MARLENE CRISOSTOMO & JOSE G.R. No.

164787
G. CRISOSTOMO,
Petitioners, Present:

PANGANIBAN, C.J.
Chairperson,
YNARES-SANTIAGO,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.

Promulgated:
FLORITO M. GARCIA, JR.,
Respondent. January 31, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

On 20 June 2002, respondent Florito M. Garcia, Jr. filed Civil Case No. C-20128 for
cancellation of Transfer Certificate of Title (TCT) No. 273165 of the Registry of Deeds
of Caloocan City against petitioners-spouses Marlene and Jose Crisostomo raffled to
Branch 121 of the Regional Trial Court of Caloocan City.[1]

In his Complaint,[2] dated 16 June 2002, respondent alleged that on 24 September

1986, Victoria Garcia Vda. de Crisostomo, mother of petitioner Jose G. Crisostomo,
sold to him, by way of a Deed of Absolute Sale,[3] the property, described in the
aforesaid TCT including the improvements and rights thereon, particularly described as
TAG No. 84-205-1097 (Urban Bliss Level I [ZIP] located at
163 Libis Talisay, Caloocan City). In the Deed of Sale, petitioner Jose Crisostomo and
his sister Cristina Crisostomo signed as witnesses in the execution of the
instrument. Since they were distant relatives, respondent allowed Victoria and her
children, petitioner Jose and Cristina, to stay in the subject property as lessees under a
Contract of Lease.[4] By virtue of the said deed of sale, respondent effected the transfer
of the tax declaration covering the property, under his name from the City Assessors
Office of Caloocan City.

However, before the transfer of title to respondent could be completed, petitioners-

spouses Jose and Marlene Crisostomo were able to secure a loan from the National
Home Mortgage Finance Corporation using the subject property as security through bad
faith and machinations. Worse, petitioners were able to transfer the subject property
under their names, obtaining TCT No. 273165, from the Registry of Deeds
of Caloocan City, without the knowledge and consent of the respondent.

Instead of an Answer, petitioners filed an Urgent Motion to Dismiss Action, [5] alleging
that since respondents cause of action is based on an alleged deed of sale executed on
24 September 1986, the cause of action of the respondent to enforce and to implement
the instrument arose on 24 September 1986 and pursuant to Article 1144 [6] of the Civil
Code, the action must be brought within 10 years from the time the right of action
accrues. Thus, from 24 September 1986, respondent had only up to 24 September
1996 within which to file the action. Since the complaint was filed only on 20 June 2002,
or after the lapse of more than 16 years, the cause of action is clearly barred by
prescription.
Respondent, in his Comment[7] to the Motion to Dismiss, countered that the cause of
action has not yet prescribed. He contends that Article 1144 of the Civil Code does not
apply to the case because the complaint is for cancellation of title registered in the
names of the petitioners and for reconveyance. Respondent further points out that he
did not file an action for specific performance based on the deed of sale. The complaint,
he said, is for reconveyance based on an implied or constructive trust which expires in
10 years counted from the date the adverse title to the property is asserted by the
possessor.
After the parties filed their respective reply[8] and rejoinder,[9] the motion was deemed
submitted for resolution.

Resolving the motion,[10] the trial court issued an Order dated 12 August 2003,
dismissing the same for lack of merit, in this wise:

It appears from the pleadings submitted by the parties that the mother of
defendant Jose Crisostomo had sold the property subject matter of this
case to the plaintiff as evidenced by a Deed of Absolute Sale. However,
before the property could have been registered with the Register of
Deeds and a transfer certificate of title could have been issued, the
defendants had obtained a loan from the National Home Mortgage
Finance Corporation using the subject property as collateral. The
defendants were able to transfer the subject property in their names now
covered by Transfer Certificate of Title No. 273165 before the Register of
Deeds of Caloocan City.

By way of an opposition, the plaintiff alleged that the action is for the
cancellation of title based on fraud which was discovered upon the
registration of the property in 1993. The case was filed on June 20,
2003,(sic) hence, the action has not yet prescribed.

While it is true that in action based on a written contract prescribes in 10

years, the same however does not find application in the case at bar. The
plaintiff is trying to cancel the transfer certificate of title issued in favor of
the private defendants based on the alleged fraud which was discovered
in 1993.

WHEREFORE, in view of the foregoing, the instant motion is hereby

DENIED for utter lack of merit.

The defendants are directed to file their Answer within ten (10) days from
receipt of a copy of this order.[11]

Petitioners filed a Motion for Reconsideration,[12] dated 11 September 2003[13] which the
respondent opposed.[14] The trial court denied the Motion for Reconsideration in an
Order dated 21 October 2003.[15] Undaunted, petitioners filed a Petition
for Certiorari[16] before the Court of Appeals.[17]
In a resolution[18] dated 20 February 2004, the Court of Appeals resolved to dismiss the
petition outright stating that the defense of prescription being a question of fact, the
same is not proper in a petition for certiorari.[19]

Petitioners filed a Motion for Reconsideration[20] dated 22 March 2004 which was denied
in a resolution dated 06 August 2004.[21]

Hence, this petition grounded on the following:

I.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING

THAT THE ISSUE OF PRESCRIPTION INVOLVES A QUESTION OF
FACT.

II.

EVEN ASSUMING ARGUENDO THAT SAID ISSUE OF PRESCRIPTION

INVOLVES A QUESTION OF FACT, WHETHER OR NOT THE COURT
OF APPEALS ERRED BY REFUSING TO RESOLVE THE MERITS OF
THE SAID PETITION BELOW.

III.

WHETHER OR NOT THE ACTION FILED BY THE RESPONDENT HAD

ALREADY PRESCRIBED.[22]

On the issue of whether the defense of prescription is a question of fact or law, the
distinction is settled that there is a question of fact when the doubt or difference arises
as to the truth or falsehood of the alleged facts. On the other hand, a question of law
exists when there is a doubt or controversy as to what the law is on a certain state of
facts.[23] For a question to be one of law, the same must not involve an examination of
the probative value of the evidence presented by the litigants or any of them. [24] The
resolution of the issue must rest solely on what the law provides on the given set of
circumstances. Once it is clear that the issue invites a review of the evidence presented,
the question posed is one of fact.[25]
The test of whether a question is one of law or of fact is not the appellation given to
such question by the party raising the same; rather, it is whether the appellate court can
determine the issue raised without reviewing or evaluating the evidence, in which case,
it is a question of law; otherwise it is a question of fact. [26]
In the case of Santos, et al. v. Aranzanso,[27] this Court has held that the question of
prescription of the action involves the ascertainment of factual matters such as the date
when the period to bring the action commenced to run. In Lim v. Chan,[28] this Court has
again decreed that prescription is a factual matter when it held that without conducting
trial on the merits, the trial court cannot peremptorily find the existence
of estoppel, laches, fraud or prescription of actions as these matters require
presentation of evidence and determination of facts.
At first glance, applying these jurisprudence as bases, it may seem that the Court of
Appeals acted correctly in denying the petition. However, while we agree with the Court
of Appeals that the issue of prescription is a factual matter, we deem it erroneous on its
part to have dismissed the petition on this ground. The Court of Appeals could have
squarely ruled if the trial court committed grave abuse of discretion in denying the
motion to dismiss the Complaint filed by the petitioners considering that the facts from
which the issue of prescription can be adduced are available to the appellate court, they
being extant from the records.

The records disclose that the date of registration of the subject property in the name of
the petitioners was 16 November 1993 while the Deed of Sale executed in favor of the
respondent was dated 24 September 1986. The complaint for the reconveyance and
cancellation of TCT was filed by the respondent on 20 June 2002.

Moreover, a motion to dismiss based on prescription hypothetically admits the truth of

the facts alleged in the complaint.[29] Such hypothetical admission is limited to the facts
alleged in the complaint which relate to, and are necessary for, the resolution of the
grounds stated in the motion to dismiss as preliminary matters involving substantive or
procedural laws, but not to the other facts of the case. As applied herein, the
hypothetical admission extends to the date of execution of the Deed of Sale in favor of
the respondent and to the date of registration of title in favor of the petitioners.

The foregoing considered, the Court of Appeals was properly equipped with the tools to
determine if the trial court abused its discretion in ruling that respondents cause of
action had not prescribed. Nevertheless, instead of remanding this case to the Court of
Appeals which is concededly a costly endeavor in terms of the parties resources and
time, we shall rule on the issue of prescription.[30]
Petitioners allegation that an action for the reconveyance of real property on the ground
of fraud must be filed within four years from the discovery of the fraud [31] is without
basis.

The four-year prescriptive period relied upon by the petitioners apply only if the
complaint seeks to annul a voidable contract under Article 1390[32] of the Civil Code. In
such case, the four-year prescriptive period under Article 1391[33] begins to run from the
time of discovery of the mistake, violence, intimidation, undue influence or fraud. [34]

Generally, an action for reconveyance of real property based on fraud prescribes in four
years from the discovery of fraud; such discovery is deemed to have taken place upon
the issuance of the certificate of title over the property. Registration of real property is a
constructive notice to all persons and, thus, the four-year period shall be
counted therefrom.[35]
In the case at bar, respondents action which is for Reconveyance and Cancellation of
Title is based on an implied trust under Art. 1456 of the Civil Code since he averred in
his complaint that through fraud petitioners were able to obtain a Certificate of Title over
the property. He does not seek the annulment of a voidable contract whereby Articles
1390 and 1391 of the Civil Code would find application such that the cause of action
would prescribe in four years.

Art. 1456 of the Civil Code provides:

Art. 1456. If property is acquired through mistake or fraud, the person

obtaining it is, by force of law, considered a trustee of an implied trust for
the benefit of the person from whom the property comes.

Thus, it was held that when a party uses fraud or concealment to obtain a certificate of
title of property, a constructive trust is created in favor of the defrauded party. [36]
Constructive trusts are created by the construction of equity in order to satisfy the
demands of justice and prevent unjust enrichment. They arise contrary to intention
against one who, by fraud, duress or abuse of confidence, obtains or holds the legal
right to property which he ought not, in equity and good conscience, to hold.[37]

When property is registered in anothers name, an implied or constructive trust is

created by law in favor of the true owner.[38] The action for reconveyance of the title to
the rightful owner prescribes in 10 years from the issuance of the title. [39]

An action for reconveyance based on implied or constructive trust prescribes in ten

years from the alleged fraudulent registration or date of issuance of the certificate of title
over the property.[40]

It is now well-settled that the prescriptive period to recover property obtained by fraud or
mistake, giving rise to an implied trust under Art. 1456 of the Civil Code, is 10 years
pursuant to Art. 1144. This ten-year prescriptive period begins to run from the date the
adverse party repudiates the implied trust, which repudiation takes place when the
adverse party registers the land.[41]

Clearly, the applicable prescriptive period is ten years under Art. 1144 and not four
years under Arts. 1389 and 1391.[42]

Applying the law and jurisprudential declaration above-cited to the allegations of fact in
the complaint, it can clearly be seen that respondent has a period of 10 years from the
registration of the title within which to file the action. Since the title was registered in the
name of the petitioners on 16 November 1993, respondent had a period of 10 years
from the time of the registration within which to file the complaint. Since the complaint
was filed on 20 June 2002, the action clearly has not prescribed and was timely-filed.

WHEREFORE, premises considered, the instant petition is:

(1) GRANTED, with respect to the petitioners prayer that the Court of
Appeals should have resolved the petition on the merits.

(2) DENIED, with respect to the prayer for the dismissal of Civil Case No.
C-20128 before the Regional Trial Court of Caloocan City, Branch 121.

The case is ordered remanded to the trial court which is directed to continue with the
hearing and proceed with Civil Case No. C-20128 with deliberate dispatch. No costs.

SO ORDERED.

AQUALAB PHILIPPINES, INC., G.R. No. 182673

Petitioner,
- versus - Present:

HEIRS OF MARCELINO PAGOBO, CARPIO, J., Chairperson,

namely: PELAGIO PAGOBO, CHICO-NAZARIO,
GONZALO PAGOBO, ANIANA VELASCO, JR.,
PAGOBO, ALFREDO SALVADOR, NACHURA, and
SAMUEL PAGOBO, REMEDIOS PERALTA, JJ.
PAGOBO, VALENTINA PAGOBO,
JONATHAN PAGOBO, VIRGILIO
PAGOBO, FELISA YAYON,
SIMPLICIO YAYON, BARTOLOME
YAYON, BERNARDINA YAYON, and
ISIDRA YAYON; HEIRS OF HILARION
PAGOBO, namely:PABLO PAGOBO,
ALFREDO PAGOBO, FELIX PAGOBO,
RUFINA P. DAHIL, BRIGIDA P.
GODINEZ, HONORATA P. GODINEZ,
MAXIMO PAGOBO, ADRIANA
PAGOBO, CECILIA PAGOBO, LILIA
PAGOBO, CRESCENCIO PAGOBO,
ROBERTO PAGOBO, ALFONSO
PAGOBO, CANDIDO PAGOBO,
BARTOLOME PAGOBO, ELPIDIO
PAGOBO, PEDRO PAGOBO,
ROGELIO PAGOBO, SHIRLEY P.
CAETE, MILAGROS PAGOBO,
JUANITO PAGOBO, JR., ANTONIO
PAGOBO, IRENEA PAGOBO, and
ANIANO P. WAGWAG; HEIRS OF
ANTONIO PAGOBO,
namely:GAUDENCIO PAGOBO,
LOTITA PAGOBO, ERNESTO
PAGOBO, ROMANA P. DANIL,
FELISA PAGOBO, CARMEN
PAGOBO, and SALUD
PAGOBO; HEIRS OF MAXIMO
PAGOBO, namely:RAMON PAGOBO,
RODULFO PAGOBO, CRIPSIN
PAGOBO, and URBANO
PAGOBO; HEIRS OF DONATA
PAGOBO WAGWAG, namely: FELISA
WAGWAG, ANASTACIO WAGWAG,
FILDEL WAGWAG, and NEMESIA
WAGWAG; HEIR OF AQUILINA
PAGOBO:VICTOR PAGOBO; HEIRS
OF JUANITO PAGOBO EYAS,
namely: MARCELO P. EYAS, ROCHI
P. FLORES, and ORDIE P.
FLORES; HEIRS OF CATALINA
PAGOBO, namely: RESTITUTO
PAGOBO, CARLINA P. TALINGTING,
TEOFILO P. TALINGTING, and
JUANITO P. TALINGTING,
Respondents.

Promulgated:

October 5, 2009
x-----------------------------------------------------------------------------------------x
 DECISION

VELASCO, JR., J.:

The Case

In this Petition for Review on Certiorari under Rule 45, Aqualab Philippines, Inc.
(Aqualab) assails the March 15, 2007 Decision[1] and April 22, 2008 Resolution[2] of the
Court of Appeals (CA) in CA-G.R. CV No. 58540, which reversed the September 30,
1997 Order[3] of the Regional Trial Court (RTC), Branch 53 in Lapu-lapu City, Cebu. The
RTC dismissed Civil Case No. 4086-L for Partition, Declaration of Nullity of Documents,
Cancellation of Transfer Certificate of Titles, Reconveyance with Right of Legal
Redemption, Damages and Attorneys Fees filed by respondents.

The Facts

Subject of the complaint initiated by respondents are Lots 6727-Q and 6727-Y of
the Opon Cadastre, situated in Punta Engao, Lapu-lapu City, Mactan Island, Cebu,
particularly described as follows:

LOT NO. 6727-Q

A parcel of land (Lot 6727-Q of the subdivision on plan (LRC) Psd-

117050, being a portion of Lot 6727 of the Cadastral Survey of Opon,
L.R.C. (GLRO) Cad. Rec. No. 1004), situated in the Barrio of Punta
Engao, City of Lapu-lapu, Island of Mactan x x x containing an area of
ONE THOUSAND (1,000) SQUARE METERS, more or less. All points
referred to are indicated on the plan and marked on the ground as
follows: x x x date of the original survey, Aug. 1927 Dec. 1928, and that of
the subdivision survey, Aug. 7, and 10, 1963, and Sept. 27 and 30, 1967.

LOT NO. 6727-Y

A parcel of land (Lot 6727-Y of the subdivision on plan (LRC) Psd-

117050, being a portion of Lot 6727 of the Cadastral Survey of Opon,
L.R.C. (GLRO) Cad. Rec. No. 1004), situated in the Barrio of Punta
Engao, City of Lapu-lapu, Island of Mactan x x x containing an area of
SIXTEEN THOUSAND ONE HUNDRED SIXTY SEVEN (16,167)
SQUARE METERS, more or less. All points referred to are indicated on
the plan and marked on the ground as follows: x x x date of the original
survey, Aug. 1927 Dec. 1928, and that of the subdivision survey, Aug. 7,
and 10, 1963, and Sept. 27 and 30, 1967.

Lot 6727-Q and Lot 6727-Y used to form part of Lot 6727 owned by respondents
great grandfather, Juan Pagobo, covered by Original Certificate of Title No. (OCT) RO-
2246[4] containing an area of 127,436 square meters.

Lot 6727 was once covered by Juan Pagobos homestead application. Upon his
death on January 18, 1947,[5] his homestead application continued to be processed
culminating in the issuance on December 18, 1969 of Homestead Patent No. 128470
for Lot 6727. On the basis of this homestead patent, OCT RO-2246 was issued in the
name of Juan Pagobo. Apparently, from the description of the subdivision lots of Lot
6727, particularly those of subject Lots 6727-Q and 6727-Y above, and even before the
issuance of OCT RO-2246, the mother Lot 6727 was surveyed in 1963 and 1967 and
eventually subdivided into 34 subdivision lots denominated as Lots 6727-A to 6727-HH.

Incidentally, on the same date that OCT RO-2246 was issued covering Lot 6727,
OCT RO-1277[6] was likewise issued also covering Lot 6727 in the name of the late
Juan Pagobo also pursuant to Homestead Patent No. 128470. Subsequently, however,
on August 10, 1977, OCT RO-1277 was canceled for being null and void pursuant to an
Order issued on August 4, 1977 by the Court of First Instance in Lapu-lapu City in view
of the issuance of OCT RO-2246.[7]

Shortly after OCT RO-1277 and OCT RO-2246 were issued, subject Lots 6727-Q
and 6727-Y were subsequently sold to Tarcela de Espina who then secured Transfer
Certificate of Title No. (TCT) 3294[8] therefor on April 21, 1970. The purchase by Tarcela
de Espina of subject Lot 6727-Y from the heirs of Juan Pagobo and subject Lot 6727-Q
from one Antonio Alcantara was duly annotated on the Memorandum of Incumbrances
of both OCT RO-1277[9] and OCT RO-2246.[10]

Subsequently, Tarcela de Espina sold subject lots to Rene Espina who was
issued, on September 28, 1987, TCT 17830[11] for Lot 6727-Q and TCT 17831[12] for Lot
6727-Y. Thereafter, Rene Espina sold subject lots to Anthony Gaw Kache, who in turn
was issued TCT 17918[13] and TCT 18177,[14] respectively, on November 9,
1987.Finally, Aqualab acquired subject lots from Anthony Gaw Kache and was issued
TCT 18442[15] and TCT 18443,[16] respectively, on May 4, 1988.
On August 10, 1994, respondents, alleging that Aqualab has disturbed their
peaceful occupation of subject lots in 1991, filed a Complaint[17] for Partition, Declaration
of Nullity of Documents, Cancellation of Transfer Certificate of Titles, Reconveyance
with Right of Legal Redemption, Damages and Attorneys Fees against Aqualab, the
Register of Deeds of Lapu-Lapu City, Cebu, and, for being unwilling co-plaintiffs and
alleged refusal to have subject lots partitioned, the Heirs of Bernabe Pagobo,
namely: Anastacio Pagobo, Demetrio Pagobo, Felix Pagobo, Olympia P. Tampus,
Damasa Pagobo, Salud P. Maloloy-on, Candida Pagobo, and Adriana P. Mahusay.

The Complaint pertinently alleged that:

ALLEGATIONS COMMON TO ALL CAUSE OF ACTION

4. Plaintiffs are the absolute and legal owners and rightful

possessors of Lot [no.] 6727-Q and Lot no. 6727-Y. These are ancestral
lands which are part of a bigger parcel of land, registered in the name of
the plaintiffs great grandfather Juan Pagobo and more particularly
described as follows:

xxxx
 5. Ownership and Possession by plaintiffs [sic] predecessors-in-
interest, and plaintiffs herein, respectively, over the said land, have been
peaceful, continuous [sic] open, public and adverse, since the year 1936
or even earlier. Their peaceful possession was disturbed only in 1991 as
hereinafter described.

xxxx

15. In the records with the office of the Registry of Deeds of Lapu-
Lapu City, Lot No. 6727 of the Opon Cadastre has been subdivided in to
THIRTY-FOUR (34) lots and are denominated as Lots Nos. 6727-A to
6727-HH, respectively, as per subdivision plan, a machine copy of which
is hereto attached and marked as Annex A hereof.

16. Defendants Anastacio Pagobo, x x x are the surviving children

and grandchildren, respectively, of the late BERNABE PAGOBO and are
herein joined as party-defendants for being unwilling co-plaintiffs; and also
because despite demands by plaintiffs upon these aforenamed
defendants for the partition of the aforesaid land, the latter refused and still
refuses to have the same partitioned.

FIRST CAUSE OF ACTION AGAINST DEFENDANT

AQUALAB PHILIPPINES, INC. AND SANTIAGO TANCHAN, JR.

17. Sometime in 1991, defendant Aqualab Philippines Inc.

represented by Santiago Tanchan, Jr., claiming ownership of Lot Nos.
6727-Q and 6727-Y, forcibly entered, and without any court Order, and
against the will of the plaintiffs, said Lot no. 6727-Q and Lot no. 6727-
Y. The truth of the matter is that these defendants despite full knowledge
that absolute and legal ownership of Lot no. 6727-Q and Lot no. 6727-Y
belonged to plaintiffs, and despite knowledge that peaceful, public and
adverse possession were being continuously exercised by plaintiff over
said land for a period in excess of THIRTY (30) years, did there and then,
by the use of fraud and misrepresentation and without informing the
plaintiffs, caused the transfer into the name of defendant Aqualab
Philippines Inc., Lot no. 6727-Q and Lot no. 6727-Y, consisting of an area
of ONE THOUSAND (1,000) SQUARE METERS and SIXTEEN
THOUSAND ONE HUNDRED SIXTY SEVEN (16,167) SQUARE
METERS, respectively. Lots No. 6727-Q and Lot no. 6727-Y are presently
covered by Transfer Certificate of Titles No. 18442 and CTC No. 18443,
respectively, copies of which are hereto attached as Annexes B and C,
respectively.

18. The defendants entered into transactions of the lands subject

matter of this case, without the knowledge of plaintiffs and their
predecessors-in-interest, and defendants did so despite full knowledge
that ownership of said lands belonged to plaintiffs and their predecessors-
in-interest; and that defendants entered into said transactions despite full
knowledge by them and their predecessors-in-interest that the lots was
[sic] covered by a homestead patent and as such cannot be alienated
within twenty-five (25) years from its issuance on February 10, 1970.

SECOND CAUSE OF ACTION

xxxx
 20. Granting, without necessarily admitting, that the transaction
entered into by the defendants are legal and binding; Plaintiffs then have
not been duly notified of the said sale and therefore, have the right to
redeem the same under Article 1620 in relation to Article 1623 of the New
Civil Code, and also under Commonwealth Acts [sic] No. 141, as
amended.[18]

On August 26, 1994, the heirs of Bernabe Pagobo filed their Answer,[19] asserting
that subject Lot 6727-Y was owned by their predecessor Bernabe Pagobo as evidenced
by Tax Declaration No. (TD) 00520.[20] They maintained that even before the Second
World War and before the death of Juan Pagobo on January 18, 1947, Bernabe Pagobo
already had possession of subject Lot 6727-Y which was the portion assigned to
him. Moreover, they contended that respondents never made any demands for partition
of subject Lot 6727-Y.

On September 12, 1994, Aqualab filed its Motion to Dismiss[21] on the grounds of:
(1) prescription of the action for declaration of nullity of documents, cancellation of
transfer certificates of title, and reconveyance; and (2) no cause of action for partition
and legal redemption of the mother title of subject lots, i.e., OCT RO-2246 had already
been subdivided and several conveyances made of the subdivided lots.
Ruling of the Trial Court

By Order dated September 30, 1997, the RTC granted Aqualabs motion and
dismissed respondents complaint, disposing as follows:

Wherefore, in the light of the foregoing considerations, defendant

Aqualabs motion to dismiss, being impressed with merit, is hereby
granted. The complaint in the above-entitled case is hereby dismissed.

SO ORDERED. [22]

In granting Aqualabs motion to dismiss, the trial court ruled that prescription has
set in. Moreover, the trial court held that Aqualab is an innocent purchaser for value
and, thus, its rights are protected by law. Finally, it concluded that legal redemption or
reconveyance was no longer available to respondents.

Undaunted, respondents appealed the above dismissal to the CA. The parties
thereafter filed their respective briefs.

Ruling of the Appellate Court

 The CA saw things differently. On March 15, 2007, it rendered the assailed
decision, reversing the September 30, 1997 Order of dismissal by the RTC, declaring
the sale of subject lots as null and void, and remanding the case to the trial court for
partition proceedings. The fallo reads:

WHEREFORE, in view of the foregoing premises, the Order of the

Regional Trial Court dismissing the instant Complaint for Partition,
Declaration of Nullity of Documents, Cancellation of Transfer Certificates
of Title, Reconveyance with Right of Legal Redemption, Damages and
Attorneys Fees, and other Reliefs is REVERSED and SET ASIDE, and the
instant appeal is GRANTED, hereby declaring the sale of the homestead
and TCT Nos. 18442 and 18443 under the name of Aqualab null and void,
and ordering the Register of Deeds for the City of Lapu-lapu to cancel
both certificates of title and to issue new certificates of title over Lots 6727-
Q and 6727-Y under the name of appellants, and let this case be
REMANDED to the trial court for the presentation of evidence on the claim
for partition and for damages.

SO ORDERED.[23]

The CA resolved the following issues: (1) the propriety of the dismissal of the
complaint by the RTC; and, (2) whether respondents have the right to redeem subject
lots.The CA ruled that the trial court erred in dismissing the complaint as the sale of
subject lots to Tarcela de Espina was void, thus making the subsequent conveyances
ineffective and no titles were validly transferred. Moreover, it ruled that Aqualab is not
an innocent purchaser for value, and held that respondents, as heirs of the homestead
grantee, never lost their valid title to the subject lots.

Through the equally assailed April 22, 2008 Resolution, the CA denied Aqualabs
motion for reconsideration.

Hence, we have this petition.

The Issues

(A)

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A

RADICAL DEPARTURE FROM THE USUAL AND ACCEPTED COURSE
OF JUDICIAL PROCEEDINGS THAT WOULD WARRANT THE
REVERSAL OF THE COURT OF APPEALS DECISION

(B)
WHETHER OR NOT THE COMPLAINT SHOULD BE DISMISSED
COMPLAINT [SIC] ON THE GROUND OF LACK OF CAUSE OF ACTION

(C)

WHETHER OR NOT THE TRANSFERS OF THE DISPUTED PROPERTY

TO HEREIN PETITIONERS PREDECESSORS-IN-INTEREST WERE
VIOLATIVE OF THE FIVE (5) YEAR PROHIBITIVE PERIOD UNDER
SECTION 118 OF THE PUBLIC LAND ACT SO AS TO WARRANT
THEIR NULLIFICATION

(D)

WHETHER OR NOT THE PETITIONER IS AN INNOCENT PURCHASER

IN GOOD FAITH

(E)

WHETHER OR NOT THE RESPONDENTS CAUSE OF ACTION HAS

PRESCRIBED WARRANTING THE DISMISSAL OF THEIR COMPLAINT
ON THE GROUND OF PRESCRIPTION

(F)

WHETHER OR NOT THE RESPONDENTS COMPLAINT CONSTITUTES

A COLLATERAL ATTACK AGAINST THE TITLES OF HEREIN
PETITIONERS PREDECESSORS-IN-INTEREST WARRANTING THE
DISMISSAL THEREOF

(G)

WHETHER OR NOT THE RESPONDENTS APPEAL BEFORE THE

COURT OF APPEALS SHOULD HAVE BEEN DISMISSED IN VIEW OF
THE RESPONDENTS ADMISSION THAT THE CONVEYANCE OF THE
DISPUTED PROPERTY TO HEREIN PETITIONER WAS VALID

(H)

WHETHER OR NOT THE COURT OF APPEALS DEPRIVED THE

PETITIONER OF ITS PROPERTY WITHOUT DUE PROCESS OF LAW
WHEN IT NULLIFIED THE PETITIONERS TITLE AND OWNERSHIP
OVER SUBJECT PROPERTY WITHOUT TRIAL THEREBY DEPRIVING
THE PETITIONER OF ITS PROPERTY WITHOUT DUE PROCESS OF
LAW[24]

The Courts Ruling

 The petition is partly meritorious.

The core issues raised in the instant petition are factual in nature and can be
summed up into two: first, whether the action of respondents is barred by prescription;
and second, whether Aqualab is an innocent purchaser for value.

Hypothetical Admission of Factual Allegations

in the Complaint by Filing a Motion to Dismiss

In filing a motion to dismiss, the movant hypothetically admits the truth of the
material and relevant facts alleged and pleaded in the complaint. The court, in resolving
the motion to dismiss, must consider such hypothetical admission, the documentary
evidence presented during the hearing thereof, and the relevant laws and jurisprudence
bearing on the issues or subject matter of the complaint.

Dismissal by Trial Court on Prescription and

Finding Defendant an Innocent Purchaser for Value

The trial court ruled that prescription has set in, since respondents alleged in the
complaint fraud and misrepresentation in procuring the transfer of subject lots, and such
transfer was made on April 21, 1970, while the instant complaint was filed only on
August 10, 1994, or a little over 24 years. Relying on Buenaventura v. Court of
Appeals,[25]where the Court held that an action for reconveyance of title due to fraud is
susceptible to prescription either within four or 10 years, the trial court held that the
instant action is definitely barred. It also ruled that even if a constructive trust was
created as averred by respondents, still, the instant action has prescribed for a
constructive trust prescribes in 10 years, relying on Tenio-Obsequio v. Court of
Appeals.[26]

Moreover, the trial court, also relying on Tenio-Obsequio, agreed with Aqualabs
assertion that it was an innocent purchaser for value, which merely relied on the
correctness of the TCTs covering subject lots, i.e., TCT 17918 and TCT 18177 in the
name of Anthony Gaw Kache, and, as such, Aqualab, as vendee, need not look beyond
the certificate of title and investigate the title of the vendor appearing on the face of said
titles.

Finally, the trial court concluded that respondents cannot invoke legal redemption
under Article 1620 in relation to Art. 1623 of the Civil Code and under Commonwealth
Act No. (CA) 141, as amended,[27] for Lot 6727 had already been divided into
subdivision lots, the subject of numerous transactions. Besides, it reasoned that legal
redemption under CA 141 is only applicable to cases of proper conveyance of a land
covered by a homestead patent, but not, as in the instant case, when the conveyances
were assailed to be improper.

Aqualab Hypothetically Admitted the Fraudulent Conveyances

and Respondents Possession of Subject Lots

Respondents aver that they are the absolute and lawful owners of subject
properties, i.e., Lots 6727-Q and 6727-Y, over which they have had actual possession
since 1936 or earlier until sometime in 1991, when Aqualab disturbed such
possession.[28] While the records show that respondents did not have in their names the
certificate of titles over subject lots, the factual assertion of open, peaceful, public, and
adverse possession is hypothetically admitted by Aqualab.

Moreover, respondents allege that the conveyances of subject lots were

fraudulently made in violation of the restrictions on alienation of homesteads under CA
141, and that said conveyances were made without their knowledge and, thus,
asserting their right to redeem the subject properties in line with the policy of CA 141
that the homestead should remain with the grantee and his family. [29] The alleged
fraudulent conveyances were likewise hypothetically admitted by Aqualab.

On the other hand, Aqualabs co-defendants, the heirs of Bernabe Pagobo, to

respondents complaint, filed their Answer asserting possession and ownership over
subject Lot6727-Y by submitting TD 00520 to prove payment of the real estate tax
thereon. However, on the allegation of disturbance of possession and fraudulent
conveyances without knowledge of respondents, the heirs of Bernabe Pagobo merely
maintained that they had no knowledge and information sufficient to form a belief as to
the truth thereof.

It is, thus, clear that by filing its motion to dismiss, Aqualab hypothetically
admitted the veracity of respondents continuous possession of subject lots until 1991
when Aqualab disturbed such possession. Aqualab likewise hypothetically admitted the
fraudulent and illegal conveyances of subject lots.

In its Motion to Dismiss, Aqualab moved for the dismissal of respondents

complaint on the ground of prescription, that it is an innocent purchaser for value whose
rights are protected by law, and that the complaint failed to state a cause of action for
partition and legal redemption.

Prescription Is Not Apparent

 on the Face of the Complaint

From the foregoing premises, the trial court erred in finding

prescription. Prescription, as a ground for a motion to dismiss, is adequate when the
complaint, on its face, shows that the action has already prescribed.[30] Such is not the
case in this instance. Respondents have duly averred continuous possession until 1991
when such was allegedly disturbed by Aqualab. Being in possession of the subject
lotshypothetically admitted by Aqualabrespondents right to reconveyance or annulment
of title has not prescribed or is not time-barred.

Verily, an action for annulment of title or reconveyance based on fraud is

imprescriptible where the plaintiff is in possession of the property subject of the
acts.[31] And the prescriptive period for the reconveyance of fraudulently registered real
property is 10 years, reckoned from the date of the issuance of the certificate of title, if
the plaintiff is not in possession.[32] Thus, one who is in actual possession of a piece of
land on a claim of ownership thereof may wait until his possession is disturbed or his
title is attacked before taking steps to vindicate his right.[33]

In the instant case, as hypothetically admitted, respondents were in possession

until 1991, and until such possession is disturbed, the prescriptive period does not
run. Since respondents filed their complaint in 1994, or three years after their
possession was allegedly disturbed, it is clear that prescription has not set in, either due
to fraud or constructive trust.

Besides, if the plaintiff, as the real owner of the property, remains in possession
of the property, the prescriptive period to recover title and possession of the property
does not run against him. In such a case, an action for reconveyance, if nonetheless
filed, would be in the nature of a suit for quieting of title, an action that is
imprescriptible.[34]

Thus, the trial courts reliance on Buenaventura[35] and Tenio-Obsequio[36] for

prescription on the right of reconveyance due to fraud and constructive trust,
respectively, is misplaced, for in both cases, the plaintiffs before the trial court were not
in possession of the lots subject of their action.

Aqualab Not an Innocent Purchaser for Value Due to the Hypothetically Admitted
Respondents Possession of Subject Lots

In the instant case, again based on the hypothetically admitted allegations in the
complaint, it would appear that Anthony Gaw Kache, Aqualabs predecessor-in-interest,
was not in possession of subject lots. Such a fact should have put Aqualab on guard
relative to the possessors (respondents) interest over subject lots. A buyer of real
property that is in the possession of a person other than the seller must be wary, and a
buyer who does not investigate the rights of the one in possession can hardly be
regarded as a buyer in good faith.[37]

Having hypothetically admitted respondents possession of subject lots, Aqualab

cannot be considered, in the context of its motion to dismiss, to be an innocent
purchaser for value or a purchaser in good faith. Moreover, the defense of indefeasibility
of a Torrens title does not extend to a transferee who takes it with notice of a flaw in the
title of his transferor.[38]

The Complaint Sufficiently

States a Cause of Action

Upon the foregoing disquisitions, it is abundantly clear to the Court that

respondents complaint sufficiently stated, under the premises, a cause of action. Not
lost on us is the fact that the RTC dismissed the complaint of respondents on the
grounds of prescription and in the finding that Aqualab is an innocent purchaser for
value of the subject lots.Quoting Philippine Bank of Communications v. Trazo,[39] the
Court said in Bayot v. Court of Appeals[40] that:

A cause of action is an act or omission of one party in violation of

the legal right of the other. A motion to dismiss based on lack
of cause of action hypothetically admits the truth of the allegations in the
complaint. The allegations in a complaint are sufficient to constitute
a cause of action against the defendants if, hypothetically admitting the
facts alleged, the court can render a valid judgment upon the same in
accordance with the prayer therein. A cause of action exists if the
following elements are present, namely: (1) a right in favor of the plaintiff
by whatever means and under whatever law it arises or is created; (2) an
obligation on the part of the named defendant to respect or not to violate
such right; and (3) an act or omission on the part of such defendant
violative of the right of the plaintiff or constituting a breach of the obligation
of the defendant to the plaintiff for which the latter may maintain an action
for recovery of damages.[41]

Indeed, to sustain a motion to dismiss for lack of cause of action, the complaint
must show that the claim for relief does not exist rather than that a claim has been
defectively stated or is ambiguous, indefinite, or uncertain. [42] However, a perusal of
respondents Complaint before the RTC, in light of Aqualabs motion to dismiss which
hypothetically admitted the truth of the allegations in the complaint, shows that
respondents action before the RTC has sufficiently stated a cause of
action. Hypothetically admitting fraud in the transfers of subject lots, which indisputably
were first transferred in apparent violation of pertinent provisions in CA 141 prohibiting
alienation of homesteads within five years from the grant of the homestead patent, and
the continuing possession of respondents until 1991 of the subject lots, the action for
reconveyance and nullification filed in 1994 not only sufficiently stated a cause of action
but also has not yet prescribed.
 Given the findings above, the trial court gravely committed an error of judgment
in granting Aqualabs motion to dismiss.

The appellate court was, thus, correct insofar as it reversed and set aside the
September 30, 1997 Order of dismissal of the trial court. Unfortunately, however, it went
further, for it did not merely remand the case for further proceedings, i.e., for trial on the
merits, but it also resolved and decided the case in favor of respondents without going
into a full-blown trial on the merits. This violated Aqualabs right to due process.

The CA Committed Reversible Error

in Deciding the Case on the Merits

The CA reversibly erred when it decided the case on the merits when what was
appealed thereto was a dismissal of the case through a motion to dismiss. There was
no trial on the merits. Thus, its resolution of the case on the merits had no factual
basis. The lynchpins in the resolution of the motion to dismiss are in the issues of
prescription and whether Aqualab is an innocent purchaser for value. On these two
issues we ruled, as discussed above, that based on the motion to dismiss, the
allegations in the complaint, and the pieces of documentary evidence on record,
prescription has not yet set in and that Aqualab is apparently not a purchaser in good
faith for, as hypothetically admitted, respondents had possession over subject lots until
1991.

Such hypothetical admission, however, is not equivalent to or constitutive of a

judicial admission, for, after all, Aqualab has not yet filed its Answer. It was, therefore,
erroneous for the CA to decide the case on the merits. And much less can the CA rule
that Aqualab did not controvert respondents allegation of disturbance in their
possession. It was a hypothetically admitted fact but not the factual finding of the trial
court.

The Parties Assertions and Allegations

Still Have to Be Proved by Trial on the Merits

First, the assertion of respondents that they had possession until 1991, a factual
issue, still had to be established on trial. Indeed, he who asserts a fact has the burden
of proving it. So, too, the contention of being an innocent purchaser for value by
Aqualab still has yet to be determined through a trial on the merits. The hypothetical
admission applied against a defendant is relied upon by the court only to resolve his
motion to dismiss. Verily, the burden of proving the purchasers good faith lies in the one
who asserts the sameit is not enough to invoke the ordinary presumption of good
faith.[43]

And if Aqualab is found to be truly an innocent purchaser for value, its rights as
such is protected by law; more so in situations where there have been a series of
transfers of the subject lots, in which case, respondents rights, if any, will be for
damages from those who perpetrated the fraudulent conveyances.

No Factual and Legal Bases for the

Cancellation of Certificates of Title

Second, and corollary to the first, given that there is no judicial factual finding that
Aqualab is not an innocent purchaser for value, it is legally and factually without bases
for the appellate court to order the cancellation of the certificates of title covering subject
lots in the name of Aqualab.

Third, the issues of reconveyance or redemptive rights of respondents and their

action for partition have to be resolved by the trial court in light of its eventual findings
from a trial on the merits of the instant case.

We, thus, hold that the instant case should proceed to trial for the parties to
adduce their respective evidence to support their contrary positions in the defense of
their asserted rights.

WHEREFORE, this petition is hereby PARTIALLY GRANTED. The CAs

Decision dated March 15, 2007 and Resolution dated April 22, 2008 in CA-G.R. CV No.
58540 are hereby REVERSED and SET ASIDE. The RTCs Order dated September 30,
1997 dismissing Civil Case No. 4086-L is likewise REVERSED and SET ASIDE. The
instant case is hereby REINSTATED, and petitioner Aqualab is REQUIRED within the
period available pursuant to Section 4 of Rule 16, 1997 Revised Rules of Civil
Procedure TO FILE its answer before the trial court. The trial court is ordered to
proceed with dispatch to the trial on the merits.

No costs.
 SO ORDERED.

Petitions Involving Certificate Of Title

1. There are 4 petitions—petition for surrender of title, petition for correction,
amendments, or alterations in the certificate of title, petition for the issuance of new
owner’s duplicate of title, petition for reconstitution

2. Petition for the surrender of the owner’s duplicate of title—the law speaks of two
instances. The first one involves involuntary transactions and the other one, voluntary
transactions. In both instances the procedure is to file a petition in the Regional Trial
Court for the owner to surrender the owner’s duplicate of title.

3. If the owner’s duplicate of title is lost, the law requires that notice under oath be given
to the RD. There should be a verified affidavit that will serve as notice to the RD that the
particular owner’s duplicate is lost. This will prevent any transaction that may arise from
the loss of the owner’s duplicate. This particular petition would prosper and the
corresponding duplicate issued will be valid if the owner’s duplicate is really lost. When
the owner’s duplicate is still existing upon filing of petition, the court doesn’t acquire
jurisdiction and the proceedings are null and void. The title is null and void and thus, can
be attacked collaterally.

4. Petition for reconstitution is filed when the certificate of title has been lost or
destroyed. This pertains to original and transfer certificates of title as well as
encumbrances and liens. Purpose is to bring back to its original form and state. No
addition nor reductions. If it is found out that the certificate is not lost or
destroyed, court doesn’t attack jurisdiction and proceedings are null and void.

5. There are two kinds of restitution—judicial and administrative. Judicial is when you
file a petition in court. Administrative is when you file the petition with the RD. It is easier
with the Register of Deeds as you have to file it with the reconstituting officer of the
Register of Deeds only.
6. The court in entertaining petitions for reconstitution should be careful and cautious.
Section 12 and 13 are mandatory requirements. Section 12 refers to the contents
requirement as 13 refers to the publication requirements.

7. The reconstitution proceedings are proceedings in rem.

8. Section 2 and 3 of RA 26 will tell the different documents or evidence that you can
submit for a petition for reconstitution can prosper. Sources found in the law are in a
hierarchy of preference. First and foremost in this list, may it be for the original or
transfer certificates of title is the owner’s duplicate of title.

9. The phrase “Any other document” will pertain to documents similar to those
previously enumerated. An example is a case pertaining to an action for the recovery of
possession. The court decision contained the technical description of the land and
whatnot as would pertain to any other document that warrants
reconstitution.

10. Administrative reconstitution is warranted in cases where the number of certificates

lost is not less than 500 and the cause of the loss or destruction is by fire, flood or any
other force majeure. If you pass these requirements, then administrative reconstitution
is allowed. If you are not satisfied, you can go to the LRA within 15 days from the
receipt of the decision. If not the LRA, file a petition for review with the proper court or
specifically, the RTC. This can be done within 60 days from knowledge of decision but
not later than 6 months from promulgation of decision.

11. The reconstituted title should be in the form and condition as the original lost title.

12. All these petitions and motions should be filed with the same registration case. This
is specifically provided for in Section 108. You will use the same case number wherein
the title was issued.

G.R. No. 203786 October 23, 2013

AQUILES RIOSA, Petitioner,

vs.
TABACO LA SUERTE CORPORATION, Respondent.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure assailing the May 30 2012 Decision1 of the Court of Appeals CA), and its
September 20 2012 Resolution2 in CA-G.R. CV No. 96459 reversing the September 30
2010 Decision3 of the Regional Trial Court Branch 15 Tabaco City Albay RTC), which
granted the complaint for annulment/declaration of nullity of the deed of absolute sale
and transfer certificate of title reconveyance and damages.

The Facts

On February 26, 2002, petitioner Aquiles Riosa (Aquiles) filed his Complaint for
Annulment/Declaration of Nullity of Deed of Absolute Sale and Transfer Certificate of
Title, Reconveyance and Damages against respondent Tabaco La Suerte Corporation
(La Suerte) before the RTC.

In his complaint, Aquiles alleged that he was the owner and in actual possession of a
52-square meter commercial lot situated in Barangay Quinale, Tabaco City, Albay; that
he acquired the said property through a deed of cession and quitclaim executed by his
parents, Pablo Riosa, Sr. and Sabiniana Biron; that he declared the property in his
name and had been religiously paying the realty tax on the said property; that
thereafter, his daughter, Annie Lyn Riosa Zampelis, renovated the commercial building
on the lot and introduced improvements costing no less than ₱300,000.00; that
subsequently, on three (3) occasions, he obtained loans from Sia Ko Pio in the total
amount of ₱50,000.00; that as a security for the payment of loans, Sia Ko Pio requested
from him a photocopy of the deed of cession and quitclaim; that Sia Ko Pio presented to
him a document purportedly a receipt for the ₱50,000.00 loan with an undertaking to
pay the total amount of ₱52,000.00 including the ₱2,000.00 attorney’s fees; that without
reading the document, he affixed his signature thereon; and that in September 2001, to
his surprise, he received a letter from La Suerte informing him that the subject lot was
already registered in its name.
Aquiles claimed that by means of fraud, misrepresentation and deceit employed by Sia
Ko Pio, he was made to sign the document which he thought was a receipt and
undertaking to pay the loan, only to find out later that it was a document of sale. Aquiles
averred that he did not appear before the notary public to acknowledge the sale, and
that the notary public, a municipal judge, was not authorized to notarize a deed of
conveyance. He further claimed that he could not have sold the commercial building on
the lot as he had no transmissible right over it, as it was not included in the deed of
cession and quitclaim. He, thus, prayed for the nullification of the deed of sale and
certificate of title in the name of La Suerte and the reconveyance of the subject property
to him.4

In its Answer, La Suerte averred that it was the actual and lawful owner of the
commercial property, after purchasing it from Aquiles on December 7, 1990; that it
allowed Aquiles to remain in possession of the property to avoid the ire of his father
from whom he had acquired property inter vivos, subject to his obligation to vacate the
premises anytime upon demand; that on February 13, 1991, the Register of Deeds of
Albay issued Transfer Certificate of Title (TCT) No. T-80054 covering the subject
property in its name; that Aquiles necessarily undertook the cost of repairs and did not
pay rent for using the premises; that Aquiles transacted with it, through Sia Ko Pio, now
deceased, who was then its Chief Executive Officer; that his opinion that only the land
was sold was absurd because the sale of the principal included its accessories, not to
mention that he did not make any reservation at the time the deed was executed; that it
repeatedly asked Aquiles to vacate the premises but to no avail; that, instead, he tried
to renovate the building in 2001 which prompted it to lodge a complaint with the Office
of the Mayor on the ground that the renovation work was without a building permit; and
that Aquiles’ complaint was barred by prescription, laches, estoppel and indefeasibility
of La Suerte’s title.5

During the trial, Aquiles and his daughter, Anita Riosa Cabanele, testified to prove his
causes of action. To defend its rightful claim, La Suerte presented the testimony of Juan
Pielago Sia (Juan), the son of Sia Ko Pio and a member of the board. Aquiles also
presented his wife, Erlinda, as rebuttal witness.

On September 30, 2010, the RTC ruled in favor of Aquiles, disposing as follows:

Wherefore, foregoing premises considered, judgment is hereby rendered in favor of the

plaintiff and against the defendant.

1. Ordering the annulment of sale of the subject lot purportedly executed by

plaintiff Aquiles Riosa in favor of defendant corporation;

2. Annulling the Transfer Certificate of Title No. 80054 in the name of defendant
corporation;

3. Ordering defendant corporation to pay plaintiff the amount of Twenty

Thousand Pesos (₱20,000.00) as Attorney’s fees;

4. Ordering defendant to pay plaintiff the amount of Twenty Thousand

(₱20,000.00) as exemplary damages; and

5. Ordering defendant to pay plaintiff the amount of Twenty Thousand Pesos

(₱20,000.00) as Attorney’s fees.

SO ORDERED.6

The RTC gave credence to the testimony of Aquiles that he was made to sign an
instrument of sale without his knowledge because he trusted Sia Ko Pio and he was of
the belief that what he had signed was merely an instrument of indebtedness. It cited,
as legal basis, Article 1330 of the Civil Code which provides that a contract where the
consent is given thru violence, intimidation, undue influence or fraud is voidable.
Inasmuch as the property was acquired thru fraud, the person who obtained it by force
of law was considered a trustee of an implied trust for the benefit of the person from
whom the property came. Thus, according to the RTC, La Suerte was bound to
reconvey to Aquiles the subject property.

With its motion for reconsideration denied, La Suerte appealed to the CA. In its May 30,
2012 Decision, the CA reversed the RTC decision and upheld the validity of the subject
deed of sale in favor of La Suerte. It declared La Suerte as the lawful owner of the
subject lot and improvements thereon, subject to the right of reimbursement for the
renovation expenses. The CA held that tax declarations or realty tax payments by
Aquiles were not conclusive evidence of ownership, citing Spouses Camara v. Spouses
Malabao,7 where it was ruled that a party’s declaration of real property and his payment
of realty taxes could not defeat a certificate of title which was an absolute and
indefeasible evidence of ownership of the property in favor of the person whose name
appeared thereon. The dispositive portion of the CA decision reads:

WHEREFORE, premises considered, the instant appeal is GRANTED. The September

30, 2010 Decision of the Regional Trial Court of Tabaco City, Albay, Branch 15, is
REVERSED and SET ASIDE and a new one is rendered:

1. DISMISSING the complaint for annulment of deed of sale and transfer

certificate of title, without prejudice to the right of plaintiff-appellee’s daughter to a
reimbursement for the renovation works she made on the structure/building on
the lot; and

2. GRANTING defendant-appellant’s counterclaim although in the reduced

amount of ₱100,000.00.

SO ORDERED.8

Aquiles filed his Motion for Reconsideration9 of the CA decision, but the same was
denied by the CA in its September 20, 2012 Resolution. Hence, Aquiles filed the
present petition before this Court raising the following

ISSUES

1. Whether or not the Honorable Court of Appeals committed serious error in

reversing the decision of the Trial Court disregarding the conclusion and findings
of the Trial court;

2. Whether the Honorable Court of Appeals committed serious error of law in

holding that the personal loan of petitioner obtained and granted by Sia Ko Pio is
a consideration of sale of the property in favor of the respondent corporation La
Suerte Corporation;

3. Whether the Honorable Court of Appeals erred in finding that there was a valid
and perfected contract of sale of real property between petitioner and respondent
corporation La Suerte Corporation;

4. Whether the Honorable Court of Appeals committed serious error of law and
applicable jurisprudence in resolving petitioner’s actual physical possession of
the property in question; and 5. Whether the Honorable Court of Appeals
committed serious error of law by awarding damages to the respondent. 10
The primordial issue to be resolved is whether there was a perfected and valid contract
of sale for the subject property between Aquiles and La Suerte, through its Chief
Executive Officer, Sia Ko Pio.

Aquiles argues that there was no perfected contract to sell because (1) there was no
transaction between La Suerte and Aquiles for the sale of the property in question; (2)
there was no board resolution authorizing Sia Ko Pio to purchase the property; (3) there
was no evidence that the money received by Aquiles from Sia Ko Pio came from La
Suerte; and (4) he did not appear before the notary public for notarization of the
instrument of sale. Moreover, there was a discrepancy in the date appearing in the deed
of sale and the date in the acknowledgment and the notarial reference.

La Suerte, in its Comment,11 argued that Aquiles’ petition should be dismissed because
it raised only questions of fact as only pure question of law is allowed in a petition for
certiorari under Rule 45. It counters that the notarized deed of sale was the very
evidence of the agreement between them. According to it, said deed of sale was binding
and enforceable between them, albeit there was a discrepancy in the dates, for the
time-honored rule is that even a verbal contract of sale of real estate produces legal
effect between the parties. La Suerte adds that the absence of a board resolution for the
purchase of the property has no controlling consequence as La Suerte had ratified the
act of Sia Ko Pio.

The Court’s Ruling

Notably, the issues raised in the petition are factual in nature. Essentially, Aquiles asks
the Court to review the factual determination of the CA. As a rule, only questions of law
may be raised in a petition for review on certiorari because the Court is not a trier of
facts and is not to review or calibrate the evidence on record.12 When supported by
substantial evidence, the findings of fact by the CA are conclusive and binding on the
parties and are not reviewable by this Court, unless the case falls under any of the
recognized exceptions.13 An acceptable exception is where there is a conflict between
the factual determination of the trial court and that of the appellate court. In such a case,
it becomes imperative to digress from this general rule and revisit the factual
circumstances surrounding the controversy.14

In this case, although the RTC and the CA were one in ruling that the prescriptive period
of reconveyance did not run against Aquiles because he remained in possession of the
subject property, they differred in their findings of fact and conclusions on the question
of whether there was a perfected and valid contract of sale.

The RTC annulled the sale of the subject properties on the ground of fraud as Aquiles
was made to sign an instrument which he believed to be a receipt of indebtedness. On
the contrary, the CA ruled that the contract of sale was valid. The CA wrote:

Nevertheless, We rule that the subject deed of sale is valid. We are not convinced of
Aquiles’ bare assertion that the said document was executed through fraud,
misrepresentation or deceit, and that his wife’s signature thereon was forged. The rule
is that for an action for reconveyance based on fraud to prosper, the party seeking
reconveyance must prove by clear and convincing evidence his title to the property and
the fact of fraud. It must be stressed that mere allegations of fraud are not enough.
Intentional acts to deceive and deprive another of his right, or in some manner, injure
him, must be specifically alleged and proved.15

After an assiduous assessment of the evidentiary records, the Court holds otherwise.

The Court agrees with the finding of the RTC that there was no perfected contract of
sale. It is a hornbook doctrine that the findings of fact of the trial court are entitled to
great weight on appeal and should not be disturbed except for strong and valid reasons,
because the trial court is in a better position to examine the demeanor of the witnesses
while testifying.16

The elements of a contract of sale are: a] consent or meeting of the minds, that is,
consent to transfer ownership in exchange for the price; b] determinate subject matter;
and c] price certain in money or its equivalent.17

In this case, there was no clear and convincing evidence that Aquiles definitely sold the
subject property to La Suerte, nor was there evidence that La Suerte authorized its chief
executive officer, Sia Ko Pio, to negotiate and conclude a purchase of the property.
Aquiles’ narration in open court is clear that he did not intend to transfer ownership of
his property. The pertinent parts of his testimony read:

Q – How much is your debt to the father of Jhony known as Pia Wo?

ATTY. GONZAGA: The question refers to Sia Ko Pio?

ATTY. BROTAMONTE: Pia Wa.

A – At first I borrowed ₱3,000.00.

Q – Thereafter is there any additional amount?

A – Then, he give me ₱10,000.00.

Q – Thereafter, is there any additional amount?

A – After the money was exhausted, I borrowed ₱10,000.00.

Q – After that ₱10,000.00, did you borrow another loan? A – The next amount I
borrowed from him is ₱20,000.00.

Q – Now did you sign any document showing receipt of that amount you received from
Pia Wa? A – The last time that I borrowed from him he wants to buy the property but I
told him that I will not sell it.

ATTY. BROTAMONTE:

Q – What happened when you did not like to sell the property?

A – He did not say anything but he made me sign a paper evidencing my debt from him.

Q – Were you able to read the papers you signed if there is wording or statement?

A – I did not read it anymore because I trust him.

Q – What happened thereafter?

A – After several years we come to know that our property is already in their
name.18 [Emphases supplied]

The foregoing testimony negates any intention on the part of Aquiles to sell the property
in exchange for the amounts borrowed. Evidently, it was a series of transactions
between Aquiles and Sia Po Ko, but not between the parties. The transactions were
between Aquiles, as borrower, and Sia Ko Pio, as lender. It was not a sale between
Aquiles, as vendor, and La Suerte, as vendee. There was no agreement between the
parties. As the first element was wanting, Aquiles correctly argued that there was no
contract of sale. Under Article 1475 of the Civil Code, the contract of sale is perfected at
the moment there is a meeting of minds on the thing which is the object of the contract
and on the price.

Aquiles acknowledged that he signed the receipt for the total loan amount of
₱50,000.00 plus ₱2,000.00 as attorney’s fees. There is, however, no proof that it came
from La Suerte as the consideration of the sale. Accordingly, there is no basis for a
holding that the personal loan of Aquiles from Sia Ko Pio was the consideration for the
sale of his property in favor of La Suerte. As to La Suerte’s contention that a deed of
absolute sale was purportedly executed by Aquiles in its favor, it failed to adduce
convincing evidence to effectively rebut his consistent claim that he was not aware that
what he had signed was already an instrument of sale, considering his trust and
confidence on Sia Ko Pio who was his long-time friend and former employer.

The fact that the alleged deed of sale indubitably bore Aquiles’ signature deserves no
evidentiary value there being no consent from him to part with his property. Had he
known that the document presented to him was an instrument of sale, he would not
have affixed his signature on the document. It has been held that the existence of a
signed document purporting to be a contract of sale does not preclude a finding that the
contract is invalid when the evidence shows that there was no meeting of the minds
between the seller and buyer.19

Indeed, if Aquiles sold the property in favor of La Suerte, he would not have religiously
and continuously paid the real property taxes. Also of note is the fact that his daughter
spent ₱ 300,000.00 for the renovation of improvements. More important, La Suerte did
not earlier ask him to transfer the possession thereof to the company. These
uncontroverted attendant circumstances bolster Aquiles’ positive testimony that he did
not sell the property.

And for said reasons, the CA should not have favorably considered the validity of the
deed of absolute sale absent any written authority from La Suerte’s board of directors
for Sia Ko Pio to negotiate and purchase Aquiles property on its behalf and to use its
money to pay the purchase price. The Court notes that when Sia Ko Pio’s son, Juan
was presented as an officer of La Suerte, he admitted that he could not find in the
records of the corporation any board resolution authorizing his father to purchase
disputed property.20 In Spouses Firme v. Bukal Enterprises and Development
Corporation,21 it was written:

It is the board of directors or trustees which exercises almost all the corporate powers in
a corporation. Thus, the Corporation Code provides:

SEC. 23. The board of directors or trustees. — Unless otherwise provided in this Code,
the corporate powers of all corporations formed under this Code shall be exercised, all
business conducted and all property of such corporations controlled and held by the
board of directors or trustees to be elected from among the holders of stock, or where
there is no stock, from among the members of the corporation, who shall hold office for
one (1) year and until their successors are elected and qualified. x x x

SEC. 36. Corporate powers and capacity. — Every corporation incorporated under this
Code has the power and capacity:

xxxx

7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and
otherwise deal with such real and personal property, including securities and bonds of
other corporations, as the transaction of a lawful business of the corporation may
reasonably and necessarily require, subject to the limitations prescribed by the law and
the Constitution.

xxxx

Under these provisions, the power to purchase real property is vested in the board of
directors or trustees. While a corporation may appoint agents to negotiate for the
purchase of real property needed by the corporation, the final say will have to be with
the board, whose approval will finalize the transaction. A corporation can only exercise
its powers and transact its business through its board of directors and through its
officers and agents when authorized by a board resolution or its by-laws. As held in AF
Realty & Development, Inc. v. Dieselman Freight Services, Co.:

Section 23 of the Corporation Code expressly provides that the corporate powers of all
corporations shall be exercised by the board of directors. Just as a natural person may
authorize another to do certain acts in his behalf, so may the board of directors of a
corporation validly delegate some of its functions to individual officers or agents
appointed by it. Thus, contracts or acts of a corporation must be made either by the
board of directors or by a corporate agent duly authorized by the board. Absent such
valid delegation/authorization, the rule is that the declarations of an individual director
relating to the affairs of the corporation, but not in the course of, or connected with, the
performance of authorized duties of such director, are held not binding on the
corporation.22 [Emphases supplied]

In the case at bench, Sia Ko Pio, although an officer of La Suerte, had no authority from
its Board of Directors to enter into a contract of sale of Aquiles’ property. It is, thus, clear
that the loan obtained by Aquiles from Sia Ko Pio was a personal loan from the latter,
not a transaction between Aquiles and La Suerte. There was no evidence to show that
Sia Ko Pio was clothed with authority to use his personal fund for the benefit of La
Suerte. Evidently, La Suerte was never in the picture.

The CA also failed to consider the glaring material discrepancies on the dates
appearing in the purported deed of absolute sale notarized by Judge Arsenio Base,
Municipal Court Presiding Judge of Tabaco City (Judge Base).

An examination of the alleged contract of sale shows three (3) dates:

1. In witness whereof, I have hereunto affixed my signature this 8th day of

December 1999 in Tabaco, Albay, Philippines;

2. Before me, this 7th day of December, 1990 in Tabaco, Albay; and

3. Doc. No. 587;

Page No. 12;
Book No. 4;
Series of 1990.

The document was dated 1999, but the date in the acknowledgment and notarial
reference was an earlier date, 1990. The ex-oficio notary public, Judge Base, was not
presented to explain the apparent material discrepancy of the dates appearing on the
questioned document. This only confirms the claim of Aquiles that he signed the receipt
representing his loan at the bodega of Sia Ko Pio sometime in 1990, and not at the
office of Judge Base in 1999.

La Suerte insists that the discrepancy on the dates was a mere clerical error that did not
invalidate the deed of sale. It is worthy to stress that a notarial document is evidence of
the facts in the clear unequivocal manner therein expressed and has in its favor the
presumption of regularity. While it is true that an error in the notarial inscription does not
generally invalidate a sale, if indeed it took place, the same error can only mean that the
document cannot be treated as a notarial document and thus, not entitled to the
presumption of regularity. The document would be taken out of the realm of public
documents whose genuineness and due execution need not be proved. 23

An even more substantial irregularity raised by Aquiles pertains to the capacity of the
notary public, Judge Base, to notarize the deed of sale. Judge Base, who acted as ex-
oficio notary public, is not allowed under the law to notarize documents not connected
with the exercise of his official duties. The case of Tigno v. Aquino 24 is enlightening:

There are possible grounds for leniency in connection with this matter, as Supreme
Court Circular No. I-90 permits notaries public ex officio to perform any act within the
competency of a regular notary public provided that certification be made in the
notarized documents attesting to the lack of any lawyer or notary public in such
municipality or circuit. Indeed, it is only when there are no lawyers or notaries public that
the exception applies. The facts of this case do not warrant a relaxed attitude towards
Judge Cariño's improper notarial activity. There was no such certification in the Deed of
Sale. Even if one was produced, we would be hard put to accept the veracity of its
contents, considering that Alaminos, Pangasinan, now a city, was even then not an
isolated backwater town and had its fair share of practicing lawyers.25

In this case, no such certification was attached to the alleged notarized

document.1âwphi1 Also, the Court takes note of Aquiles’ averment that there were
several lawyers commissioned as notary public in Tabaco City. With Judge Base not
being authorized to notarize a deed of conveyance, the notarized document cannot be
considered a valid registrable document in favor of La Suerte.

Moreover, Aquiles wife, Erlinda, who appeared to have affixed her signature as a
witness to the purported document of sale, categorically stated that she never signed
such an instrument and never appeared before a notary public.

Although it is true that the absence of notarization of the deed of sale would not
invalidate the transaction evidenced therein,26 yet an irregular notarization reduces the
evidentiary value of a document to that of a private : document, which requires proof of
its due execution and authenticity to be admissible as evidence.27

It should be noted that the deed of sale was offered in evidence as authentic by La
Suerte, hence, the burden was upon it to prove its authenticity and due execution. La
Suerte unfortunately failed to discharge this burden. Accordingly, the preponderance of
evidence is in favor of Aquiles.

In fine, considering the irregularities or defects in the execution and notarization of the
deed of sale, the Court finds Itself unable to stamp its seal of approval on it. The R TC
was correct in ordering its annulment.

WHEREFORE, the petition is GRANTED. The May 30, 2012 Decision of the Court of
Appeals in CA-G.R. CV No. 96459 is REVERSED and SET ASIDE. The September 30,
2010 Decision of the Regional Trial Court, Branch 15 Tabaco City, Albay, is
REINSTATED.

This disposition is without prejudice to any valid claim of the heirs of Sia Ko Pio against
Aquiles. SO ORDERED.
 September 16, 2015

G.R. No. 173186

ANICETO UY, Petitioner,

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

DECISION

JARDELEZA, J.:

This is a Petition for Review on Certiorari1 under Rule 45 of the Revised Rules of Court
assailing the Decision2dated January 26, 2006 of the Court of Appeals, Mindanao
Station, Cagayan de Oro City in CA-G.R. CV No. 70648, and its Resolution3 dated May
18, 2006 denying petitioner's motion for reconsideration.

The Facts

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

parcel of land described as Lot No. 54-B (LRC) Psd 39172 and covered by Transfer
Certificate of Title (TCT) No. T-19586 from herbrother. The land was later subdivided,
with the corresponding titles issued in Naval-Sai's name in the Register of Deeds of
North Cotabato.4 Two of these subdivided lots, Lots No. 54-B-8 (LRC) Psd 173106 and
No. 54-B-9 (LRC) Psd 173106, covered by TCTs No. T-58334 and No. T-
58335,5 respectively, are the subject of this case.

Subsequently, Naval-Sai sold Lot No. 54-B-76(LRC) Psd 173106 to a certain Bobby Adil
on installment, onthe condition that the absolute deed of sale will be executed only upon
full payment. Adil failed to pay the amortization, forcing him to sell his unfinished
building on the property to spouses Francisco and Louella Omandac.7

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

Sometime thereafter, Naval-Sai learned that petitioner filed a case for recovery of
possession (Civil Case No. 1007) against Francisco Omandac. Branch 17 of the
Regional Trial Court (RTC) in Kidapawan City ruled in favor of petitioner.9 Naval-Sai
filed a motion for new trial before the Court of Appeals, arguing that her signature in the
purported deed of sale presented in the case between her and petitioner was a forgery.
Civil Case No. 1007, however, became final and executory in 2001.10 The spouses
Omandac were ejected from the property and petitioner gained possession of the
same.11

In July 1999, Naval-Sai filed a Complaint for Annulment of Deed with Damages12 before
the same Branch 17 of the RTC in Kidapawan City against petitioner. The subject of the
complaint was the deed of sale allegedly executed between Naval-Sai and petitioner
involving Lots No. 54-B-8 and No. 54-B-9. Naval-Sai prayed that the deed of sale be
declared null and void ab initiobecause the alleged sale between her and petitioner was
a forgery. Naval-Sai argued that she never sold the lots and that her signature in the
purported deed of sale is spurious.
Naval-Sai filed an Amended Complaint13 dated July 29, 1999. She asserted that the
subject TCTs were already cancelled by virtue of the deed of sale. TCT No. T-62446
was issued in lieu of TCT No. T-58334 and TCT No. T-62447 replaced TCT No. T-
58335. Hence, the Amended Complaint added as a relief the declaration of TCTs No. T-
62446 and No.T-62447, which were registered in the name of petitioner, as null and
void abinitio.Unlike the original complaint, however, the Amended Complaint was not
signed by Naval-Sai, but by her counsel.

In his Answer with Counterclaim14 dated October 4, 1999, petitioner specifically denied
that the two TCTs were delivered to him by Ng as a guaranty for payment of her loan.
Petitioner claimed that he and Naval-Sai entered into a valid contract of sale in 1981
and that the lots were sold for value. The corresponding TCTs were issued in his name
shortly thereafter and since then, he had been in complete control of the properties.
When Francisco Omandac constructed a house in one of the properties, petitioner filed
Civil Case No. 1007.

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

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

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

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

SO ORDERED.15

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

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

Under the Land Registration Act, a title is valid and effective until annulled or reviewed
in a direct proceeding and not in a collateral one, which review must be made within one
year from the issuance of the title. After the lapse of such period, the title would be
conclusive against the whole world including the government. In other words, the title,
after the lapse of one year from registration become[s] indefeasible.16
On the issue of non-compliance with the required certification on non-forum shopping,
the RTC noted that Naval-Sai did not explain why she failed to comply with the Rules.
The RTC cited the case of Five Star Bus Company, Inc. v. Court of Appeals 17where we,
faced with the similar issue of whether or not to dismiss a petition on the ground that the
certification was signed by counsel, ruled that there was non-compliance with the
Supreme Court Revised Circular No. 28-9118 and that substantial compliance cannot be
applied.19

The Court of Appeals set aside the order of the RTC in the now assailed
Decision20dated January 26, 2006.The Court of Appeals ruled that there was substantial
compliance with the requirement of verification and certification of non-forum shopping.
It noted that the original complaint has a proper verification and certification of non-
forum shopping signed by Naval-Sai herself. What was signed by Naval-Sai’s counsel
was the amended complaint dated July 29, 1999. Its verification and certification carries
the statement "x xxthat this [a]mended [c]omplaint should be taken and read together
with the original complaint; x xx"21 which the Court of Appeals found to be a "cautionary
move" tantamount to substantial compliance.22The Court of Appeals further explained
that the rule on certification against forum shopping was complied with in the original
complaint because although an amended complaint supersedes the pleading that it
amends, it is not an initiatory pleading contemplated under the Rules of Court. 23

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

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

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

xxx

An action for reconveyance on the ground that the certificate of title was obtained by
means of a fictitious or forged deed of sale is virtually an action for the declaration of the
nullity of the forged deed, hence, it does not prescribe. x xx24

However, the Court of Appeals emphasized that despite its discussion on the
prescriptibility of the action, it has not made a finding that the deed of sale is indeed
fictitious or forged because it is for the RTC to rule on after evidence has been
presented and evaluated. Thus, the relevant dispositive portion of the Court of Appeals'
decision reads:
WHEREFORE, premises considered, the petition is GRANTED. The assailed Order of
dismissal dated 30 March 2001 is hereby SET ASIDE and deemed of no effect.

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

SO ORDERED.25

Petitioner filed a Motion for Reconsideration26 onMarch 3, 2006, which was denied by
the Court of Appeals in its Resolution27 dated May 18, 2006.

Hence, this petition, which raises the following issues:

I.

THE COURT OF APPEALS ERRED WHEN IT RULED THAT THERE WAS

SUBSTANTIAL COMPLIANCE WITH THE REQUIREMENTS ON CERTIFICATION
FOR NON-FORUM SHOPPING.

II.

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

Our Ruling

There was substantial compliance with the requirements on certification against

forum shopping.

A certification against forum shopping is a peculiar and personal responsibility of the

party, an assurance given to the court or other tribunal that there are no other pending
cases involving basically the same parties, issues and causes of action. 28 It must be
executed by the party-pleader, not by his counsel. If, however, for reasonable or
justifiable reasons, the party-pleader is unable to sign, he must execute a Special
Power of Attorney (SPA) designating his counsel of record to sign on his behalf.29

Here, the original complaint contained a proper verification and certification against
forum shopping duly signed by Naval-Sai as plaintiff. The verification and certification in
the amended complaint, on the other hand, was only signed by her counsel, Atty.
Norberto L. Ela. Atty. Ela was not authorized to sign on behalf of Naval-Sai, as in fact,
she assigned one Rodolfo Florentino as agent.30 The Court of Appeals pointed out that
in the certification in the amended complaint, Atty. Ela specified that it should be taken
and read together with the original complaint. The Court of Appeals took this as a
cautionary move on the part of Naval-Sai, justifying the relaxation of the rules on the
ground of substantial compliance. We find, however, that this cautionary move is
ineffectual because under the Rules of Civil Procedure, an amended complaint
supersedes the original complaint.31 For all intents and purposes, therefore, the original
complaint and its verification and certification ceased to exist. This, notwithstanding, we
find there was still substantial compliance with the Rules.

In the case of Far Eastern Shipping Company v. Court of Appeals,32 while we said that,
strictly, a certification against forum shopping by counsel is a defective certification, the
verification, signed by petitioner’s counsel in said case, is substantial compliance
because it served the purpose of the Rules of informing the Court of the pendency of
another action or proceeding involving the same issues. We then explained that
procedural rules are instruments in the speedy and efficient administration of justice
which should be used to achieve such end and not to derail it.33
We also find that the prima facie merits of the case serve as a special circumstance or a
compelling reason to relax the rules on certification against forum shopping.

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

forum shopping which was signed only by the counsel, and not by the party. In LDP
Marketing, Inc. v. Monter,35 there was initially no proof that the one who signed the
certification was authorized to do so in behalf of the corporation. In these two cases, we
nonetheless chose to overlook the procedural lapses in the interest of substantial justice
and the existence of prima facie merit in the petitions.

We have ruled that the general rule is that non-compliance or a defect in the certification
is not curable by its subsequent submission or correction. However, there are cases
where we exercised leniency and relaxed the rules on the ground of substantial
compliance, the presence of special circumstances or compelling reasons.36 The rules
on forum-shopping are designed to promote and facilitate the orderly administration of
justice and "should not be interpreted with such absolute literalness as to subvert its
own ultimate and legitimate objective or the goal of all rules of procedure— which is to
achieve substantial justice as expeditiously as possible."37

The nature of Naval-Sai’s

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

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

In order to arrive at a conclusion on whether the action has prescribed, we have to

determine the nature of the action.

We agree with the Court of Appeals that the action of Naval-Sai is one for
reconveyance. Although the designation of the complaint is annulment of deed, and
does not include reconveyance, the facts alleged and reliefs sought show that
reconveyance is the end goal. What determines the nature of the action are the
allegations in the complaint. The cause of action in a complaint is not determined by the
designation given by the complaint, but by what the allegations in the body of the
complaint define or describe,38as well as the character of the relief sought.39

An action for reconveyance is a legal and equitable remedy granted to the rightful owner
of land which has been wrongfully or erroneously registered in the name of another for
the purpose of compelling the latter to transfer or reconvey the land to him. 40 In an
action for reconveyance, the decree of registration is respected as incontrovertible.
What is sought instead is the transfer of the property, which has been wrongfully or
erroneously registered in another person’s name, to its rightful and legal owner, or to
one with a better right.41However, such recourse cannot be availed of once the property
has passed to an innocent purchaser for value. For an action for reconveyance to
prosper, the property should not have passed into the hands of an innocent purchaser
for value.42
Here, Naval-Sai does not only seek to annul the purported deed of sale but also to
cancel TCTs No. T-62446 and No. 62447 in the name of petitioner. If the reliefs are
granted and the TCTs are cancelled, the titles to

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

An action for reconveyanceis basedon Section 53, paragraph 3 of Presidential Decree

(PD) No. 1529,43 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 for valueof a certificate of title. x x x

In Caro v. Court of Appeals,44 we said that this provision should be read in conjunction
with Article 1456 of the Civil Code, which provides:

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

The law creates the obligation of the trustee to reconvey the property and its title in
favor of the true owner. Correlating Section 53, paragraph 3 of PD No. 1529 and Article
1456 of the Civil Code with Article 1144 (2) of the Civil Code,45 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.46 This ten-year prescriptive period
begins to run from the date the adverse party repudiates the implied trust, which
repudiation takes place when the adverse party registers the land. 47 An exception to this
rule is when the party seeking reconveyance based on implied or constructive trust is in
actual, continuous and peaceful possession of the property involved. 48 Prescription
does not commence to run against him because the action would be in the nature of a
suit for quieting of title, an action that is imprescriptible.49

The foregoing cases on the prescriptibility of actions for reconveyanceapply when the
action is based on fraud, or when the contract used as basis for the action is voidable.
Under Article 1390 of the Civil Code, a contract is voidable when the consent of one of
the contracting parties is vitiated by mistake, violence, intimidation, undue influence or
fraud. When the consent is totally absent and not merely vitiated, the contract is
void.50An action for reconveyance may also be based on a void contract. 51When the
action for reconveyance is based on a void contract, as when there was no consent on
the part of the alleged vendor, the action is imprescriptible.52The property may be
reconveyed to the true owner, notwithstanding the TCTs already issued in another’s
name. The issuance of a certificate of title in the latter’s favor could not vest upon him or
her ownership of the property; neither could it validate the purchase thereof which is null
and void. Registration does not vest title; it is merely the evidence of such title. Our land
registration laws do not give the holder any better title than what he actually has. Being
null and void, the sale produces no legal effects whatsoever.53

Whether an action for reconveyance prescribes or not is therefore determined by the

nature of the action, that is, whether it is founded on a claim of the existence of an
implied or constructive trust, or one based on the existence of a void or inexistent
contract.This is evident in several of our past decisions. In Casipit v. Court of
Appeals,54 we rejected the claim of imprescriptibility and applied the 10-year
prescription where the action filed was based on fraud:
There is no dispute that an action for reconveyance based on a void contract is
imprescriptible (Castillo, et al. v. Madrigal, et al., G.R. No. 62650, June 27, 1991;
Baranda, et al. v. Baranda, et al., G.R. No. 73275, May 20, 1987, 150 SCRA 59).
However, We simply cannot apply this principle to the present case because the action
filed by petitioner before the trial court was 1) for reconveyance based on fraud since
the ownership of private respondents over the questioned property was allegedly
established on "false assertions, misrepresentations and deceptive allegations" (p. 182,
Records); and 2) for rescission of the "Kasulatan ng Pagmamana at Paghahati" (pp.
173, 187, Records). x xx55

On the other hand, in Daclag v. Macahilig,56we rejected the claim of petitioners that
prescription is applicable because the action was based on fraud. We ruled that the
action was not subject to prescription because it was, in fact, based on a deed of sale
that was null and void. Thus:

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

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

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

In Santos v. Heirs of DomingaLustre,58 the complaint alleged that the deed of sale was
simulated by forging the signature of the original registered owner. We ruled in favor of
imprescribility applying the doctrine that the action for reconveyance on the ground that
the certificate of title was obtained by means of a fictitious deed of sale is virtually an
action for the declaration of its nullity, which does not prescribe.

Also, and more illustrative of the discussion above, in Castillo v. Heirs of Vicente
Madrigal,59 it was alleged by the plaintiffs that they never signed any document. We
ruled as follows:

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

In dismissing petitioners' complaint on the ground of prescription, the trial court opined
(p. 123, Rollo):

"x xx, any action for annulment of the deed and TCT 72066 should have been instituted
within ten (10) years from the accrual of the cause of action, that, (sic) is, ten years from
1943 when the deed was executed at the earliest, or ten years from 1944 at the latest.
This action was filed on December 17, 1979, or after more than 30 years from 1943 and
1944. The action, therefore, has long prescribed. xxx."
The Court of Appeals expressed the same opinion (p. 51, Rollo):

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

Both courts ruled incorrectly. It is evident in paragraphs 9, 10 and 12 of the complaint,

supra, that petitioners sought the declaration of the inexistence of the deed of sale
because of the absence of their consent. Thus, following the provision of Article 1410 of
the Civil Code, this kind of action is imprescriptible. The action for reconveyance is
likewise imprescriptible because its basis is the alleged void contract of sale. x xx60

(Citations omitted)

We conclude that, contrary to the claim of petitioner, the action for reconveyance is
based neither on an implied or constructive trust nor fraud.1âwphi1 Naval-Sai alleged
that the purported deed of sale, which became the basis to transfer the titles in
petitioner’s name, was an absolute forgery because she never sold the two lots to any
person.61 Naval-Sai also alleged that her signature and that of her husband’s, in the
deed of sale are forgeries.62These allegations make the action one based on a void or
inexistent contract for lack of consent on the part of the alleged vendor, Naval-Sai.
Based on the complaint, Naval-Sai only consented to use the titles of the two lots as
security to a loan she obtained from Ng.63

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

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

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

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

Similarly, the elements of laches must be proven positively. Laches is evidentiary in

nature, a fact that cannot be established by mere allegations in the
pleadings.65 Therefore, at this stage, the dismissal on the ground of laches would be
premature. The issues must be resolved in the trial on the merits.

Moreover, laches is a doctrine in equity, and applied only in the absence of, and never
against, statutory law.66 The positive mandate of Article 1410 of the Civil Code
conferring imprescriptibility to actions or defense for the declaration of the inexistence of
a contract should pre-empt and prevail over all abstract arguments based only on
equity.67

WHEREFORE, the petition is DENIED. Let the records of this case be remanded for
further proceedings to the Regional Trial Court of Kidapawan City, Branch 17, which is
hereby ORDERED to try and decide the case with dispatch.

SO ORDERED.