FIRST DIVISION
[ G.R. No. 138945, August 19, 2003 ]
FELIX GOCHAN AND SONS REALTY CORPORATION AND STA. LUCIA REALTY AND DEVELOPMENT CORPORATION, PETITIONERS, VS. HEIRS OF RAYMUNDO BABA, NAMELY, BESTRA BABA, MARICEL BABA, CRESENCIA BABA, ANTONIO BABA, AND PETRONILA BABA, REPRESENTED BY ATTORNEY-IN-FACT VIRGINIA SUMALINOG, RESPONDENTS.
D E C I S I O N
YNARES-SANTIAGO, J.:
The purpose of an action or suit and the law to govern it, including the period of prescription, is to be determined by the complaint itself, its allegations and prayer for relief.[1] Thus, while the issues of possession and fraud are material to the prescriptibility of suits captioned as reconveyance and quieting of title,[2] it would not be so where, from the allegations of the complaint, the action is in reality one for declaration of nullity of contracts on the ground of absence of the essential requisites thereof. These contracts are void ad initio and actions to declare their inexistence do not prescribe.[3]
This is a petition for review on certiorari seeking to set aside the February 12, 1999 Decision[4] of the Court of Appeals in CA-G.R. CV No. 57080, which reversed the May 3, 1997 Order[5] of the Regional Trial Court of Lapu-Lapu City, Branch 54, in Civil Case No. 4494-L.
The facts show that Lot No. 3537, a conjugal property of spouses Raymundo Baba and Dorotea Inot, was originally titled under Original Certificate of Title No. RO-0820,[6] in the name of Dorotea. After Raymundo's demise in 1947, an extrajudicial settlement of his estate, including Lot No. 3537, was executed on December 8, 1966,[7] among the heirs of Raymundo, namely, Dorotea Inot and his 2 children, Victoriano Baba and Gregorio Baba. One-half undivided portion of the 6,326 square meter lot was adjudicated in favor of Dorotea, and the other half divided between Victoriano and Gregorio. On December 28, 1966, Dorotea, Victoriano and Gregorio, in consideration of the amount of P2,346.70, sold Lot No. 3537 to petitioner Felix Gochan and Sons Realty Corporation (Gochan Realty).[8] Consequently, OCT No. RO-0820 was cancelled and in lieu thereof, Transfer Certificate of Title No. T-1842, dated February 23, 1968 was issued in favor of Gochan Realty.[9] Sometime in 1995, the latter entered into a joint venture agreement with Sta. Lucia Realty and Development Corporation Inc. for the development, among others, of Lot No. 3537, into a subdivision.[10]
On June 13, 1996, respondents Bestra, Maricel, Crecencia, Antonio and Petronila, all surnamed Baba, filed a complaint for quieting of title and reconveyance with damages against petitioners with the RTC of Lapu-Lapu City, Branch 54, docketed as Civil Case No. 4494-L. They alleged that they are among the 7 children of Dorotea Inot and Raymundo Baba; that petitioners connived with Dorotea Inot, Victoriano and Gregorio Baba in executing the extrajudicial settlement and deed of sale which fraudulently deprived them of their hereditary share in Lot No. 3537; and that said transactions are void insofar as their respective shares are concerned because they never consented to the said sale and extrajudicial settlement, which came to their knowledge barely a year prior to the filing of the complaint.[11]
In its answer,[12] petitioner Gochan Realty averred that respondents have no personality to sue because they are not children of Dorotea Inot and Raymundo Baba; that even assuming they are lawful heirs of the spouses, their action is barred by estoppel, laches and prescription for having been filed more than 28 years after the issuance of the transfer certificate of title in its name; and that any defect in the transactions leading to its acquisition of Lot No. 3537 will not affect its title because it is a purchaser in good faith and for value.
Meanwhile, petitioner Sta. Lucia Realty and Development Corporation Inc. was declared in default for failure to file an answer within the reglementary period.[13]
On May 3, 1997, the complaint for quieting of title and reconveyance with damages filed against petitioner was dismissed on the ground of prescription and laches. The trial court ruled that respondents' action is one for enforcement of implied or constructive trust based on fraud which prescribes in 10 years from the issuance of title over the property. Hence, respondents' action was barred by prescription and laches for having been filed after 28 years from the time Gochan Realty obtained title to the property.
Respondents appealed to the Court of Appeals which reversed the decision of the trial court and reinstated the complaint of respondents. While it also found that respondents' action is a suit to enforce an implied or constructive trust based on fraud, it ruled that since respondents are in possession of the disputed property, their action cannot be barred by prescription and laches, being in the nature of a suit for quieting of title. Petitioner's motion for reconsideration was denied on May 25, 1999.
Hence, the instant petition where the sole issue raised for resolution is whether or not respondents' complaint is dismissible on the ground of prescription and laches.
In determining whether the complaint is barred by the statute of limitations, both courts held that respondents' action is grounded on fraud, and applied the rule that the fraudulent conveyance of the property creates an implied trust, an obligation created by law, which prescribes in ten years from the date of the issuance of the certificate of title.[14] However, the Court of Appeals held that such an action does not prescribe when the disputed property is in the possession of the plaintiff seeking reconveyance.[15] The issue of possession, however, is not material in the case at bar. A circumspect scrutiny of the complaint reveals that although the respondents describe the extrajudicial settlement and deed of sale as fraudulent insofar as their shares are concerned, their action in reality seeks to declare said deeds as inexistent for lack of consent, an essential element for the existence of a contract. The settled rule is that the purpose of an action or suit and the law to govern it, including the period of prescription, is to be determined by the complaint itself, its allegations and prayer for relief.[16]
In the case at bar, the allegations of the complaint unmistakably assail the extrajudicial settlement and deed of sale with respect to their share on the ground of absence of consent. Thus, respondents alleged in their complaint -
2.2 Dorotea Inot, Gregorio Baba, Victoriano Baba and defendant Felix Gochan and Realty Corporation, conniving and confederating with each other, with the evil motive and bad intent of getting the corresponding hereditary share of the plaintiffs... caused the [issuance of a] Transfer Certificate of Title covering the entire lot in the name of defendant Felix Gochan and Realty Corporation... They have made to appear in a document denominated as Extrajudicial Settlement dated 8 February 1966 and Deed of Absolute Sale dated 28 December 1966 in favor of defendant Felix Gochan and Realty Corporation, that they have validly executed the same free from legal infirmity and element of perjury, notwithstanding clear and full knowledge about plaintiff's real right and interest thereto, machine copies of the said document are hereto attached as Annex "C" and "D" respectively;
2.3 To all legal intents and purposes, plaintiffs herein never disposed of their share to anybody much less to the defendant Felix Gochan and Realty Corporation.
2.4 Subsequently, other defendant Sta. Lucia Realty Corporation, despite its knowledge about the defect in the title entered into a Joint Venture Agreement with other defendant Felix Gochan Realty Corporation and the same being annotated in TCT No. T-1824 as Entry Nos. 9371-XIII-D.B,9372 and 9373;
2.5 Complainants, upon knowledge about the said humiliating situation, did not waste time in exhausting all its recovering mode and legal remedies thru seeking relief unto this Honorable Court.
2.6 The assessed value of the lot is P38,220.00;
x x x x x x x x x
3.0 Consequently, the fraudulent acts of the defendant Felix Gochan and Realty Corporation and the eventual participation of the defendant Sta. Lucia Realty Corporation shall have no legal and valid effect insofar as the corresponding and respective share of each plaintiff is concerned which is Three Hundred Fifty Five (355) Square meters, more or less, each or a total area of One Thousand Nine Hundred Seventy-Five (1,975) square meters, more or less. The deed of conveyance aforestated shall not therefore bind the plaintiffs;[17]
Hence, for purposes of determining whether respondents' action has prescribed, fraud in the conveyance of the disputed lot and the possession thereof by the respondents are not material. The fact that the conveyance of a property was fraudulent, either because it was procured without the knowledge of some of the co-owners or by virtue of the owner's forged signature or by a fictitious deed of sale, does not automatically make fraud the basis for reconveyance of the disputed property. The real question in the instant case (without, however, prejudging the validity or invalidity of the sale to Gochan Realty), is whether or not from the allegations of the complaint, there exists a cause of action to declare the inexistence of the contract of sale with respect to the shares of respondents in Lot No. 3537 on the ground of absence of any of the essential requisites of a valid contract. If the answer is in the negative, then the dismissal of the complaint must be upheld, otherwise, the dismissal on the ground of prescription is erroneous because actions for the declaration of inexistence of contracts on the ground of absence of any of the essential requisites thereof do not prescribe.
Under Article 1318 of the Civil Code, there is no contract unless the following requisites concur: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation. The absence of any of these essential requisites renders the contract inexistent and an action or defense to declare said contract void ab initio does not prescribe, pursuant to Article 1410 of the same Code. In Delos Reyes v. Court of Appeals,[18] it was held that one of the requisites of a valid contract under Article 1318 of the Civil Code, namely, the consent and the capacity to give consent of the parties to the contract, is an indispensable condition for the existence of consent. There is no effective consent in law without the capacity to give such consent. In other words, legal consent presupposes capacity. Thus, there is said to be no consent, and consequently, no contract when the agreement is entered into by one in behalf of another who has never given him authorization therefor unless he has by law a right to represent the latter. [19]
In Heirs of Romana Ingjug-Tiro v. Casals,[20] the Court, applying Article 1410 of the Civil Code declared that a claim of prescription is unavailing where the assailed conveyance is void ab initio with respect to those who had no knowledge of the transaction. The case involved a fraudulent sale and extrajudicial settlement of a lot executed without the knowledge and consent of some of the co-owners. It was held that the sale of the realty is void in so far as it prejudiced the shares of said co-owners and that the issuance of a certificate of title over the whole property in favor of the vendee does not divest the other co-owners of the shares that rightfully belonged to them. The nullity of the said sale proceeds from the absence of legal capacity and consent to dispose of the property. Thus -
Article 1458 of the New Civil Code provides: "By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent." It is essential that the vendors be the owners of the property sold otherwise they cannot dispose that which does not belong to them. As the Romans put it: "Nemo dat quod non habet." No one can give more than what he has. The sale of the realty to respondents is null and void insofar as it prejudiced petitioners' interests and participation therein. At best, only the ownership of the shares of Luisa, Maria and Guillerma in the disputed property could have been transferred to respondents.
Consequently, respondents could not have acquired ownership over the land to the extent of the shares of petitioners. The issuance of a certificate of title in their favor could not vest upon them ownership of the entire 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 to respondents of petitioners' shares produced no legal effects whatsoever.
Similarly, the claim that Francisco Ingjug died in 1963 but appeared to be a party to the Extrajudicial Settlement and Confirmation of Sale executed in 1967 would be fatal to the validity of the contract, if proved by clear and convincing evidence. Contracting parties must be juristic entities at the time of the consummation of the contract. Stated otherwise, to form a valid and legal agreement it is necessary that there be a party capable of contracting and a party capable of being contracted with. Hence, if any one party to a supposed contract was already dead at the time of its execution, such contract is undoubtedly simulated and false and therefore null and void by reason of its having been made after the death of the party who appears as one of the contracting parties therein. The death of a person terminates contractual capacity.
In actions for reconveyance of property predicated on the fact that the conveyance complained of was null and void ab initio, a claim of prescription of action would be unavailing. The action or defense for the declaration of the inexistence of a contract does not prescribe...[21]
Likewise, in the cases of Solomon v. Intermediate Appellate Court,[22] Vda. De Portugal v. Intermediate Appellate Court,[23] Garanciang v. Garanciang,[24] and Lacsamana v. Court of Appeals,[25] the Court ruled that conveyances by virtue of a forged signature or a fictitious deed of sale are void ab initio. The absence of the essential requites of consent and cause or consideration in these cases rendered the contract inexistent and the action to declare their nullity is imprescriptible.
Nemo dat quod non habet -- No one can give more than what he has.[26] Assuming that the allegations in respondents' complaint are true, their claim that the execution of the extrajudicial settlement and the deed of sale involving Lot No. 3537, which led to the issuance of a certificate of title in the name of Gochan Realty, was without their knowledge or consent, gives rise to an imprescriptible cause of action to declare said transactions inexistent on the ground of absence of legal capacity and consent. Hence, the dismissal of respondents' complaint on the ground of prescription was erroneous.
On the other hand, laches is defined as failure or neglect for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier. It is negligence or omission to assert a right within a reasonable time, warranting presumption that the party entitled to assert it has abandoned it or has declined to assert it.[27] Its elements are: (1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation which the complaint seeks a remedy; (2) delay in asserting the complainant's rights, the complainant having had knowledge or notice of the defendant's conduct as having been afforded an opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right in which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred.[28]
Though laches applies even to imprescriptible actions,[29] its elements must be proved positively.[30] Laches is evidentiary in nature which could not be established by mere allegations in the pleadings and can not be resolved in a motion to dismiss.[31] At this stage therefore, the dismissal of the complaint on the ground of laches is premature.
It is but fair, without prejudging the issues, that the parties be allowed to substantiate their respective claims and defenses in a full-blown trial, and obtain a ruling on all the issues presented in their pleadings.[32] Indeed, while the averments in the complaint show that respondents' action is imprescriptible, Gochan Realty is not precluded from presenting evidence that it is a purchaser in good faith or that respondents have no personality to sue for reconveyance or, even assuming that they are lawful heirs of Dorotea Inot and Raymundo Baba, that they are guilty of laches or are estopped from questioning the validity of the extrajudicial partition and deed of sale of Lot No. 3537 with respect to their shares.
The trial court thus erred in dismissing respondent's complaint on the ground of prescription and laches, and while the Court of Appeals is correct in ordering the reinstatement of the complaint, its decision is sustained on a different ground.
WHEREFORE, in view of all the foregoing, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 57080, which ordered that the instant case be REMANDED to the Regional Trial Court of Lapu-Lapu City, Branch 54, for trial and judgment on the merits is AFFIRMED.
SO ORDERED.
Vitug, Carpio, and Azcuna, JJ., concur.
Davide, Jr., C.J., abroad, on official business.
[1] Tavera v. Philippine Tuberculosis Society, Inc., 197 Phil. 919, 926 (1982); citing Rone, et al. v. Claro, et al., 91 Phil. 250 (1952).
[2] Del Campo v. Court of Appeals, G.R. No. 108228, 1 February 2001, 351 SCRA 1, 10-11; citing David, et al. v. Malay, et al., G.R. No. 132644, 19 November 1999, 318 SCRA 711; Armamento v. Guerrero, G.R. No. L-34228, 21 February 1980, 96 SCRA 178; Javier v. Court of Appeals, G.R. No. 101177, 28 March 1994, 231 SCRA 498; Alzona, et al. v. Capunitan Reyes, 114 Phil. 377 (1962); Gonzales v. Jimenez, Sr., 121 Phil. 84 (1965); Cuaycong, et al. v. Cuaycong, et al., 129 Phil. 439 (1967); Faja v. Court of Appeals, G.R. No. L-45045, 28 February 1977, 75 SCRA 441; Heirs of Jose Olviga v. Court of Appeals, G.R. No. 104813, 21 October 1993, 227 SCRA 330.
[3] Civil Code, Article 1318 in relation to Article 1410.
[4] Penned by Associate Justice Eugenio J. Labitoria and concurred in by Associate Justices Jesus M. Elbinias and Marina L. Buzon.
[5] Penned by Judge Rumoldo R. Fernandez.
[6] Records, p. 7.
[7] Id., p. 9.
[8] Id., p. 10.
[9] Id., p. 8.
[10] Joint Venture Agreement, Rollo, p. 35.
[11] Complaint, Records, p. 1; Reply, Records, p. 27.
[12] Records, p. 21.
[13] Order dated October 30, 1996, Records, p. 51.
[14] Amerol v. Bagumbayan, G.R. No. L-30212, 30 September 1987, 154 SCRA 388, 406-407; citing the Civil Code, Articles 1456 and 1144.
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.
Article 1144. The following actions must be brought within ten years from the time the right of action accrues:
| (1) | Upon a written contract; |
| (2) | Upon an obligation created by law; |
| (3) | Upon a judgment. |
| x x x x x x x x x | |
[15] Del Campo v. Court of Appeals, supra, note 2.
[16] Tavera v. Philippine Tuberculosis Society, Inc., supra, note 1.
[17] Complaint, Records, pp. 2-4.
[18] 372 Phil. 522, 534-535 (1999).
[19] Id., citing Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. IV, p. 445; citing 8 Manresa 646; Bumanlag v. Alzate, G.R. No. L-39119, 14 September 1986, 144 SCRA 480; Mindanao Academy v. Yap, 121 Phil. 204 (1965); Estoque v. Pajimula, 133 Phil. 55 (1968); Segura v. Segura, G.R. No. L-29320, 19 September 1988, 165 SCRA 368; Frias v. Esquive, G.R. No. L-24679, 30 October 1975, 167 SCRA 487; Civil Code, Articles 1317 and 1453.
[20] G.R. No. 134718, 20 August 2001, 363 SCRA 435.
[21] Id., pp. 441-442.
[22] G.R. No. 70263, 14 May 1990, 185 SCRA 352, 363-364.
[23] G.R. No. L-73564, 25 March 1988, 159 SCRA 178, 183.
[24] 138 Phil. 237, 239 (1969).
[25] 351 Phil. 526, 533-534 (1998).
[26] Heirs of Romana Ingjug-Tiro v. Casals, supra.
[27] Abrazaldo v. Court of Appeals, G.R. No. 144817, March 7, 2002.
[28] Santos v. Santos, G.R. No. 133895, 2 October 2001, 366 SCRA 395, 405-406; citing Maneclang v. Court of Appeals, G.R. No. 27876, 22 April 1992, 208 SCRA 179.
[29] Buenaventura v. Court of Appeals, G.R. No. 50837, December 28, 1992, 216 SCRA 818, 823; citing Rafols v. Barba, G.R. No. L-28446, 13 December 1982, 119 SCRA 146.
[30] Santos v. Santos, supra.
[31] National Irrigation Administration v. Court of Appeals, 376 Phil. 362, 376 (1999); Españo, Sr. v. Court of Appeals, 335 Phil. 983, 987 (1997).
[32] Heirs of Romana Ingjug-Tiro v. Casals, supra.
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SECOND DIVISION
[ G.R. No. 131679, February 01, 2000 ]
CAVITE DEVELOPMENT BANK AND FAR EAST BANK AND TRUST COMPANY, PETITIONERS, VS. SPOUSES CYRUS LIM AND LOLITA CHAN LIM AND COURT OF APPEALS, RESPONDENTS.
D E C I S I O N
MENDOZA, J.:
This is a petition for review on certiorari of the decision[1] of the Court of Appeals in C.A. GR CV No. 42315 and the order dated December 9, 1997 denying petitioners’ motion for reconsideration.
The following facts are not in dispute.
Petitioners Cavite Development Bank (CDB) and Far East Bank and Trust Company (FEBTC) are banking institutions duly organized and existing under Philippine laws. On or about June 15, 1983, a certain Rodolfo Guansing obtained a loan in the amount of P90,000.00 from CDB, to secure which he mortgaged a parcel of land situated at No. 63 Calavite Street, La Loma, Quezon City and covered by TCT No. 300809 registered in his name. As Guansing defaulted in the payment of his loan, CDB foreclosed the mortgage. At the foreclosure sale held on March 15, 1984, the mortgaged property was sold to CDB as the highest bidder. Guansing failed to redeem, and on March 2, 1987, CDB consolidated title to the property in its name. TCT No. 300809 in the name of Guansing was cancelled and, in lieu thereof, TCT No. 355588 was issued in the name of CDB.
On June 16, 1988, private respondent Lolita Chan Lim, assisted by a broker named Remedios Gatpandan, offered to purchase the property from CDB. The written Offer to Purchase, signed by Lim and Gatpandan, states in part:
We hereby offer to purchase your property at #63 Calavite and Retiro Sts., La Loma, Quezon City for P300,000.00 under the following terms and conditions:
| (1) | 10% Option Money; |
| (2) | Balance payable in cash; |
| (3) | Provided that the property shall be cleared of illegal occupants or tenants. |
Pursuant to the foregoing terms and conditions of the offer, Lim paid CDB P30,000.00 as Option Money, for which she was issued Official Receipt No. 3160, dated June 17, 1988, by CDB. However, after some time following up the sale, Lim discovered that the subject property was originally registered in the name of Perfecto Guansing, father of mortgagor Rodolfo Guansing, under TCT No. 91148. Rodolfo succeeded in having the property registered in his name under TCT No. 300809, the same title he mortgaged to CDB and from which the latter’s title (TCT No. 355588) was derived. It appears, however, that the father, Perfecto, instituted Civil Case No. Q-39732 in the Regional Trial Court, Branch 83, Quezon City, for the cancellation of his son’s title. On March 23, 1984, the trial court rendered a decision[2] restoring Perfecto’s previous title (TCT No. 91148) and cancelling TCT No. 300809 on the ground that the latter was fraudulently secured by Rodolfo. This decision has since become final and executory.
Aggrieved by what she considered a serious misrepresentation by CDB and its mother-company, FEBTC, on their ability to sell the subject property, Lim, joined by her husband, filed on August 29, 1989 an action for specific performance and damages against petitioners in the Regional Trial Court, Branch 96, Quezon City, where it was docketed as Civil Case No. Q-89-2863. On April 20, 1990, the complaint was amended by impleading the Register of Deeds of Quezon City as an additional defendant.
On March 10, 1993, the trial court rendered a decision in favor of the Lim spouses. It ruled that: (1) there was a perfected contract of sale between Lim and CDB, contrary to the latter’s contention that the written offer to purchase and the payment of P30,000.00 were merely pre-conditions to the sale and still subject to the approval of FEBTC; (2) performance by CDB of its obligation under the perfected contract of sale had become impossible on account of the 1984 decision in Civil Case No. Q-39732 cancelling the title in the name of mortgagor Rodolfo Guansing; (3) CDB and FEBTC were not exempt from liability despite the impossibility of performance, because they could not credibly disclaim knowledge of the cancellation of Rodolfo Guansing’s title without admitting their failure to discharge their duties to the public as reputable banking institutions; and (4) CDB and FEBTC are liable for damages for the prejudice caused against the Lims.[3] Based on the foregoing findings, the trial court ordered CDB and FEBTC to pay private respondents, jointly and severally, the amount of P30,000.00 plus interest at the legal rate computed from June 17, 1988 until full payment. It also ordered petitioners to pay private respondents, jointly and severally, the amounts of P250,000.00 as moral damages, P50,000.00 as exemplary damages, P30,000.00 as attorney’s fees, and the costs of the suit.[4]
Petitioners brought the matter to the Court of Appeals, which, on October 14, 1997, affirmed in toto the decision of the Regional Trial Court. Petitioners moved for reconsideration, but their motion was denied by the appellate court on December 9, 1997. Hence, this petition. Petitioners contend that -
- The Honorable Court of Appeals erred when it held that petitioners CDB and FEBTC were aware of the decision dated March 23, 1984 of the Regional Trial Court of Quezon City in Civil Case No. Q-39732.
- The Honorable Court of Appeals erred in ordering petitioners to pay interest on the deposit of THIRTY THOUSAND PESOS (P30,000.00) by applying Article 2209 of the New Civil Code.
- The Honorable Court of Appeals erred in ordering petitioners to pay moral damages, exemplary damages, attorney’s fees and costs of suit.
I.
At the outset, it is necessary to determine the legal relation, if any, of the parties.
Petitioners deny that a contract of sale was ever perfected between them and private respondent Lolita Chan Lim. They contend that Lim’s letter-offer clearly states that the sum of P30,000.00 was given as option money, not as earnest money.[5] They thus conclude that the contract between CDB and Lim was merely an option contract, not a contract of sale.
The contention has no merit. Contracts are not defined by the parties thereto but by principles of law.[6] In determining the nature of a contract, the courts are not bound by the name or title given to it by the contracting parties.[7] In the case at bar, the sum of P30,000.00, although denominated in the offer to purchase as "option money," is actually in the nature of earnest money or down payment when considered with the other terms of the offer. In Carceler v. Court of Appeals,[8] we explained the nature of an option contract, viz. -
An option contract is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or not to enter into a principal contract, it binds the party who has given the option not to enter into the principal contract with any other person during the period designated, and within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. It is a separate agreement distinct from the contract to which the parties may enter upon the consummation of the option.
An option contract is therefore a contract separate from and preparatory to a contract of sale which, if perfected, does not result in the perfection or consummation of the sale. Only when the option is exercised may a sale be perfected.
In this case, however, after the payment of the 10% option money, the Offer to Purchase provides for the payment only of the balance of the purchase price, implying that the "option money" forms part of the purchase price. This is precisely the result of paying earnest money under Art. 1482 of the Civil Code. It is clear then that the parties in this case actually entered into a contract of sale, partially consummated as to the payment of the price. Moreover, the following findings of the trial court based on the testimony of the witnesses establish that CDB accepted Lim’s offer to purchase:
It is further to be noted that CDB and FEBTC already considered plaintiffs’ offer as good and no longer subject to a final approval. In his testimony for the defendants on February 13, 1992, FEBTC’s Leomar Guzman stated that he was then in the Acquired Assets Department of FEBTC wherein plaintiffs’ offer to purchase was endorsed thereto by Myoresco Abadilla, CDB’s senior vice-president, with a recommendation that the necessary petition for writ of possession be filed in the proper court; that the recommendation was in accord with one of the conditions of the offer, i.e., the clearing of the property of illegal occupants or tenants (tsn, p. 12); that, in compliance with the request, a petition for writ of possession was thereafter filed on July 22, 1988 (Exhs. 1 and 1-A); that the offer met the requirements of the banks; and that no rejection of the offer was thereafter relayed to the plaintiffs (p. 17); which was not a normal procedure, and neither did the banks return the amount of P30,000.00 to the plaintiffs.[9]
Given CDB’s acceptance of Lim’s offer to purchase, it appears that a contract of sale was perfected and, indeed, partially executed because of the partial payment of the purchase price. There is, however, a serious legal obstacle to such sale, rendering it impossible for CDB to perform its obligation as seller to deliver and transfer ownership of the property.
Nemo dat quod non habet, as an ancient Latin maxim says. One cannot give what one does not have. In applying this precept to a contract of sale, a distinction must be kept in mind between the "perfection" and "consummation" stages of the contract.
A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.[10] It is, therefore, not required that, at the perfection stage, the seller be the owner of the thing sold or even that such subject matter of the sale exists at that point in time.[11] Thus, under Art. 1434 of the Civil Code, when a person sells or alienates a thing which, at that time, was not his, but later acquires title thereto, such title passes by operation of law to the buyer or grantee. This is the same principle behind the sale of "future goods" under Art. 1462 of the Civil Code. However, under Art. 1459, at the time of delivery or consummation stage of the sale, it is required that the seller be the owner of the thing sold. Otherwise, he will not be able to comply with his obligation to transfer ownership to the buyer. It is at the consummation stage where the principle of nemo dat quod non habet applies.
In Dignos v. Court of Appeals,[12] the subject contract of sale was held void as the sellers of the subject land were no longer the owners of the same because of a prior sale.[13] Again, in Nool v. Court of Appeals,[14] we ruled that a contract of repurchase, in which the seller does not have any title to the property sold, is invalid:
We cannot sustain petitioners’ view. Article 1370 of the Civil Code is applicable only to valid and enforceable contracts. The Regional Trial Court and the Court of Appeals ruled that the principal contract of sale contained in Exhibit C and the auxiliary contract of repurchase in Exhibit D are both void. This conclusion of the two lower courts appears to find support in Dignos v. Court of Appeals, where the Court held:
"Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses, they were no longer owners of the same and the sale is null and void."
In the present case, it is clear that the sellers no longer had any title to the parcels of land at the time of sale. Since Exhibit D, the alleged contract of repurchase, was dependent on the validity of Exhibit C, it is itself void. A void contract cannot give rise to a valid one. Verily, Article 1422 of the Civil Code provides that (a) contract which is the direct result of a previous illegal contract, is also void and inexistent."
We should however add that Dignos did not cite its basis for ruling that a "sale is null and void" where the sellers "were no longer the owners" of the property. Such a situation (where the sellers were no longer owners) does not appear to be one of the void contracts enumerated in Article 1409 of the Civil Code. Moreover, the Civil Code itself recognizes a sale where the goods are to be acquired x x x by the seller after the perfection of the contract of sale, clearly implying that a sale is possible even if the seller was not the owner at the time of sale, provided he acquires title to the property later on.
In the present case, however, it is likewise clear that the sellers can no longer deliver the object of the sale to the buyers, as the buyers themselves have already acquired title and delivery thereof from the rightful owner, the DBP. Thus, such contract may be deemed to be inoperative and may thus fall, by analogy, under item No. 5 of Article 1409 of the Civil Code: Those which contemplate an impossible service. Article 1459 of the Civil Code provides that "the vendor must have a right to transfer the ownership thereof [subject of the sale] at the time it is delivered." Here, delivery of ownership is no longer possible. It has become impossible.[15]
In this case, the sale by CDB to Lim of the property mortgaged in 1983 by Rodolfo Guansing must, therefore, be deemed a nullity for CDB did not have a valid title to the said property. To be sure, CDB never acquired a valid title to the property because the foreclosure sale, by virtue of which the property had been awarded to CDB as highest bidder, is likewise void since the mortgagor was not the owner of the property foreclosed.
A foreclosure sale, though essentially a "forced sale," is still a sale in accordance with Art. 1458 of the Civil Code, under which the mortgagor in default, the forced seller, becomes obliged to transfer the ownership of the thing sold to the highest bidder who, in turn, is obliged to pay therefor the bid price in money or its equivalent. Being a sale, the rule that the seller must be the owner of the thing sold also applies in a foreclosure sale. This is the reason Art. 2085[16] of the Civil Code, in providing for the essential requisites of the contract of mortgage and pledge, requires, among other things, that the mortgagor or pledgor be the absolute owner of the thing pledged or mortgaged, in anticipation of a possible foreclosure sale should the mortgagor default in the payment of the loan.
There is, however, a situation where, despite the fact that the mortgagor is not the owner of the mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale arising therefrom are given effect by reason of public policy. This is the doctrine of "the mortgagee in good faith" based on the rule that all persons dealing with property covered by a Torrens Certificate of Title, as buyers or mortgagees, are not required to go beyond what appears on the face of the title.[17] The public interest in upholding the indefeasibility of a certificate of title, as evidence of the lawful ownership of the land or of any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied upon what appears on the face of the certificate of title.
This principle is cited by petitioners in claiming that, as a mortgagee bank, it is not required to make a detailed investigation of the history of the title of the property given as security before accepting a mortgage.
We are not convinced, however, that under the circumstances of this case, CDB can be considered a mortgagee in good faith. While petitioners are not expected to conduct an exhaustive investigation on the history of the mortgagor’s title, they cannot be excused from the duty of exercising the due diligence required of banking institutions. In Tomas v. Tomas,[18] we noted that it is standard practice for banks, before approving a loan, to send representatives to the premises of the land offered as collateral and to investigate who are the real owners thereof, noting that banks are expected to exercise more care and prudence than private individuals in their dealings, even those involving registered lands, for their business is affected with public interest. We held thus:
We, indeed, find more weight and vigor in a doctrine which recognizes a better right for the innocent original registered owner who obtained his certificate of title through perfectly legal and regular proceedings, than one who obtains his certificate from a totally void one, as to prevail over judicial pronouncements to the effect that one dealing with a registered land, such as a purchaser, is under no obligation to look beyond the certificate of title of the vendor, for in the latter case, good faith has yet to be established by the vendee or transferee, being the most essential condition, coupled with valuable consideration, to entitle him to respect for his newly acquired title even as against the holder of an earlier and perfectly valid title. There might be circumstances apparent on the face of the certificate of title which could excite suspicion as to prompt inquiry, such as when the transfer is not by virtue of a voluntary act of the original registered owner, as in the instant case, where it was by means of a self-executed deed of extra-judicial settlement, a fact which should be noted on the face of Eusebia Tomas certificate of title. Failing to make such inquiry would hardly be consistent with any pretense of good faith, which the appellant bank invokes to claim the right to be protected as a mortgagee, and for the reversal of the judgment rendered against it by the lower court.[19]
In this case, there is no evidence that CDB observed its duty of diligence in ascertaining the validity of Rodolfo Guansing’s title. It appears that Rodolfo Guansing obtained his fraudulent title by executing an Extra-Judicial Settlement of the Estate With Waiver where he made it appear that he and Perfecto Guansing were the only surviving heirs entitled to the property, and that Perfecto had waived all his rights thereto. This self-executed deed should have placed CDB on guard against any possible defect in or question as to the mortgagor’s title. Moreover, the alleged ocular inspection report[20] by CDB’s representative was never formally offered in evidence. Indeed, petitioners admit that they are aware that the subject land was being occupied by persons other than Rodolfo Guansing and that said persons, who are the heirs of Perfecto Guansing, contest the title of Rodolfo.[21]
II.
The sale by CDB to Lim being void, the question now arises as to who, if any, among the parties was at fault for the nullity of the contract. Both the trial court and the appellate court found petitioners guilty of fraud, because on June 16, 1988, when Lim was asked by CDB to pay the 10% option money, CDB already knew that it was no longer the owner of the said property, its title having been cancelled.[22] Petitioners contend that: (1) such finding of the appellate court is founded entirely on speculation and conjecture; (2) neither CDB nor FEBTC was a party in the case where the mortgagor’s title was cancelled; (3) CDB is not privy to any problem among the Guansings; and (4) the final decision cancelling the mortgagor’s title was not annotated in the latter’s title.
As a rule, only questions of law may be raised in a petition for review, except in circumstances where questions of fact may be properly raised.[23] Here, while petitioners raise these factual issues, they have not sufficiently shown that the instant case falls under any of the exceptions to the above rule. We are thus bound by the findings of fact of the appellate court. In any case, we are convinced of petitioners’ negligence in approving the mortgage application of Rodolfo Guansing.
III.
We now come to the civil effects of the void contract of sale between the parties. Article 1412(2) of the Civil Code provides:
If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:
. . . .
| (2) | When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply with his promise. |
Private respondents are thus entitled to recover the P30,000.00 option money paid by them. Moreover, since the filing of the action for damages against petitioners amounted to a demand by respondents for the return of their money, interest thereon at the legal rate should be computed from August 29, 1989, the date of filing of Civil Case No. Q-89-2863, not June 17, 1988, when petitioners accepted the payment. This is in accord with our ruling in Castillo v. Abalayan[24] that in case of a void sale, the seller has no right whatsoever to keep the money paid by virtue thereof and should refund it, with interest at the legal rate, computed from the date of filing of the complaint until fully paid. Indeed, Art. 1412(2) which provides that the non-guilty party "may demand the return of what he has given" clearly implies that without such prior demand, the obligation to return what was given does not become legally demandable.
Considering CDB’s negligence, we sustain the award of moral damages on the basis of Arts. 21 and 2219 of the Civil Code and our ruling in Tan v. Court of Appeals[25] that moral damages may be recovered even if a bank’s negligence is not attended with malice and bad faith. We find, however, that the sum of P250,000.00 awarded by the trial court is excessive. Moral damages are only intended to alleviate the moral suffering undergone by private respondents, not to enrich them at the expense of the petitioners.[26] Accordingly, the award of moral damages must be reduced to P50,000.00.
Likewise, the award of P50,000.00 as exemplary damages, although justified under Art. 2232 of the Civil Code, is excessive and should be reduced to P30,000.00. The award of P30,000.00 attorney’s fees based on Art. 2208, pars. 1, 2, 5 and 11 of the Civil Code should similarly be reduced to P20,000.00.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the MODIFICATION as to the award of damages as above stated.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur.
[1] Per Justice B.A. Adefuin-de la Cruz and concurred in by Justice Fidel F. Purisima (now Associate Justice of the Supreme Court) and Justice Ricardo P. Galvez.
[2] Exhibit 2; Records, pp. 149-151.
[3] RTC Decision, CA Rollo, pp. 32-34.
[4] Id., at p. 35.
[5] Petition, p. 13; Rollo, p. 21.
[6] Borromeo v. Court of Appeals, 47 SCRA 65 (1972)
[7] Baluran v. Navarro, 79 SCRA 309 (1977)
[8] G.R. No. 127471, February 10, 1999.
[9] RTC Decision, CA Rollo, p. 49.
[10] Civil Code, Art. 1475.
[11] Martin v. Reyes, 91 Phil. 666 (1952)
[12] 158 SCRA 375 (1988)
[13] Id., p. 383.
[14] 276 SCRA 144 (1997)
[15] Id., at pp. 157-158.
[16] "The following requisites are essential to the contracts of pledge and mortgage:
. . . .
(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged."
[17] Philippine National Bank v. Intermediate Appellate Court, 176 SCRA 736 (1989), citing Quimson v. Suarez, 45 Phil 901 (1924)
[18] 98 SCRA 280 (1980) (Empasis added)
[19] Id., at 287.
[20] TSN of the testimony of Atty. Rafael Hilao, Jr., p. 10, April 10, 1992.
[21] Petition, p. 8; Appellants’ Brief, p. 6; Rollo, pp. 6 and 16.
[22] CA Decision, Rollo, p. 40.
[23] See Philippine Home Assurance Corp. v. Court of Appeals, 257 SCRA 468 (1996)
[24] 30 SCRA 359 (1969)
[25] 239 SCRA 310 (1994)
[26] Zenith Insurance Corporation v. Court of Appeals, 185 SCRA 402 (1990)
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SECOND DIVISION
[ G.R. No. 179743, August 02, 2010 ]
HADJA FATIMA GAGUIL MAGOYAG, JOINED BY HER HUSBAND, HADJI HASAN MADLAWI MAGOYAG, PETITIONERS, VS. HADJI ABUBACAR MARUHOM, RESPONDENT.
D E C I S I O N
NACHURA, J.:
Hadja Fatima Gaguil Magoyag and her husband Hadji Hasan Madlawi Magoyag (petitioners), appeal by certiorari under Rule 45 of the Rules of Court the April 28, 2006 Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 75765, and the August 28, 2007 Resolution[2] denying its reconsideration.
The antecedents:
On December 20, 1982, respondent Hadji Abubacar Maruhom (respondent) was awarded a market stall at the Reclamation Area by the Islamic City of Marawi.[3]
On December 1, 1985, respondent orally sold his stall to petitioner for P20,000.00. Later, on December 10, 1985, respondent executed a Deed of Assignment,[4] confirming the oral sale; assigning, selling, transferring, and conveying his market stall to petitioners for a consideration of P20,000.00. In the same Deed of Assignment, petitioners leased the subject stall to respondent for a monthly rental of P250.00, beginning December 1, 1985, renewable every year at the option of petitioners. Respondent undertook to pay in advance the rentals for six months amounting to P1,500.00 on or before December 1, 1985.
Respondent religiously paid the monthly rentals of P250.00, which was increased to P300.00 on December 1, 1988; and to P400.00 beginning December 1, 1991. However, on June 1, 1993, respondent simply stopped paying the rentals. Respondent promised to settle his unpaid account, but he failed to make good his promise. Petitioner then demanded that respondent vacate the property, but the demand just fell on deaf ears.
Accordingly, on August 22, 1994, petitioners filed a complaint[5] for recovery of possession and damages, with prayer for issuance of a temporary restraining order (TRO), with the Regional Trial Court (RTC) of Marawi City.
In his Answer,[6] respondent admitted selling the subject stall for P20,000.00 to petitioners, but averred that the sale was with right to repurchase; and on condition that he would remain in possession of the subject stall as long as he wants. He signed the Deed of Assignment on petitioners' assurance that the conditions they earlier agreed upon were contained in the deed. Being illiterate, he just relied on petitioners' assurances. Respondent denied that he refused to pay the agreed monthly rentals; alleging that petitioners were the ones who refused to receive the rental payments and instead demanded payment of P150,000.00. The Deed of Assignment, he added, failed to express the true intent and agreement of the parties; and his signature thereon was procured by fraud, deceit, and misrepresentation; hence, void ab initio. Respondent further averred that the complaint failed to state a cause of action, as petitioners failed to comply with the provisions of Presidential Decree (P.D.) No. 1508, or the Katarungang Pambarangay Law, and the Local Government Code of 1991. He also assailed the jurisdiction of the RTC over the complaint, claiming the jurisdiction falls with the Municipal Trial Court (MTC). Finally, he averred that the complaint lacked the required verification and certification against forum shopping. Respondent, therefore, prayed for the dismissal of the complaint.
On June 10, 2002, the RTC rendered a Decision,[7] viz.:
After a careful examination of the foregoing facts and pieces of evidence as presented by the parties, this court is convinced that [petitioners] spouses has (sic) proved and duly established that indeed [respondent] have (sic) agreed to sell to [petitioners] spouses whatever rights that he has over the disputed stall. Their transaction was even admitted by the [respondent] when he signed the acknowledgment receipt (Exhs. "B" & "B-1") for P20,000.00 which is the agreed purchase price and the notarized Deed of Assignment (Exh. "A" to "A-6). [Respondent], however, claimed that the contents of the Deed of Assignment was (sic) not even read & translated to him, he being illiterate (sic).
The transaction was further supported by [respondent's] counter-offer to buy the stall for P80,000.00 (Exh. "D") and the acknowledgment receipts of [respondent] on the payment of rentals to the [petitioners] (Exhs. "H" to "H-6", Exh(s). "I-1" to "I-6" and Exh(s) "J" to "J-3".
The only evidence presented by the [respondent] is his lone testimony and Exh. "1" awarding [the] subject stall by the City Government to him.
The [respondent] did not present any evidence on his alleged ownership over [the] subject stall except a certification (Exh. "1") dated December 20, 1982 from the City Government awarding [the] same to him and subject even to the condition that he cannot sell, donate or otherwise alienate the same without the consent of the City Government.
It appears therefore that [the] subject stall is owned by the City Government of Marawi and that [respondent] cannot even sell or dispose of the same.
Not being the owner, the principle NEMO DAT QUOD NON HABET which means ONE CANNOT GIVE WHAT ONE DOES NOT HAVE squarely applies in this case.
At most, what [respondent] can sell is whatever rights that he has over the disputed stalls like his continued possession over the same for his business purposes. This is what [petitioner-spouses] acquired in the interest of justice.[8]
The RTC disposed, thus:
WHEREFORE, judgment is hereby rendered in favor of [petitioner-spouses] and against the [respondent] as follows:
- Whatever rights that [respondent] Hadji Abubacar Maruhom has over stall No. CTD 1583 as described in the complaint as lessee or grantee or even as the alleged owner are hereby transferred to [petitioner-spouses] Hadji Fatima Gaguil Magoyag and Hadji Hasan Madlawi Mangoyag. Said [respondent] is ordered to vacate the stall in favor of [petitioners];
- Ordering [respondent] to pay unto petitioner the following:
(a) The unpaid rentals from June 1, 1993 up to May 31, 2002 at Three Hundred Pesos (P300.00) a month or a total of P24,900.00;
(b) Ten Thousand (P10,000.00) pesos - moral and [e]xemplary [d]amages;
(c) Twenty Thousand (P20,000.00) pesos - Attorney's fees.
SO ORDERED.[9]
Respondent appealed to the CA faulting the RTC for not dismissing the complaint. He argued that the complaint was filed in brazen violation of Supreme Court Circular No. 04-94 and the Rules of Court requiring a certification of non-forum shopping. He added that the subject stall is owned by the City Government of Marawi that cannot be leased or alienated. The Deed of Assignment that he executed in favor of the petitioners is, therefore, null and void. He urged the CA to apply the civil law rule on pari delicto.
On April 28, 2006, the CA rendered the assailed Decision reversing the RTC. The decretal portion of the CA Decision reads:
WHEREFORE, the assailed decision of the Regional Trial Court is hereby REVERSED AND SET ASIDE and another one entered declaring the Deed of Assignment dated December 10, 1985 void and [of] no effect and ordering [respondent] to pay the loan amount of P20,000.00 plus P250.00 as monthly interest thereon from the date of demand or August 1, 1994 until the same shall have been fully paid. No pronouncement as to costs.
SO ORDERED.[10]
Petitioners filed a motion for reconsideration, but the CA denied it on August 28, 2007.[11]
Hence, this appeal by petitioners, ascribing reversible error on the part of the CA for reversing the RTC. Specifically, they argue that the CA erred in declaring that the transaction they had with respondent was a loan with mortgage; and invalidating the Deed of Assignment. They insist that respondent already transferred his entire interest over the subject stall in their favor. Thus, they are entitled to the possession of the property.
In declaring the transaction as loan with mortgage, the CA explains in this wise:
x x x [t]he evidence overwhelmingly showed that the real intention of the [respondent] was to have the subject market stall mortgaged, in order to secure the payment of the loan of P20,000.00 from [petitioners]. There was no genuine intention on his part to sell the property. In fact, even after the execution of the Deed of Assignment, [respondent] remained in possession of the said property and paid religiously the so-called "monthly rentals" in the amount of two hundred fifty (P250.00) which, in reality, was the amount they had agreed upon as interest on the loan. For these reasons, We find and so hold that the purported assignment was really meant to be a contract of loan in the amount of P20,000.00 with interest thereon at the rate of P250.00 per month. The property was intended to serve as a collateral for the loan. It is firmly ensconced in jurisprudence that neither clarity of contract terms nor explicitness of the name given to it can bar Us from determining the true intent of the parties.
x x x x[12]
We find the finding of the CA contrary to the evidence on record, if not outright preposterous.
The Deed of Assignment[13] reads in full:
DEED OF ASSIGNMENT
Know all men by these presents:
This DEED OF ASSIGNMENT made and executed by and between:
The FIRST PARTY: Hadji Abubacar Maruhom, of legal age, married, businessman by occupation and a resident of Marawi City
-and-
The SECOND PARTY: Hadji Fatima Gaguil-Magoyag, also of legal age, married and a government employee with postal address at Moriatao Balindong, Taraka, Lanao del Sur
W I T N E S S E T H
That for and in consideration of the sum of TWENTY THOUSAND PESOS: (P20,000.00), Philippine Currency which amount has been paid by the Second Party and receipt hereof has been acknowledge[d] by the First Party, the said First [P]arty does hereby assign, [sell] transfer and convey unto the Second Party that certain two-storey Market Stall No. CTD 1583 situated in the Reclamation Area, Marawi City which is made of cement, and lumber and more particularly described as follows:
Stall No. - - - - - - - - - - - - - - - - - - CTD 1583
Length - - - - - - - - - - - - - - - - - - - - 3 meters
Width - - - - - - - - - - - - - - - - - - - - 2 meters
Adjacent Stall Owner - - - - - - - - - - Rakim Bayabao
Fronting - - - - - - - - - - - - - - - - - - Hadji Cosain Saripada
Back - - - - - - - - - - - - - - - - - - - - - Hadji Alawi Pacati
of which market stall the First Party is the registered holder/owner under the following terms and conditions:
- The FIRST PARTY is authorize[d] and empower[ed] to continue engaging in business in his own sole account on the said stall N[o]. CTD 1583 on a monthly rental of TWO HUNDRED FIFTY PESOS: (P250.00) to be paid by said FIRST PARTY to SECOND PARTY six months in advance the monthly rental to start on December 1, 1985 renewable every year at the option of the SECOND PARTY.
- The FIRST PARTY agrees to pay the SECOND PARTY the first six-month advance rental in the amount of One Thousand Five Hundred Pesos: (P1,500.00) on or before December 1, 1985, [a]nd the succeeding monthly rental shall always be payable six-month[s] in advance on a progressive rate reckoned from the future rental of adjoining stall holder/owner.
- The FIRST PARTY shall not directly or indirectly lease, assign or mortgage or [in] any way encumber said Market Stall N[o]. 1583 or any portion thereof without the written permission of the Second Party; any contract or agreement made in violation thereof shall be null and void.
- The FIRST PARTY shall turnover the Market Stall No. CTD 1583 to the SECOND PARTY should the FIRST PARTY decide to abandon the said Market Stall No. CTD 1583;
- All repairs within the premises shall be at the sole account and expense of the FIRST PARTY without right to reimbursement.
- The FIRST PARTY shall use the said Market Stall No. 1583 exclusively for business and shall not bring into the said stall any inflammable or explosive goods or materials nor any article which may expose the said stall from fire or increase the fire hazard.
- That all charges for water, light, gas, telephone within the stall shall be at the sole account of the FIRST without right to reimbursement;
- The FIRST PARTY shall be responsible for the payment of all taxes on the said [S]tall No. CTD 1583 and the compliance of all laws, ordinances and regulations or order of the National or City Government authorities arising from or requiring the use, occupation and utilization of the said Market Stall No. CTD 1583. Failure to comply with said laws, ordinances, regulations or order shall be at the exclusive risk and expense of the FIRST PARTY.
By no stretch of imagination can we construe the provisions of the Deed of Assignment as a contract of loan with mortgage. Crystal clear in the Deed of Assignment are unambiguous provisions that respondent assigned, sold, transferred, and conveyed the subject market stall to petitioners. Nowhere in the Deed does it say that respondent obtained a loan of P20,000.00, and mortgaged the subject stall as security.
The most fundamental rule in the interpretation of contracts is that, if the terms are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of the contract provisions shall control.[14] Its meaning should be determined without reference to extrinsic facts or aids. The intention of the parties must be gathered from that language, and from that language alone. Stated differently, where the language of a written contract is clear and unambiguous, the contract must be taken to mean that which, on its face, it purports to mean, unless some good reason can be assigned to show that the words should be understood in a different sense. Courts cannot make for the parties better or more equitable agreements than they themselves have been satisfied to make, or rewrite contracts because they operate harshly or inequitably as to one of the parties, or alter them for the benefit of one party and to the detriment of the other, or by construction, relieve one of the parties from the terms which he voluntarily consented to, or impose on him those which he did not.[15]
That respondent sold the subject stall for P20,000.00 to petitioners was admitted by respondent in his Answer,[16] although he averred that the sale was with a right to repurchase. Even the testimony[17] of respondent points to no other transaction than a sale in favor of petitioners. The CA, therefore, committed a serious blunder in making a new contract for the parties, and declaring the Deed of Assignment as a contract of loan with mortgage.
Indubitably, the transaction between petitioners and respondent was a sale. As such, under ordinary circumstances, petitioners could recover possession of the property from respondent. Unfortunately in this case, the Court cannot grant petitioners the relief that they are praying for - recovery of possession of the subject stall.
The records show that Market Stall No. CTD 1583 is owned by the City Government of Marawi. Indeed, the RTC and the CA correctly held that it was the City Government of Marawi, not respondent, that owned Market Stall No. CTD 1583. Respondent, as a mere grantee of the subject stall, was prohibited from selling, donating, or otherwise alienating the same without the consent of the City Government; violation of the condition shall automatically render the sale, donation, or alienation null and void.[18] Thus, we sustain the CA in declaring the Deed of Assignment null and void, but we cannot abide by the CA's final disposition.
A void contract is equivalent to nothing; it produces no civil effect. It does not create, modify, or extinguish a juridical relation. Parties to a void agreement cannot expect the aid of the law; the courts leave them as they are, because they are deemed in pari delicto or in equal fault.[19] To this rule, however, there are exceptions that permit the return of that which may have been given under a void contract. One of the exceptions is found in Article 1412 of the Civil Code, which states:
Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:
| (1) | When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking; |
| (2) | When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply with his promise. |
Respondent was well aware that as mere grantee of the subject stall, he cannot sell it without the consent of the City Government of Marawi. Yet, he sold the same to petitioners. The records, however, are bereft of any allegation and proof that petitioners had actual knowledge of the status of respondent's ownership of the subject stall. Petitioners can, therefore, recover the amount they had given under the contract.
In Cavite Development Bank v. Spouses Lim,[20] and Castillo, et al. v. Abalayan,[21] we held that in case of a void sale, the seller has no right whatsoever to keep the money paid by virtue thereof, and should refund it, with interest at the legal rate, computed from the date of filing of the complaint until fully paid. Petitioners can, therefore, recover the amount of P20,000.00 from respondent with interest at 6% per annum from the time of the filing of the complaint until the finality of this Decision, and 12% per annum thereafter until full payment.
WHEREFORE, the petition is PARTLY GRANTED. The April 28, 2006 Decision and August 28, 2007 Resolution of the Court of Appeals in CA G.R. CV No. 75765 are AFFIRMED with MODIFICATION. The Deed of Assignment dated December 10, 1985 is declared VOID AB INITIO. Respondent Hadji Abubacar Maruhom is ordered to return to petitioners Hadja Fatima Gaguil Magoyag and Hadji Hasan Madlawi Magoyag the amount of P20,000.00 with interest at 6% per annum from the time of the filing of the complaint until the finality of this Decision and 12% per annum thereafter until full payment.
No pronouncement as to costs.
SO ORDERED.
Carpio, (Chairperson), Peralta, Abad, and Mendoza, JJ., concur.
[1] Penned by Associate Justice Edgardo A. Camello, with Associate Justices Normandie B. Pizarro and Ricardo R. Rosario, concurring; rollo, pp. 33-44.
[2] Id. at 45-46.
[3] See Exhibit "1", record, p. 207.
[4] Exhibit "A", id. at 131-132.
[5] Id. at 1-5.
[6] Id. at 14-17.
[7] Id. at 245-252.
[8] Id. at 251.
[9] Id. at 251-252.
[10] Rollo, at 43.
[11] Id. at 45.
[12] Id. at 40.
[13] Supra note 3, at 131-132.
[14] Continental Cement Corp. v. Filipinas (PREFAB) Systems, Inc., G.R. No. 176917, August 4, 2009, 595 SCRA 215, 225.
[15] Benguet Corporation v. Cabildo, G.R. No. 151402. August 22, 2008, 563 SCRA 25, 38.
[16] See Answer, record, p. 14.
[17] TSN, August 16, 2000 and March 6, 2001.
[18] Supra note 3.
[19] Menchavez v. Teves, Jr., 490 Phil. 268, 280 (2005).
[20] 381 Phil 355, 371 (2000).
[21] 141 Phil. 57, 63 (1969).
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SECOND DIVISION
[ G.R. No. 187056, September 20, 2010 ]
JARABINI G. DEL ROSARIO, PETITIONER, VS. ASUNCION G. FERRER, SUBSTITUTED BY HER HEIRS, VICENTE, PILAR, ANGELITO, FELIXBERTO, JR., ALL SURNAMED G. FERRER, AND MIGUELA FERRER ALTEZA, RESPONDENTS.
D E C I S I O N
ABAD, J.:
This case pertains to a gift, otherwise denominated as a donation mortis causa, which in reality is a donation inter vivos made effective upon its execution by the donors and acceptance thereof by the donees, and immediately transmitting ownership of the donated property to the latter, thus precluding a subsequent assignment thereof by one of the donors.
The Facts and the Case
On August 27, 1968 the spouses Leopoldo and Guadalupe Gonzales executed a document entitled "Donation Mortis Causa"[1] in favor of their two children, Asuncion and Emiliano, and their granddaughter, Jarabini (daughter of their predeceased son, Zoilo) covering the spouses' 126-square meter lot and the house on it in Pandacan, Manila[2] in equal shares. The deed of donation reads:
It is our will that this Donation Mortis Causa shall be irrevocable and shall be respected by the surviving spouse.
It is our will that Jarabini Gonzales-del Rosario and Emiliano Gonzales will continue to occupy the portions now occupied by them.
It is further our will that this DONATION MORTIS CAUSA shall not in any way affect any other distribution of other properties belonging to any of us donors whether testate or intestate and where ever situated.
It is our further will that any one surviving spouse reserves the right, ownership, possession and administration of this property herein donated and accepted and this Disposition and Donation shall be operative and effective upon the death of the DONORS.[3]
Although denominated as a donation mortis causa, which in law is the equivalent of a will, the deed had no attestation clause and was witnessed by only two persons. The named donees, however, signified their acceptance of the donation on the face of the document.
Guadalupe, the donor wife, died in September 1968. A few months later or on December 19, 1968, Leopoldo, the donor husband, executed a deed of assignment of his rights and interests in subject property to their daughter Asuncion. Leopoldo died in June 1972.
In 1998 Jarabini filed a "petition for the probate of the August 27, 1968 deed of donation mortis causa" before the Regional Trial Court (RTC) of Manila in Sp. Proc. 98-90589.[4] Asuncion opposed the petition, invoking his father Leopoldo's assignment of his rights and interests in the property to her.
After trial, the RTC rendered a decision dated June 20, 2003,[5] finding that the donation was in fact one made inter vivos, the donors' intention being to transfer title over the property to the donees during the donors' lifetime, given its irrevocability. Consequently, said the RTC, Leopoldo's subsequent assignment of his rights and interest in the property was void since he had nothing to assign. The RTC thus directed the registration of the property in the name of the donees in equal shares.[6]
On Asuncion's appeal to the Court of Appeals (CA), the latter rendered a decision on December 23, 2008,[7] reversing that of the RTC. The CA held that Jarabini cannot, through her petition for the probate of the deed of donation mortis causa, collaterally attack Leopoldo's deed of assignment in Asuncion's favor. The CA further held that, since no proceeding exists for the allowance of what Jarabini claimed was actually a donation inter vivos, the RTC erred in deciding the case the way it did. Finally, the CA held that the donation, being one given mortis causa, did not comply with the requirements of a notarial will,[8] rendering the same void. Following the CA's denial of Jarabini's motion for reconsideration,[9] she filed the present petition with this Court.
Issue Presented
The key issue in this case is whether or not the spouses Leopoldo and Guadalupe's donation to Asuncion, Emiliano, and Jarabini was a donation mortis causa, as it was denominated, or in fact a donation inter vivos.
The Court's Ruling
That the document in question in this case was captioned "Donation Mortis Causa" is not controlling. This Court has held that, if a donation by its terms is inter vivos, this character is not altered by the fact that the donor styles it mortis causa.[10]
In Austria-Magat v. Court of Appeals,[11] the Court held that "irrevocability" is a quality absolutely incompatible with the idea of conveyances mortis causa, where "revocability" is precisely the essence of the act. A donation mortis causa has the following characteristics:
1. It conveys no title or ownership to the transferee before the death of the transferor; or, what amounts to the same thing, that the transferor should retain the ownership (full or naked) and control of the property while alive;
2. That before his death, the transfer should be revocable by the transferor at will, ad nutum; but revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed; and
3. That the transfer should be void if the transferor should survive the transferee.[12] (Underscoring supplied)
The Court thus said in Austria-Magat that the express "irrevocability" of the donation is the "distinctive standard that identifies the document as a donation inter vivos." Here, the donors plainly said that it is "our will that this Donation Mortis Causa shall be irrevocable and shall be respected by the surviving spouse." The intent to make the donation irrevocable becomes even clearer by the proviso that a surviving donor shall respect the irrevocability of the donation. Consequently, the donation was in reality a donation inter vivos.
The donors in this case of course reserved the "right, ownership, possession, and administration of the property" and made the donation operative upon their death. But this Court has consistently held that such reservation (reddendum) in the context of an irrevocable donation simply means that the donors parted with their naked title, maintaining only beneficial ownership of the donated property while they lived.[13]
Notably, the three donees signed their acceptance of the donation, which acceptance the deed required.[14] This Court has held that an acceptance clause indicates that the donation is inter vivos, since acceptance is a requirement only for such kind of donations. Donations mortis causa, being in the form of a will, need not be accepted by the donee during the donor's lifetime.[15]
Finally, as Justice J. B. L. Reyes said in Puig v. Peñaflorida,[16] in case of doubt, the conveyance should be deemed a donation inter vivos rather than mortis causa, in order to avoid uncertainty as to the ownership of the property subject of the deed.
Since the donation in this case was one made inter vivos, it was immediately operative and final. The reason is that such kind of donation is deemed perfected from the moment the donor learned of the donee's acceptance of the donation. The acceptance makes the donee the absolute owner of the property donated.[17]
Given that the donation in this case was irrevocable or one given inter vivos, Leopoldo's subsequent assignment of his rights and interests in the property to Asuncion should be regarded as void for, by then, he had no more rights to assign. He could not give what he no longer had. Nemo dat quod non habet.[18]
The trial court cannot be faulted for passing upon, in a petition for probate of what was initially supposed to be a donation mortis causa, the validity of the document as a donation inter vivos and the nullity of one of the donor's subsequent assignment of his rights and interests in the property. The Court has held before that the rule on probate is not inflexible and absolute.[19] Moreover, in opposing the petition for probate and in putting the validity of the deed of assignment squarely in issue, Asuncion or those who substituted her may not now claim that the trial court improperly allowed a collateral attack on such assignment.
WHEREFORE, the Court GRANTS the petition, SETS ASIDE the assailed December 23, 2008 Decision and March 6, 2009 Resolution of the Court of Appeals in CA-G.R. CV 80549, and REINSTATES in toto the June 20, 2003 Decision of the Regional Trial Court of Manila, Branch 19, in Sp. Proc. 98-90589.
SO ORDERED.
Carpio, Peralta, Bersamin,* and Perez,** JJ., concur.
* Designated as additional member in lieu of Associate Justice Jose Catral Mendoza, per Special Order 886 dated September 1, 2010.
** Designated as additional member in lieu of Associate Justice Antonio Eduardo B. Nachura, per Special Order 894 dated September 20, 2010.
[1] Rollo, p. 101.
[2] Covered by Transfer Certificate of Title (TCT) 101873.
[3] Supra note 1.
[4] "In the Matter of the Petition for the Allowance of the Donation Mortis Causa of Leopoldo Gonzales. Jarabini del Rosario, Petitioner."
[5] Rollo, pp. 125-128.
[6] Id. at 128.
[7] Id. at 54-64; penned by Associate Justice Apolinario D. Bruselas, Jr. with the concurrence of Associate Justices Bienvenido L. Reyes and Mariflor P. Punzalan Castillo.
[8] Art. 728. Donations which are to take effect upon the death of the donor partake of the nature of testamentary provisions, and shall be governed by the rules established in the Title on Succession.
Art. 805. Every will, other than a holographic will, must be subscribed at the end thereof by the testator himself or by the testator's name written by some other person in his presence, and by his express direction, and attested and subscribed by three or more credible witnesses in the presence of the testator and of one another.
The testator or the person requested by him to write his name and the instrumental witnesses of the will, shall also sign, as aforesaid, each and every page thereof, except the last, on the left margin, and all the pages shall be numbered correlatively in letters placed on the upper part of each page.
The attestation shall state the number of pages used upon which the will is written, and the fact that the testator signed the will and every page thereof, or caused some other person to write his name, under his express direction, in the presence of the instrumental witnesses, and that the latter witnessed and signed the will and all the pages thereof in the presence of the testator and of one another.
If the attestation clause is in a language not known to the witnesses, it shall be interpreted to them.
[9] Rollo, p. 66.
[10] Concepcion v. Concepcion, 91 Phil. 823, 828 (1952).
[11] 426 Phil. 263 (2002).
[12] Aluad v. Aluad, G.R. No. 176943, October 17, 2008, 569 SCRA 697, 705-706.
[13] Austria-Magat v. Court of Appeals, supra note 11, at 274; Spouses Gestopa v. Court of Appeals, 396 Phil. 262, 271 (2000); Alejandro v. Judge Geraldez, 168 Phil. 404, 420-421 (1977); Cuevas v. Cuevas, 98 Phil. 68, 71 (1955); Bonsato v. Court of Appeals, 95 Phil. 481, 488 (1954).
[14] Rollo, p. 101.
[15] Austria-Magat v. Court of Appeals, supra note 11, at 276-277.
[16] 122 Phil. 665, 672 (1965).
[17] Heirs of Sevilla v. Sevilla, 450 Phil. 598, 613 (2003).
[18] Gochan & Sons Realty Corp. v. Heirs of Raymundo Baba, 456 Phil. 569, 579 (2003).
[19] Reyes v. Court of Appeals, 346 Phil. 266, 273 (1997).
Source: Supreme Court E-Library | Date created: 2010-10-13 15:19:37
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THIRD DIVISION
[ G.R. No. 160346, August 25, 2009 ]
PURITA PAHUD, SOLEDAD PAHUD, AND IAN LEE CASTILLA (REPRESENTED BY MOTHER AND ATTORNEY-IN-FACT VIRGINIA CASTILLA), PETITIONERS, VS. COURT OF APPEALS, SPOUSES ISAGANI BELARMINO AND LETICIA OCAMPO, EUFEMIA SAN AGUSTIN-MAGSINO, ZENAIDA SAN AGUSTIN-MCCRAE, MILAGROS SAN AGUSTIN-FORTMAN, MINERVA SAN AGUSTIN-ATKINSON, FERDINAND SAN AGUSTIN, RAUL SAN AGUSTIN, ISABELITA SAN AGUSTIN-LUSTENBERGER AND VIRGILIO SAN AGUSTIN, RESPONDENTS.
DECISION
NACHURA, J.:
For our resolution is a petition for review on certiorari assailing the April 23, 2003 Decision[1] and October 8, 2003 Resolution[2] of the Court of Appeals (CA) in CA-G.R. CV No. 59426. The appellate court, in the said decision and resolution, reversed and set aside the January 14, 1998 Decision[3] of the Regional Trial Court (RTC), which ruled in favor of petitioners.
The dispute stemmed from the following facts.
During their lifetime, spouses Pedro San Agustin and Agatona Genil were able to acquire a 246-square meter parcel of land situated in Barangay Anos, Los Baños, Laguna and covered by Original Certificate of Title (OCT) No. O-(1655) 0-15.[4] Agatona Genil died on September 13, 1990 while Pedro San Agustin died on September 14, 1991. Both died intestate, survived by their eight (8) children: respondents Eufemia, Raul, Ferdinand, Zenaida, Milagros, Minerva, Isabelita and Virgilio.
Sometime in 1992, Eufemia, Ferdinand and Raul executed a Deed of Absolute Sale of Undivided Shares[5] conveying in favor of petitioners (the Pahuds, for brevity) their respective shares from the lot they inherited from their deceased parents for P525,000.00.[6] Eufemia also signed the deed on behalf of her four (4) other co-heirs, namely: Isabelita on the basis of a special power of attorney executed on September 28, 1991,[7] and also for Milagros, Minerva, and Zenaida but without their apparent written authority.[8] The deed of sale was also not notarized.[9]
On July 21, 1992, the Pahuds paid P35,792.31 to the Los Baños Rural Bank where the subject property was mortgaged.[10] The bank issued a release of mortgage and turned over the owner's copy of the OCT to the Pahuds.[11] Over the following months, the Pahuds made more payments to Eufemia and her siblings totaling to P350,000.00.[12] They agreed to use the remaining P87,500.00[13] to defray the payment for taxes and the expenses in transferring the title of the property.[14] When Eufemia and her co-heirs drafted an extra-judicial settlement of estate to facilitate the transfer of the title to the Pahuds, Virgilio refused to sign it.[15]
On July 8, 1993, Virgilio's co-heirs filed a complaint[16] for judicial partition of the subject property before the RTC of Calamba, Laguna. On November 28, 1994, in the course of the proceedings for judicial partition, a Compromise Agreement[17] was signed with seven (7) of the co-heirs agreeing to sell their undivided shares to Virgilio for P700,000.00. The compromise agreement was, however, not approved by the trial court because Atty. Dimetrio Hilbero, lawyer for Eufemia and her six (6) co-heirs, refused to sign the agreement because he knew of the previous sale made to the Pahuds.[18]
On December 1, 1994, Eufemia acknowledged having received P700,000.00 from Virgilio.[19] Virgilio then sold the entire property to spouses Isagani Belarmino and Leticia Ocampo (Belarminos) sometime in 1994. The Belarminos immediately constructed a building on the subject property.
Alarmed and bewildered by the ongoing construction on the lot they purchased, the Pahuds immediately confronted Eufemia who confirmed to them that Virgilio had sold the property to the Belarminos.[20] Aggrieved, the Pahuds filed a complaint in intervention[21] in the pending case for judicial partition.
After trial, the RTC upheld the validity of the sale to petitioners. The dispositive portion of the decision reads:
WHEREFORE, the foregoing considered, the Court orders:
- the sale of the 7/8 portion of the property covered by OCT No. O (1655) O-15 by the plaintiffs as heirs of deceased Sps. Pedro San Agustin and Agatona Genil in favor of the Intervenors-Third Party plaintiffs as valid and enforceable, but obligating the Intervenors-Third Party plaintiffs to complete the payment of the purchase price of P437,500.00 by paying the balance of P87,500.00 to defendant Fe (sic) San Agustin Magsino. Upon receipt of the balance, the plaintiff shall formalize the sale of the 7/8 portion in favor of the Intervenor[s]-Third Party plaintiffs;
- declaring the document entitled "Salaysay sa Pagsang-ayon sa Bilihan" (Exh. "2-a") signed by plaintiff Eufemia San Agustin attached to the unapproved Compromise Agreement (Exh. "2") as not a valid sale in favor of defendant Virgilio San Agustin;
- declaring the sale (Exh. "4") made by defendant Virgilio San Agustin of the property covered by OCT No. O (1655)-O-15 registered in the names of Spouses Pedro San Agustin and Agatona Genil in favor of Third-party defendant Spouses Isagani and Leticia Belarmino as not a valid sale and as inexistent;
- declaring the defendant Virgilio San Agustin and the Third-Party defendants spouses Isagani and Leticia Belarmino as in bad faith in buying the portion of the property already sold by the plaintiffs in favor of the Intervenors-Third Party Plaintiffs and the Third-Party Defendant Sps. Isagani and Leticia Belarmino in constructing the two-[storey] building in (sic)the property subject of this case; and
- declaring the parties as not entitled to any damages, with the parties shouldering their respective responsibilities regarding the payment of attorney[']s fees to their respective lawyers.
No pronouncement as to costs.
SO ORDERED.[22]
Not satisfied, respondents appealed the decision to the CA arguing, in the main, that the sale made by Eufemia for and on behalf of her other co-heirs to the Pahuds should have been declared void and inexistent for want of a written authority from her co-heirs. The CA yielded and set aside the findings of the trial court. In disposing the issue, the CA ruled:
WHEREFORE, in view of the foregoing, the Decision dated January 14, 1998, rendered by the Regional Trial Court of Calamba, Laguna, Branch 92 in Civil Case No. 2011-93-C for Judicial Partition is hereby REVERSED and SET ASIDE, and a new one entered, as follows:
| (1) | The case for partition among the plaintiffs-appellees and appellant Virgilio is now considered closed and terminated; |
| (2) | Ordering plaintiffs-appellees to return to intervenors-appellees the total amount they received from the latter, plus an interest of 12% per annum from the time the complaint [in] intervention was filed on April 12, 1995 until actual payment of the same; |
| (3) | Declaring the sale of appellant Virgilio San Agustin to appellants spouses, Isagani and Leticia Belarmino[,] as valid and binding; |
| (4) | Declaring appellants-spouses as buyers in good faith and for value and are the owners of the subject property. |
No pronouncement as to costs.
SO ORDERED.[23]
Petitioners now come to this Court raising the following arguments:
- The Court of Appeals committed grave and reversible error when it did not apply the second paragraph of Article 1317 of the New Civil Code insofar as ratification is concerned to the sale of the 4/8 portion of the subject property executed by respondents San Agustin in favor of petitioners;
- The Court of Appeals committed grave and reversible error in holding that respondents spouses Belarminos are in good faith when they bought the subject property from respondent Virgilio San Agustin despite the findings of fact by the court a quo that they were in bad faith which clearly contravenes the presence of long line of case laws upholding the task of giving utmost weight and value to the factual findings of the trial court during appeals; [and]
- The Court of Appeals committed grave and reversible error in holding that respondents spouses Belarminos have superior rights over the property in question than petitioners despite the fact that the latter were prior in possession thereby misapplying the provisions of Article 1544 of the New Civil Code.[24]
The focal issue to be resolved is the status of the sale of the subject property by Eufemia and her co-heirs to the Pahuds. We find the transaction to be valid and enforceable.
Article 1874 of the Civil Code plainly provides:
Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.
Also, under Article 1878,[25] a special power of attorney is necessary for an agent to enter into a contract by which the ownership of an immovable property is transmitted or acquired, either gratuitously or for a valuable consideration. Such stringent statutory requirement has been explained in Cosmic Lumber Corporation v. Court of Appeals:[26]
[T]he authority of an agent to execute a contract [of] sale of real estate must be conferred in writing and must give him specific authority, either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in the contract he did execute. A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. The express mandate required by law to enable an appointee of an agency (couched) in general terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. For the principal to confer the right upon an agent to sell real estate, a power of attorney must so express the powers of the agent in clear and unmistakable language. When there is any reasonable doubt that the language so used conveys such power, no such construction shall be given the document.[27]
In several cases, we have repeatedly held that the absence of a written authority to sell a piece of land is, ipso jure, void,[28] precisely to protect the interest of an unsuspecting owner from being prejudiced by the unwarranted act of another.
Based on the foregoing, it is not difficult to conclude, in principle, that the sale made by Eufemia, Isabelita and her two brothers to the Pahuds sometime in 1992 should be valid only with respect to the 4/8 portion of the subject property. The sale with respect to the 3/8 portion, representing the shares of Zenaida, Milagros, and Minerva, is void because Eufemia could not dispose of the interest of her co-heirs in the said lot absent any written authority from the latter, as explicitly required by law. This was, in fact, the ruling of the CA.
Still, in their petition, the Pahuds argue that the sale with respect to the 3/8 portion of the land should have been deemed ratified when the three co-heirs, namely: Milagros, Minerva, and Zenaida, executed their respective special power of attorneys[29] authorizing Eufemia to represent them in the sale of their shares in the subject property.[30]
While the sale with respect to the 3/8 portion is void by express provision of law and not susceptible to ratification,[31] we nevertheless uphold its validity on the basis of the common law principle of estoppel.
Article 1431 of the Civil Code provides:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.
True, at the time of the sale to the Pahuds, Eufemia was not armed with the requisite special power of attorney to dispose of the 3/8 portion of the property. Initially, in their answer to the complaint in intervention,[32] Eufemia and her other co-heirs denied having sold their shares to the Pahuds. During the pre-trial conference, however, they admitted that they had indeed sold 7/8 of the property to the Pahuds sometime in 1992.[33] Thus, the previous denial was superseded, if not accordingly amended, by their subsequent admission.[34] Moreover, in their Comment,[35] the said co-heirs again admitted the sale made to petitioners.[36]
Interestingly, in no instance did the three (3) heirs concerned assail the validity of the transaction made by Eufemia to the Pahuds on the basis of want of written authority to sell. They could have easily filed a case for annulment of the sale of their respective shares against Eufemia and the Pahuds. Instead, they opted to remain silent and left the task of raising the validity of the sale as an issue to their co-heir, Virgilio, who is not privy to the said transaction. They cannot be allowed to rely on Eufemia, their attorney-in-fact, to impugn the validity of the first transaction because to allow them to do so would be tantamount to giving premium to their sister's dishonest and fraudulent deed. Undeniably, therefore, the silence and passivity of the three co-heirs on the issue bar them from making a contrary claim.
It is a basic rule in the law of agency that a principal is subject to liability for loss caused to another by the latter's reliance upon a deceitful representation by an agent in the course of his employment (1) if the representation is authorized; (2) if it is within the implied authority of the agent to make for the principal; or (3) if it is apparently authorized, regardless of whether the agent was authorized by him or not to make the representation.[37]
By their continued silence, Zenaida, Milagros and Minerva have caused the Pahuds to believe that they have indeed clothed Eufemia with the authority to transact on their behalf. Clearly, the three co-heirs are now estopped from impugning the validity of the sale from assailing the authority of Eufemia to enter into such transaction.
Accordingly, the subsequent sale made by the seven co-heirs to Virgilio was void because they no longer had any interest over the subject property which they could alienate at the time of the second transaction.[38] Nemo dat quod non habet. Virgilio, however, could still alienate his 1/8 undivided share to the Belarminos.
The Belarminos, for their part, cannot argue that they purchased the property from Virgilio in good faith. As a general rule, a purchaser of a real property is not required to make any further inquiry beyond what the certificate of title indicates on its face.[39] But the rule excludes those who purchase with knowledge of the defect in the title of the vendor or of facts sufficient to induce a reasonable and prudent person to inquire into the status of the property.[40] Such purchaser cannot close his eyes to facts which should put a reasonable man on guard, and later claim that he acted in good faith on the belief that there was no defect in the title of the vendor. His mere refusal to believe that such defect exists, or his obvious neglect by closing his eyes to the possibility of the existence of a defect in the vendor's title, will not make him an innocent purchaser for value, if afterwards it turns out that the title was, in fact, defective. In such a case, he is deemed to have bought the property at his own risk, and any injury or prejudice occasioned by such transaction must be borne by him.[41]
In the case at bar, the Belarminos were fully aware that the property was registered not in the name of the immediate transferor, Virgilio, but remained in the name of Pedro San Agustin and Agatona Genil.[42] This fact alone is sufficient impetus to make further inquiry and, thus, negate their claim that they are purchasers for value in good faith.[43] They knew that the property was still subject of partition proceedings before the trial court, and that the compromise agreement signed by the heirs was not approved by the RTC following the opposition of the counsel for Eufemia and her six other co-heirs.[44] The Belarminos, being transferees pendente lite, are deemed buyers in mala fide, and they stand exactly in the shoes of the transferor and are bound by any judgment or decree which may be rendered for or against the transferor.[45] Furthermore, had they verified the status of the property by asking the neighboring residents, they would have been able to talk to the Pahuds who occupy an adjoining business establishment[46] and would have known that a portion of the property had already been sold. All these existing and readily verifiable facts are sufficient to suggest that the Belarminos knew that they were buying the property at their own risk.
WHEREFORE, premises considered, the April 23, 2003 Decision of the Court of Appeals as well as its October 8, 2003 Resolution in CA-G.R. CV No. 59426, are REVERSED and SET ASIDE. Accordingly, the January 14, 1998 Decision of Branch 92 of the Regional Trial Court of Calamba, Laguna is REINSTATED with the MODIFICATION that the sale made by respondent Virgilio San Agustin to respondent spouses Isagani Belarmino and Leticia Ocampo is valid only with respect to the 1/8 portion of the subject property. The trial court is ordered to proceed with the partition of the property with dispatch.
SO ORDERED.
Chico-Nazario, Velasco, Jr., and Peralta, JJ., concur.
Carpio-Morales, J., Please see concurring dissenting opinion.
* Additional member in lieu of Associate Justice Consuelo Ynares-Santiago per Special Order No. 679 dated August 3, 2009.
** In lieu of Associate Justice Consuelo-Ynares-Santiago per Special Order No. 678 dated August 3, 2009.
[1] Penned by Associate Justice Juan Q. Enriquez, Jr., with Associate Justices Mercedes Gozo-Dadole and Hakim S. Abdulwahid, concurring; rollo, pp. 35-45.
[2] Id. at 47-48.
[3] Rollo, pp. 121-146.
[4] Id. at 85-86.
[5] Id. at 49-50.
[6] Id. at 37-38.
[7] Id. at 61.
[8] Id. at 37.
[9] Id. at 50, 140.
[10] Id. at 13.
[11] Id. at 38.
[12] Id. at 89-96.
[13] Id. at 97.
[14] Id. at 13, 140.
[15] Id. at 38.
[16] Id. at 51-54. The complaint was docketed as Civil Case No. 2011-93-C.
[17] Id. at 69-71.
[18] Id. at 136, 139.
[19] Id. at 106.
[20] Id. at 135-136.
[21] Id. at 72-84.
[22] Id. at 145-146.
[23] Id. at 44-45.
[24] Id. at 19.
[25] Article 1878(5) provides:
Art. 1878. Special powers of attorney are necessary in the following cases:
x x x x
(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration.
[26] 332 Phil. 948 (1996).
[27] Id. at 957-958. (Emphasis supplied, citations omitted.)
[28] Estate of Lino Olaguer, etc. v. Hon. CA and Emiliano M. Ongjoco, G.R. No. 173312, August 26, 2008; Dizon v. Court of Appeals, G.R. Nos. 122544 and 124741, January 28, 2003, 396 SCRA 151, 155; AF Realty & Development, Inc. v. Dieselman Freight Services, Co., 424 Phil. 446, 455 (2002); San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals, G.R. No. 129459, September 29, 1998, 296 SCRA 631, 648.
[29] Special Power of Attorney of Isabelita San Agustin-Lustenberger was executed on September 28, 1991, rollo, p. 61 (Annex "E"); Special Power of Attorney of Milagros San Agustin-Fortman was executed in December 1992, id. at 62 (Annex "F"); Special Power of Attorney of Minerva San Agustin-Atkinson was executed, undated, but was witnessed by G.R. Stephenson, Commissioner for Oaths, on February 12, 1993, id. at 63 (Annex "G"); and Special Power of Attorney of Zenaida San Agustin-McCrae was executed on May 10, 1993, id. at 64 (Annex "H").
[30] Rollo, p. 20.
[31] CIVIL CODE, Art. 1409 provides in part:
Art. 1409. The following contracts are inexistent and void from the beginning:
x x x x
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.
[32] I Records, p. 26; Exh. "I-A," entitled Answer to Counterclaim dated December 14, 1993.
[33] II Records, pp. 262-264.
[34] RULES OF COURT, Rule 10, Sec. 5 provides in full:
SEC. 5. Amendment to conform to or authorize presentation of evidence. - When issues not raised by the pleadings are tried with the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so with liberality if the presentation of the merits of the action and the ends of substantial justice will be subserved thereby. The court may grant a continuance to enable the amendment to be made.
[35] Rollo, pp. 200-204.
[36] Id. at 200.
[37] See De Leon, Comments and Cases on Partnership, Agency and Trusts, 2005 edition, p. 538, citing Mechem, Cases on the Law of Agency, p. 230.
[38] CIVIL CODE, Art. 1409 provides in part:
Art. 1409. The following contracts are inexistent and void from the beginning:
x x x x
(3) Those whose cause or object did not exist at the time of the transaction;
x x x x
These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.
[39] Lu v. Intermediate Appellate Court, G.R. No. 70149, January 30, 1989, 169 SCRA 595, 604; Lopez v. Court of Appeals, G.R. No. 49739, January 20, 1989, 169 SCRA 271, 275-276.
[40] Abad v. Guimba, G.R. No. 157002, July 29, 2005, 465 SCRA 356, 367.
[41] Bailon-Casilao v. Court of Appeals, G.R. No. L-78178, April 15, 1988, 160 SCRA 738, 750.
[42] I Records, pp. 5-6.
[43] Guaranteed Homes, Inc. v. Heirs of Maria P. Valdez, et al., G.R. No. 171531, January 30, 2009.
[44] I Records, pp. at 60-61.
[45] Voluntad v. Dizon, G.R. No. 132294, August 26, 1999, 313 SCRA 209.
[46] Rollo, p. 16.
CONCURRING AND DISSENTING OPINION
CARPIO MORALES, J.:
The ponencia reinstates the trial court's Decision of January 14, 1998 with the modification that "the sale made by respondent Virgilio San Agustin to respondent spouses Isagani Belarmino and Leticia Ocampo is valid only with respect to the 1/8 portion of the subject property."[1]
I submit that the validity of the sale to spouses Belarmino extends to 4/8 or one-half of the property, inclusive of the combined 3/8 share of respondents-sisters Zenaida, Milagros and Minerva, all bearing the maiden surname of San Agustin, thus leaving only one-half of the property to petitioners Purita Pahud, et al. who earlier purchased from Eufemia San Agustin (Eufemia) the property including the 3/8 portion over which no written authority from the three sisters was secured. The ponente, Justice Nachura, in fact, agrees to this proposition "in principle."[2]
The ponencia even rejects petitioners' contention that the special power of attorney subsequently executed by Zenaida, Milagros and Minerva in favor of Eufemia effectively ratified their earlier purchase of the property insofar as the 3/8 portion is concerned, for the established reason that void contracts or the illegal terms thereof[3] are not susceptible to ratification. The subsequent execution by the three sisters of the respective special powers of attorney only means that they considered the previous sale null and recognized the salability of their 3/8 portion, thus paving the way for its transfer to Virgilio San Agustin and its eventual sale to the spouses Belarmino.
Indeed, as the ponencia elucidates, Articles 1874 and 1878 of the Civil Code clearly provide that a special power of attorney is necessary for an agent to "enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration" and that specifically in cases of sale of a piece of land or any interest therein through an agent, "the authority of the latter shall be in writing; otherwise the sale shall be void."
The ponencia takes one step further, however, in upholding the validity of the sale of the 3/8 portion belonging to the 3 sisters to petitioner notwithstanding the want of a written authority to sell, by applying the principle of estoppel. It ratiocinates:
While the sale with respect to the 3/8 portion is void by express provision of law and not susceptible to ratification, we nevertheless uphold its validity on the basis of the common law principle of estoppel.
Article 1431 of the Civil Code provides:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon
True, at the time of the sale to the Pahuds, Eufemia was not armed with the requisite special power of attorney to dispose of the 3/8 portion of the property. Initially, in their answer to the complaint in intervention, Eufemia and her other co-heirs denied having sold their shares to the Pahuds. During the pre-trial conference, however, they admitted that they had indeed sold 7/8 of the property to the Pahuds sometime in 1992. Thus, the previous denial was superseded, if not accordingly amended, by their subsequent admission. Moreover, in their Comment, the said co-heirs again admitted the sale made to petitioners.
Interestingly, in no instance did the three (3) heirs concerned assail the validity of the transaction made by Eufemia to the Pahuds on the basis of want of written authority to sell. They could have easily filed a case for annulment of the sale of their respective shares against Eufemia and the Pahuds. Instead, they opted to remain silent and left the task of raising the validity of the sale as an issue to their co-heir, Virgilio, who is not privy to the said transaction. They cannot be allowed to rely on Eufemia, their attorney-in-fact, to impugn the validity of the first transaction because to allow them to do so would be tantamount to giving premium to their sister's dishonest and fraudulent deed. Undeniably, therefore, the silence and passivity of the three co-heirs on the issue bar them from making a contrary claim.
It is a basic rule in the law of agency that a principal is subject to liability for loss caused to another by the latter's reliance upon a deceitful representation by an agent in the course of his employment (1) if the representation is authorized; (2) if it is within the implied authority of the agent to make for the principal; or (3) if it is apparently authorized, regardless of whether the agent was authorized by him or not to make the representation.
By their continued silence, Zenaida, Milagros and Minerva have caused the Pahuds to believe that they have indeed clothed Eufemia with the authority to transact on their behalf. Clearly, the three co-heirs are now estopped from impugning the validity of the sale from assailing the authority of Eufemia to enter such transaction.[4] (Emphasis and underscoring supplied)
It is from this aspect of the ponencia that I respectfully dissent.
Equity cannot supplant or contravene the law.[5]
Article 1432 of the Civil Code expressly states that the principles of estoppel are adopted "insofar as they are not in conflict with the provisions of this Code," among other laws.
Indeed, estoppel, being a principle in equity, cannot be applied in the presence of a law clearly applicable to the case. The Court is first and foremost a court of law. While equity might tilt on the side of one party, the same cannot be enforced so as to overrule positive provisions of law in favor of the other.[6]
Moreover, the evident purpose of the legal requirement of such written authority is not only to safeguard the interest of an unsuspecting owner from being prejudiced by the unauthorized act of another, but also to caution the buyer to assure himself of the specific authorization of the putative agent. In other words, the drafters of the law already saw the risky predicament of selling lands through agents which, in the absence of a specific law, would otherwise ultimately depend on equity to resolve disputes such as the present case. The law undoubtedly seeks to prevent the following confusion:
Case law tells us that the elements of estoppel are: "first, the actor who usually must have knowledge, notice or suspicion of the true facts, communicates something to another in a misleading way, either by words, conduct or silence; second, the other in fact relies, and relies reasonably or justifiably, upon that communication; third, the other would be harmed materially if the actor is later permitted to assert any claim inconsistent with his earlier conduct; and fourth, the actor knows, expects or foresees that the other would act upon the information given or that a reasonable person in the actor's position would expect or foresee such action."[7]
The depicted scenario is precisely the misunderstanding between parties to such type of sale which the lawmakers sought to avoid in prescribing the conditions for the validity of such sale of land. The present case is a classic example of a tedious litigation which had ensued as a result of such misunderstanding. This is what the law endeavors to avert.[8] It is not for the Court to suspend the application of the law and revert to equitable grounds in resolving the present dispute.
Assuming arguendo that estoppel can contradict positive law, I submit that Article 1431 of the Civil Code does not apply since it speaks of one's prior admission or representation, without which the other person could not have relied on it before acting accordingly.
The ponencia cites acts or omissions on the part of the three sisters which came after the fact such as their "admission" and "continued silence" which, however, could not retroact to the time of the previous sale as to consider petitioners to have accordingly relied on such admission or representation before buying the property from Eufemia. The application of the principle of estoppel is proper and timely in heading off shrewd efforts at renouncing one's previous acts to the prejudice of another who had dealt honestly and in good faith.[9] It is thus erroneous to conclude that Zenaida, Milagros and Minerva have caused petitioners to believe that they have clothed Eufemia with the authority to transact on their behalf.
Could the three sisters ratify the previous sale through their subsequent acts or omissions? I opine they cannot. The ponencia concedes that "the sale with respect to the 3/8 portion is void by express provision of law and not susceptible to ratification."
The previous sale being violative of an express mandate of law, such cannot be ratified by estoppel. Estoppel cannot give validity to an act that is prohibited by law or one that is against public policy. Neither can the defense of illegality be waived.[10] An action or defense for the declaration of the inexistence of a contract does not prescribe.[11] Amid the confusion from the double dealing made by their sibling Eufemia, the three sisters expectedly kept mum about it. Succinctly, their "continued silence" cannot be taken against them. Bargaining away a provision of law should not be countenanced.
Neither can their "admission" to a question of law bind them. The ponencia highlights the admission made by Eufemia and her co-heirs during the pre-trial conference before the trial court and in their Comment on the present petition that they had earlier sold 7/8 of the property to petitioners. These statements could not mean, however, as an admission in petitioners' favor that Zenaida, Milagros and Minerva validly sold their respective shares to petitioners. They could only admit to the statement of fact[12] that the sale took place, but not to the conclusion of law that the sale was valid, precisely because the validity of the sales transaction is at issue as it was contested by the parties.
Further, the textbook citation of the rule involving a principal's responsibility for an agent's misrepresentation within the scope of an agent's authority as annotated by the cited author under Article 1900 of the Civil Code is inapplicable. The qualifying phrase "in the course of his employment" presupposes that an agency relationship is existing. The quoted rule clearly recites that a principal is held liable if the "deceitful representation" (not the agency relationship) is authorized either expressly, impliedly, or apparently. In this case, there was no agency relationship to speak of.
I, therefore, vote to reinstate the trial court's January 14, 1998 Decision with modification that the sale made by respondent Virgilio San Agustin to respondent spouses Isagani Belarmino and Leticia Ocampo is valid with respect to the 4/8 portion of the subject property.
[1] Ponencia, p. 12 (underscoring supplied).
[2] Ponencia, p. 7.
[3] CIVIL CODE, Art. 1420 in relation to Art. 493.
[4] Ponencia, pp. 8-10.
[5] Valdevieso v. Damalerio, 492 Phil. 51, 59 (2005).
[6] Vide id. A waiver will be inoperative and void if it infringes on the rights of others (Ouano v. Court of Appeals, infra at 704).
[7] Phil. Bank of Communications v. CA, 352 Phil. 1, 9 (1998).
[8] Cf. Powton Conglomerate, Inc. v. Agcolicol, 448 Phil. 643, 653 (2003) for analogy respecting the vital preconditions to the validity of a contract for additional works under Article 1724 of the Civil Code.
[9] Vide Pureza v. CA, 352 Phil. 717, 722 (1998).
[10] Vide Ouano v. Court of Appeals, 446 Phil. 690, 708 (2003).
[11] CIVIL CODE, Art. 1410.
[12] RULES OF COURT, Rule 18, Sec. 2 (d). Pre-trial allows the parties to obtain stipulations or admissions of fact and of documents.
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THIRD DIVISION
[ G.R. No. 160743, August 04, 2009 ]
CORNELIA BALADAD (REPRESENTED BY HEINRICH M. ANGELES AND REX AARON A. BALADAD), PETITIONER, VS. SERGIO A. RUBLICO AND SPOUSES LAUREANO F. YUPANO, RESPONDENTS.
D E C I S I O N
NACHURA, J.:
Before us is a petition for review of the November 5, 2002 Decision[1] of the Court of Appeals (CA), as well as its November 10, 2003 Resolution[2] in CA-G.R. CV No. 34979, which reversed and set aside the September 9, 1991 Decision[3] of Branch 133 of the Regional Trial Court (RTC) of Makati City, in a complaint for annulment of sale, cancellation of title and damages[4] filed by petitioner Cornelia Baladad against herein respondents.
Below are the antecedent facts.
Two parcels of land located in what was then called the Municipality of Makati, Province of Rizal were registered in the name of Julian Angeles on December 20, 1965 under Transfer Certificate of Title (TCT) No. 155768.[5] On December 3, 1968, Julian and Corazon Rublico, after co-habiting for some time, got married. Julian was already 65 years old then, while Corazon was already 67.[6] At that time, Corazon already had a son, respondent Sergio A. Rublico, by Teofilo Rublico, who died sometime before the outbreak of the Second World War.[7] After Teofilo's death, Corazon cohabited with Panfilo de Jesus and then, later, with Julian. Julian died on February 2, 1969[8] leaving no compulsory heirs[9] except his wife and his brother, Epitacio.
On February 4, 1985, while on her death bed, Cornelia was surrounded by four individuals - her niece, petitioner Cornelia Baladad; her nephew, Vicente Angeles; a certain Rosie Francisco; and notary public Atty. Julio Francisco who had been called, accompanied by Cornelia herself to Corazon's house, to notarize a deed entitled Extrajudicial Settlement of Estate with Absolute Sale. In his testimony, Atty. Francisco said that Corazon imprinted her thumbmark on the document after he read and explained the contents thereof in Tagalog to her.[10] In the said document, Corazon and Epitacio adjudicated unto themselves the two lots registered in the name of Julian - with three-fourths (¾) of the property going to Corazon
and the remaining one-fourth (¼) to Epitacio. The document also stated that both Corazon and Epitacio conveyed by way of absolute sale both their shares in the said lots in favor of Cornelia, Epitacio's daughter, in exchange for the amount of P107,750.00. Corazon's thumbmark was imprinted at the bottom of the said deed, while Vicente, Epitacio's son, signed in behalf of Epitacio by virtue of a power of attorney.[11] There was no signature of Cornelia on the said document.
Two days later, Corazon passed away.
Title over the said lots remained in the name of Julian, but on July 20, 1987, more than two years after Corazon's death, respondent Sergio executed an Affidavit of Adjudication by Sole Heir of Estate of Deceased Person[12] adjudicating unto himself the same parcels of land which had been subject of the deed of sale between Corazon and Cornelia. On October 27, 1987, Sergio filed a petition for reconstitution of the owner's copy of TCT No. 155768 averring that after the death of Corazon, he tried to locate the copy of the title but to no avail.[13] The petition was granted on January 11, 1988[14] and a new owner's duplicate title (TCT No. 155095) was issued in the name of Sergio on April 18, 1988.[15]
On May 31, 1988, Sergio sold the two lots to spouses Laureano and Felicidad Yupano for P100,000.00.[16] Sergio's certificate of title was cancelled and TCT No. 155338 was issued in favor of the Yupanos. On July 26, 1988, the said title was also cancelled and TCT Nos. 156312[17] and 156313[18] separately covering the two parcels of land were issued. On July 17, 1990, Cornelia caused the annotation on the said TCTs of her adverse claim over the said properties.
Meanwhile, there were seven families who occupied the lots and paid rentals to Julian and, later, to Corazon. After Corazon's death, they paid rentals to Cornelia through Pacifica Alvaro, and later to Cornelia's brother, Vicente, when Cornelia transferred her residence to the United States. When the Yupanos demanded payment of rentals from the tenants, the latter filed a complaint for interpleader on May 19, 1989. The case was docketed as Civil Case No. 89-3947. On September 3, 1990, Branch 148 of the Makati RTC rendered a Decision[19] declaring the Yupanos as the legal and lawful owners of the two lots.
On August 3, 1990, a month before the promulgation of the decision, Cornelia filed a complaint for annulment of sale, cancellation of title and damages, which is now the subject of this Rule 45 petition. Cornelia argued that Sergio knew of the sale made by Corazon in her favor and was even given part of the proceeds. Cornelia also averred that the Yupanos could not be considered as buyers in good faith, because they only lived a block from the disputed properties and had knowledge that the two lots had been sold to Cornelia prior to Corazon's death.[20]
For their part, respondents argued that the Extrajudicial Settlement with Absolute Sale dated February 4, 1985 could not have been executed because at the time, Corazon was already dying. Ignacio Rublico, Sergio's son, also testified that he saw Vicente Angeles holding the hand of Corazon to affix her thumbmark on a blank sheet of paper.[21] Sergio also argued that the property was originally bought by his mother, but was only registered in the name of Julian in keeping with the tradition at that time.[22]
After the trial, Branch 133 of the Makati RTC ruled in favor of Cornelia.[23] Upon appeal, the CA reversed the RTC ruling[24] prompting Cornelia to file a motion for reconsideration,[25] but the same was denied for lack of merit.[26] Hence, this petition.
The determinative issue is the validity of the Extrajudicial Settlement of Estate with Absolute Sale purportedly executed by Corazon prior to her death.
We find in favor of petitioner.
The Extrajudicial Settlement of Estate with Absolute Sale executed by Corazon and Epitacio through the latter's attorney-in-fact, Vicente Angeles, partakes of the nature of a contract. To be precise, the said document contains two contracts, to wit: the extrajudicial adjudication of the estate of Julian Angeles between Corazon and Epitacio as Julian's compulsory heirs, and the absolute sale of the adjudicated properties to Cornelia. While contained in one document, the two are severable and each can stand on its own. Hence, for its validity, each must comply with the requisites prescribed in Article 1318 of the Civil Code, namely (1) consent of the contracting parties; (2) object certain, which is the subject matter of the contract; and (3) cause of the obligation which is established.
During the trial, respondents argued that the document was not valid because at the time it was executed, Corazon was already weak and could not have voluntarily given her consent thereto. One of the witnesses for the defense even testified that it was Vicente who placed Corazon's thumbprint on a blank document, which later turned out to be the Extrajudicial Adjudication with Absolute Sale. We are, however, inclined to agree with the RTC's finding on this matter, viz:
Ignacio is not a reliable witness. He was very certain the event took place on February 4, 1985 and Corazon was already dead. This was his testimony on cross-examination. He had forgotten that Corazon died on February 6, 1985 or two days after. So, when confronted with this contradiction, he had to change his stance and claim that Corazon was still alive when it happened.[27]
It is also noteworthy that in the course of the trial, respondents did not question Corazon's mental state at the time she executed the said document.
Respondents only focused on her physical weakness, arguing that she could not have executed the deed because she was already dying and, thus, could not appear before a notary public.[28] Impliedly, therefore, respondents indulged the presumption that Corazon was still of sound and disposing mind when she agreed to adjudicate and sell the disputed properties on February 4, 1985.
Respondents also failed to refute the testimony of Atty. Francisco, who notarized the deed, that he personally read to Corazon the contents of the Extrajudicial Settlement of Estate with Absolute Sale, and even translated its contents to Tagalog.
And, most important of all is the fact that the subject deed is, on its face, unambiguous. When the terms of a contract are lawful, clear and unambiguous, facial challenge cannot be allowed. We should not go beyond the provisions of a clear and unambiguous contract to determine the intent of the parties thereto, because we will run the risk of substituting our own interpretation for the true intent of the parties.
It is immaterial that Cornelia's signature does not appear on the Extrajudicial Settlement of Estate with Absolute Sale. A contract of sale is perfected the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price.[29] The fact that it was Cornelia herself who brought Atty. Francisco to Corazon's house to notarize the deed shows that she had previously given her consent to the sale of the two lots in her favor. Her subsequent act of exercising dominion over the subject properties further strengthens this assumption.
Based on these findings, we are constrained to uphold the validity of the disputed deed. Accordingly, respondent Sergio Rublico never had the right to sell the subject properties to the Yupanos, because he never owned them to begin with. Nemo dat quod non habet. Even before he could inherit any share of the properties from his mother, Corazon, the latter had already sold them to Cornelia.
The Yupanos, for their part, cannot feign ignorance of all these, and argue that Sergio's certificate of title was clean on its face. Even prior to May 31, 1988, when they bought the properties from Sergio, it had been widely known in the neighborhood and among the tenants residing on the said lots that ownership of the two parcels of land had been transferred to Cornelia as, in fact, it was Cornelia's brother, Vicente, who had been collecting rentals on the said properties. The Yupanos lived only a block away from the disputed lots.[30] The husband, Laureano Yupano, was relatively close to Julian and to Epitacio and had known Cornelia before the latter left to live in the United States from 1979 to 1983.[31] Before he bought the property from Sergio, Laureano himself verified that there were tenants who had been paying rentals to Vicente.[32] All these should have alerted him to doubt the validity of Sergio's title over the said lots. Yet, the Yupanos chose to ignore these obvious indicators.
In Abad v. Guimba,[33] we explained:
[A]s a rule, the purchaser is not required to explore further than what the Certificate indicates on its face. This rule, however, applies only to innocent purchasers for value and in good faith; it excludes a purchaser who has knowledge of a defect in the title of the vendor, or of facts sufficient to induce a reasonable prudent man to inquire into the status of the property.[34]
We thus declare the Affidavit of Adjudication by Sole Heir of Estate of Deceased person executed by Sergio Rublico to be void and without any effect. The sale made by him to spouses Yupano is, likewise, declared null and void. Respondent Sergio Rublico is ordered to return the amount of P100,000.00 paid to him by spouses Laureano Yupano, less the amount spent on the acquisition of the invalid title procured by him with the acquiescence of the Yupanos.
WHEREFORE, premises considered, the Decision of the Court of Appeals in CA-G.R. CV No. 34979 dated November 5, 2002 is hereby REVERSED and SET ASIDE. Accordingly, the Decision of the Regional Trial Court of Makati dated September 9, 1991 is REINSTATED with MODIFICATION in that:
- the Extrajudicial Adjudication of Estate with Absolute Sale dated February 4, 1985 as VALID;
- the sale between respondent Sergio Rublico and Spouses Laureano Yupano is NULL and VOID. Respondent Sergio Rublico is ordered to return the P100,000.00 paid by the Yupanos, less the amount spent on the acquisition of the invalid title procured by him with the acquiescence of the Yupanos; and
- the Register of Deeds of Makati is ordered to CANCEL Transfer Certificate of Title Nos. 156312 and 156313 in the name of Laureano Yupano and, in lieu thereof, RESTORE Transfer Certificate No. 155768.
SO ORDERED.
Ynares-Santiago, (Chairperson), Chico-Nazario, Velasco, Jr., and Peralta, JJ., concur.
[1] Penned by Associate Justice Remedios A. Salazar-Fernando, with Associate Justices Ruben T. Reyes (later, Supreme Court Associate Justice) and Edgardo F. Sundiam, concurring; rollo, pp. 105-117.
[2] Id. at 143-145.
[3] Id. at 49-60.
[4] Records, pp. 1-8.
[5] Id. at 121-122.
[6] Id. at 40.
[7] Id. at 26.
[8] Id. at 41.
[9] Rollo, p. 50.
[10] TSN, July 5, 1991, pp. 13-14.
[11] Id. at 203-204.
[12] Id. at 13.
[13] Id. at 43-44.
[14] Id. at 47-48
[15] Id. at 50.
[16] Id. at 14-15.
[17] Id. at 212-214.
[18] Id. at 215-217.
[19] Id. at 104-108 and rollo, p. 110.
[20] Records, pp. 1-4
[21] TSN, May 21, 1991, pp. 20-23.
[22] Rollo, p. 110.
[23] The dispositive portion of decision of Branch 133 of the RTC of Makati dated September 9, 1991 reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants as follows:
(a) Declaring the affidavit of Self-Adjudication dated July 20, 1987 and the Affidavit of Extrajudicial Settlement of a Deceased Person dated February 16, 1988 of Sergio A. Rublico, null and void;
(b) Declaring the Deed of Absolute Sale of the litigated property by Sergio Rublico in favor of Laureano Yupano, null and void;
(c) Ordering the Register of Deeds of Makati to cancel Transfer Certificate of Title Nos. 156312 and 156313 in the name of Laureano Yupano and in lieu thereof to restore Transfer Certificate Title No. 155768 and issue a duplicate owner's certificate of title thereof in the name of Cornelia A. Baladad;
(d) Ordering defendants Sergio A. Rublico and Spouses Laureano F. Yupano to pay, jointly and severally, the amount of P10,000.00 as moral damages; and the amount of P10,000.00 as attorney's fees; and, to pay the costs.
SO ORDERED. (Rollo, pp. 59-60.)
[24] The fallo of the CA decision dated November 5, 2002 reads:
WHEREFORE, premises considered, the decision dated September 9, 1991 of the Regional Trial Court, Branch 133, Makati in Civil Case No. 90-2093 is hereby REVERSED and SET ASIDE, thus declaring: (1) the Deed of Extrajudicial Settlement with Absolute Sale in favor of plaintiff-appellee as null and void; (2) the Affidavit of Self-Adjudication executed by defendant-appellant Sergio Rublico as valid; and (3) defendants-appellants Yupanos as purchasers in good faith and lawful owners of the subject parcels of land.
SO ORDERED. (Id. at 116-117.)
[25] Id. at 118-141.
[26] Id. at 143-145.
[27] Id. at 54.
[28] Id. at 109.
[29] Article 1475, Civil Code.
[30] Rollo, p. 107.
[31] TSN, May 21, 1991, p. 42; and May 23, 1991, p. 18.
[32] TSN, May 23, 1991, p. 37.
[33] G.R. No. 157002, July 29, 2005, 465 SCRA 356, 357.
[34] Id. at 367.
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FIRST DIVISION
[ G.R. No. 143573, January 30, 2009 ]
ADORACION ROSALES RUFLOE, ALFREDO RUFLOE AND RODRIGO RUFLOE, PETITIONERS, VS. LEONARDA BURGOS, ANITA BURGOS, ANGELITO BURGOS, AMY BURGOS, ELVIRA DELOS REYES AND JULIAN C. TUBIG, RESPONDENTS.
D E C I S I O N
LEONARDO-DE CASTRO, J.:
Under consideration is this petition for review under Rule 45 of the Rules of Court seeking the reversal and setting aside of the Decision[1] dated January 17, 2000 of the Court of Appeals (CA) in CA-G.R. CV. No. 49939, and its Resolution[2] dated June 9, 2000, denying petitioners' motion for reconsideration.
The assailed decision reversed and set aside the February 10, 1995 decision[3] of the Regional Trial Court (RTC) at Muntinlupa, Metro Manila, Branch 276,[4] in its Civil Case No. 90-359, an action for Declaration of Nullity of Contract and Cancellation of Transfer Certificate of Titles and Damages, commenced by the petitioners against herein respondents.
The factual antecedents are as follows:
Petitioner Adoracion Rufloe is the wife of Angel Rufloe, now deceased, while co-petitioners Alfredo and Rodrigo are their children. During the marriage of Adoracion and Angel, they acquired a 371-square meter parcel of land located at Barangay Bagbagan, Muntinlupa, and covered by Transfer Certificate of Title (TCT) No. 406851 which is the subject of the present controversy.
Sometime in 1978, respondent Elvira Delos Reyes forged the signatures of Adoracion and Angel in a Deed of Sale dated September 8, 1978 to make it appear that the disputed property was sold to her by the spouses Rufloe. On the basis of the said deed of sale, Delos Reyes succeeded in obtaining a title in her name, TCT No. S-74933.
Thus, in November 1979, the Rufloes filed a complaint for damages against Delos Reyes with the RTC of Pasay City alleging that the Deed of Sale was falsified as the signatures appearing thereon were forged because Angel Rufloe died in 1974, which was four (4) years before the alleged sale in favor of Delos Reyes. The complaint was docketed as Civil Case No. M-7690.[5] They also filed a notice of adverse claim on November 5, 1979.
On December 4, 1984, during the pendency of Civil Case No. M-7690, Delos Reyes sold the subject property to respondent siblings Anita, Angelina, Angelito and Amy (Burgos siblings). A new title, TCT No. 135860, was then issued in their names.
On December 12, 1985, the Burgos siblings, in turn, sold the same property to their aunt, Leonarda Burgos. However, the sale in favor of Leonarda was not registered. Thus, no title was issued in her name. The subject property remained in the name of the Burgos siblings who also continued paying the real estate taxes thereon.
On February 6, 1989, the RTC of Pasay City, Branch 108,[6] rendered its decision in Civil Case No. M-7690 declaring that the Deed of Sale in favor of Delos Reyes was falsified as the signatures of the spouses Rufloe had been forged. The trial court ruled that Delos Reyes did not acquire ownership over the subject property. Said decision had become final and executory.
Such was the state of things when, on February 8, 1990, in the RTC of Muntinlupa, the Rufloes filed their complaint for Declaration of Nullity of Contract and Cancellation of Transfer Certificate of Titles against respondents Leonarda and the Burgos siblings, and Delos Reyes. In their complaint, docketed as Civil Case No. 90-359, the Rufloes basically alleged that inasmuch as the Deed of Sale in favor of Delos Reyes was falsified, no valid title was ever conveyed to the Burgos siblings.[7] The Burgos siblings executed a simulated deed of sale in favor of Leonarda knowing fully well that their title was a nullity.
In their common "Answer," respondents maintained that they bought the property in good faith after they were shown a genuine copy of the title of the disputed property by Delos Reyes. They also insisted that they were innocent purchasers in good faith and for value.[8]
On February 10, 1995, the trial court rendered a decision declaring that Leonarda and the Burgos siblings were not innocent purchasers for value and did not have a better right to the property in question than the true and legal owners, the Rufloes. The trial court also held that the subsequent conveyance of the disputed property to Leonarda by the Burgos siblings was simulated to make it appear that Leonarda was a buyer in good faith. The trial court then directed the Register of Deeds of Makati, Rizal to reinstate the title of the spouses Rufloe, and to cancel all other titles subsequent to the said title particularly TCT No. S-74933 issued to Delos Reyes and TCT No. 135860 issued to the Burgos siblings.[9]
Respondents interposed an appeal to the CA, whereat the appellate recourse was docketed as CA-G.R. CV. No. 49939.
As stated at the threshold hereof, the CA, in its decision dated January 17, 2000, reversed and set aside that of the trial court, declaring in the process that respondents were purchasers in good faith and for value. In so ruling, the CA explained:
Measured by this yardstick, defendants-appellants [herein respondents] are purchasers in good faith and for value. Amado Burgos bought the subject property (for his children Anita, Angelina, Angelito and Amy) free from any lien or encumbrance or any notice of adverse claim annotated thereto. He was presented with a clean title already in the name of the seller. If a person purchases a piece of land on the assurance that the seller's title thereto is valid, he should not run the risk of being told later that his acquisition was ineffectual after all. If we were to void a sale of property covered by a clean and unencumbered torrens title, public confidence in the Torrens System would be eroded and transactions would have to be attended by complicated and inconclusive investigations and uncertain proof of ownership. The consequences would be that land conflicts could proliferate and become more abrasive, if not violent. (Words in bracket ours).[10]
Their motion for reconsideration having been denied by the CA in its equally challenged resolution of June 9, 2000, petitioners are now with us via the present recourse, faulting the CA as follows:
- THE HONORABLE COURT OF APPEALS DECIDED THIS CASE IN A WAY NOT IN ACCORD WITH THE APPLICABLE DECISIONS OF THE HONORABLE SUPREME COURT.
- THERE ARE SPECIAL AND IMPORTANT REASONS THAT REQUIRE A REVIEW OF THE CA DECISION.
- THE HONORABLE CA ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT COUNTERMANDED THE FINDINGS OF THE REGIONAL TRIAL COURT EVEN ON POINTS AND QUESTIONS OF CREDIBILITY.
- THE CA JUDGMENT THAT REVERSED THE RTC DECISION IS NOT SUPPORTED BY THE EVIDENCE ON RECORD AND IS CONTRARY TO ESTABLISHED PRECEDENTS LAID DOWN BY THE HONORABLE SUPREME COURT.
- THE CA ERRED IN LAW IN PRACTICALLY HOLDING THAT A DEAD MAN ANGEL RUFLOE (ANGEL NEVER SIGNED) VALIDLY DISPOSED OF HIS PROPERTY (A HOUSE AND LOT COVERED BY A TCT THROUGH A FALSIFIED DEED OF SALE) AFTER HIS DEATH FOUR (4) YEARS BEFORE THE EXECUTION OF THE DEED.
- THE CA ERRED IN LAW IN HOLDING ANITA, ANGELINA, AMY AND ANGELITO BURGOS AND THEIR SUCCESOR-IN-INTEREST (THEIR AUNT) LEONARDA BURGOS ARE BUYERS IN GOOD FAITH.
- THE CA IGNORED THE PLAIN PROVISIONS OF THE CIVIL CODE THAT "IN ALL CONTRACTUAL, PROPERTY OR OTHER RELATIONS, WHEN ONE OF THE PARTIES IS AT A DISADVANTAGE ON ACCOUNT OF HIS MORAL DEPENDENCE, IGNORANCE, INDIGENCE, MENTAL WEAKNESS, TENDER AGE OR OTHER HANDICAP, THE COURT MUST BE VIGILANT FOR HIS PROTECTION."[11]
In a gist, the issues to be resolved are (1) whether the sale of the subject property by Delos Reyes to the Burgos siblings and the subsequent sale by the siblings to Leonarda were valid and binding; and (2) whether respondents were innocent purchasers in good faith and for value despite the forged deed of sale of their transferor Delos Reyes.
The issues necessitate an inquiry into the facts. While, as a rule, factual issues are not within the province of this Court, nonetheless, in light of the conflicting factual findings of the two (2) courts below, an examination of the facts obtaining in this case is in order.
The Rufloes aver that inasmuch as the Deed of Sale purportedly executed by them in favor of Delos Reyes was a forgery, she could not pass any valid right or title to the Burgos siblings and Leonarda. The Rufloes also contend that since the Burgos siblings and Leonarda acquired the subject property with notice that another person has a right to or interest in such property, they cannot be considered innocent purchasers in good faith and for value.
For their part, the Burgos siblings and Leonarda insist that their title is valid and binding. They maintain that under the Torrens System, a person dealing with registered land may safely rely on the correctness on the certificate of title without the need of further inquiry. For this reason, the Court cannot disregard the right of an innocent third person who relies on the correctness of the certificate of title even if the sale is void.
We find merit in the petition.
The issue concerning the validity of the deed of sale between the Rufloes and Delos Reyes had already been resolved with finality in Civil Case No. M-7690 by the RTC of Pasay City which declared that the signatures of the alleged vendors, Angel and Adoracion Rufloe, had been forged.[12] It is undisputed that the forged deed of sale was null and void and conveyed no title. It is a well-settled principle that no one can give what one does not have, nemo dat quod non habet. One can sell only what one owns or is authorized to sell, and the buyer can acquire no more right than what the seller can transfer legally.[13] Due to the forged deed of sale, Delos Reyes acquired no right over the subject property which she could convey to the Burgos siblings. All the transactions subsequent to the falsified sale between the spouses Rufloe and Delos Reyes are likewise void, including the sale made by the Burgos siblings to their aunt, Leonarda.
We now determine whether respondents Burgos siblings and Leonarda Burgos were purchasers in good faith. It has been consistently ruled that a forged deed can legally be the root of a valid title when an innocent purchaser for value intervenes.[14]
An innocent purchaser for value is one who buys the property of another without notice that some other person has a right to or interest in it, and who pays a full and fair price at the time of the purchase or before receiving any notice of another person's claim.[15] The burden of proving the status of a purchaser in good faith and for value lies upon one who asserts that status. This onus probandi cannot be discharged by mere invocation of the ordinary presumption of good faith.[16]
As a general rule, every person dealing with registered land, as in this case, may safely rely on the correctness of the certificate of title issued therefor and will in no way oblige him to go beyond the certificate to determine the condition of the property. However, this rule admits of an unchallenged exception:
... a person dealing with registered land has a right to rely on the Torrens certificate of title and to dispense with the need of inquiring further except when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation. The presence of anything which excites or arouses suspicion should then prompt the vendee to look beyond the certificate and investigate the title of the vendor appearing on the face of said certificate. One who falls within the exception can neither be denominated an innocent purchaser for value nor a purchaser in good faith and, hence, does not merit the protection of the law.[17]
The circumstances surrounding this case point to the absolute lack of good faith on the part of respondents. The evidence shows that the Rufloes caused a notice of adverse claim to be annotated on the title of Delos Reyes as early as November 5, 1979.[18] The annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property, and serves as a notice and warning to third parties dealing with said property that someone is claiming an interest on the same or may have a better right than the registered owner thereof. Despite the notice of adverse claim, the Burgos siblings still purchased the property in question.
Too, at the time the Burgos siblings bought the subject property on December 4, 1984, Civil Case No. M-7690,[19] an action for damages, and Criminal Case No. 10914-P,[20] for estafa, filed by the Rufloes against Delos Reyes, were both pending before the RTC of Pasay City. This circumstance should have alerted the Burgos siblings as to the validity of Delos Reyes' title and her authority and legal right to sell the property.
Equally significant is the fact that Delos Reyes was not in possession of the subject property when she sold the same to the Burgos siblings. It was Amado Burgos who bought the property for his children, the Burgos siblings. Amado was not personally acquainted with Delos Reyes prior to the sale because he bought the property through a real estate broker, a certain Jose Anias, and not from Delos Reyes herself. There was no showing that Amado or any of the Burgos siblings exerted any effort to personally verify with the Register of Deeds if Delos Reyes' certificate of title was clean and authentic. They merely relied on the title as shown to them by the real estate broker. An ordinarily prudent man would have inquired into the authenticity of the certificate of title, the property's location and its owners. Although it is a recognized principle that a person dealing with registered land need not go beyond its certificate of title, it is also a firmly established rule that where circumstances exist which would put a purchaser on guard and prompt him to investigate further, such as the presence of occupants/tenants on the property offered for sale, it is expected that the purchaser would inquire first into the nature of possession of the occupants, i.e., whether or not the occupants possess the land in the concept of an owner. Settled is the rule that a buyer of real property that is in the possession of a person other than the seller must be wary and should investigate the rights of those in possession. Otherwise, without such inquiry, the buyer can hardly be regarded as a buyer in good faith.[21]
In the same vein, Leonarda cannot be categorized as a purchaser in good faith. Since it was the Rufloes who continued to have actual possession of the property, Leonarda should have investigated the nature of their possession.
We cannot ascribe good faith to those who have not shown any diligence in protecting their rights. Respondents had knowledge of facts that should have led them to inquire and investigate in order to acquaint themselves with possible defects in the title of the seller of the property. However, they failed to do so. Thus, Leonarda, as well as the Burgos siblings, cannot take cover under the protection the law accords to purchasers in good faith and for value. They cannot claim valid title to the property.
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. To be effective, the inscription in the registry must have been made in good faith. A holder in bad faith of a certificate of title is not entitled to the protection of the law, for the law cannot be used as a shield for fraud.[22]
We quote with approval the following findings of the trial court showing that the sale between the Burgos siblings and Leonarda is simulated:
- The sale was not registered, a circumstance which is inconceivable in a legitimate transfer. A true vendee would not brook any delay in registering the sale in his favor. Not only because registration is the operative act that effects property covered by the Torrens System, but also because registration and issuance of new title to the transferee, enable this transferee to assume domiciliary and possessory rights over the property. These benefits of ownership shall be denied him if the titles of the property shall remain in the name of vendor. Therefore, it is inconceivable as contrary to behavioral pattern of a true buyer and the empirical knowledge of man to assume that a buyer who invested on the property he bought would be uninvolved and not endeavor to register the property he bought. The nonchalance of Leonarda amply demonstrates the pretended sale to her, and the evident scheme of her brother Amado who invested on the property he bought.
- Despite the sale of property to Leonarda, the sellers continued paying taxes on the property from the time they acquired it from Elvira in 1984 up to the present or a period of ten years. The tax payment receipts remained in the name of Anita and her siblings, (Exhibits "16" to "16-H"). On the other hand, Leonarda does not even pretend to have paid any tax on the land she allegedly bought in 1985. Even the Tax Declaration issued in 1988, three years after the sale to her (Leonarda) is still in the name of her nieces and nephew. These circumstances can only account for the fact that her nieces and nephew remained the owners of the land and continued paying taxes thereon.
- Leonarda never exercised the attributes of ownership. Far from it, she vested the exercise of domiciliary and possessory rights in her brother Amado the father of Anita, Angelina, Angelito and Amy, by constituting him with full power including the ejectment of plaintiffs, to defend and to enter a compromise of any case he may file. She allowed the children of Amado to remain as the registered owners of the property without pressing for its transfer to her.
- And, this simulated sale is the handiwork of Amado who apparently acted advisedly to make it appear that his sister Leonarda as the second transferee of the property is an innocent purchaser for value. Since he or his children could not plausibly assume the stance of a buyer in good faith from the forger Elvira Delos Reyes, knowing of Elvira's defective title, Amado hoped that the entry of his sister Leonarda, might conjure the image and who might pass off as an innocent purchaser, specially considering that the notice of adverse claim of the Plaintiffs which was annotated in Elvira's title was not, strangely enough, NOT carried over in the title of his children, who were made to appear as the sellers to their Aunt Leonarda. It was a neat chicanery of Amado to bring the property out of the reach of Plaintiffs thru a series of transfers involving a third party, to make her appear as an innocent purchaser for value. His sister could be manipulated to evict or oust the real owners from their own property thru a documentary manipulation. Unfortunately, his scheme has not passed unnoticed by a discerning and impartial evaluator, like this court. The Municipal Court of Muntinlupa in Civil Case No. 17446 has even established that Amado's children Anita and others are buyers in bad faith who knew of the defective title of their transferor Elvira Delos Reyes, the forger, as aforestated.
These circumstances taken altogether would show that the sale, which occurred between Leonarda and the Burgos siblings, was simply a scheme designed to cleanse the title passed on to them by the forger Delos Reyes. Respondents had to resort to this strategy because they were fully aware that their title, having originated from the forged deed of sale of Delos Reyes, was not a clean and valid title. The trial court explained, thus:
And, this simulated sale is the handiwork of Amado who apparently acted advisedly to make it appear that his sister Leonarda as the second transferee of the property is an innocent purchaser for value. Since he or his children could not plausibly assume the stamp of a buyer in good faith from the forger Elvira Delos Reyes, knowing Elvira's defective title, Amado had hoped that the entry of his sister Leonarda, might conjure the image and might pass off as an innocent purchaser. xxx. It was a neat chicanery of Amado to bring the property out of the reach of plaintiffs [herein petitioners] thru a series of transfers involving a third party, to make her appear as an innocent purchaser for value. Unfortunately, his scheme has not passed unnoticed by a discerning and impartial evaluator, like this Court.[23] (Words in bracket ours)
Patently, the Burgos siblings were not innocent purchasers for value and the simulated sale to Leonarda did not remove the defect in their title.
Accordingly, we sustain the trial court's award of P20,000.00 as moral damages, P50,000.00 as exemplary damages, and P50,000.00 as attorney's fees.[24]
However, the actual damages in the amount of P134,200.00 should be deleted. In view of this Court's ruling that the property rightfully belongs to petitioners and must be restored to them, there is no more basis for the award of said actual damages to the Rufloes.
WHEREFORE, the petition for review is hereby GRANTED. The assailed decision and resolution of the Court of Appeals in CA-G.R. CV. No. 49939 are REVERSED and SET ASIDE. Accordingly, the decision of the trial court is hereby REVIVED, except the award of actual damages which must be deleted.
SO ORDERED.
Carpio, **(Acting Chairperson), Austria-Martinez,***Corona, and Carpio Morales, JJ., concur.
Puno, J., on official leave.
** Acting Chairperson in lieu of Chief Justice Reynato S. Puno as per Special Order No. 552-A.
*** Additional Members in lieu of Chief Justice Reynato S. Puno and Justice Adolfo S. Azcuna as per Special Order No. 553.
[1] Penned by then Associate Justice Romeo A. Brawner, now Commissioner of the Commission on Elections, with Associate Justice Fermin A. Martin, Jr. (now ret.) and Associate Justice Renato C. Dacudao (now ret.) concurring; rollo, pp.45-50.
[2] Id., at 52.
[3] Id., at 83-90.
[4] Presided by Judge N.C. Perello.
[5] Entitled, "Adoracion Rosales Rufloe, Alfredo Rufloe and Rodrigo Rufloe v. Elvira Delos Reyes, Pedro Solima, Estrellita Solima, Estollo Calalang and Julian Tubig"; records, pp. 131-134.
[6] Presided by Judge Priscilla C. Mijares; rollo, pp. 72-75.
[7] Records, pp. 1-11.
[8] Id., at 28-33.
[9] Supra note 3.
[10] Rollo, p. 49.
[11] Id., at 11-12.
[12] See note 6.
[13] Consolidated Rural Bank, Inc. v. Court of Appeals, G.R. No. 132161, January 17, 2005, 448 SCRA 347, 363.
[14] Cayana v. Court of Appeals, G.R. No. 125607, March 18, 2004, 426 SCRA 10, 22.
[15] Domingo v. Reed, G.R. No. 157701, December 9, 2005, 477 SCRA 227, 241.
[16] Uy v. Court of Appeals, G.R. No. 109197, June 21, 2001, 359 SCRA 262, 271.
[17] Sandoval v. Court of Appeals, G.R. No. 106657, August 1, 1996, 260 SCRA 283, 295.
[18] Documentary Exhibits of Leonarda Burgos, et al., Exhibit 12, p. 22.
[19] Supra note 5.
[20] Records, pp. 126-130.
[21] Republic v. De Guzman, G.R. No. 105630, February 23, 2000, 326 SCRA 267, 277.
[22] Samonte v. Court of Appeals, G.R. No. 104223, July 12, 2001, 361 SCRA 173, 183.
[23] Rollo, p. 87.
[24] Article 2208 (1), Civil Code of the Philippines.
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SECOND DIVISION
[ G.R. NO. 160556, August 03, 2007 ]
TEOFILO BAUTISTA, REPRESENTED BY FRANCISCO MUÑOZ, ATTORNEY-IN-FACT, PETITIONER, VS. ALEGRIA BAUTISTA, ANGELICA BAUTISTA, PRISCILLA BAUTISTA, GILBERT BAUTISTA, JIM BAUTISTA, GLENDA BAUTISTA, GUEN BAUTISTA, GELACIO BAUTISTA, GRACIA BAUTISTA, PEDRO S. TANDOC AND CESAR TAMONDONG, RESPONDENTS.
D E C I S I O N
CARPIO MORALES, J.:
During her lifetime, Teodora Rosario was the owner of a 211.80-square meter parcel of land (the property) in Poblacion, San Carlos City, Pangasinan, covered by Transfer Certificate of Title (TCT) No. 12951. She died intestate on January 19, 1970, leaving behind her spouse Isidro Bautista (Isidro) and five children, namely: Teofilo Bautista (Teofilo), Alegria Bautista (Alegria), Angelica Bautista (Angelica), Pacita Bautista (Pacita) and Gil Bautista (Gil).
On April 21, 1981, Isidro and four of his five children - Pacita, Gil, Alegria, and Angelica - executed a Deed of Extra-Judicial Partition[1] of the property in which Isidro waived his share in favor of his said four children. Teofilo was excluded from the partition.
Alegria and Angelica, who, under the Deed of Extra-Judicial Partition, acquired ½ of the property, sold the same, by Deed of Absolute Sale dated May 14, 1981, to their sibling Pacita and her common-law husband Pedro Tandoc (Pedro).[2]
Pacita and Pedro soon obtained tax declarations[3] and TCT No. 18777[4] in their names over 209.85 square meters of the property including the shares they purchased from Angelica and Alegria.
Pacita, with Pedro's conformity, later conveyed via Deed of Absolute Sale[5] dated April 13, 1993 ½ of the property in favor of Cesar Tamondong, Pedro's nephew.
On January 24, 1994, herein petitioner Teofilo, represented by his attorney-in-fact Francisco Muñoz, filed a Complaint[6] against his siblings Alegria and Angelica, along with Pedro (the common-law husband of his already deceased sister Pacita), Priscilla Bautista (wife of his already deceased brother Gil), Pricilla's children Gilbert, Jim, Glenda, Guen, and Gelacio and Cesar Tamondong before the Regional Trial Court (RTC) of San Carlos City, for annulment of documents, partition, recovery of ownership, possession and damages.
In his complaint, petitioner claimed that his co-heirs defrauded him of his rightful share of the property and that the deed of sale executed by Pacita in favor of Cesar Tamondong was fictitious as it was impossible for her to have executed the same in Manila, she being already seriously ill at the time.[7]
In their Answer,[8] the defendants-herein respondents sisters Alegria and Angelica, who were joined therein by their co-defendants-respondents Priscilla, Gilbert, Jim, Glenda, Guen, Gelacio, and Gracia, claimed that it was Pacita who caused the execution of the Deed of Extra-Judicial Partition and because they trusted Pacita, they signed the document without scrutinizing it; and that they learned about the contents of the partition only upon Teofilo's filing of the Complaint.
By way of cross-claim[9] against Pedro and Cesar Tamondong, the answering defendants-respondents claimed that a few weeks after the partition, Pacita approached Angelica and Alegria to borrow their share in the property on her representation that it would be used as security for a business loan; and that agreeing to accommodate Pacita, Angelica and Alegria signed a document which Pacita prepared which turned out to be the deed of absolute sale in Pacita's favor.
In their Answer with Counterclaim,[10] Pedro and Cesar Tamondong claimed that they were buyers in good faith.[11] In any event, they contended that prescription had set in, and that the complaint was a mere rehash of a previous complaint for falsification of public document which had been dismissed by the prosecutor's office.[12]
By Decision[13] of June 24, 1999, Branch 57 of the RTC of San Carlos City rendered judgment in favor of Teofilo, disposing as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered:
- Declaring as null and void and of no force and effect the following documents:
- Deed of Extra-Judicial Partition dated April 21, 1981;
- Deed of Absolute Sale [d]ated May 14, 1981;
- Transfer Certificate of Title No. 18777;
- Tax Declaration Nos. 59941, 45999, and 46006;
- Deed of Absolute Sale dated April 13, 1993;
- Ordering the partition of the land in question among the compulsory heirs of the late Spouses Isidro Bautista and Teodora Rosario
- Ordering defendants Cesar Tamondong and Pedro Tandoc to vacate the premises.
No pronouncement[s] as to cost.[14] (Underscoring supplied)
On appeal by Pedro and Cesar Tamondong, the Court of Appeals, by Decision[15] of February 21, 2003, reversed and set aside the trial court's decision and dismissed Teofilo's complaint on the ground of prescription.[16] His Motion for Reconsideration[17] having been denied,[18] Teofilo filed the present Petition for Review on Certiorari.[19]
The petition is impressed with merit.
The Court of Appeals, in holding that prescription had set in, reasoned:
Unquestionably, the Deed of Extra-judicial Partition is invalid insofar as it affects the legitimate share pertaining to the defendant-appellee in the property in question. There can be no question that the Deed of Extra-judicial Partition was fraudulently obtained. Hence, an action to set it aside on the ground of fraud could be instituted. Such action for the annulment of the said partition, however, must be brought within four years from the discovery of the fraud. Significantly, it cannot be denied, either, that by its registration in the manner provided by law, a transaction may be known actually or constructively.
In the present case, defendant-appellee is deemed to have been constructively notified of the extra-judicial settlement by reason of its registration and annotation in the certificate of title over the subject lot on December 21, 1981. From the time of its registration, defendant-appellee had four (4) years or until 21 December 1985, within which to file his objections or to demand the appropriate settlement of the estate. Unfortunately, defendant-appellee failed to institute the present civil action within said period, having filed the same only on 17 January 1994 or more than twelve (12) years from the registration of the deed of extra-judicial partition. Hence, defendant-appellee's right to question the deed of extra-judicial partition has prescribed.
Even on the extreme assumption that defendant-appellee's complaint in Civil Case No. SC-1797 is an action for reconveyance of a portion of the property which rightfully belongs to him based upon an implied trust resulting from fraud, said remedy is already barred by prescription. An action of reconveyance of land based upon an implied or constructive trust prescribes after ten years from the registration of the deed or from the issuance of the title.
x x x x
The complaint of defendant-appellee was filed only on 17 January 1994, while the deed of extra-judicial partition was registered and inscribed on Transfer Certificate of Title 12951, on 21 December 1981. Clearly, the complaint was filed twelve (12) years and twenty-seven (27) days after the inscription of the deed of extra-judicial partition on TCT 12951. Hence, even if We consider defendant-appellee's complaint as an action for reconveyance against plaintiff-appellants on the basis of implied trust, we find and so hold that his remedy for reconveyance has also prescribed.[20] (Underscoring supplied)
As gathered from the above-quoted portion of its decision, the Court of Appeals applied the prescriptive periods for annulment on the ground of fraud and for reconveyance of property under a constructive trust.
The extra-judicial partition executed by Teofilo's co-heirs was invalid, however. So Segura v. Segura[21] instructs:
x x x The partition in the present case was invalid because it excluded six of the nine heirs who were entitled to equal shares in the partitioned property. Under the rule, "no extra-judicial settlement shall be binding upon any person who has not participated therein or had no notice thereof." As the partition was a total nullity and did not affect the excluded heirs, it was not correct for the trial court to hold that their right to challenge the partition had prescribed after two years x x x[22] (Underscoring supplied)
The deed of extra-judicial partition in the case at bar being invalid, the action to have it annulled does not prescribe.[23]
Since the deed of extra-judicial partition is invalid, it transmitted no rights to Teofilo's co-heirs.[24] Consequently, the subsequent transfer by Angelica and Alegria of ½ of the property to Pacita and her husband Pedro, as well as the transfer of ½ of the property to Cesar Tamondong is invalid, hence, conferring no rights upon the transferees under the principle of nemo dat quod non habet.[25]
WHEREFORE, the petition is GRANTED. The decision of the court a quo is SET ASIDE and the Decision of the Regional Trial Court of San Carlos City, Pangasinan, Branch 57 is REINSTATED.
SO ORDERED.
Quisumbing, (Chairperson), Carpio, Tinga, and Velasco, Jr., JJ., concur.
[1] RTC records, p. 10.
[2] Id. at 11.
[3] Id. at 13-15.
[4] Id. at 12.
[5] Id. at 16-17.
[6] Id. at 1-6.
[7] Id. at 2-4.
[8] Id. at 60-62.
[9] Id. at 61.
[10] Id. at 99-103.
[11] Id. at 101-102.
[12] Id. at 101.
[13] Id. at 445-452.
[14] Id. at 451-452.
[15] CA rollo, pp. 73-81; penned by Court of Appeals Associate Justice Teodoro P. Regino, with the concurrences of Associate Justices Buenaventura J. Guerrero and Danilo B. Pine.
[16] Id. at 77-81.
[17] Id. at 82-84.
[18] Id. at 112.
[19] Rollo, pp. 10-27.
[20] CA rollo, pp. 77-79.
[21] G.R. No. L-29320, September 19, 1988, 165 SCRA 368.
[22] Id. at 373.
[23] Vide CIVIL CODE, Article 1410; Salomon v. IAC, G.R. No. 70263, May 14, 1990, 185 SCRA 352, 363.
[24] Vide Heirs of Celso Amarante v. Court of Appeals, G.R. No. 76386, May 21, 1990, 185 SCRA 585, 601.
[25] Vide Segura v. Segura, supra note 21, at 375.
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FIRST DIVISION
[ G.R. NO. 167412, February 22, 2006 ]
JUANITA NAVAL, PETITIONER, VS. COURT OF APPEALS, JUANITO CAMALLA, JAIME NACION, CONRADO BALILA, ESTER MOYA AND PORFIRIA AGUIRRE, RESPONDENTS.
DECISION
YNARES-SANTIAGO, J.:
This petition for review assails the Decision[1] of the Court of Appeals dated December 14, 2004, in CA-G.R. SP No. 86736, which reversed the Decision[2] of the Regional Trial Court (RTC) of Naga City, Branch 26, in Civil Case No. 2004-0054 affirming the Decision[3] of the Municipal Circuit Trial Court (MCTC) of Magarao-Canaman, Camarines Sur, as well as the Resolution[4] dated February 17, 2005 denying petitioner's motion for reconsideration.
The facts of the case are as follows:
On December 2, 1969, Ildefonso A. Naval sold a parcel of land located in Sto. Tomas, Magarao, Camarines Sur, consisting of 858 sq. m. to Gregorio B. Galarosa. The sale was recorded in the Registry of Property of the Registry of Deeds of Camarines Sur on December 3, 1969 pursuant to Act No. 3344, the law governing registrations of all instruments on unregistered lands.[5]
Subsequently, Gregorio sold portions of the land to respondents Conrado Rodrigo Balilla[6] on November 4, 1976, Jaime Nacion[7] on January 10, 1977 and spouses Ireneo and Ester Moya[8] in July 1977, and Juanito Camalla[9] on September 4, 1987. All buyers occupied the portion they bought, built improvements thereon, and paid the taxes due thereto.[10]
The controversy arose when petitioner Juanita Naval, the great granddaughter of Ildefonso, was issued on April 1, 1975 by the Register of Deeds of Camarines Sur an Original Certificate of Title (OCT) No. RP-5386 (29791), covering 733 sq. m. of the subject land.[11] She claimed that she bought the subject land from Ildefonso in 1972.[12]
On November 10, 1977, petitioner filed a complaint for recovery of possession against Bartolome Aguirre, Conrado Balila,[13] Ireneo Moya, Jaime Nacion and Domingo Nacion, which was docketed as Civil Case No. 306.[14] However, the case was dismissed[15] without prejudice[16] for failure to prosecute the action for an unreasonable length of time.
Almost 20 years later, or on April 21, 1997, petitioner re-filed the complaint for recovery of possession with damages before the MCTC of Magarao-Canaman, Camarines Sur, against Juanita[17] Camalla, Diosdado Balila, Conrado Balila, Forferia[18] Aguirre, Jaime Nacion and Ester Moya. The case was docketed as Civil Case No. 994.
After trial, the MCTC rendered its decision, the dispositive portion reads as follows:
WHEREFORE, for all the foregoing consideration, decision is hereby rendered in favor of the plaintiff and against defendants:
1) Declaring the plaintiff to be the legal owner of the land as described in paragraph 2 of the complaint;
2) Ordering defendants Juanito Camalla, Diosdado Balila, Conrado Balila, Porferia Aguirre and Jaime Nacion to vacate the property in question and to deliver its possession to the plaintiff;
3) Ordering Ester Moya to vacate the fifty (50) square meters occupied by her and to relinquish its possession to the plaintiff;
4) Dismissing the respective claims for damages of the parties.
Pronouncing no costs.
SO ORDERED.[19]
Aggrieved, respondents appealed the decision to the RTC of Naga City, which affirmed in toto the assailed decision.[20]
Respondents thereafter elevated the case to the Court of Appeals via Rule 42 of the Rules of Court. Finding the prior registration of the deed of sale between Ildefonso and Gregorio with the Register of Deeds as a constructive notice to subsequent buyers, the appellate court reversed the decision of the RTC. Thus,
WHEREFORE, premises considered, the present petition is hereby GRANTED. The appealed decision of the court a quo is hereby REVERSED and SET ASIDE and a new judgment is hereby entered dismissing respondent's complaint for recovery of possession with damages. Petitioners' counterclaim for damages is likewise dismissed for lack of legal and factual bases.
No pronouncement as to costs.
SO ORDERED.[21]
Hence, this petition assigning the following errors:
I
THE COURT OF APPEALS ERRED IN DECLARING THAT GREGORIO GALAROSA HAS RIGHTFULLY ACQUIRED OWNERSHIP OVER THE LOT COVERED BY OCT RP #5386 (29791) AND DECLARING HIM TO HAVE POSSESSED THE LOT BEFORE THE ALLEGED SALES TO RESPONDENTS.
II
THE COURT OF APPEALS ERRED IN HOLDING THAT THE PAYMENT OF TAXES BY RESPONDENTS WERE (sic) EVIDENCE OF LAWFUL POSSESSION AND OWNERSHIP.
III
THE COURT OF APPEALS ERRED IN DECLARING THAT THE LOTS CLAIMED BY THE RESPONDENTS HAVE BEEN POSSESSED BY THEM IN GOOD FAITH DESPITE THEIR KNOWLEDGE OF THE EXISTENCE OF OCT RP #5386(29791).[22]
Petitioner claims that she has superior rights over the subject land because the sale between Ildefonso and Gregorio and the subsequent registration thereof with the Register of Deeds had no legal effect since the subject land was declared in the name of Agrifina Avila while the tax declaration cancelled by Gregorio's was that of Gregorio Boñaga. Petitioner thus assails the right claimed by Gregorio over the subject land from which the respondents derived their respective claims.[23]
On the other hand, respondents contend that the registered sale by Ildefonso to Gregorio in 1969 of the subject land, from whom they derive their claims, vests them with better right than the petitioner; that registration under Act No. 3344 served as constructive notice to the whole world, including the petitioner, who claimed to have purchased the subject land from Ildefonso in 1972, but failed to present evidence to prove such acquisition.[24]
We deny the petition.
Prefatorily, a perusal of the records reveals that during the trial, petitioner vigorously asserted that the subject land was the exclusive property of Ildefonso who sold it to her in 1972.[25] However, in this appeal, petitioner assails the ownership not only of Gregorio but also of Ildefonso by alleging that at the time the latter sold the land to Gregorio, the same was declared in the name of Agrifina Avila. When a party adopts a certain theory in the court below, he is not allowed to change his theory on appeal, for to allow him to do so would not only be unfair to the other party, but it would also be offensive to the basic rules of fair play, justice and due process.[26]
In this appeal, the issue for resolution is who has the superior right to a parcel of land sold to different buyers at different times by its former owner.
It is not disputed that the subject land belonged to Ildefonso and that it was not registered under the Torrens System[27] when it was sold to Gregorio in 1969 and to the petitioner in 1972. Further, the deed of sale between Ildefonso and Gregorio was registered with the Register of Deeds of Camarines Sur pursuant to Act No. 3344, as shown by Inscription No. 54609 dated December 3, 1969, Page 119, Volume 186, File No. 55409 at the back thereof.
In holding that respondents have a better right to possess the subject land in view of the bona fide registration of the sale with the Register of Deeds of Camarines Sur by Ildefonso and Gregorio, the Court of Appeals applied Article 1544 of the Civil Code, which provides:
ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.
While we agree with the appellate court that respondents have superior right over the petitioner on the subject property, we find Article 1544 inapplicable to the case at bar since the subject land was unregistered at the time of the first sale. The registration contemplated under this provision has been held to refer to registration under the Torrens System, which considers the act of registration as the operative act that binds the land.[28] Thus, in Carumba v. Court of Appeals,[29] we held that Article 1544 of the Civil Code has no application to land not registered under Torrens System.
The law applicable therefore is Act No. 3344, which provides for the registration of all instruments on land neither covered by the Spanish Mortgage Law nor the Torrens System. Under this law, registration by the first buyer is constructive notice to the second buyer that can defeat his right as such buyer in good faith.
Applying the law, we held in Bautista v. Fule[30] that the registration of an instrument involving unregistered land in the Registry of Deeds creates constructive notice and binds third person who may subsequently deal with the same property. We also held in Bayoca v. Nogales[31] that:
Verily, there is absence of prior registration in good faith by petitioners of the second sale in their favor. As stated in the Santiago case, registration by the first buyer under Act No. 3344 can have the effect of constructive notice to the second buyer that can defeat his right as such buyer. On account of the undisputed fact of registration under Act No. 3344 by [the first buyers], necessarily, there is absent good faith in the registration of the sale by the [second buyers] for which they had been issued certificates of title in their names. It follows that their title to the land cannot be upheld. x x x.
Even if petitioner argues that she purchased and registered the subject land in good faith and without knowledge of any adverse claim thereto, respondents still have superior right over the disputed property. We held in Rayos v. Reyes[32] that:
"[T]he issue of good faith or bad faith of the buyer is relevant only where the subject of the sale is registered land and the purchaser is buying the same from the registered owner whose title to the land is clean x x x in such case the purchaser who relies on the clean title of the registered owner is protected if he is a purchaser in good faith for value." Since the properties in question are unregistered lands, petitioners as subsequent buyers thereof did so at their peril. Their claim of having bought the land in good faith, i.e., without notice that some other person has a right to or interest in the property, would not protect them if it turns out, as it actually did in this case, that their seller did not own the property at the time of the sale.
It is an established principle that no one can give what one does not have, nemo dat quod non habet. Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can acquire no more than what the seller can transfer legally.[33] In the case at bar, since Ildefonso no longer owned the subject land at the time of the sale to the petitioner, he had nothing to sell and the latter did not acquire any right to it.
Even if we apply Article 1544, the facts would nonetheless show that respondents and their predecessors-in-interest registered first the source of their ownership and possession, i.e., the 1969 deed of sale, and possessed the subject land at the earliest time. Applying the doctrine of "priority in time, priority in rights" or "prius tempore, potior jure," respondents are entitled to the ownership and possession of the subject land.[34]
True, a certificate of title, once registered, should not thereafter be impugned, altered, changed, modified, enlarged or diminished except in a direct proceeding permitted by law.[35] Moreover, Section 32 of Presidential Decree No. 1529 provides that "[u]pon the expiration of said period of one year, the decree of registration and the certificate of title shall become incontrovertible."
However, it does not deprive an aggrieved party of a remedy in law. What cannot be collaterally attacked is the certificate of title and not the title or ownership which is represented by such certificate. Ownership is different from a certificate of title.[36] The fact that petitioner was able to secure a title in her name did not operate to vest ownership upon her of the subject land. Registration of a piece of land under the Torrens System does not create or vest title, because it is not a mode of acquiring ownership. A certificate of title is merely an evidence of ownership or title over the particular property described therein.[37] It cannot be used to protect a usurper from the true owner; nor can it be used as a shield for the commission of fraud; neither does it permit one to enrich himself at the expense of others.[38] Its issuance in favor of a particular person does not foreclose the possibility that the real property may be co-owned with persons not named in the certificate, or that it may be held in trust for another person by the registered owner.[39]
As correctly held by the Court of Appeals, notwithstanding the indefeasibility of the Torrens title, the registered owner may still be compelled to reconvey the registered property to its true owners. The rationale for the rule is that reconveyance does not set aside or re-subject to review the findings of fact of the Bureau of Lands. In an action for reconveyance, the decree of registration is respected as incontrovertible. What is sought instead is the transfer of the property or its title which has been wrongfully or erroneously registered in another person's name, to its rightful or legal owner, or to the one with a better right.[40]
Finally, the Court of Appeals correctly held that an action for reconveyance does not prescribe when the plaintiff is in possession of the land to be reconveyed, as in this case. Thus, in Leyson v. Bontuyan:[41]
x x x [T]his Court declared that an action for reconveyance based on fraud is imprescriptible where the plaintiff is in possession of the property subject of the acts. In Vda. de Cabrera v. Court of Appeals, the Court held:
... [A]n action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten years, the point of reference being the date of registration of the deed or the date of the issuance of the certificate of title over the property, but this rule applies only when the plaintiff or the person enforcing the trust is not in possession of the property, since if a person claiming to be the owner thereof is in actual possession of the property, as the defendants are in the instant case, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe. The reason for this is that one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession.
Similarly, in the case of David v. Malay, the same pronouncement was reiterated by the Court:
... There is settled jurisprudence that one who is in actual possession of a piece of land claiming to be owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of the court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession. No better situation can be conceived at the moment for Us to apply this rule on equity than that of herein petitioners whose ... possession of the litigated property for no less than 30 years and was suddenly confronted with a claim that the land she had been occupying and cultivating all these years, was titled in the name of a third person. We hold that in such a situation the right to quiet title to the property, to seek its reconveyance and annul any certificate of title covering it, accrued only from the time the one in possession was made aware of a claim adverse to his own, and it is only then that the statutory period of prescription commences to run against such possessor.
The paramount reason for this exception is based on the theory that registration proceedings could not be used as a shield for fraud. Moreover, to hold otherwise would be to put premium on land-grabbing and transgressing the broader principle in human relations that no person shall unjustly enrich himself at the expense of another.
WHEREFORE, in view of the foregoing, the petition is DENIED. The Decision of the Court of Appeals dated December 14, 2004, in CA-G.R. SP No. 86736, dismissing petitioner's complaint for recovery of possession and respondents' counterclaim for damages for lack of legal and factual bases, and the Resolution dated February 17, 2005 denying the motion for reconsideration, are AFFIRMED.
SO ORDERED.
Panganiban, C.J., (Chairman), Austria-Martinez and Callejo, Sr., JJ., concur
Chico-Nazario, J., on leave.
[1] CA rollo, pp. 153-171. Penned by Associate Justice Martin S. Villarama, Jr. and concurred in by Associate Justices Regalado E. Maambong and Lucenito N. Tagle.
[2] Id. at 111-117. Penned by Judge Filemon B. Montenegro.
[3] Id. at 81-95. Penned by Judge Eddie P. Monserate.
[4] Id. at 190.
[5] Records, p. 253.
[6] Id. at 314.
[7] Id. at 278.
[8] Id. at 272.
[9] Id. at 263.
[10] CA rollo, p. 155.
[11] Rollo, p. 57.
[12] CA rollo, p. 111.
[13] Referred to as Conrado Balilia in some parts of the records.
[14] CA rollo, p. 112.
[15] Id.
[16] Id.
[17] Referred to as Juanito Camalla in some parts of the records.
[18] Referred to as Porferia Aguirre in some parts of the records.
[19] CA rollo, pp. 94-95.
[20] Id. at 117.
[21] Id. at 170-171.
[22] Rollo, pp. 17-18.
[23] Id. at 18.
[24] Id. at 142-143 & 147.
[25] CA rollo, p. 111.
[26] Homeowners Savings & Loan Bank v. Dailo, G.R. No. 153802, March 11, 2005, 453 SCRA 283, 293.
[27] Act No. 496 (1903) or the Land Registration Act, now Presidential Decree No. 1529 (1978) or the Property Registration Decree.
[28] Abrigo v. De Vera, G.R. No. 154409, June 21, 2004, 432 SCRA 544, 557.
[29] G.R. No. L-27587, February 18, 1970, 31 SCRA 558, 560-561.
[30] 85 Phil. 391, 393 (1950), cited in Naawan Community Rural Bank, Inc. v. Court of Appeals, 443 Phil. 56, 64 (2003).
[31] 394 Phil. 465, 479-480 (2000).
[32] 446 Phil. 32, 50 (2003).
[33] Consolidated Rural Bank (Cagayan Valley), Inc. v. Court of Appeals, G.R. No. 132161, January 17, 2005, 448 SCRA 347, 363.
[34] Rayos v. Reyes, supra at 51.
[35] De Pedro v. Romasan Development Corporation, G.R. No. 158002, February 28, 2005, 452 SCRA 564, 575.
[36] Lee Tek Sheng v. Court of Appeals, 354 Phil. 556, 561 (1998).
[37] Heirs of Clemente Ermac v. Heirs of Vicente Ermac, 451 Phil. 368, 377 (2003).
[38] De Pedro v. Romasan Development Corporation, supra at 577.
[39] Lee Tek Sheng v. Court of Appeals, supra at 561-562.
[40] Heirs of Pomposa Saludares v. Court of Appeals, G.R. No. 128254, January 16, 2004, 420 SCRA 51, 56.
[41] G.R. No. 156357, February 18, 2005, 452 SCRA 94, 113-115.
Source: Supreme Court E-Library | Date created: 2008-08-11 08:43:05
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SECOND DIVISION
[ G.R. NO. 143027, October 11, 2005 ]
ENCARNACION L. CUIZON AND SALVADOR CUIZON, PETITIONERS, VS. MERCEDES C. REMOTO, LEONIDA R. MEYNARD, CELERINA R. ROSALES AND REMEDIOS C. REMOTO, RESPONDENTS.
D E C I S I O N
AUSTRIA-MARTINEZ, J.:
The parties in this case are vying for ownership of a 4,300 square meter-land located in Barangay Basilisa, Remedios T. Romualdez, Agusan del Norte.
Petitioners-spouses Encarnacion L. Cuizon and Salvador Cuizon rely on Transfer Certificate of Title (TCT) No. RT-3121 in the name of "Encarnacion L. Cuizon, married to Salvador Cuizon," issued by the Registry of Deeds of Agusan del Norte on March 15, 1984,[1] pursuant to a notarized Extra-Judicial Settlement with Sale dated August 3, 1983 (1983 Extra-Judicial Settlement with Sale) executed by the heirs of Placida Tabada-Lambo (Placida), wherein they adjudicated unto themselves the one-fourth share of Placida, and, at the same time, sold said portion to their co-heir, Encarnacion L. Cuizon.[2] TCT No. RT-3121 is a transfer from TCT No. RT-183 which originally covers 16 hectares in the name of Placida (married to Gervacio Lambo), Eugenio Tabada, Raymunda Tabada and Patrecia Tabada, each being one-fourth shareowner.[3]
On the other hand, respondents have in their favor a notarized Deed of Sale of Real Property dated September 19, 1968, (1968 Deed of Sale) involving a portion of the same property covered by TCT No. RT-183, measuring 4,300 square meters, executed by Placida in favor of Angel Remoto (Angel), husband of respondent Mercedes C. Remoto, and father of the other respondents, Leonida R. Meynard, Celerina R. Rosales and Remedios C. Remoto.[4]
In a Decision dated March 9, 1990 rendered by the Regional Trial Court of Butuan City (Branch 3) in Civil Case No. 2846, which is an action for reconveyance filed by respondents against petitioners on August 13, 1984, the trial court ruled in favor of respondents and ordered that the property be reconveyed to them. The dispositive portion of the decision reads:
Wherefore, judgment is rendered in favor of herein plaintiffs Mercedes Remoto and children Celerino R. Rosales, Leonida R. Meynard, Candelaria and Remedios both surnamed Remoto, and against defendant-spouses Salvador and Encarnacion Cuizon ordering the latter:
1) To immediately reconvey the lot in question to herein plaintiffs;
2) To pay the sum of Two Thousand (P2,000.00) Pesos as litigation expenses;
3) To pay the sum of Five Thousand (P5,000.00) Pesos as attorney's fees; and
4) To pay the costs (sic) of suit.
Done in Chambers this 9th day of March, 1990, at Butuan City, Philippines.[5]
In awarding the property to respondents, the trial court made the following findings and conclusion, which the Court quotes with approval, viz.:
. . . a careful examination of the evidence on record shows that the evidence of the plaintiffs is strong, substantial convincing and worthy of belief than that of the defendants. The plaintiffs can legally claim possession and ownership of the lot in dispute covered by the one-paged duly notarized but unregistered Deed of Sale of Real Property (Exh. A, Rollo, p. 45 or 89). A perusal of this document discloses that it was duly notarized and signed by vendor Placida Tabada, together with [h]usband Gervacio Lambo, and vendee Angel Remoto. Incidentally, the defendants-spouses utterly failed to prove any defect and irregularity in the exec[u]tion of this Exh. A.
It is the posture of the defendants-spouses that this "state" (sic) and unregistered deed of sale (Exh. A) "has lost its due execution and genuineness and the fact of its being a public document"; that it cannot defeat the duly registered Deed of Extrajudicial Settlement with Absolute Sale (Exh. 1-B); and that the issuance of TCT No. RT-3121 in favor of defendants-spouses (Exh. 3) conferred the latter a better right to the litigated lot under the Torrens system.
This Court is not in accord to (sic) these posturings of defendants-spouses. Exhibit A, which is duly notarized, is a public document. Although it is not registered, it is still enforceable and binding not only between the parties but also their successors-in-interest. ...
It is likewise [the] stance of defendants-spouses that they are purchasers in good faith and for value of the lot in question. This fact is vividly rebutted by the straight forward and credible testimonies of plaintiffs Mercedes O. Remoto and Candelaria Remoto. Both testified that it was in September, 1982, not in 1983 as defendant Salvador Cuizon wants this court to believe, when defendants-spouses went to the residence of the Remotos and learned of the existence of Exhibit A; that it was on this occasion that defendants-spouses were actually shown the document, and that they read and examined the same (Vide, tsn. December 28, 1984, 284-289; tsn. April 24, 1986, 32, 34-37).
Besides, defendants-spouses could not feign ignorance of the unrebutted fact that the plaintiffs had enjoyed continuous, open, adverse and public possession of the litigated lot in the concept of an owner for a duration of fourteen years or more, i.e., from September 19, 1968, the date of execution of Exhibit A, to the present (tsn. December 28, 1984, 283-284) or until September, 1982 when they became aware of the existence of Exhibit A. Nor could the defendants-spouses deny the unrebutted fact that they never had taken possession of the litigated lot (tsn. id., 274-275).
Despite their knowledge of the existence of the Exhibit A and of the continuous public and adverse possession for fourteen years of the lot by the plaintiffs, defendants-spouses had caused the execution of the Deed of Extrajudicial Settlement with Sale on August 3, 1983 by the Heirs of Placida Tabada-Lambo in their favor (Exh. 1-B), and the consequent issuance of TCT RT-3121 in the name of defendant Encarnacion-Cuizon (Exh. 3). Hence, defendants-spouses were buyers in bad faith. They could not pretend a lack of knowledge of plaintiffs' claim and interest in the land. They also acted in bad faith in the registration of the Deed of Extrajudicial Settlement with Sale (Exh. 1-B) and in their acquisition of TCT RT-3121 (Exh. 3).
...
Since defendants-spouses knew of the existence of the first deed of sale, Exhibit A, this first unregistered deed of sale prevails over the registered second deed of sale, Exhibit 1-B.
...
It is also stressed herein that the claim of defendants-spouses that they bought the disputed lot in 1964 on installment basis from Placida Tabada and Gervacio Lambo cannot be given credence. This claim of theirs is self-serving and an afterthought in their last attempts to bolster their defense. In the absence of a written document embodying the supposed deed of sale, the latter is unenforceable contract. This conclusion is in pursuance to sub-paragraph (e), paragraph 2 of Art. 1403 of the Civil Code. ...
Furthermore, it is the submission of the defendants-spouses that Exhibit A is a simulated contract because the questioned lot was intended for donation as a barrio site. This submission of their (sic) cannot be sustained in the absence of a written deed of donation. ...
In fine, this Court finds and so holds that the Deed of Sale of Real Property of September 1968 (Exh. A) can be the legal basis not only of the possession and ownership of the lot in litigation, but also for the reconveyance of the same in favor of the plaintiffs.[6]
On appeal by petitioners, docketed as CA-G.R. CV No. 31587, the Court of Appeals (CA) affirmed the findings and conclusion of the trial court in its Decision[7] dated December 16, 1999, the dispositive portion of which reads:
WHEREFORE, foregoing premises considered, the instant appeal being devoid of any merit in fact and in law, is hereby ordered DISMISSED; and the decision appealed from hereby AFFIRMED IN TOTO.
With cost to Defendants-appellants.
SO ORDERED.[8]
Petitioners filed a motion for reconsideration but the CA denied it per Resolution dated March 31, 2000.[9]
In the present petition for review, petitioners insist that they are the rightful owners of the property based on TCT No. RT-3121, and that the 1968 Deed of Sale is void, fictitious, unenforceable and has no legal effect. Petitioners also argue that: (1) the property is covered by TCT No. RT-183 issued on June 21, 1930, and every person dealing with registered land may safely rely on the correctness of the title; (2) at the time the 1968 Deed of Sale was executed, no written notice was given to all possible co-redemptioners, co-heirs, and co- owners, as provided for under Articles 1620 and 1623 of the Civil Code; (3) respondents' possession is ineffectual against a torrens title; and (4) respondents' action is barred by prescription and laches.[10]
The issue in this case is: who has a better right to the property in dispute?
As a rule, the Court cannot review the factual findings of the trial court and the CA in a petition for review on certiorari under Rule 45 of the Rules of Court.[11] It should be stressed that a review by certiorari under Rule 45 is a matter of discretion. Under this mode of review, the jurisdiction of the Court is limited to reviewing only errors of law, not of fact. When supported by substantial evidence, findings of fact of the trial court as affirmed by the CA are conclusive and binding on the parties.[12] This Court will not review unless there are exceptional circumstances, viz.: (a) where the conclusion is a finding grounded entirely on speculation, surmise and conjectures; (b) where the information made is manifestly mistaken; (c) where there is grave abuse of discretion; (d) where the judgment is based on a misapplication of facts, and the findings of facts of the trial court and the appellate court are contradicted by the evidence on record; and (e) when certain material facts and circumstances had been overlooked by the trial court which, if taken into account, would alter the result of the case.[13] There exists no exceptional circumstance in this case that would warrant a departure from the factual findings of both the trial court and the CA.
As correctly ruled by both the trial court and the CA, the 1968 Deed of Sale executed by Placida in favor of Angel should prevail over the 1983 Extra-Judicial Settlement with Sale made by the heirs of Placida in favor of petitioners-spouses Cuizon. Prior tempore, potior jure. It simply means, "He who is first in time is preferred in right." The only essential requisite of this rule is priority in time, and the only one who can invoke this is the first vendee.[14] Records bear the fact that when Placida sold her one-fourth portion of the property covered by TCT No. RT-183 in 1968, the 1983 Extra-Judicial Settlement with Sale was still inexistent, and more importantly, said portion was yet to be transferred by succession to Placida's heirs. The records also show that after Placida sold her portion to Angel, the latter immediately took possession of the same. Applying the principle of priority in time, it is clear that Angel, and consequently his heirs, the respondents herein, have a superior right to the property.
It must be noted that the sale by Placida to Angel is evidenced by a duly notarized deed of sale. Documents acknowledged before notaries public are public documents and public documents are admissible in evidence without necessity of preliminary proof as to their authenticity and due execution. They have in their favor the presumption of regularity, and to contradict the same, there must be evidence that is clear, convincing and more than merely preponderant.[15] Petitioners failed to present any clear and convincing evidence to prove that the deed of sale is "void, fictitious, unenforceable and has no legal effect."
Petitioners harp on the fact that the 1968 Deed of Sale dated September 19, 1968, while notarized, was not registered or annotated on TCT No. RT-183. Petitioners must be reminded that registration is not a requirement for validity of the contract as between the parties, for the effect of registration serves chiefly to bind third persons.[16] Petitioners are not third persons within the contemplation of the registration rule. The conveyance shall not be valid against any person unless registered, except (1) the grantor, (2) his heirs and devisees, and (3) third persons having actual notice or knowledge thereof. Petitioners are both related to the original owner of the property, Placida. Petitioner Encarnacion Lambo-Cuizon is an heir of Placida, while Salvador Cuizon is Encarnacion's husband. Hence, registration is not required to bind petitioners.
Furthermore, where the party has knowledge of a prior existing interest which is unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him.[17] As was found by the trial court, before petitioners bought the property in 1983, they went to the Remotos' residence in 1982 and were shown a copy of the 1968 Deed of Sale. While petitioners dispute the year, saying that it was in 1983 and not 1982 when they went to the Remotos' residence, the Court abides by the trial court's finding considering that it was in the best position to assess the respective testimonies of the contending claimants.[18]
Petitioners rely heavily on TCT No. RT-3121 issued in their names. In the first place, the issuance of the title was made pursuant to the 1983 Extra-Judicial Settlement with Sale. At the time this document was entered into by the heirs of Placida, the latter was no longer the owner of the property, having earlier sold the same to Angel. No one can give what one does not have -- nemo dat quod non habet. Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can acquire no more than what the seller can transfer legally.[19] Such being the case, the heirs of Placida did not acquire any right to adjudicate the property unto them and sell it to Encarnacion.
What's more, the defense of indefeasibility of the torrens title does not extend to a transferee who takes the certificate of title with notice of a flaw in his title. The principle of indefeasibility of title is unavailing where there was fraud that attended the issuance of the free patents and titles.[20] As previously noted, petitioners knew of the existence of the 1968 Deed of Sale as the Remotos showed it to them in 1982, a year before the execution of the 1983 Extra-Judicial Settlement with Sale. Thus, it cannot be said that petitioners are transferees in good faith and therefore, the defense of indefeasibility of the torrens title is not applicable to them.
Likewise, petitioners cannot complain that no written notice was given to all possible redemptioners or heirs at the time of the execution of the 1968 Deed of Sale. Under the provisions of the Civil Code on Legal Redemption, it is stated:
Article 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of any of them, are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one.
Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the share they may respectively have in the thing owned in common.
Art. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
Corollary to these, Article 1088 of the Civil Code, provides:
Art. 1088. Should any of the heirs sell his hereditary rights to a stranger before the partition, any or all of the co-heirs may be subrogated to the rights of the purchaser by reimbursing him for the price of the sale, provided they do so within the period of one month from the time they were notified in writing of the sale by the vendor.
The right of legal redemption pertains to Placida's original co-owners, namely, Eugenio Tabada, Raymunda Tabada and Patrecia Tabada, and their respective heirs,[21] not to petitioners who are the heirs of Placida. Also, the written notification should come from the vendor or prospective vendor, Placida in this case, and not from any other person.[22] This is so because the vendor is in the best position to know who are his co-owners that under the law must be notified of the sale. Also, the notice by the seller removes all doubts as to fact of the sale, its perfection; and its validity, the notice being a reaffirmation thereof, so that the party notified need not entertain doubt that the seller may still contest the alienation. This assurance would not exist if the buyer should give the notice.[23]
Even if the property has not yet been formally subdivided, still, records show that the particular portions belonging to the co-owners have already been allocated and Placida's co-owners have already been exercising proprietary rights over their respective allotments. Thus, inscribed on TCT No. RT-183 are several deeds of mortgages executed by Placida's co-owner Eugenio C. Tabada in favor of the Butuan City Rural Bank with respect to his one-fourth share, and a Deed of Sale with Right of Repurchase dated May 13, 1968 executed by the spouses Eugenio G. Tabada and Trinidad Ontong in favor of one Hernando R. Sanchez, also covering Eugenio's one-fourth portion of the property.[24]
The Court notes, however, that the property originally co-owned by Placida, Eugenio Tabada, Raymunda Tabada and Patrecia Tabada, covered by TCT No. RT-183, measures 16 hectares, while the 1968 Deed of Sale covers 4,300 square meters.
The right of Placida to sell her one-fourth portion of the property covered by TCT No. RT-183 is sanctioned under Article 493 of the Civil Code, to wit:
Art. 493. Each co-owner shall have the full ownership of his part and the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership.
The sale to Angel affects only Placida's pro indiviso share in the property, and Angel gets only what corresponds to Placida's share in the partition of the property owned in common. Since a co-owner is entitled to sell his undivided share, a sale of the entire property by one co-owner without the consent of the other co-owners is not null and void; only the rights of the co-owner/seller are transferred, thereby making the buyer a co-owner of the property.[25]
Given the foregoing, the portion sold by Placida and bought by Angel under the 1968 Deed of Sale should only pertain to one-fourth of Placida's share in the 16-hectare property, or 4,000 square meters.
Lastly, prescription and laches do not apply in this case. To begin with, respondents have been in actual and continuous possession of the property since Angel first bought it in 1968. If a person claiming to be the owner thereof is in actual possession of the property, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe. The reason for this is that one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession.[26]
Neither can respondents be held guilty of laches. On the contrary, it was respondents' vigilance in protecting their right over the property that gave rise to the present case. Their action for reconveyance was filed only after one year and ten days from the execution of the 1983 Extra-Judicial Settlement with Sale, one year and three days after its registration, and four months and twenty-eight days after the issuance of TCT No. RT-3121. Obviously, laches has not yet set in.
WHEREFORE, the petition is DISMISSED. The Court of Appeals Decision dated December 16, 1999 together with its Resolution dated March 31, 2000 in CA-G.R. CV No. 31587 is AFFIRMED.
SO ORDERED.
Puno, Tinga, and Chico-Nazario, JJ., concur.
Callejo, Sr., J., on leave.
[1] Exhibit "D," Folder of Exhibits, back of p. 8.
[2] Exhibit "13," Folder of Exhibits, pp. 44-46.
[3] Exhibit "C," Folder of Exhibits, back of p. 5.
[4] Annex "A," Original Records, p. 305.
[5] Original Records, p. 653.
[6] Id., pp. 648-653.
[7] Penned by Associate Justice Jose L. Sabio, Jr., with Associate Justices Ramon A. Barcelona and Demetrio G. Demetria, concurring.
[8] CA Rollo, pp. 180-181.
[9] Id., p. 197.
[10] Rollo, pp. 31-35.
[11] Philippine National Bank vs. Heirs of Militar, G.R. No. 164801, August 18, 2005.
[12] Agas vs. Sabico, G.R. No. 156447, April 26, 2005.
[13] Martinez vs. Court of Appeals, G.R. No. 131673, September 10, 2004, 438 SCRA 130, 149.
[14] Consolidated Rural Bank (Cagayan Valley), Inc. vs. Court of Appeals, G.R. No. 132161, January 17, 2005.
[15] Ruiz, Sr. vs. Court of Appeals, G.R. No. 121298, July 31, 2001, 362 SCRA 40, 52.
[16] Heirs of Manlapat vs. Court of Appeals, G.R. No. 125585, June 8, 2005.
[17] Ibid.
[18] Spouses Paragas vs. Balacano, G.R. No. 168220, August 31, 2005.
[19] Consolidated Rural Bank (Cagayan Valley), Inc. case, supra.
[20] Vda. De Cabrera vs. Court of Appeals, G.R. No. 108547, February 3, 1997, 267 SCRA 338, 353.
[21] Fernandez vs. Tarun, G.R. No. 143868, November 14, 2002, 391 SCRA 653.
[22] De Ape vs. Court of Appeals, G.R. No. 133638, April 15, 2005.
[23] Ibid.
[24] Original Records, back of p. 49, p. 50 and back of p. 50.
[25] Aguirre vs. Court of Appeals, G.R. No. 122249, January 29, 2004, 421 SCRA 310, 324.
[26] Cabrera vs. Court of Appeals, G.R. No. 108547, February 3, 1997, 267 SCRA 339, 354.
Source: Supreme Court E-Library | Date created: 2008-09-22 08:33:40
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SECOND DIVISION
[ G.R. No. 120098, October 02, 2001 ]
RUBY L. TSAI, PETITIONER, VS. HON. COURT OF APPEALS, EVER TEXTILE MILLS, INC. AND MAMERTO R. VILLALUZ, RESPONDENTS.
[G.R. NO. 120109. OCTOBER 2, 2001]
PHILIPPINE BANK OF COMMUNICATIONS, PETITIONER, VS. HON. COURT OF APPEALS, EVER TEXTILE MILLS AND MAMERTO R. VILLALUZ, RESPONDENTS.
D E C I S I O N
QUISUMBING, J.:
These consolidated cases assail the decision[1] of the Court of Appeals in CA-G.R. CV No. 32986, affirming the decision[2] of the Regional Trial Court of Manila, Branch 7, in Civil Case No. 89-48265. Also assailed is respondent court's resolution denying petitioners' motion for reconsideration.
On November 26, 1975, respondent Ever Textile Mills, Inc. (EVERTEX) obtained a three million peso (P3,000,000.00) loan from petitioner Philippine Bank of Communications (PBCom). As security for the loan, EVERTEX executed in favor of PBCom, a deed of Real and Chattel Mortgage over the lot under TCT No. 372097, where its factory stands, and the chattels located therein as enumerated in a schedule attached to the mortgage contract. The pertinent portions of the Real and Chattel Mortgage are quoted below:
MORTGAGE
(REAL AND CHATTEL)
xxx
The MORTGAGOR(S) hereby transfer(s) and convey(s), by way of First Mortgage, to the MORTGAGEE, xxx certain parcel(s) of land, together with all the buildings and improvements now existing or which may hereafter exist thereon, situated in xxx.
"Annex A"
(Real and Chattel Mortgage executed by Ever Textile Mills in favor of PBCommunications - continued)
| LIST OF MACHINERIES & EQUIPMENT | |||
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| A. | Forty Eight (48) units of Vayrow Knitting Machines-Tompkins made in Hongkong: | ||
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| Serial Numbers | Size of Machines | ||
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| xxx | |||
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| B. | Sixteen (16) sets of Vayrow Knitting Machines made in Taiwan. | ||
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| xxx | |
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| C. | Two (2) Circular Knitting Machines made in West Germany. | ||
| xxx |
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| D. | Four (4) Winding Machines. | ||
| xxx |
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| SCHEDULE "A" | |||
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| I. | TCT # 372097 - RIZAL | ||
| xxx |
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| II. | Any and all buildings and improvements now existing or hereafter to exist on the above-mentioned lot. | ||
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| III. | MACHINERIES & EQUIPMENT situated, located and/or installed on the above-mentioned lot located at xxx | ||
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| (a) | Forty eight sets (48) Vayrow Knitting Machines xxx |
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| (b) | Sixteen sets (16) Vayrow Knitting Machines xxx |
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| (c) | Two (2) Circular Knitting Machines xxx |
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| (d) | Two (2) Winding Machines xxx |
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| (e) | Two (2) Winding Machines xxx |
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| IV | Any and all replacements, substitutions, additions, increases and accretions to above properties. | ||
| xxx[3] | |||
On April 23, 1979, PBCom granted a second loan of P3,356,000.00 to EVERTEX. The loan was secured by a Chattel Mortgage over personal properties enumerated in a list attached thereto. These listed properties were similar to those listed in Annex A of the first mortgage deed.
After April 23, 1979, the date of the execution of the second mortgage mentioned above, EVERTEX purchased various machines and equipments.
On November 19, 1982, due to business reverses, EVERTEX filed insolvency proceedings docketed as SP Proc. No. LP-3091-P before the defunct Court of First Instance of Pasay City, Branch XXVIII. The CFI issued an order on November 24, 1982 declaring the corporation insolvent. All its assets were taken into the custody of the Insolvency Court, including the collateral, real and personal, securing the two mortgages as abovementioned.
In the meantime, upon EVERTEX's failure to meet its obligation to PBCom, the latter commenced extrajudicial foreclosure proceedings against EVERTEX under Act 3135, otherwise known as "An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate Mortgages" and Act 1506 or "The Chattel Mortgage Law". A Notice of Sheriff's Sale was issued on December 1, 1982.
On December 15, 1982, the first public auction was held where petitioner PBCom emerged as the highest bidder and a Certificate of Sale was issued in its favor on the same date. On December 23, 1982, another public auction was held and again, PBCom was the highest bidder. The sheriff issued a Certificate of Sale on the same day.
On March 7, 1984, PBCom consolidated its ownership over the lot and all the properties in it. In November 1986, it leased the entire factory premises to petitioner Ruby L. Tsai for P50,000.00 a month. On May 3, 1988, PBCom sold the factory, lock, stock and barrel to Tsai for P9,000,000.00, including the contested machineries.
On March 16, 1989, EVERTEX filed a complaint for annulment of sale, reconveyance, and damages with the Regional Trial Court against PBCom, alleging inter alia that the extrajudicial foreclosure of subject mortgage was in violation of the Insolvency Law. EVERTEX claimed that no rights having been transmitted to PBCom over the assets of insolvent EVERTEX, therefore Tsai acquired no rights over such assets sold to her, and should reconvey the assets.
Further, EVERTEX averred that PBCom, without any legal or factual basis, appropriated the contested properties, which were not included in the Real and Chattel Mortgage of November 26, 1975 nor in the Chattel Mortgage of April 23, 1979, and neither were those properties included in the Notice of Sheriff's Sale dated December 1, 1982 and Certificate of Sale dated December 15, 1982.
The disputed properties, which were valued at P4,000,000.00, are: 14 Interlock Circular Knitting Machines, 1 Jet Drying Equipment, 1 Dryer Equipment, 1 Raisin Equipment and 1 Heatset Equipment.
The RTC found that the lease and sale of said personal properties were irregular and illegal because they were not duly foreclosed nor sold at the December 15, 1982 auction sale since these were not included in the schedules attached to the mortgage contracts. The trial court decreed:
WHEREFORE, judgment is hereby rendered in favor of plaintiff corporation and against the defendants:
1. Ordering the annulment of the sale executed by defendant Philippine Bank of Communications in favor of defendant Ruby L. Tsai on May 3, 1988 insofar as it affects the personal properties listed in par. 9 of the complaint, and their return to the plaintiff corporation through its assignee, plaintiff Mamerto R. Villaluz, for disposition by the Insolvency Court, to be done within ten (10) days from finality of this decision;
2. Ordering the defendants to pay jointly and severally the plaintiff corporation the sum of P5,200,000.00 as compensation for the use and possession of the properties in question from November 1986 to February 1991 and P100,000.00 every month thereafter, with interest thereon at the legal rate per annum until full payment;
3. Ordering the defendants to pay jointly and severally the plaintiff corporation the sum of P50,000.00 as and for attorney's fees and expenses of litigation;
4. Ordering the defendants to pay jointly and severally the plaintiff corporation the sum of P200,000.00 by way of exemplary damages;
5. Ordering the dismissal of the counterclaim of the defendants; and
6. Ordering the defendants to proportionately pay the costs of suit.
SO ORDERED.[4]
Dissatisfied, both PBCom and Tsai appealed to the Court of Appeals, which issued its decision dated August 31, 1994, the dispositive portion of which reads:
WHEREFORE, except for the deletion therefrom of the award for exemplary damages, and reduction of the actual damages, from P100,000.00 to P20,000.00 per month, from November 1986 until subject personal properties are restored to appellees, the judgment appealed from is hereby AFFIRMED, in all other respects. No pronouncement as to costs.[5]
Motion for reconsideration of the above decision having been denied in the resolution of April 28, 1995, PBCom and Tsai filed their separate petitions for review with this Court.
In G.R. No. 120098, petitioner Tsai ascribed the following errors to the respondent court:
I
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN EFFECT MAKING A CONTRACT FOR THE PARTIES BY TREATING THE 1981 ACQUIRED MACHINERIES AS CHATTELS INSTEAD OF REAL PROPERTIES WITHIN THEIR EARLIER 1975 DEED OF REAL AND CHATTEL MORTGAGE OR 1979 DEED OF CHATTEL MORTGAGE.
II
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN HOLDING THAT THE DISPUTED 1981 MACHINERIES ARE NOT REAL PROPERTIES DEEMED PART OF THE MORTGAGE - DESPITE THE CLEAR IMPORT OF THE EVIDENCE AND APPLICABLE RULINGS OF THE SUPREME COURT.
III
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN DEEMING PETITIONER A PURCHASER IN BAD FAITH.
IV
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN ASSESSING PETITIONER ACTUAL DAMAGES, ATTORNEY'S FEES AND EXPENSES OF LITIGATION - FOR WANT OF VALID FACTUAL AND LEGAL BASIS.
V
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN HOLDING AGAINST PETITIONER'S ARGUMENTS ON PRESCRIPTION AND LACHES.[6]
In G.R. No. 120109, PBCom raised the following issues:
I.
DID THE COURT OF APPEALS VALIDLY DECREE THE MACHINERIES LISTED UNDER PARAGRAPH 9 OF THE COMPLAINT BELOW AS PERSONAL PROPERTY OUTSIDE OF THE 1975 DEED OF REAL ESTATE MORTGAGE AND EXCLUDED THEM FROM THE REAL PROPERTY EXTRAJUDICIALLY FORECLOSED BY PBCOM DESPITE THE PROVISION IN THE 1975 DEED THAT ALL AFTER-ACQUIRED PROPERTIES DURING THE LIFETIME OF THE MORTGAGE SHALL FORM PART THEREOF, AND DESPITE THE UNDISPUTED FACT THAT SAID MACHINERIES ARE BIG AND HEAVY, BOLTED OR CEMENTED ON THE REAL PROPERTY MORTGAGED BY EVER TEXTILE MILLS TO PBCOM, AND WERE ASSESSED FOR REAL ESTATE TAX PURPOSES?
II.
CAN PBCOM, WHO TOOK POSSESSION OF THE MACHINERIES IN QUESTION IN GOOD FAITH, EXTENDED CREDIT FACILITIES TO EVER TEXTILE MILLS WHICH AS OF 1982 TOTALLED P9,547,095.28, WHO HAD SPENT FOR MAINTENANCE AND SECURITY ON THE DISPUTED MACHINERIES AND HAD TO PAY ALL THE BACK TAXES OF EVER TEXTILE MILLS BE LEGALLY COMPELLED TO RETURN TO EVER THE SAID MACHINERIES OR IN LIEU THEREOF BE ASSESSED DAMAGES. IS THAT SITUATION TANTAMOUNT TO A CASE OF UNJUST ENRICHMENT?[7]
The principal issue, in our view, is whether or not the inclusion of the questioned properties in the foreclosed properties is proper. The secondary issue is whether or not the sale of these properties to petitioner Ruby Tsai is valid.
For her part, Tsai avers that the Court of Appeals in effect made a contract for the parties by treating the 1981 acquired units of machinery as chattels instead of real properties within their earlier 1975 deed of Real and Chattel Mortgage or 1979 deed of Chattel Mortgage.[8] Additionally, Tsai argues that respondent court erred in holding that the disputed 1981 machineries are not real properties.[9] Finally, she contends that the Court of Appeals erred in holding against petitioner's arguments on prescription and laches[10] and in assessing petitioner actual damages, attorney's fees and expenses of litigation, for want of valid factual and legal basis.[11]
Essentially, PBCom contends that respondent court erred in affirming the lower court's judgment decreeing that the pieces of machinery in dispute were not duly foreclosed and could not be legally leased nor sold to Ruby Tsai. It further argued that the Court of Appeals' pronouncement that the pieces of machinery in question were personal properties have no factual and legal basis. Finally, it asserts that the Court of Appeals erred in assessing damages and attorney's fees against PBCom.
In opposition, private respondents argue that the controverted units of machinery are not "real properties" but chattels, and, therefore, they were not part of the foreclosed real properties, rendering the lease and the subsequent sale thereof to Tsai a nullity.[12]
Considering the assigned errors and the arguments of the parties, we find the petitions devoid of merit and ought to be denied.
Well settled is the rule that the jurisdiction of the Supreme Court in a petition for review on certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual findings complained of are devoid of support by the evidence on record or the assailed judgment is based on misapprehension of facts.[13] This rule is applied more stringently when the findings of fact of the RTC is affirmed by the Court of Appeals.[14]
The following are the facts as found by the RTC and affirmed by the Court of Appeals that are decisive of the issues: (1) the "controverted machineries" are not covered by, or included in, either of the two mortgages, the Real Estate and Chattel Mortgage, and the pure Chattel Mortgage; (2) the said machineries were not included in the list of properties appended to the Notice of Sale, and neither were they included in the Sheriff's Notice of Sale of the foreclosed properties.[15]
Petitioners contend that the nature of the disputed machineries, i.e., that they were heavy, bolted or cemented on the real property mortgaged by EVERTEX to PBCom, make them ipso facto immovable under Article 415 (3) and (5) of the New Civil Code. This assertion, however, does not settle the issue. Mere nuts and bolts do not foreclose the controversy. We have to look at the parties' intent.
While it is true that the controverted properties appear to be immobile, a perusal of the contract of Real and Chattel Mortgage executed by the parties herein gives us a contrary indication. In the case at bar, both the trial and the appellate courts reached the same finding that the true intention of PBCOM and the owner, EVERTEX, is to treat machinery and equipment as chattels. The pertinent portion of respondent appellate court's ruling is quoted below:
As stressed upon by appellees, appellant bank treated the machineries as chattels; never as real properties. Indeed, the 1975 mortgage contract, which was actually real and chattel mortgage, militates against appellants' posture. It should be noted that the printed form used by appellant bank was mainly for real estate mortgages. But reflective of the true intention of appellant PBCOM and appellee EVERTEX was the typing in capital letters, immediately following the printed caption of mortgage, of the phrase "real and chattel." So also, the "machineries and equipment" in the printed form of the bank had to be inserted in the blank space of the printed contract and connected with the word "building" by typewritten slash marks. Now, then, if the machineries in question were contemplated to be included in the real estate mortgage, there would have been no necessity to ink a chattel mortgage specifically mentioning as part III of Schedule A a listing of the machineries covered thereby. It would have sufficed to list them as immovables in the Deed of Real Estate Mortgage of the land and building involved.
As regards the 1979 contract, the intention of the parties is clear and beyond question. It refers solely to chattels. The inventory list of the mortgaged properties is an itemization of sixty-three (63) individually described machineries while the schedule listed only machines and 2,996,880.50 worth of finished cotton fabrics and natural cotton fabrics.[16]
In the absence of any showing that this conclusion is baseless, erroneous or uncorroborated by the evidence on record, we find no compelling reason to depart therefrom.
Too, assuming arguendo that the properties in question are immovable by nature, nothing detracts the parties from treating it as chattels to secure an obligation under the principle of estoppel. As far back as Navarro v. Pineda, 9 SCRA 631 (1963), an immovable may be considered a personal property if there is a stipulation as when it is used as security in the payment of an obligation where a chattel mortgage is executed over it, as in the case at bar.
In the instant case, the parties herein: (1) executed a contract styled as "Real Estate Mortgage and Chattel Mortgage," instead of just "Real Estate Mortgage" if indeed their intention is to treat all properties included therein as immovable, and (2) attached to the said contract a separate "LIST OF MACHINERIES & EQUIPMENT". These facts, taken together, evince the conclusion that the parties' intention is to treat these units of machinery as chattels. A fortiori, the contested after-acquired properties, which are of the same description as the units enumerated under the title "LIST OF MACHINERIES & EQUIPMENT," must also be treated as chattels.
Accordingly, we find no reversible error in the respondent appellate court's ruling that inasmuch as the subject mortgages were intended by the parties to involve chattels, insofar as equipment and machinery were concerned, the Chattel Mortgage Law applies, which provides in Section 7 thereof that: "a chattel mortgage shall be deemed to cover only the property described therein and not like or substituted property thereafter acquired by the mortgagor and placed in the same depository as the property originally mortgaged, anything in the mortgage to the contrary notwithstanding."
And, since the disputed machineries were acquired in 1981 and could not have been involved in the 1975 or 1979 chattel mortgages, it was consequently an error on the part of the Sheriff to include subject machineries with the properties enumerated in said chattel mortgages.
As the auction sale of the subject properties to PBCom is void, no valid title passed in its favor. Consequently, the sale thereof to Tsai is also a nullity under the elementary principle of nemo dat quod non habet, one cannot give what one does not have.[17]
Petitioner Tsai also argued that assuming that PBCom's title over the contested properties is a nullity, she is nevertheless a purchaser in good faith and for value who now has a better right than EVERTEX.
To the contrary, however, are the factual findings and conclusions of the trial court that she is not a purchaser in good faith. Well-settled is the rule that the person who asserts the status of a purchaser in good faith and for value has the burden of proving such assertion.[18] Petitioner Tsai failed to discharge this burden persuasively.
Moreover, a purchaser in good faith and for value is one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same, at the time of purchase, or before he has notice of the claims or interest of some other person in the property.[19] Records reveal, however, that when Tsai purchased the controverted properties, she knew of respondent's claim thereon. As borne out by the records, she received the letter of respondent's counsel, apprising her of respondent's claim, dated February 27, 1987.[20] She replied thereto on March 9, 1987.[21] Despite her knowledge of respondent's claim, she proceeded to buy the contested units of machinery on May 3, 1988. Thus, the RTC did not err in finding that she was not a purchaser in good faith.
Petitioner Tsai's defense of indefeasibility of Torrens Title of the lot where the disputed properties are located is equally unavailing. This defense refers to sale of lands and not to sale of properties situated therein. Likewise, the mere fact that the lot where the factory and the disputed properties stand is in PBCom's name does not automatically make PBCom the owner of everything found therein, especially in view of EVERTEX's letter to Tsai enunciating its claim.
Finally, petitioners' defense of prescription and laches is less than convincing. We find no cogent reason to disturb the consistent findings of both courts below that the case for the reconveyance of the disputed properties was filed within the reglementary period. Here, in our view, the doctrine of laches does not apply. Note that upon petitioners' adamant refusal to heed EVERTEX's claim, respondent company immediately filed an action to recover possession and ownership of the disputed properties. There is no evidence showing any failure or neglect on its part, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier. The doctrine of stale demands would apply only where by reason of the lapse of time, it would be inequitable to allow a party to enforce his legal rights. Moreover, except for very strong reasons, this Court is not disposed to apply the doctrine of laches to prejudice or defeat the rights of an owner.[22]
As to the award of damages, the contested damages are the actual compensation, representing rentals for the contested units of machinery, the exemplary damages, and attorney's fees.
As regards said actual compensation, the RTC awarded P100,000.00 corresponding to the unpaid rentals of the contested properties based on the testimony of John Chua, who testified that the P100,000.00 was based on the accepted practice in banking and finance, business and investments that the rental price must take into account the cost of money used to buy them. The Court of Appeals did not give full credence to Chua's projection and reduced the award to P20,000.00.
Basic is the rule that to recover actual damages, the amount of loss must not only be capable of proof but must actually be proven with reasonable degree of certainty, premised upon competent proof or best evidence obtainable of the actual amount thereof.[23] However, the allegations of respondent company as to the amount of unrealized rentals due them as actual damages remain mere assertions unsupported by documents and other competent evidence. In determining actual damages, the court cannot rely on mere assertions, speculations, conjectures or guesswork but must depend on competent proof and on the best evidence obtainable regarding the actual amount of loss.[24] However, we are not prepared to disregard the following dispositions of the respondent appellate court:
... In the award of actual damages under scrutiny, there is nothing on record warranting the said award of P5,200,000.00, representing monthly rental income of P100,000.00 from November 1986 to February 1991, and the additional award of P100,000.00 per month thereafter.
As pointed out by appellants, the testimonial evidence, consisting of the testimonies of Jonh (sic) Chua and Mamerto Villaluz, is shy of what is necessary to substantiate the actual damages allegedly sustained by appellees, by way of unrealized rental income of subject machineries and equipments.
The testimony of John Cua (sic) is nothing but an opinion or projection based on what is claimed to be a practice in business and industry. But such a testimony cannot serve as the sole basis for assessing the actual damages complained of. What is more, there is no showing that had appellant Tsai not taken possession of the machineries and equipments in question, somebody was willing and ready to rent the same for P100,000.00 a month.
x x x
Then, too, even assuming arguendo that the said machineries and equipments could have generated a rental income of P30,000.00 a month, as projected by witness Mamerto Villaluz, the same would have been a gross income. Therefrom should be deducted or removed, expenses for maintenance and repairs. ... Therefore, in the determination of the actual damages or unrealized rental income sued upon, there is a good basis to calculate that at least four months in a year, the machineries in dispute would have been idle due to absence of a lessee or while being repaired. In the light of the foregoing rationalization and computation, We believe that a net unrealized rental income of P20,000.00 a month, since November 1986, is more realistic and fair.[25]
As to exemplary damages, the RTC awarded P200,000.00 to EVERTEX which the Court of Appeals deleted. But according to the CA, there was no clear showing that petitioners acted malevolently, wantonly and oppressively. The evidence, however, shows otherwise.
It is a requisite to award exemplary damages that the wrongful act must be accompanied by bad faith,[26] and the guilty acted in a wanton, fraudulent, oppressive, reckless or malevolent manner.[27] As previously stressed, petitioner Tsai's act of purchasing the controverted properties despite her knowledge of EVERTEX's claim was oppressive and subjected the already insolvent respondent to gross disadvantage. Petitioner PBCom also received the same letters of Atty. Villaluz, responding thereto on March 24, 1987.[28] Thus, PBCom's act of taking all the properties found in the factory of the financially handicapped respondent, including those properties not covered by or included in the mortgages, is equally oppressive and tainted with bad faith. Thus, we are in agreement with the RTC that an award of exemplary damages is proper.
The amount of P200,000.00 for exemplary damages is, however, excessive. Article 2216 of the Civil Code provides that no proof of pecuniary loss is necessary for the adjudication of exemplary damages, their assessment being left to the discretion of the court in accordance with the circumstances of each case.[29] While the imposition of exemplary damages is justified in this case, equity calls for its reduction. In Inhelder Corporation v. Court of Appeals, G.R. No. L-52358, 122 SCRA 576, 585, (May 30, 1983), we laid down the rule that judicial discretion granted to the courts in the assessment of damages must always be exercised with balanced restraint and measured objectivity. Thus, here the award of exemplary damages by way of example for the public good should be reduced to P100,000.00.
By the same token, attorney's fees and other expenses of litigation may be recovered when exemplary damages are awarded.[30] In our view, RTC's award of P50,000.00 as attorney's fees and expenses of litigation is reasonable, given the circumstances in these cases.
WHEREFORE, the petitions are DENIED. The assailed decision and resolution of the Court of Appeals in CA-G.R. CV No. 32986 are AFFIRMED WITH MODIFICATIONS. Petitioners Philippine Bank of Communications and Ruby L. Tsai are hereby ordered to pay jointly and severally Ever Textile Mills, Inc. the following: (1) P20,000.00 per month, as compensation for the use and possession of the properties in question from November 1986[31] until subject personal properties are restored to respondent corporation; (2) P100,000.00 by way of exemplary damages, and (3) P50,000.00 as attorney's fees and litigation expenses. Costs against petitioners.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.
[1] Rollo, G.R. No. 120109, pp. 23-45.
[2] Id. at 23-24.
[3] Folder of Exhibits, pp. 5-12.
[4] Rollo, G.R. No. 120109, pp. 23-24.
[5] Id. at 45.
[6] Rollo, G.R. No. 120098, pp. 23-25.
[7] Rollo, G.R. No. 120109, pp. 9-10.
[8] Rollo, G.R. No. 120098, p. 25.
[9] Id. at 33.
[10] Id. at 49.
[11] Id. at 44.
[12] Id. at 133.
[13] Congregation of the Religious of the Virgin Mary v. Court of Appeals, 291 SCRA 385, 391-392 (1998).
[14] Manlapaz vs. Court of Appeals, 147 SCRA 236, 239 (1987).
[15] Rollo, G.R. No. 120109, pp. 62-63.
[16] Rollo, G.R. No. 120098, pp. 68-69.
[17] Segura vs. Segura, 165 SCRA 368, 375 (1988); Noel vs. Court of Appeals, G.R. No. 59550, 240 SCRA 78, 88 (1995).
[18] Mathay v. Court of Appeals, 295 SCRA 556, 575 (1998).
[19] Diaz-Duarte vs. Ong, 298 SCRA 388, 397 (1998).
[20] Exhibit "U", Folder of Exhibits, p. 64.
[21] Exhibit "V", Id. at 66.
[22] Noel vs. Court of Appeals, 240 SCRA 78, 90 (1995).
[23] Ace Haulers Corporation v. CA, et al., G.R. No127934, August 23, 2000, p. 11.
[24] Barzaga vs. Court of Appeals, 268 SCRA 105, 113-114 (1997).
[25] Rollo, G.R. No. 120109, pp. 43-44.
[26] "J" Marketing Corp. vs. Sia, Jr., 285 SCRA 580, 583-584 (1998).
[27] Cervantes vs. Court of Appeals, 304 SCRA 25, 33 (1997).
[28] Exhibit "X", Folder of Exhibits, p. 69.
[29] Art. 2216. Civil Code. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages may be adjudicated. The assessment of such damages, except liquidated ones, is left to the discretion of the court, according to the circumstances of each case.
[30] Vital-Gozon v. Court of Appeals, 292 SCRA 124, 147 (1998).
[31] The time when PBCom leased the disputed properties to Tsai. CA Rollo, p. 34.
Source: Supreme Court E-Library | Date created: 2010-12-20 10:04:32
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