
(a) When the findings are grounded entirely on speculation,
surmises, or conjectures;
(b) When the inference made is manifestly mistaken, absurd, or
impossible;
(c) When there is grave abuse of discretion;
(d) When the judgment is based on a misapprehension of facts;
 (e) When the findings of facts are conflicting;
(f) When in making its findings the CA went beyond the issues of
the case, or its findings are contrary to the admissions of both the
appellant and the appellee;
(g) When the CA’s findings are contrary to those by the trial court;
(h) When the findings are conclusions without citation of specific
evidence on which they are based;
(i) When the facts set forth in the petition as well as in the
petitioner’s main and reply briefs are not disputed by the
respondent;
(j) When the findings of fact are premised on the supposed absence
of evidence and contradicted by the evidence on record; or
(k) When the CA manifestly overlooked certain relevant facts not
disputed by the parties, which, if properly considered, would justify
a different conclusion.15
In the present case, the findings of fact of the MTC and the CA are in conflict
with those of the RTC.
After a review of the records, however, the Court finds that the petition must
fail as it finds no error in the findings of fact and conclusions of law of the CA
and the MTC.
Petitioners claim that they have acquired ownership over the disputed lot
through ordinary acquisitive prescription.
Acquisitive prescription of dominion and other real rights may be ordinary or
extraordinary.16 Ordinary acquisitive prescription requires possession in
good faith and with just title for ten (10) years.17 Without good faith and just
title, acquisitive prescription can only be extraordinary in character which
requires uninterrupted adverse possession for thirty (30) years. 18
Possession "in good faith" consists in the reasonable belief that the person
from whom the thing is received has been the owner thereof, and could
transmit his ownership.19 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.20
In the instant case, it is clear that during their possession of the property in
question, petitioners acknowledged ownership thereof by the immediate
predecessor-in-interest of respondents. This is clearly shown by the Tax
Declaration in the name of Jaime for the year 1984 wherein it contains a
statement admitting that Jaime's house was built on the land of Vicente,
respondents' immediate predecessor-in-interest.21 Petitioners never disputed
such an acknowledgment. Thus, having knowledge that they nor their
predecessors-in-interest are not the owners of the disputed lot, petitioners'
possession could not be deemed as possession in good faith as to enable
them to acquire the subject land by ordinary prescription. In this respect, the
Court agrees with the CA that petitioners' possession of the lot in question
was by mere tolerance of respondents and their predecessors-in-interest.
Acts of possessory character executed due to license or by mere tolerance
of the owner are inadequate for purposes of acquisitive
prescription.22 Possession, to constitute the foundation of a prescriptive right,
must be en concepto de dueño, or, to use the common law equivalent of the
term, that possession should be adverse, if not, such possessory acts, no
matter how long, do not start the running of the period of prescription. 23
Moreover, the CA correctly held that even if the character of petitioners'
possession of the subject property had become adverse, as evidenced by
their declaration of the same for tax purposes under the names of their
predecessors-in-interest, their possession still falls short of the required
period of thirty (30) years in cases of extraordinary acquisitive prescription.
Records show that the earliest Tax Declaration in the name of petitioners
was in 1974. Reckoned from such date, the thirty-year period was completed
in 2004. However, herein respondents' complaint was filed in 1996,
effectively interrupting petitioners' possession upon service of summons on
them.24Thus, petitioners’ possession also did not ripen into ownership,
because they failed to meet the required statutory period of extraordinary
prescription.
This Court has held that the evidence relative to the possession upon which
the alleged prescription is based, must be clear, complete and conclusive in
order to establish the prescription.25 In the present case, the Court finds no
error on the part of the CA in holding that petitioners failed to present
competent evidence to prove their alleged good faith in neither possessing
the subject lot nor their adverse claim thereon. Instead, the records would
show that petitioners' possession was by mere tolerance of respondents and
their predecessors-in-interest.1avvphi1
Finally, as to the issue of whether the due execution and authenticity of the
deed of sale upon which respondents anchor their ownership were not
proven, the Court notes that petitioners did not raise this matter in their
Answer as well as in their Pre-Trial Brief. It was only in their Comment to
respondents' Petition for Review filed with the CA that they raised this issue.
Settled is the rule that points of law, theories, issues, and arguments not
adequately brought to the attention of the trial court need not be, and
ordinarily will not be, considered by a reviewing court. 26 They cannot be
raised for the first time on appeal. To allow this would be offensive to the
basic rules of fair play, justice and due process.27

Even granting that the issue of due execution and authenticity was properly
raised, the Court finds no cogent reason to depart from the findings of the
CA, to wit:

xxxx

Based on the foregoing, respondents [Jaime Abalos and the Spouses Felix
and Consuelo Salazar] have not inherited the disputed land because the
same was shown to have already been validly sold to Marcos Torio, who,
thereupon, assigned the same to his son Vicente, the father of petitioners
[herein respondents]. A valid sale was amply established and the said
validity subsists because the deed evidencing the same was duly notarized.

There is no doubt that the deed of sale was duly acknowledged before a
notary public. As a notarized document, it has in its favor the presumption of
regularity and it carries the evidentiary weight conferred upon it with respect
to its due execution. It is admissible in evidence without further proof of its
authenticity and is entitled to full faith and credit upon its face. 28

Indeed, settled is the rule in our jurisdiction that a notarized document has in
its favor the presumption of regularity, and to overcome the same, there
must be evidence that is clear, convincing and more than merely
preponderant; otherwise, the document should be upheld. 29 In the instant
case, petitioners' bare denials will not suffice to overcome the presumption
of regularity of the assailed deed of sale.

WHEREFORE, the petition is DENIED. The assailed Decision and

Resolution of the Court of Appeals in CA-G.R. SP No. 91887
are AFFIRMED.

SO ORDERED.
ART. 1137
G.R. No. 201405, August 24, 2015
LIWAYWAY ANDRES, RONNIE ANDRES, AND PABLO B.
FRANCISCO, Petitioners, v. STA. LUCIA REALTY & DEVELOPMENT,
INCORPORATED, Respondent.
DECISION
DEL CASTILLO, J.:
Not all may demand for an easement of right-of-way. Under the law, an
easement of right-of-way may only be demanded by the owner of an
immovable property or by any person who by virtue of a real right may
cultivate or use the same.
This Petition for Review on Certiorari assails the November 17, 2011
Decision1 of the Court of Appeals in CA-G.R. CV No. 87715, which reversed
and set aside the May 22, 2006 Decision2 of the Regional Trial Court (RTC),
Binangonan, Rizal, Branch 68 granting petitioners Pablo B. Francisco
(Pablo), Liwayway Andres (Liwayway), Ronnie Andres (Ronnie) and their co-
plaintiff Liza Andres (Liza) a 50-square meter right-of-way within the
subdivision of respondent Sta. Lucia Realty and Development, Incorporated
(respondent).
Likewise assailed is the March 27, 2012 CA Resolution 3 which denied
petitioners and Liza's Motion for Reconsideration thereto.
Factual Antecedents
Petitioners and Liza filed a Complaint4 for Easement of Right-of-Way against
respondent before the RTC on November 28,2000. They alleged that they
are co-owners and possessors for more than 50 years of three parcels of
unregistered agricultural land in Pag-asa, Binangonan, Rizal with a total area
of more or less 10,500 square meters (subject property). A few years back,
however, respondent acquired the lands surrounding the subject property,
developed the same into a residential subdivision known as the Binangonan
Metropolis East, and built a concrete perimeter fence around it such that
petitioners and Liza were denied access from subject property to the nearest
public road and vice versa. They thus prayed for a right-of-way within
Binangonan Metropolis East in order for them to have access to Col. Guido
Street, a public road.
In its Answer,5 respondent denied knowledge of any property adjoining its
subdivision owned by petitioners and Liza. At any rate, it pointed out that
petitioners and Liza failed to sufficiently allege in their complaint the
existence of the requisites for the grant of an easement of right-of-way.
During trial, Pablo testified that he bought a 4,000-square meter-portion of
the subject property from Carlos Andres (Carlos), the husband of Liwayway
and father of Ronnie and Liza.6 According to Pablo, he and his co-plaintiffs
are still in possession of the subject property as evidenced by an April 13,
1998 Certification7 issued by the Barangay Chairman of Pag-asa.8 Further,
Pablo clarified that the easement of right-of-way that they are asking from
respondent would traverse the latter's subdivision for about 50 meters from
the subject property all the way to another subdivision that he co-owns,
Victoria Village, which in turn, leads to Col. Guido Street. 9 He claimed that
the prevailing market value of lands in the area is about P600.00 per square
meter. Pablo also explained that the subject property is still not registered
under the Land Registration Act since no tax declaration over the same has
been issued to them despite application with the Municipal Assessor of
Binangonan.10 When required by the court to submit documents regarding
the said application,11 Pablo attached in his Compliance,12 among others,
Carlos' letter13 of Maty 18, 1998 to the Municipal Assessor of Binangonan
requesting for the issuance of a tax declaration and the reply thereto dated
August 5, 199814 of the Provincial Assessor of Rizal. In the aforesaid reply,
the Provincial Assessor denied the request on the ground that the subject
property was already declared for taxation purposes under the name of Juan
Diaz and later, in the name of Juanito15Blanco, et al. (the Blancos).
Liwayway testified next. According to her, she and her children Ronnie and
Liza are the surviving heirs of the late Carlos who owned the subject
property.16 Carlos acquired ownership over the same after he had been in
continuous, public and peaceful possession thereof for 50 years, 17 the
circumstances of which he narrated in a Sinumpaang Salaysay18 that he
executed while he was still alive. Carlos stated therein that even before he
was born in 1939, his father was already in possession and working on the
subject property; that in 1948, he started to help his father in tilling the land;
that when his father became weak and eventually died, he took over the
land; and, that he already sought to register his ownership of the property
with the Department of Environment and Natural Resources (DENR) and to
declare the same for taxation purposes.
For its part, respondent presented as a lone witness the then Municipal
Assessor of Binangonan, Virgilio Flordeliza (Flordeliza). Flordeliza confirmed
that Carlos wrote him a letter-request for the issuance of a tax
declaration.19 He, however, referred the matter to the Provincial Assessor of
Rizal since the property for which the tax declaration was being applied for
was already declared for taxation purposes in the name of one Juan
Diaz.20 Later, the tax declaration of Juan Diaz was cancelled and in lieu
thereof, a tax declaration in the name of the Blancos was issued. 21 For this
reason, the Provincial Assessor of Rizal denied Carlos' application for
issuance of tax declaration.22cralawrednad
Ruling of the Regional Trial Court
The RTC rendered its Decision23 on May 22, 2006. It observed that
petitioners and Liza's allegation in their Complaint that they were in
possession of the subject property for more than 50 years was not denied by
respondent in its Answer. Thus, the same is deemed to have been impliedly
admitted by the latter. It then ratiocinated that based on Article 1137 24 of the
Civil Code, petitioners and Liza are considered owners of the subject
property through extraordinary prescription. Having real right over the same,
therefore, they are entitled to demand an easement of right-of-way under
Article 64925cralawred of the Civil Code.
The RTC further held that Pablo's testimony sufficiently established: (1) that
the subject property was surrounded by respondent's property; (2) the area
and location of the right-of-way sought; (3) the value of the land on which the
right-of-way is to be constituted which was P600.00 per square meter; and
(4) petitioners and Liza's possession of the subject property up to the
present time.
In the ultimate, said court concluded that petitioners and Liza are entitled to
an easement of right-of-way, thus:cralawlawlibrary
WHEREFORE, judgment is hereby rendered giving the plaintiffs a right of
way of 50 square meters to reach Victoria Village towards Col. Guido Street.
Defendant Sta. Lucia is hereby ordered to grant the right of way to the
plaintiffs as previously described upon payment of an indemnity equivalent to
the market value of the [50-square meter right of way].
SO ORDERED.26
Respondent filed a Notice of Appeal27 which was given due course by the
RTC in an Order28 dated June 27, 2006.
Ruling of the Court of Appeals
On appeal, respondent argued mat petitioners and Liza were neither able to
prove that they were owners nor that they have any real right over the
subject property intended to be the dominant estate. Hence, they are not
entitled to demand an easement of right-of-way. At any rate, they likewise
failed to establish that the only route available from their property to Col.
Guido Street is through respondent's subdivision.
In a Decision29 dated November 17, 2011, the CA held that the evidence
adduced by petitioners and Liza failed to sufficiently establish their asserted
ownership and possession of the subject property. Moreover, it held that
contrary to the RTC's observation, respondent in fact denied in its Answer
the allegation of petitioners and Liza that they have been in possession of
subject property for more than 50 years. In view of these, the CA concluded
that petitioners and Liza have no right to demand an easement of right-of-
way from respondent, thus:cralawlawlibrary
WHEREFORE, in view of the foregoing, the appeal is hereby GRANTED.
Accordingly, the May 22, 2006 Decision of the Regional Trial Court of
Binangonan, Rizal, Branch 68 is REVERSED and SET ASIDE. Civil Case
No. 00-037-B is ordered DISMISSED.
SO ORDERED.30
Petitioners and Liza's Motion for Reconsideration31 was denied in the CA
Resolution32 dated March 27, 2012.
Hence, petitioners seek recourse to this Court through this Petition for
Review on Certiorari.
Issue
Whether petitioners are entitled to demand an easement of right-of-way from
respondent.
Our Ruling
The Petition has no merit.
Under Article 649 of the Civil Code, an easement of right-of-way may be
demanded by the owner of an immovable or by any person who by virtue of
a real right may cultivate or use the same.
Here, petitioners argue that they are entitled to demand an easement of
right-of-way from respondent because they are the owners of the subject
property intended to be the dominant estate. They contend that they have
already acquired ownership of the subject property through ordinary
acquisitive prescription.33 This is considering that their possession became
adverse as against the Blancos (under whose names the subject property is
declared for taxation) when Carlos formally registered his claim of ownership
with the DENR and sought to declare the subject property for taxation
purposes in 1998. And since more than 10 years 34 had lapsed from that time
without the Blancos doing anything to contest their continued possession of
the subject property, petitioners aver that ordinary acquisitive prescription
had already set in their favor and against the Blancos.
In the alternative, petitioners assert that they have already become owners
of the subject property through extraordinary acquisitive prescription since
(1) they have been in open, continuous and peaceful possession thereof for
more than 50 years; (2) the subject property, as depicted in the Survey Plan
they caused to be prepared is alienable and disposable; (3) Carlos filed a
claim of ownership over the property with the DENR, the agency charged
with the administration of alienable public land; and (4) Carlos' manifestation
of willingness to declare the property for taxation purposes not only had the
effect of giving notice of his adverse claim on the property but also
strengthened his bona fide claim of ownership over the same.
It must be stressed at the outset that contrary to petitioners' allegations,
there is no showing that Carlos filed a claim of ownership over the subject
property with the DENR. His April 13, 1998 letter35 to the said office which
petitioners assert to be an application for the registration of such claim is
actually just a request for the issuance of certain documents and nothing
more. Moreover, while Carlos indeed attempted to declare the subject
property for taxation purposes, his application, as previously mentioned, was
denied because a tax declaration was already issued to the Blancos.
Anent petitioners' invocation of ordinary acquisitive prescription, the Court
notes that the same was raised for the first time on appeal. Before the RTC,
petitioners based their claim of ownership on extraordinary acquisitive
prescription under Article 1137 of the Civil Code36 such that the said court
declared them owners of the subject property by virtue thereof in its May 22,
2006 Decision.37 Also with the CA, petitioners initially asserted ownership
through extraordinary acquisitive prescription.38 It was only later in their
Motion for Reconsideration39 therein that they averred that their ownership
could also be based on ordinary acquisitive prescription. 40 "Settled is the rule
that points of law, theories, issues and arguments not brought to the
attention of the lower court need not be considered by a reviewing court, as
they cannot be raised for the first time at that late stage. Basic
considerations of fairness and due process impel this rule."41cralawrednad
Even if timely raised, such argument of petitioners, as well as with respect to
extraordinary acquisitive prescription, fails. "Prescription is one of the modes
of acquiring ownership under the Civil Code."42 There are two modes of
prescription through which immovables may be acquired - ordinary
acquisitive prescription which requires possession in good faith and just title
for 10 years and, extraordinary prescription wherein ownership and other
real rights over immovable property are acquired through uninterrupted
adverse possession for 30 years without need of title or of good
faith.43 However, it was clarified in the Heirs of Mario Malabanan v. Republic
of the Philippines,44 that only lands of the public domain subsequently
classified or declared as no longer intended for public use or for the
development of national wealth, or removed from the sphere of public
dominion and are considered converted into patrimonial lands or lands of
private ownership, may be alienated or disposed through any of the modes
of acquiring ownership under the Civil Code.45 And if the mode of acquisition
is prescription, whether ordinary or extraordinary, it must first be shown that
the land has already been converted to private ownership prior to the
requisite acquisitive prescriptive period. Otherwise, Article 1113 of the Civil
Code, which provides that property of the State not patrimonial in character
shall not be the subject of prescription, applies.46cralawrednad
Sifting through petitioners' allegations, it appears that the subject property is
an unregistered public agricultural land. Thus, being a land of the public
domain, petitioners, in order to validly claim acquisition thereof through
prescription, must first be able to show that the State has -
expressly declared through either a law enacted by Congress or a
proclamation issued by the President that the subject [property] is no longer
retained for public service or the development of the national wealth or that
the property has been converted into patrimonial. Consequently, without an
express declaration by the State, the land remains to be a property of public
dominion and hence, not susceptible to acquisition by virtue of prescription.47
In the absence of such proof of declaration in this case, petitioners' claim of
ownership over the subject property based on prescription necessarily
crumbles. Conversely, they cannot demand an easement of right-of-way
from respondent for lack of personality.
All told, the Court finds no error on the part of the CA in reversing and setting
aside the May 22, 2006 Decision of the RTC and in ordering the dismissal of
petitioners' Complaint for Easement of Right-of-Way against respondent.
WHEREFORE, the Petition is DENIED. The November 17, 2011 Decision
and March 27, 2014 Resolution of the Court of Appeals in CA-G.R. CV No.
87715 are AFFIRMED.
SO ORDERED.chanrobles virtuallawlibrary
ART. 1142
G.R. No. 213014, October 14, 2015
MAYBANK PHILIPPINES, INC. (FORMERLY PNB-REPUBLIC
BANK1), Petitioner, v. SPOUSES OSCAR AND NENITA
TARROSA, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari2 are the Decision3 dated
November 29, 2013 and the Resolution4 dated May 13, 2014 of the Court of
Appeals (CA) in CA-G.R. CV No. 02211, which affirmed the Decision5 dated
June 16, 2005 of the Regional Trial Court of Bacolod City, Branch 41 (RTC)
in Civil Case No. 98-10451 declaring the extrajudicial foreclosure sale of the
property covered by Transfer Certificate of Title (TCT) No. T-5649 as null
and void for being barred by prescription.
The Facts
On December 15, 1980, respondents-spouses Oscar and Nenita Tarrosa
(Sps. Tarrosa) obtained from then PNB-Republic Bank, now petitioner
Maybank Philippines, Inc. (Maybank), a loan in the amount of P91,000.00.
The loan was secured by a Real Estate Mortgage6 dated January 5, 1981
(real estate mortgage) over a 500-square meter parcel of land situated in
San Carlos City, Negros Occidental (subject property), covered by TCT No.
T-5649,7 and the improvements thereon.8
After paying the said loan, or sometime in March 1983, Sps. Tarrosa
obtained another loan from Maybank in the amount of P60,000.00 (second
loan),9 payable on March 11, 1984.10 However, Sps. Tarrosa failed to settle
the second loan upon maturity.11
Sometime in April 1998, Sps. Tarrosa received a Final Demand
Letter12 dated March 4, 1998 (final demand letter) from Maybank requiring
them to settle their outstanding loan in the aggregate amount of
P564,579.91, inclusive of principal, interests, and penalty charges. 13 They
offered to pay a lesser amount, which Maybank refused. 14 Thereafter, or on
June 25, 1998, Maybank commenced extrajudicial foreclosure
proceedings15 before the office of Ex-Officio Provincial Sheriff Ildefonso
Villanueva, Jr. (Sheriff Villanueva). The subject property was eventually sold
in a public auction sale held on July 29, 199816 for a total bid price of
P600,000.00, to the highest bidder, Philmay Property, Inc. (PPI), which was
thereafter issued a Certificate of Sale17 dated July 30, 1998.18
On September 7, 1998, Sps. Tarrosa filed a complaint19 for declaration of
nullity and invalidity of the foreclosure of real estate and of public auction
sale proceedings and damages with prayer for preliminary injunction against
Maybank, PPI, Sheriff Villanueva, and the Registry of Deeds of San Carlos
City, Negros Occidental (RD-San Carlos), before the RTC, docketed as Civil
Case No. 98-10451. They averred, inter alia, that: (a) the second loan was a
clean or unsecured loan; (b) after receiving the final demand letter, they tried
to pay the second loan, including the agreed interests and charges, but
Maybank unjustly refused their offers of payment; and (c) Maybank's right to
foreclose had prescribed or is barred by laches.20
On the other hand, Maybank and PPI countered21 that: (a) the second loan
was secured by the same real estate mortgage under a continuing security
provision therein; (b) when the loan became past due, Sps. Tarrosa
promised to pay and negotiated for a restructuring of their loan, but failed to
pay despite demands; and (c) Sps. Tarrosa's positive acknowledgment and
admission of their indebtedness controverts the defense of prescription.
The RTC Ruling
In a Decision23 dated June 16, 2005, the RTC held that the second loan was
subject to the continuing security provision in the real estate
mortgage.24 However, it ruled that Maybank's right to foreclose, reckoned
from the time the mortgage indebtedness became due and payable on
March 11, 1984, had already prescribed, considering the lack of any timely
judicial action, written extrajudicial demand or written acknowledgment by
the debtor of his debt that could interrupt the prescriptive
period.25Accordingly, it declared the extrajudicial foreclosure proceedings
affecting the subject property as null and void, and ordered Maybank to pay
Sps. Tarrosa moral and exemplary damages, as well as attorney's fees and
litigation expenses.26
Maybank filed a motion for reconsideration27 which was, however, denied in
an Order28 dated December 9, 2005, prompting it to appeal29 to the CA.
The CA Ruling
In a Decision30 dated November 29, 2013, the CA affirmed the RTC ruling
that Maybank's right to foreclose the real estate mortgage over the subject
property is already barred by prescription. It held that the prescriptive period
should be reckoned from March 11, 1984 when the second loan had become
past due and remained unpaid since demand was not a condition sine qua
non for the accrual of the latter's right to foreclose under paragraph 5 of the
real estate mortgage. It observed that Maybank failed to present evidence of
any timely written extrajudicial demand or written acknowledgment by the
debtors of their debt that could have effectively interrupted the running of the
prescriptive period.31
Undaunted, Maybank moved for reconsideration, 32 which was denied in a
Resolution33 dated May 13, 2014; hence this petition.
The Issues Before the Court
The essential issue for the Court's resolution is whether or not the CA
committed reversible error in finding that Maybank's right to foreclose the
real estate mortgage over the subject property was barred by
prescription.chanrobleslaw
The Court's Ruling
The petition is meritorious.
An action to enforce a right arising from a mortgage should be
enforced within ten (10) years from the time the right of action
accrues, i.e., when the mortgagor defaults in the payment of his
obligation to the mortgagee; otherwise, it will be barred by prescription
and the mortgagee will lose his rights under the mortgage.34 However,
mere delinquency in payment does not necessarily mean delay in the legal
concept. To be in default is different from mere delay in the grammatical
sense, because it involves the beginning of a special condition or status
which has its own peculiar effects or results.35
In order that the debtor may be in default, it is necessary that: (a) the
obligation be demandable and already liquidated; (b) the debtor delays
performance; and (c) the creditor requires the performance judicially or
extrajudicially,36unless demand is not necessary - i.e., when there is an
express stipulation to that effect; where the law so provides; when the period
is the controlling motive or the principal inducement for the creation of the
obligation; and where demand would be useless. Moreover, it is not
sufficient that the law or obligation fixes a date for performance; it must
further state expressly that after the period lapses, default will commence.
Thus, it is only when demand to pay is unnecessary in case of the
aforementioned circumstances, or when required, such demand is
made and subsequently refused that the mortgagor can be considered
in default and the mortgagee obtains the right to file an action to
collect the debt or foreclose the mortgage.38
In the present case, both the CA and the RTC reckoned the accrual of
Maybank's cause of action to foreclose the real estate mortgage over the
subject property from the maturity of the second loan on May 11, 1984. The
CA further held that demand was unnecessary for the accrual of the cause of
action in light of paragraph 5 of the real estate mortgage, which pertinently
provides:
5. In the event that the Mortgagor herein should fail or refuse to pay any of
the sums of money secured by this mortgage, or any part thereof, in
accordance with the terms and conditions herein set forth, or should he/it fail
to perform any of the conditions stipulated herein, then and in any such
case, the Mortgagee shall have the right, at its election to foreclose this
mortgage, [x x x].39
However, this provision merely articulated Maybank's right to elect
foreclosure upon Sps. Tarrosa's failure or refusal to comply with the
obligation secured, which is one of the rights duly accorded to mortgagees in
a similar situation.40 In no way did it affect the general parameters of default,
particularly the need of prior demand under Article 1169 41 of the Civil Code,
considering that it did not expressly declare: (a) that demand shall not be
necessary in order that the mortgagor may be in default; or (b) that default
shall commence upon mere failure to pay on the maturity date of the loan.
Hence, the CA erred in construing the above provision as one through which
the parties had dispensed with demand as a condition sine qua non for the
accrual of Maybank's right to foreclose the real estate mortgage over the
subject property, and thereby, mistakenly reckoned such right from the
maturity date of the loan on March 11, 1984. In the absence of showing that
demand is unnecessary for the loan obligation to become due and
demandable, Maybank's right to foreclose the real estate mortgage accrued
only after the lapse of the period indicated in its final demand letter for Sps.
Tarrosa to pay, i.e., after the lapse of five (5) days from receipt of the final
demand letter dated March 4, 1998.42 Consequently, both the CA and the
RTC committed reversible error in declaring that Maybank's right to foreclose
the real estate mortgage had already prescribed.
Thus, considering that the existence of the loan had been admitted, the
default on the part of the debtors-mortgagors had been duly established, and
the foreclosure proceedings had been initiated within the prescriptive period
as afore-discussed, the Court finds no reason to nullify the extrajudicial
foreclosure sale of the subject property.
WHEREFORE, the petition is GRANTED. The Decision dated

November 29, 2013 and the Resolution dated May 13, 2014 of the Court of
Appeals in CA-G.R. CV No. 02211 are hereby REVERSED AND SET
ASIDE. The complaint in Civil Case No. 98-10451 is DISMISSED.

SO ORDERED.
ART.1143
G.R. No. 159508 August 29, 2012
JUAN B. BANEZ, JR., Petitioner,
vs.
HON. CRISANTO C. CONCEPCION, IN HIS CAPACITY AS THE
PRESIDING JUDGE OF THE RTC-BULACAN, MALOLOS CITY, AND THE
ESTATE OF THE LATE RODRIGO GOMEZ, REPRESENTED BY ITS
ADMINISTRATRIX, TSUI YUK YING, Respondents.
DECISION
BERSAMIN, J.:
The petitioner has directly come to the Court via petition for certiorari1 filed
on September 4, 2003 to assail the orders dated March 24, 2003 (reversing
an earlier order issued on February 18, 2003 granting his motion to dismiss
on the ground of the action being already barred by prescription, and
reinstating the action),2 April 21, 2003 (denying his motion for
reconsideration),3 and August 19, 2003 (denying his second motion for
reconsideration and ordering him to file his answer within 10 days from
notice despite the principal defendant not having been yet validly served with
summons and copy of the complaint),4 all issued by the Regional Trial Court
(RTC), Branch 12, in Malolos City in Civil Case No. 722-M-2002,5 an action
for the recovery of ownership and possession. He alleges that respondent
Presiding Judge thereby acted with grave abuse of discretion amounting to
lack or excess of jurisdiction.
Antecedents
The present controversy started almost four decades ago when Leodegario
B. Ramos (Ramos), one of the defendants in Civil Case No. 722-M-2002,
discovered that a parcel of land with an area of 1,233 square meters, more
or less, which was a portion of a bigger tract of land with an area of 3,054
square meters, more or less, located in Meycauayan, Bulacan that he had
adjudicated solely to himself upon his mother’s death on November 16, 1982
had been earlier transferred by his mother to one Ricardo Asuncion, who
had, in turn, sold it to the late Rodrigo Gomez.
On February 1, 1990, Ramos, alleging that Gomez had induced him to sell
the 1,233 square meters to Gomez on the understanding that Gomez would
settle Ramos’ obligation to three other persons, commenced in the RTC in
Valenzuela an action against Gomez, also known as Domingo Ng Lim,
seeking the rescission of their contract of sale and the payment of damages,
docketed as Civil Case No. 3287-V-90 entitled Leodegario B. Ramos v.
Rodrigo Gomez, a.k.a. Domingo Ng Lim.6
On October 9, 1990, before the Valenzuela RTC could decide Civil Case No.
3287-V-90 on the merits, Ramos and Gomez entered into a compromise
agreement.7 The RTC approved their compromise agreement through its
decision rendered on the same date.8
The petitioner, being then the counsel of Ramos in Civil Case No. 3287-V-
90, assisted Ramos in entering into the compromise agreement "to finally
terminate this case." The terms and conditions of the compromise
agreement were as follows:
COME NOW, the Parties, assisted by their respective counsels, and before
this Honorable Court, most respectfully submit this COMPROMISE
AGREEMENT for approval, as to finally terminate this case, the terms and
conditions of which being as follows:
1. That out of the total area of Three Thousand and Fifty
Four (3,054) sq. m., more or less, covered by formerly
O.C.T. No. P-2492 (M), Registry of Deeds of Bulacan,
known as Lot No. 6821, Cad-337 Lot 4020-E, Csd-04-
001618-D, and now by the Reconstituted Transfer
Certificate of Title No. T-10179-P (M) defendant shall
cause survey of said property, at its own expense, to
segregate the area of One Thousand Two Hundred Thirty-
Three, (1,233) sq. m. more or less, to take along lines two
(2) to three (3), then to four (4) and up to five (5) of said
plan, Csd-04-001618-D;
2. That upon completion of the technical survey and plan,
defendant shall cause the registration of the Deed of
Absolute Sale executed by plaintiff over the 1,233 sq. m. in
his favor and that defendant shall deliver the survey and
plan pertaining to the 1,821 sq, m. to the plaintiff with both
parties defraying the cost of registration and titling over
their respective shares;
3. That to carry out the foregoing, plaintiff shall entrust the
Owner’s Duplicate of said TCT No. T-10179-P (M),
 Registry of Deeds of Meycauayan, Bulacan, to the
defendant, upon approval of this COMPROMISE
AGREEMENT by the Court;
4. That upon the approval of this Compromise Agreement
plaintiff shall execute a Deed of Absolute Sale in favor of
defendant over the 1,233 sq. m. surveyed and segregated
from the 1,821 sq. m. which should remain with the plaintiff
and to be titled in his name;
5. That plaintiff obligates himself to return his loan
obligation to the defendant, in the principal sum of P
80,000.00 plus P 20,000.00 for the use thereof, and an
additional sum of P 10,000.00 in the concept of attorney’s
fees, which sums shall be guaranteed by a post-dated
check, in the amount of P 110,000.00 in plaintiff’s name
with his prior endorsement, drawn and issued by plaintiff’s
counsel, for a period of Sixty (60) days from October 9,
1990;
6. That in the event the check issued pursuant to
paragraph 5 hereof, is dishonored for any reason
whatsoever, upon presentment for payment, then this
Compromise Agreement, shall be considered null and void
and of no effect whatsoever;
7. That upon faithful compliance with the terms and
conditions of this COMPROMISE AGREEMENT and the
Decision based thereon, the parties hereto shall have
respectively waived, conceded and abandoned all claims
and rights of action of whatever kind or nature, against
each other over the subject property.
WHEREFORE, premises considered, the parties hereto hereby jointly and
severally pray before this Honorable Court to approve this COMPROMISE
AGREEMENT and thereupon render its Decision based thereon terminating
the case.
One of the stipulations of the compromise agreement was for Ramos to
execute a deed of absolute sale in favor of Gomez respecting the parcel of
land with an area of 1,233 square meters, and covered by Transfer
Certificate of Title (TCT) No. T-13005 P(M) in the name of Ramos.9 Another
stipulation was for the petitioner to issue post-dated checks totaling ₱
110,000.00 to guarantee the payment by Ramos of his monetary obligations
towards Gomez as stated in the compromise agreement broken down as
follows: (a) ₱ 80,000.00 as Ramos’ loan obligation to Gomez; (b) ₱
20,000.00 for the use of the loan; and (c) ₱ 10,000.00 as attorney’s fees. Of
these amounts, only ₱ 80,000.00 was ultimately paid to Gomez, because the
petitioner’s check dated April 23, 1991 for the balance of ₱ 30,000.00 was
dishonored for insufficiency of funds.
Gomez meanwhile died on November 7, 1990. He was survived by his wife
Tsui Yuk Ying and their minor children (collectively to be referred to as the
Estate of Gomez). The Estate of Gomez sued Ramos and the petitioner for
specific performance in the RTC in Caloocan City to recover the balance of
₱ 30,000.00 (Civil Case No. C-15750). On February 28, 1994, however, Civil
Case No. C-15750 was amicably settled through a compromise agreement,
whereby the petitioner directly bound himself to pay to the Estate of Gomez
₱ 10,000.00 on or before March 15, 1994; ₱ 10,000.00 on or before April 15,
1994; and ₱ 10,000.00 on or before May 15, 1994.
The Estate of Gomez performed the obligations of Gomez under the first
paragraph of the compromise agreement of October 9, 1990 by causing the
survey of the bigger tract of land containing an area of 3,054 square meters,
more or less, in order to segregate the area of 1,233 square meters that
should be transferred by Ramos to Gomez in accordance with Ramos’
undertaking under the second paragraph of the compromise agreement of
October 9, 1990. But Ramos failed to cause the registration of the deed of
absolute sale pursuant to the second paragraph of the compromise
agreement of October 9, 1990 despite the Estate of Gomez having already
complied with Gomez’s undertaking to deliver the approved survey plan and
to shoulder the expenses for that purpose. Nor did Ramos deliver to the
Estate of Gomez the owner’s duplicate copy of TCT No. T-10179 P(M) of the
Registry of Deeds of Meycauayan, Bulacan, as stipulated under the third
paragraph of the compromise agreement of October 9, 1990. Instead,
Ramos and the petitioner caused to be registered the 1,233 square meter
portion in Ramos’s name under TCT No. T-13005-P(M) of the Registry of
Deeds of Meycauayan, Bulacan.
Accordingly, on July 6, 1995, the Estate of Gomez brought a complaint for
specific performance against Ramos and the petitioner in the RTC in
Valenzuela (Civil Case No. 4679-V-95)10 in order to recover the 1,233 square
meter lot. However, the Valenzuela RTC dismissed the complaint on April 1,
1996 upon the motion of Ramos and the petitioner on the ground of improper
venue because the objective was to recover the ownership and possession
of realty situated in Meycauayan, Bulacan, and because the proper recourse
was to enforce the judgment by compromise Agreement rendered on
October 9, 1990 through a motion for execution.
The Estate of Gomez appealed the order of dismissal to the Court of
Appeals (CA), which ruled on July 24, 2001 to affirm the Valenzuela RTC
and to dismiss the appeal (CA-G.R. CV No. 54231).
On September 20, 2002, the Estate of Gomez commenced Civil Case No.
722-M-2002 in the Valenzuela RTC, ostensibly to revive the judgment by
compromise rendered on October 9, 1990 in Civil Case No. 3287-V-90,
praying that Ramos be ordered to execute the deed of absolute sale
covering the 1,233 square meter lot pursuant to the fourth stipulation of the
compromise agreement of October 9, 1990. The petitioner was impleaded as
a party-defendant because of his having guaranteed the performance by
Ramos of his obligation and for having actively participated in the
transaction.
On January 8, 2003, the petitioner moved for the dismissal of Civil Case No.
722-M-2002, alleging that the action was already barred by res judicata and
by prescription; that he was not a real party-in-interest; and that the amount
he had guaranteed with his personal check had already been paid by Ramos
with his own money.11
Initially, on February 18, 2003,12 the RTC granted the petitioner’s motion to
dismiss, finding that the right of action had already prescribed due to more
than 12 years having elapsed from the approval of the compromise
agreement on October 9, 1990, citing Article 1143 (3) of the Civil Code
(which provides a 10-year period within which a right of action based upon a
judgment must be brought from).
On March 24, 2003,13 however, the RTC reversed itself upon motion of the
Estate of Gomez and set aside its order of February 18, 2003. The RTC
reinstated Civil Case No. 722-M-2002, holding that the filing of the complaint
for specific performance on July 6, 1995 in the Valenzuela RTC (Civil Case
No. 4679-V-95) had interrupted the prescriptive period pursuant to Article
1155 of the Civil Code.
The petitioner sought reconsideration, but the RTC denied his motion for that
purpose on April 21, 2003.
On May 12, 2003, the petitioner filed a second motion for reconsideration,
maintaining that the Estate of Gomez’s right of action had already
prescribed; and that the judgment by compromise of October 9, 1990 had
already settled the entire controversy between the parties.
On August 19, 2003,14 the RTC denied the second motion for
reconsideration for lack of merit.
Hence, this special civil action for certiorari commenced on September 4,
2003 directly in this Court.
Issues
The petitioner insists that:
xxx the lower court acted with grave abuse of discretion, amounting to lack
of, or in excess of jurisdiction, when, after having correctly ordered the
dismissal of the case below, on the ground of prescription under Art. 1144,
par. 3, of the Civil Code, it reconsidered and set aside the same, on the
factually baseless and legally untenable Motion for Reconsideration of
Private Respondent, insisting, with grave abuse of discretion, if not bordering
on ignorance of law, and too afraid to face reality, that it is Art. 1155 of the
same code, as invoked by Private Respondents, that applies, and required
herein petitioner to file his answer, despite petitioner’s first Motion for
Reconsideration, which it treated as a mere scrap of paper, yet, at the same
[sic] again it insisted that Article 1155 of the Civil Code should apply, and,
thereafter when, with like, if not greater grave abuse of discretion, amounting
to lack, or in excess of jurisdiction, it again denied petitioner’s Second Motion
for Reconsideration for lack of merit, and giving petitioner a non-extendible
period of ten 10 days from notice, to file his answer.15
In his reply to the Estate of Gomez’s comment,16 the petitioner elucidated as
follows:
1) Whether or not, the Honorable public respondent Judge gravely abused
his discretion, amounting to lack of, or in excess of jurisdiction, when, after
ordered the dismissal of Civil Case No. 722-M-2002, as prescription has set
in, under Art. 1143 of the Civil Code, he set aside and reconsidered his said
Order, on motion of plaintiff, by thereafter denied petitioner’s Motion for
Reconsideration, and Second Motion for Reconsideration, insisting, despite
his being presumed to know the law, that the said action is not barred by
prescription, under Art. 1145 of the Civil Code;
2) Whether or not, the present pending action, Civil Case No. 722-M-2002,
before Branch 12 of the Regional Trial Court of Malolos, Bulacan, is barred,
and should be ordered be dismissed, on the ground of prescription, under
the law and the rules, and applicable jurisprudence.
3) Whether or not, the same action may be dismissed on other valid
grounds.17
The petitioner submits that Civil Case No. 722-M-2002 was one for the
revival of the judgment upon a compromise agreement rendered in Civil
Case No. 3287-V-90 that attained finality on October 9, 1990; that
considering that an action for revival must be filed within 10 years from the
date of finality, pursuant to Article 1144 of the Civil Code,18 in relation to
Section 6, Rule 39 of the Rules of Court,19 Civil Case No. 722-M-2002 was
already barred by prescription, having been filed beyond the 10-year
prescriptive period; that the RTC gravely abused its discretion in reinstating
the complaint despite prescription having already set in; that the dismissal of
Civil Case No. 722-M-2002 was proper also because the judgment had
already been fully satisfied; that the claim relative to the 1,233 square meter
lot under the compromise agreement had been waived, abandoned, or
otherwise extinguished on account of the failure of the Estate of Gomez’s
counsel to move for the issuance of a writ of execution; and that the Estate
of Gomez could not rely upon the pendency and effects of the appeal from
the action for specific performance after its dismissal had been affirmed by
the CA on grounds of improper venue, the plaintiff’s lack of personality, and
improper remedy (due to the proper remedy being by execution of the
judgment).
The Estate of Gomez countered that the filing on July 6, 1995 of the action
for specific performance in the RTC in Valenzuela stopped the running of the
prescriptive period; that the period commenced to run again after the CA
dismissed that action on July 24, 2001; that the total elapsed period was only
five years and 11 months; and that the action for the revival of judgment filed
on September 20, 2002 was within the period of 10 years to enforce a final
and executory judgment by action.
Ruling
We dismiss the petition for certiorari.
The orders that the petitioner seeks to challenge and to annul are the orders
denying his motion to dismiss. It is settled, however, that an order denying a
motion to dismiss, being merely interlocutory, cannot be the basis of a
petition for certiorari. An interlocutory order is not the proper subject of
a certiorari challenge by virtue of its not terminating the proceedings in which
it is issued. To allow such order to be the subject of review by certiorari not
only delays the administration of justice, but also unduly burdens the
courts.20
But a petition for certiorari may be filed to assail an interlocutory order if it is
issued without jurisdiction, or with excess of jurisdiction, or in grave abuse of
discretion amounting to lack or excess of jurisdiction. This is because as to
such order there is no appeal, or any plain, speedy, and adequate remedy in
the ordinary course of law. Rule 65 of the Rules of Court expressly
recognizes the exception by providing as follows:
Section 1. Petition for certiorari. — When any tribunal, board or officer
exercising judicial or quasi-judicial functions has acted without or in excess
of its or his jurisdiction, or with grave abuse of discretion amounting to lack
or excess of jurisdiction, and there is no appeal, or any plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby
may file a verified petition in the proper court, alleging the facts with certainty
and praying that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, and granting such incidental
reliefs as law and justice may require.
The petition shall be accompanied by a certified true copy of the judgment,
order or resolution subject thereof, copies of all pleadings and documents
relevant and pertinent thereto, and a sworn certification of non-forum
shopping as provided in the third paragraph of section 3, Rule 46. (1a)
The exception does not apply to this challenge. The petitioner has not
demonstrated how the assailed orders could have been issued without
jurisdiction, or with excess of jurisdiction, or in grave abuse of discretion
amounting to lack or excess of jurisdiction. Nor has he convinced us that he
had no plain, speedy, and adequate remedy in the ordinary course of law. In
fact and in law, he has, like filing his answer and going to pre-trial and trial.
In the end, should he still have the need to seek the review of the decision of
the RTC, he could also even appeal the denial of the motion to dismiss.
That, in reality, was his proper remedy in the ordinary course of law.
Yet another reason to dismiss the petition for certiorari exists. Although the
Court, the CA and the RTC have concurrence of jurisdiction to issue writs
of certiorari, the petitioner had no unrestrained freedom to choose which
among the several courts might his petition for certiorari be filed in. In other
words, he must observe the hierarchy of courts, the policy in relation to
which has been explicitly defined in Section 4 of Rule 65 concerning the
petitions for the extraordinary writs of certiorari, prohibition and mandamus,
to wit:
Section 4. When and where petition filed. - The petition shall be filed not later
than sixty (60) days from notice of the judgment, order or resolution. In case
a motion for reconsideration or new trial is timely filed, whether such motion
is required or not, the sixty (60) day period shall be counted from notice of
the denial of the said motion.
The petition shall be filed in the Supreme Court or, if it relates to the acts or
omissions of a lower court or of a corporation, board, officer or person, in the
Regional Trial Court exercising jurisdiction over the territorial area as defined
by the Supreme Court. It may also be filed in the Court of Appeals whether
or not the same is in the aid of its appellate jurisdiction, or in the
Sandiganbayan if it is in aid of its appellate jurisdiction. If it involves the acts
or omissions of a quasi-judicial agency, unless otherwise provided by law or
these rules, the petition shall be filed in and cognizable only by the Court of
Appeals.
No extension of time to file the petition shall be granted except for
compelling reason and in no case exceeding fifteen (15) days.
(4a)21 (Emphasis supplied)
Accordingly, his direct filing of the petition for certiorari in this Court instead
of in the CA should be disallowed considering that he did not present in the
petition any special and compelling reasons to support his choice of this
Court as the forum.
The Court must enjoin the observance of the policy on the hierarchy of
courts, and now affirms that the policy is not to be ignored without serious
consequences. The strictness of the policy is designed to shield the Court
from having to deal with causes that are also well within the competence of
the lower courts, and thus leave time to the Court to deal with the more
fundamental and more essential tasks that the Constitution has assigned to
it. The Court may act on petitions for the extraordinary writs of certiorari,
prohibition and mandamus only when absolutely necessary or when serious
and important reasons exist to justify an exception to the policy. This was
why the Court stressed in Vergara, Sr. v. Suelto:22
xxx. The Supreme Court is a court of last resort, and must so remain if it is to
satisfactorily perform the functions assigned to it by the fundamental charter
and immemorial tradition. It cannot and should not be burdened with the task
of dealing with causes in the first instance. Its original jurisdiction to issue the
so-called extraordinary writs should be exercised only where absolutely
necessary or where serious and important reasons exist therefor. Hence,
that jurisdiction should generally be exercised relative to actions or
proceedings before the Court of Appeals, or before constitutional or other
tribunals, bodies or agencies whose acts for some reason or another are not
controllable by the Court of Appeals. Where the issuance of an extraordinary
writ is also within the competence of the Court of Appeals or a Regional Trial
Court, it is in either of these courts that the specific action for the writ’s
procurement must be presented. This is and should continue to be the policy
in this regard, a policy that courts and lawyers must strictly observe.
(Emphasis supplied)
In People v. Cuaresma,23 the Court has also amplified the need for strict
adherence to the policy of hierarchy of courts. There, noting "a growing
tendency on the part of litigants and lawyers to have their applications for the
so-called extraordinary writs, and sometimes even their appeals, passed
upon and adjudicated directly and immediately by the highest tribunal of the
land," the Court has cautioned lawyers and litigants against taking a direct
resort to the highest tribunal, viz:
xxx. This Court’s original jurisdiction to issue writs of certiorari (as well as
prohibition, mandamus, quo warranto, habeas corpus and injunction) is not
exclusive. It is shared by this Court with Regional Trial Courts x x x, which
may issue the writ, enforceable in any part of their respective regions. It is
also shared by this Court, and by the Regional Trial Court, with the Court of
Appeals x x x, although prior to the effectivity of Batas Pambansa Bilang 129
on August 14, 1981, the latter's competence to issue the extraordinary writs
was restricted to those "in aid of its appellate jurisdiction." This concurrence
of jurisdiction is not, however, to be taken as according to parties seeking
any of the writs an absolute, unrestrained freedom of choice of the court to
which application therefor will be directed. There is after all a hierarchy of
courts. That hierarchy is determinative of the venue of appeals, and should
also serve as a general determinant of the appropriate forum for petitions for
the extraordinary writs. A becoming regard for that judicial hierarchy most
certainly indicates that petitions for the issuance of extraordinary writs
against first level ("inferior") courts should be filed with the Regional Trial
Court, and those against the latter, with the Court of Appeals. A direct
invocation of the Supreme Court's original jurisdiction to issue these writs
should be allowed only when there are special and important reasons
therefor, clearly and specifically set out in the petition. This is established
policy. It is a policy that is necessary to prevent inordinate demands upon
the Court’s time and attention which are better devoted to those matters
within its exclusive jurisdiction, and to prevent further over-crowding of the
Court's docket. Indeed, the removal of the restriction on the jurisdiction of the
Court of Appeals in this regard, supra— resulting from the deletion of the
qualifying phrase, "in aid of its appellate jurisdiction" — was evidently
intended precisely to relieve this Court pro tanto of the burden of dealing with
applications for the extraordinary writs which, but for the expansion of the
Appellate Court corresponding jurisdiction, would have had to be filed with it.
xxxx
The Court therefore closes this decision with the declaration for the
information and evidence of all concerned, that it will not only continue to
enforce the policy, but will require a more strict observance thereof.
(Emphasis supplied)
There being no special, important or compelling reason that justified the
direct filing of the petition for certiorari in this Court in violation of the policy
on hierarchy of courts, its outright dismissal is unavoidable.
Still, even granting that the petition for certiorari might be directly filed in this
Court, its dismissal must also follow because its consideration and resolution
would unavoidably demand the consideration and evaluation of evidentiary
matters. The Court is not a trier of facts, and cannot accept the petition
for certiorari for that reason.
Although commenced ostensibly for the recovery of possession and
ownership of real property, Civil Case No. 722-M-2002 was really an action
to revive the judgment by compromise dated October 9, 1990 because the
ultimate outcome would be no other than to order the execution of the
judgment by compromise. Indeed, it has been held that "there is no
substantial difference between an action expressly called one for revival of
judgment and an action for recovery of property under a right adjudged
under and evidenced by a final judgment."24 In addition, the parties
themselves have treated the complaint in Civil Case No. 722-M-2002 as one
for revival. Accordingly, the parties should be fully heard on their respective
claims like in any other independent action.1âwphi1
The petitioner’s defense of prescription to bar Civil Case No. 722-M-2002
presents another evidentiary concern. Article 1144 of the Civil Code
requires, indeed, that an action to revive a judgment must be brought before
it is barred by prescription, which was ten years from the accrual of the right
of action.25 It is clear, however, that such a defense could not be determined
in the hearing of the petitioner’s motion to dismiss considering that the
complaint did not show on its face that the period to bring the action to revive
had already lapsed. An allegation of prescription, as the Court put it in
Pineda v. Heirs of Eliseo Guevara,26 "can effectively be used in a motion to
dismiss only when the complaint on its face shows that indeed the action has
already prescribed, [o]therwise, the issue of prescription is one involving
evidentiary matters requiring a full blown trial on the merits and cannot be
determined in a mere motion to dismiss."
At any rate, the mere lapse of the period per se did not render the judgment
stale within the context of the law on prescription, for events that effectively
suspended the running of the period of limitation might have intervened. In
other words, the Estate of Gomez was not precluded from showing such
events, if any. The Court recognized this possibility of suspension in Lancita
v. Magbanua:27
In computing the time limited for suing out of an execution, although there is
authority to the contrary, the general rule is that there should not be included
the time when execution is stayed, either by agreement of the parties for a
definite time, by injunction, by the taking of an appeal or writ of error so as to
operate as a supersedeas, by the death of a party or otherwise. Any
interruption or delay occasioned by the debtor will extend the time within
which the writ may be issued without scire facias.
Verily, the need to prove the existence or non-existence of significant
matters, like supervening events, in order to show either that Civil Case No.
722-M-2002 was batTed by prescription or not was present and undeniable.
Moreover, the petitioner himself raised factual issues in his motion to
dismiss, like his averment of full payment or discharge of the obligation of
Ramos and the waiver or abandonment of rights under the compromise
agreement. The proof thereon cannot be received in certiorari proceedings
before the Court, but should be established in the RTC.
WHEREFORE, the Court DISMISSES the petition for certiorari;
and DIRECTS the petitioner to pay the cost of suit.
SO ORDERED
ART.1144
G.R. No. 184109 February 1, 2012
CELERINO E. MERCADO, Petitioner,
vs.
BELEN* ESPINOCILLA** AND FERDINAND ESPINOCILLA, Respondents.
DECISION
VILLARAMA, JR., J.:
The Case
Petitioner Celerino E. Mercado appeals the Decision 1 dated April 28, 2008
and Resolution2 dated July 22, 2008 of the Court of Appeals (CA) in CA-G.R.
CV No. 87480. The CA dismissed petitioner’s complaint3 for recovery of
possession, quieting of title, partial declaration of nullity of deeds and
documents, and damages, on the ground of prescription.
The Antecedent Facts
Doroteo Espinocilla owned a parcel of land, Lot No. 552, with an area of 570
sq. m., located at Magsaysay Avenue, Zone 5, Bulan, Sorsogon. After he
died, his five children, Salvacion, Aspren, Isabel, Macario, and Dionisia
divided Lot No. 552 equally among themselves. Later, Dionisia died without
issue ahead of her four siblings, and Macario took possession of Dionisia’s
share. In an affidavit of transfer of real property4 dated November 1, 1948,
Macario claimed that Dionisia had donated her share to him in May 1945.
Thereafter, on August 9, 1977, Macario and his daughters Betty Gullaba and
Saida Gabelo sold5 225 sq. m. to his son Roger Espinocilla, husband of
respondent Belen Espinocilla and father of respondent Ferdinand
Espinocilla. On March 8, 1985, Roger Espinocilla sold 6 114 sq. m. to Caridad
Atienza. Per actual survey of Lot No. 552, respondent Belen Espinocilla
occupies 109 sq. m., Caridad Atienza occupies 120 sq. m., Caroline Yu
occupies 209 sq. m., and petitioner, Salvacion's son, occupies 132 sq. m.7
The Case For Petitioner
Petitioner sued the respondents to recover two portions: an area of 28.58 sq.
m. which he bought from Aspren and another 28.5 sq. m. which allegedly
belonged to him but was occupied by Macario’s house.9 His claim has since
been modified to an alleged encroachment of only 39 sq. m. that he claims
must be returned to him. He avers that he is entitled to own and possess 171
sq. m. of Lot No. 552, having inherited 142.5 sq. m. from his mother
Salvacion and bought 28.5 sq. m. from his aunt Aspren. According to him,
his mother’s inheritance is 142.5 sq. m., that is, 114 sq. m. from Doroteo plus
28.5 sq. m. from Dionisia. Since the area he occupies is only 132 sq.
m.,10 he claims that respondents encroach on his share by 39 sq. m.11
The Case For Respondents
Respondents agree that Doroteo’s five children each inherited 114 sq. m. of
Lot No. 552. However, Macario’s share increased when he received
Dionisia’s share. Macario’s increased share was then sold to his son Roger,
respondents’ husband and father. Respondents claim that they rightfully
possess the land they occupy by virtue of acquisitive prescription and that
there is no basis for petitioner’s claim of encroachment. 12
The Trial Court’s Decision
On May 15, 2006, the Regional Trial Court (RTC) ruled in favor of petitioner
and held that he is entitled to 171 sq. m. The RTC found that petitioner
inherited 142.5 sq. m. from his mother Salvacion and bought 28.5 sq. m.
from his aunt Aspren. The RTC computed that Salvacion, Aspren, Isabel and
Macario each inherited 142.5 sq. m. of Lot No. 552. Each inherited 114 sq.
m. from Doroteo and 28.5 sq. m. from Dionisia. The RTC further ruled that
Macario was not entitled to 228 sq. m. Thus, respondents must return 39 sq.
m. to petitioner who occupies only 132 sq. m.13
There being no public document to prove Dionisia’s donation, the RTC also
held that Macario’s 1948 affidavit is void and is an invalid repudiation of the
shares of his sisters Salvacion, Aspren, and Isabel in Dionisia’s share.
Accordingly, Macario cannot acquire said shares by prescription. The RTC
further held that the oral partition of Lot No. 552 by Doroteo’s heirs did not
include Dionisia’s share and that partition should have been the main action.
Thus, the RTC ordered partition and deferred the transfer of possession of
the 39 sq. m. pending partition.14 The dispositive portion of the RTC decision
reads:
WHEREFORE, in view of the foregoing premises, the court issues the
following ORDER, thus -
 a) Partially declaring the nullity of the Deed of Absolute Sale of
Property dated August 9, 1977 x x x executed by Macario
Espinocilla, Betty E. Gullaba and Saida E. Gabelo in favor of Roger
Espinocilla, insofar as it affects the portion or the share belonging to
Salvacion Espinocilla, mother of [petitioner,] relative to the property
left by Dionisia Espinocilla, including [Tax Declaration] No. 13667
and other documents of the same nature and character which
emanated from the said sale;
b) To leave as is the Deeds of Absolute Sale of May 11, 1983 and
March 8, 1985, it having been determined that they did not involve
the portion belonging to [petitioner] x x x.
c) To effect an effective and real partition among the heirs for
purposes of determining the exact location of the share (114 sq. m.)
of the late Dionisia Espinocilla together with the 28.5 sq.
m. belonging to [petitioner’s] mother Salvacion, as well as, the
exact location of the 39 sq. m. portion belonging to the [petitioner]
being encroached by the [respondents], with the assistance of the
Commissioner (Engr. Fundano) appointed by this court.
d) To hold in abeyance the transfer of possession of the 39 sq. m.
portion to the [petitioner] pending the completion of the real partition
above-mentioned.15
The CA Decision
On appeal, the CA reversed the RTC decision and dismissed petitioner’s
complaint on the ground that extraordinary acquisitive prescription has
already set in in favor of respondents. The CA found that Doroteo’s four
remaining children made an oral partition of Lot No. 552 after Dionisia’s
death in 1945 and occupied specific portions. The oral partition terminated
the co-ownership of Lot No. 552 in 1945. Said partition also included
Dionisia’s share because the lot was divided into four parts only. And since
petitioner’s complaint was filed only on July 13, 2000, the CA concluded that
prescription has set in.16 The CA disposed the appeal as follows:
WHEREFORE, the appeal is GRANTED. The assailed May 15, 2006
Decision of the Regional Trial Court (RTC) of Bulan, Sorsogon is hereby
REVERSED and SET ASIDE. The Complaint of the [petitioner] is hereby
DISMISSED. No costs.17
The Instant Petition
The core issue to be resolved is whether petitioner’s action to recover the
subject portion is barred by prescription.
Petitioner confirms oral partition of Lot No. 552 by Doroteo's heirs, but claims
that his share increased from 114 sq. m. to 171 sq. m. and that respondents
encroached on his share by 39 sq. m. Since an oral partition is valid, the
corresponding survey ordered by the RTC to identify the 39 sq. m. that must
be returned to him could be made.18Petitioner also alleges that Macario
committed fraud in acquiring his share; hence, any evidence adduced by him
to justify such acquisition is inadmissible. Petitioner concludes that if a
person obtains legal title to property by fraud or concealment, courts of
equity will impress upon the title a so-called constructive trust in favor of the
defrauded party.19
The Court’s Ruling
We affirm the CA ruling dismissing petitioner’s complaint on the ground of
prescription.1âwphi1
Prescription, as a mode of acquiring ownership and other real rights over
immovable property, 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.
Acquisitive prescription of real rights may be ordinary or extraordinary.
Ordinary acquisitive prescription requires possession in good faith and with
just title for 10 years. In extraordinary prescription, ownership and other real
rights over immovable property are acquired through uninterrupted adverse
possession for 30 years without need of title or of good faith.20
Here, petitioner himself admits the adverse nature of respondents’
possession with his assertion that Macario’s fraudulent acquisition of
Dionisia’s share created a constructive trust. In a constructive trust, there is
neither a promise nor any fiduciary relation to speak of and the so-called
trustee (Macario) neither accepts any trust nor intends holding the property
for the beneficiary (Salvacion, Aspren, Isabel). The relation of trustee
and cestui que trust does not in fact exist, and the holding of a constructive
trust is for the trustee himself, and therefore, at all times
adverse.21 Prescription may supervene even if the trustee does not repudiate
the relationship.22
Then, too, respondents’ uninterrupted adverse possession for 55 years of
109 sq. m. of Lot No. 552 was established. Macario occupied Dionisia’s
share in 1945 although his claim that Dionisia donated it to him in 1945 was
only made in a 1948 affidavit. We also agree with the CA that Macario’s
possession of Dionisia’s share was public and adverse since his other co-
owners, his three other sisters, also occupied portions of Lot No. 552.
Indeed, the 1977 sale made by Macario and his two daughters in favor of his
son Roger confirms the adverse nature of Macario’s possession because
said sale of 225 sq. m.23 was an act of ownership over Macario’s original
share and Dionisia’s share. In 1985, Roger also exercised an act of
ownership when he sold 114 sq. m. to Caridad Atienza. It was only in the
year 2000, upon receipt of the summons to answer petitioner’s complaint,
that respondents’ peaceful possession of the remaining portion (109 sq. m.)
was interrupted. By then, however, extraordinary acquisitive prescription has
already set in in favor of respondents. That the RTC found Macario’s 1948
affidavit void is of no moment. Extraordinary prescription is unconcerned with
Macario’s title or good faith. Accordingly, the RTC erred in ruling that
Macario cannot acquire by prescription the shares of Salvacion, Aspren, and
Isabel, in Dionisia’s 114-sq. m. share from Lot No. 552.

Moreover, the CA correctly dismissed petitioner’s complaint as an action for

reconveyance based on an implied or constructive trust prescribes in 10
years from the time the right of action accrues.24 This is the other kind of
prescription under the Civil Code, called extinctive prescription, where rights
and actions are lost by the lapse of time.25 Petitioner’s action for recovery of
possession having been filed 55 years after Macario occupied Dionisia’s
share, it is also barred by extinctive prescription. The CA while condemning
Macario’s fraudulent act of depriving his three sisters of their shares in
Dionisia’s share, equally emphasized the fact that Macario’s sisters wasted
their opportunity to question his acts.

WHEREFORE, we DENY the petition for review on certiorari for lack of merit
and AFFIRM the assailed Decision dated April 28, 2008 and Resolution
dated July 22, 2008 of the Court of Appeals in CA-G.R. CV No. 87480.

No pronouncement as to costs.

SO ORDERED.
G.R. No. 165748 September 14, 2011
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,
vs.
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
URETA-GONZALES; 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
G.R. No. 165930
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
URETA-GONZALES; 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,
vs.
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.
DECISION
MENDOZA, J.:
These consolidated petitions for review on certiorari under Rule 45 of the
1997 Revised Rules of Civil Procedure assail the April 20, 2004 Decision 1 of
the Court of Appeals (CA), and its October 14, 2004 Resolution2 in C.A.-G.R.
CV No. 71399, which affirmed with modification the April 26, 2001
Decision3 of the Regional Trial Court, Branch 9, Kalibo, Aklan (RTC) in Civil
Case No. 5026.
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 Alfonso’s 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 father’s
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,5Prudencia,6 and his common-law 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 father’s 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, Alfonso’s 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, Policronio’s eldest son, representing the Heirs of
Policronio, signed the Deed of Extra-Judicial Partition in behalf of his co-
heirs.
After their father’s 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 Alfonso’s 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 Damages9 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 Conrado’s 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 declared
VOID for being ABSOLUTELY SIMULATED;
2.) The Deed of Extra-Judicial Partition, dated 19 April 1989, is
ANNULLED;
3.) The claim for actual and exemplary damages are DISMISSED
for lack of factual and legal basis.
The case is hereby REMANDED to the court of origin for the proper partition
of ALFONSO URETA’S 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 father’s 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 RTC’s 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 RTC’s 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 Extra-
Judicial Partition should not have been annulled, and instead the preterited
heirs should be given their share. The CA reiterated that Conrado’s 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 Ureta’s 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 transaction’s validity, except that it must
yield to the evidence adduced.10
As will be discussed below, the evidence overcomes these two
presumptions.
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 Alfonso’s 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 Policronio’s 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 latter’s 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 Policronio’s 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 Policronio’s 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.12Nowhere 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. Refresca13 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 evidence17
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. Policronio’s 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 Policronio’s 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 Answer31 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 Policronio’s 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 Alfonso’s 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 Alfonso’s 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
(Alfonso’s grandchildren). The Heirs of Alfonso are clearly his heirs and
successors-in-interest 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 Alfonso’s 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 other’s 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 other’s 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 Extra-Judicial
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 Alfonso’s
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 that contrary 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 Conrado’s consent was
vitiated by mistake and undue influence, and that he signed the Deed of
Extra-Judicial Partition without the authority or consent of his co-heirs.
The RTC found that Conrado’s 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 cases48 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 Extra-Judicial 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 Conrado’s 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 party’s 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, Conrado’s 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 Conrado’s 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 A: Because the way Nay Pruding explained to me is that the property of my
signed the document? grandfather will be partitioned that is why I am so happy.

A: Perhaps 3 times. xxx

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?
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: They do not know. A: The document sir? I did not tell them.

xxx Q: Even until now?

Q: After you have signed this document did you inform your brothers and A: Until now I did not inform them.52
sisters that you have signed this document?
This Court finds no cogent reason to reverse the finding of the RTC that
No I did not. 51 Conrado’s explanations were mere gratuitous assertions not entitled to any
probative weight. The RTC found Conrado’s credibility to have faltered when
xxx he testified that perhaps his siblings were already aware of the Deed of
Extra-Judicial Partition. The RTC was in the best position to judge the
credibility of the witness’ testimony. The CA also recognized that Conrado’s
Q: Now you read the document when it was allegedly brought to your house consent was not vitiated by mistake and undue influence as it required a
by your aunt Pruding Pa[r]adero? 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
A: I did not read it because as I told her I still want to ask the advise of my to his co-heirs. Findings of fact of the trial court, particularly when affirmed by
brothers and sisters. the CA, are binding to this Court.53

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?
Furthermore, this Court notes other peculiarities in Conrado’s 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 grandfather’s 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 Conrado’s 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 Attorney54 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
Mortgage55 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 Conrado’s 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
Conrado’s 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 Extra-Judicial 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 Alfonso’s
heirs received their rightful share. Conrado, who received Policronio’s 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
Extra-Judicial 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.1âwphi1 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.1ªvvph!1

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.
G.R. No. 171717 December 15, 2010
RAMON B. BRITO, SR., Petitioner,
vs.
SEVERINO D. DIANALA, VIOLETA DIANALA SALES, JOVITA DIANALA
DEQUINTO, ROSITA DIANALA, CONCHITA DIANALA and JOEL
DEQUINTO, Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari seeking to annul and set
aside the Decision1 dated January 12, 2005 and Resolution2 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
PLAINTIFFS-APPELLANTS 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, in Caro 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:
xxx xxx xxx
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;
xxx xxx xxx
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.
xxx xxx 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 x11
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
ten-year 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.1awphi1 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.
G.R. No. 128991 April 12, 2000
YOLANDA ROSELLO-BENTIR, SAMUEL PORMIDA and CHARITO
PORMIDA, petitioners,
vs.
HONORABLE MATEO M. LEANDA, in his capacity as Presiding Judge
of RTC, Tacloban City, Branch 8, and LEYTE GULF TRADERS,
INC., respondents.
KAPUNAN, J.:
Reformation. of an instrument is that remedy in equity by means of which a
written instrument is made or construed so as to express or conform to the
real intention of the parties when some error or mistake has been
committed. 1 It is predicated on the equitable maxim that equity treats as
done that which ought to be done. 2 The rationale of the doctrine is that it
would be unjust and unequitable to allow the enforcement of a written
instrument which does not reflect or disclose the real meeting of the minds of
the parties. 3 However, an action for reformation must be brought within the
period prescribed by law, otherwise, it will be barred by the mere lapse of
time. The issue in this case is whether or not the complaint for reformation
filed by respondent Leyte Gulf Traders, Inc. has prescribed and in the
negative, whether or not it is entitled to the remedy of reformation sought.
On May 15, 1992, respondent Leyte Gulf Traders, Inc. (herein referred to as
respondent corporation) filed a complaint for reformation of instrument,
specific performance, annulment of conditional sale and damages with
prayer for writ of injunction against petitioners Yolanda Rosello-Bentir and
the spouses Samuel and Charito Pormida. The case was docketed as Civil
Case No. 92-05-88 and raffled to Judge Pedro S. Espina, RTC, Tacloban
City, Branch 7. Respondent corporation alleged that it entered into a contract
of lease of a parcel of land with petitioner Bentir for a period of twenty (20)
years starting May 5, 1968. According to respondent corporation, the lease
was extended for another four (4) years or until May 31, 1992. On May 5,
1989, petitioner Bentir sold the leased premises to petitioner spouses
Samuel Pormada and Charito Pormada. Respondent corporation questioned
the sale alleging that it had a right of first refusal. Rebuffed, it filed Civil Case
No. 92-05-88 seeking the reformation of the expired contract of lease on the
ground that its lawyer inadvertently omitted to incorporate in the contract of
lease executed in 1968, the verbal agreement or understanding between the
parties that in the event petitioner Bentir leases or sells the lot after the
expiration of the lease, respondent corporation has the right to equal the
highest offer.
In due time, petitioners filed their answer alleging that the inadvertence of
the lawyer who prepared the lease contract is not a ground for reformation.
They further contended that respondent corporation is guilty of laches for not
bringing the case for reformation of the lease contract within the prescriptive
period of ten (10) years from its execution.
Respondent corporation then filed its reply and on November 18, 1992, filed
a motion to admit amended complaint. Said motion was granted by the lower
court. 4
Thereafter, petitioners filed a motion to dismiss reiterating that the complaint
should be dismissed on the ground of prescription.
On December 15, 1995, the trial court through Judge Pedro S. Espina
issued an order dismissing the complaint premised on its finding that the
action for reformation had already prescribed. The order reads:
ORDER
Resolved here is the defendants' MOTION TO DISMISS
PLAINTIFF'S complaint on ground of prescription of action.
It is claimed by plaintiff that he and defendant Bentir entered into a
contract of lease of a parcel of land on May 5, 1968 for a period of
20 years (and renewed for an additional 4 years thereafter) with the
verbal agreement that in case the lessor decides to sell the property
after the lease, she shall give the plaintiff the right to equal the
offers of other prospective buyers. It was claimed that the lessor
violated this tight of first refusal of the plaintiff when she
sureptitiously (sic) sold the land to co-defendant Pormida on May 5,
1989 under a Deed of Conditional Sale. Plaintiffs right was further
violated when after discovery of the final sale, plaintiff ordered to
equal the price of co-defendant Pormida was refused and again
defendant Bentir surreptitiously executed a final deed of sale in
favor of co-defendant Pormida in December 11, 1991.
The defendant Bentir denies that she bound herself to give the
plaintiff the right of first refusal in case she sells the property. But
 assuming for the sake of argument that such right of first refusal
was made, it is now contended that plaintiffs cause of action to
reform the contract to reflect such right of first refusal, has already
prescribed after 10 years, counted from May 5, 1988 when the
contract of lease incepted. Counsel for defendant cited Conde vs.
Malaga, L-9405 July 31, 1956 and Ramos vs. Court of Appeals,
180 SCRA 635, where the Supreme Court held that the prescriptive
period for reformation of a written contract is ten (10) years under
Article 1144 of the Civil Code.
This Court sustains the position of the defendants that this action
for reformation of contract has prescribed and hereby orders the
dismissal of the case.
SO ORDERED. 5
On December 29, 1995, respondent corporation filed a motion for
reconsideration of the order dismissing the complaint.
On January 11, 1996, respondent corporation filed an urgent ex-parte motion
for issuance of an order directing the petitioners, or their representatives or
agents to refrain from taking possession of the land in question.
Considering that Judge Pedro S. Espina, to whom the case was raffled for
resolution, was assigned to the RTC, Malolos, Bulacan, Branch 19, Judge
Roberto A. Navidad was designated in his place.
On March 28, 1996, upon motion of herein petitioners, Judge Navidad
inhibited himself from hearing the case. Consequently, the case was re-
raffled and assigned to RTC, Tacloban City, Branch 8, presided by herein
respondent judge Mateo M. Leanda.
On May 10, 1996, respondent judge issued an order reversing the order of
dismissal on the grounds that the action for reformation had not yet
prescribed and the dismissal was "premature and precipitate", denying
respondent corporation of its right to procedural due process. The order
reads:
ORDER
Stated briefly, the principal objectives of the twin motions submitted
by the plaintiffs, for resolution are:
(1) for the reconsideration of the Order of 15 December
1995 of the Court (RTC, Br. 7), dismissing this case, on
the sole ground of prescription of one (1) of the five (5)
causes of action of plaintiff in its complaint for
"reformation" of a contract of lease; and,
(2) for issuance by this Court of an Order prohibiting the
defendants and their privies-in-interest, from taking
possession of the leased premises, until a final court order
issues for their exercise of dominical or possessory right
thereto.
The records of this case reveal that co-defendant BENTER
(Yolanda) and plaintiff Leyte Gulf Traders Incorporation,
represented by Chairman Benito Ang, entered into a contract of
lease of a parcel of land, denominated as Lot No. 878-D, located at
Sagkahan District, Tacloban City, on 05 May 1968, for a period of
twenty (20) years, (later renewed for an additional two (2) years).
Included in said covenant of lease is the verbal understanding and
agreement between the contracting parties, that when the
defendant (as lessor) will sell the subject property, the plaintiff as
(lessee) has the "right of first refusal", that is, the right to equal the
offer of any other prospective third-party buyer. This agreement
(sic) is made apparent by paragraph 4 of the lease agreement
stating:
4. IMPROVEMENT. The lessee shall have the right to
erect on the leased premises any building or structure that
it may desire without the consent or approval of the Lessor
. . . provided that any improvements existing at the
termination of the lease shall remain as the property of the
Lessor without right to reimbursement to the Lessee of the
cost or value thereof.
That the foregoing provision has been included in the lease
agreement if only to convince the defendant-lessor that plaintiff
desired a priority right to acquire the property (ibid) by purchase,
upon expiration of the effectivity of the deed of lease.
In the course of the interplay of several procedural moves of the
parties herein, the defendants filed their motion to admit their
amended answer to plaintiff's amended complaint.
Correspondingly, the plaintiff filed its opposition to said motion. The
former court branch admitted the amended answer, to which order
of admission, the plaintiff seasonably filed its motion for
reconsideration. But, before the said motion for reconsideration was
acted upon by the court, the latter issued an Order on 15 December
1995, DISMISSING this case on the lone ground of prescription of
the cause of action of plaintiff's complaint on "reformation" of the
lease contract, without anymore considering the remaining cause of
action, viz.: (a) on Specific Performance; (b) an Annulment of Sale
and Title; (c) on Issuance of a Writ of Injunction, and (d) on
Damages.
With due respect to the judicial opinion of the Honorable Presiding
Judge of Branch 7 of this Court, the undersigned, to whom this
case was raffled to after the inhibition of Judge Roberto Navidad, as
acting magistrate of Branch 7, feels not necessary any more to
discuss at length that even the cause of action for "reformation" has
not, as yet, prescribed.
To the mind of this Court, the dismissal order adverted to above,
was obviously premature and precipitate, thus resulting denial upon
the right of plaintiff that procedural due process. The other
remaining four (4) causes of action of the complaint must have
been deliberated upon before that court acted hastily in dismissing
this case.
WHEREFORE, in the interest of substantial justice, the Order of the
court, (Branch 7, RTC) dismissing this case, is hereby ordered
RECONSIDERED and SET ASIDE.
Let, therefore, the motion of plaintiff to reconsider the Order
admitting the amended answer and the Motion to Dismiss this case
(ibid), be set for hearing on May 24, 1996, at 8:30 o'clock in the
morning. Service of notices must be effected upon parties and
counsel as early as possible before said scheduled date.
Concomitantly, the defendants and their privies-in-interest or
agents, are hereby STERNLY WARNED not to enter, in the
meantime, the litigated premises, before a final court order issues
granting them dominical as well as possessory right thereto.
To the motion or petition for contempt, filed by plaintiff, thru Atty.
Bartolome C. Lawsin, the defendants may, if they so desire, file
their answer or rejoinder thereto, before the said petition will be set
for hearing. The latter are given ten (10) days to do so, from the
date of their receipt of a copy of this Order.
SO ORDERED. 6
On June 10, 1996, respondent judge issued an order for status quo ante,
enjoining petitioners to desist from occupying the property. 7
Aggrieved, petitioners herein filed a petition for certiorari to the Court of
Appeals seeking the annulment of the order of respondent court with prayer
for issuance of a writ of preliminary injunction and temporary restraining
order to restrain respondent judge from further hearing the case and to direct
respondent corporation to desist from further possessing the litigated
premises and to turn over possession to petitioners.
On January 17, 1997, the Court of Appeals, after finding no error in the
questioned order nor grave abuse of discretion on the part of the trial court
that would amount to lack, or in excess of jurisdiction, denied the petition and
affirmed the questioned order. 8 A reconsideration of said decision was,
likewise, denied on April 16, 1997. 9
Thus, the instant petition for review based on the following assigned
errors, viz:
6:01 THE COURT OF APPEALS ERRED IN HOLDING THAT AN
ACTION FOR REFORMATION IS PROPER AND JUSTIFIED
UNDER THE CIRCUMSTANCES OF THE PRESENT CASE;
6.02 THE COURT OF APPEALS ERRED IN HOLDING THAT THE
ACTION FOR REFORMATION HAS NOT YET PRESCRIBED;
6.03 THE COURT OF APPEALS ERRED IN HOLDING THAT AN
OPTION TO BUY IN A CONTRACT OF LEASE IS REVIVED
FROM THE IMPLIED RENEWAL OF SUCH LEASE; AND,
6.04 THE COURT OF APPEALS ERRED IN HOLDING THAT
A STATUS QUO ANTE ORDER IS NOT AN INJUNCTIVE RELIEF
THAT SHOULD COMPLY WITH THE PROVISIONS OF RULE 58
OF THE RULES OF COURT. 10
The petition has merit.
The core issue that merits our consideration is whether the complaint for
reformation of instrument has prescribed.1awp++i1
The remedy of reformation of an instrument is grounded on the principle of
equity where, in order to express the true intention of the contracting parties,
an instrument already executed is allowed by law to be reformed. The right
of reformation is necessarily an invasion or limitation of the parol evidence
rule since, when a writing is reformed, the result is that an oral agreement is
by court decree made legally effective. 11 Consequently, the courts, as the
agencies authorized by law to exercise the power to reform an instrument,
must necessarily exercise that power sparingly and with great caution and
zealous care. Moreover, the remedy, being an extraordinary one, must be
subject to limitations as may be provided by law. Our law and jurisprudence
set such limitations, among which is laches. A suit for reformation of an
instrument may be barred by lapse of time. The prescriptive period for
actions based upon a written contract and for reformation of an instrument is
ten (10) years under Article 1144 of the Civil Code. 12 Prescription is
intended to suppress stale and fraudulent claims arising from transactions
like the one at bar which facts had become so obscure from the lapse of time
or defective memory. 13 In the case at bar, respondent corporation had ten
(10) years from 1968, the time when the contract of lease was executed, to
file an action for reformation. Sadly, it did so only on May 15, 1992 or twenty-
four (24) years after the cause of action accrued, hence, its cause of action
has become stale, hence, time-barred.
In holding that the action for reformation has not prescribed, the Court of
Appeals upheld the ruling of the Regional Trial Court that the 10-year
prescriptive period should be reckoned not from the execution of the contract
of lease in 1968, but from the date of the alleged 4-year extension of the
lease contract after it expired in 1988. Consequently, when the action for
reformation of instrument was filed in 1992 it was within ten (10) years from
the extended period of the lease. Private respondent theorized, and the
Court of Appeals agreed, that the extended period of lease was an "implied
new lease" within the contemplation of Article 1670 of the Civil
Code, 14 under which provision, the other terms of the original contract were
deemed revived in the implied new lease.
We do not agree. First, if, according to respondent corporation, there was an
agreement between the parties to extend the lease contract for four (4) years
after the original contract expired in 1988, then Art. 1670 would not apply as
this provision speaks of an implied new lease (tacita reconduccion) where at
the end of the contract, the lessee continues to enjoy the thing leased "with
the acquiescence of the lessor", so that the duration of the lease is "not for
the period of the original contract, but for the time established in Article 1682
and 1687." In other words, if the extended period of lease was expressly
agreed upon by the parties, then the term should be exactly what the parties
stipulated, not more, not less. Second, even if the supposed 4-year extended
lease be considered as an implied new lease under Art. 1670, "the other
terms of the original contract" contemplated in said provision are only those
terms which are germane to the lessee's right of continued enjoyment of the
property leased. 15 The prescriptive period of ten (10) years provided for in
Art. 1144 16 applies by operation of law, not by the will of the parties.
Therefore, the right of action for reformation accrued from the date of
execution of the contract of lease in 1968.
Even if we were to assume for the sake of argument that the instant action
for reformation is not time-barred, respondent corporation's action will still
not prosper. Under Section 1, Rule 64 of the New Rules of Court, 17 an
action for the reformation of an instrument is instituted as a special civil
action for declaratory relief. Since the purpose of an action for declaratory
relief is to secure an authoritative statement of the rights and obligations of
the parties for their guidance in the enforcement thereof, or compliance
therewith, and not to settle issues arising from an alleged breach thereof, it
may be entertained only before the breach or violation of the law or contract
to which it refers. 18 Here, respondent corporation brought the present action
for reformation after an alleged breach or violation of the contract was
already committed by petitioner Bentir. Consequently, the remedy of
reformation no longer lies.
We no longer find it necessary to discuss the other issues raised considering
that the same are predicated upon our affirmative resolution on the issue of
the prescription of the action for reformation.
WHEREFORE, the petition is hereby GRANTED. The Decision of the Court
of Appeals dated January 17, 1997 is REVERSED and SET ASIDE. The
Order of the Regional Trial Court of Tacloban City, Branch 7, dated
December 15, 1995 dismissing the action for reformation is
REINSTATED.1âwphi1.nêt
SO ORDERED.