FIRST DIVISION

G.R. Nos. 113472-73 December 20, 1994

ONG CHING PO, YU SIOK LIAN DAVID ONG and JIMMY ONG, petitioners,
vs.
COURT OF APPEALS and SOLEDAD PARIAN, respondents.

Bautista, Salva, Arrieta, Salva for petitioner.

Arthem Maceda Potian for private respondent.

QUIASON, J.:

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court of the
Decision of the Court of Appeals dated July 15, 1993, which dismissed the petition for
certiorari in CA-G.R. CV Nos. 28391-92.

On July 23, 1947, Ong Joi Jong sold a parcel of land located at Fundidor Street, San Nicolas
to private respondent Soledad Parian, the wife of Ong Yee. The latter, the brother of
petitioner Ong Ching Po, died in January 1983; while petitioner Ong Ching Po died in
October 1986. The said sale was evidenced by a notarized Deed of Sale written in English.
Subsequently, the document was registered with the Register of Deeds of Manila, which
issued Transfer Certificate of Title No. 9260 dated September 2, 1947 in the name of private
respondent.

According to private respondent, she entrusted the administration of the lot and building to
petitioner Ong Ching Po when she and her husband settled in Iloilo. When her husband
died, she demanded that the lot be vacated because she was going to sell it. Unfortunately,
petitioners refused to vacate the said premises.
On March 19, 1984, private respondent filed a case for unlawful detainer against petitioner
Ong Ching Po before the Metropolitan Trial Court of Manila, Branch 26. The inferior court
dismissed her case. The dismissal was affirmed by the Regional Trial Court, Branch 10,
Manila. The decision of the Regional Trial Court was, in turn, affirmed by the Court of
Appeals, which dismissed the petition. The decision of the Court of Appeals became final
and executory.

Petitioners, on the other hand, claimed that on July 23, 1946, petitioner Ong Ching Po
bought the said parcel of land from Ong Joi Jong. The sale was evidenced by a photo copy
of a Deed of Sale written in Chinese with the letter head "Sincere Trading Co." (Exh. "B"). An
English translation of said document (Exh. "C") read as follows:

Deed of Sale

I, Ong Joi Jong, a party to this Deed of Sale hereby sell in absolutely (sic) manner a lot
located on No. 4 Fundidor Street, San Nicolas an (sic) area consisting 213 square meters
including a one-story house erected thereon unto Mr. Ong Ching Po for the sum of
P6,000.00 the receipt of which is hereby acknowledged by me and consequently I have
executed and signed the government registered title (sic) the said lot inclusive of the house
erected thereon, now belong (sic) to Mr. Ong Ching Po unequivocally. And the purpose of
this document is to precisely serve as proof of the sale.

Addendum: I have acceded to the request of Mr. Ong Ching Po into signing another
document in favor of Soledad Parian (She is the Filipino wife of Ong Yee, brother of Ong
Ching Po) for the purpose of facilitating the issuance of the new title by the City Register of
Deeds and for the reason that he is not yet a Filipino. I certify to the truthfulness of this fact.

Lot Seller: Ong Joi Jong

(Exhibits for the plaintiff, p. 4)

On December 6, 1983, petitioner Ong Ching Po executed a Deed of Absolute Sale

conveying to his children, petitioners Jimmy and David Ong, the same property sold by Ong
Joi Jong to private respondent in 1947. On December 12 1985, petitioners Ong Ching Po,
Jimmy Ong and David Ong filed an action for reconveyance and damages against private
respondent in the Regional Trial Court, Branch 53, Manila, docketed as Case No. 85-33962.

On July 26, 1986, private respondent filed an action for quieting of title against petitioners
Ong Ching Po and his wife, petitioner Yu Siok Lian, in the Regional Trial Court, Branch 58,
Manila, docketed as Civil Case No.
86-36818. Upon her motion, the case was consolidated with Civil Case No.
85-33962. On May 30 1990, the trial court rendered a decision in favor of private
respondent. On appeal by petitioners to the Court of Appeals, the said court affirmed the
decision of the Regional Trial Court.

Hence, this petition.

II

According to petitioners, the Court of Appeals erred:

(1) When it gave full faith and credit to the Deed of Sale (Exh. "A") in favor of private
respondent, instead of the Deed of Sale (Exh. "B" and its translation, Exh. "C") in favor of
petitioner Ong Ching Po.

(2) When it concluded that the acts of petitioners were not acts of ownership; and

(3) When it ruled that no express nor implied trust existed between petitioners and
private respondent (Rollo, pp. 17-18).

As stated by petitioners themselves, what is in dispute ". . . is not so much as to which

between Exhibit "A" and "Exhibit "B" is more weighty, but whether this document is what it
purports to be (i.e., a deed of conveyance in favor of Soledad Parian [private respondent] or
it was only resorted to or executed as a subterfuge because the real buyer (Ong Ching Po)
was an alien and it was agreed upon between Ong Ching Po and his brother (Ong Yee,
Soledad Parian's husband) that the land be registered in the name of Soledad Parian in
order to avoid legal complications and to facilitate registration and transfer and that the said
title would be transferred by Soledad to Ong Ching Po or his successors-in-interest and that
she would be holding the title in trust for him" (Rollo, pp. 19-20).

We cannot go along with the claim that petitioner Ong Ching Po merely used private
respondent as a dummy to have the title over the parcel of land registered in her name
because being an alien he was disqualified to own real property in the Philippines. To sustain
such an outrageous contention would be giving a high premium to a violation of our
nationalization laws.

Assuming that Exhibit "B" is in existence and that it was duly executed, still petitioners
cannot claim ownership of the disputed lot by virtue thereof.
Section 5, Article XIII of the 1935 Constitution provides, as follows:

Save in cases of hereditary succession, no private agricultural land shall be transferred or

assigned except to individuals, corporations, or associations qualified to acquire or hold
lands of the public domain in the Philippines.

Section 14, Article XIV of the 1973 Constitution provides, as follows:

Save in cases of hereditary succession, no private land shall be transferred or conveyed

except to individuals, corporations, or associations qualified to acquire or hold lands in the
public domain.

Section 7, Article XII of the 1987 Constitution provides:

Save in cases of hereditary succession, no private lands shall be transferred or conveyed

except to individuals, corporations, or associations qualified to acquire or hold lands in the
public domain.

The capacity to acquire private land is made dependent upon the capacity to acquire or hold
lands of the public domain. Private land may be transferred or conveyed only to individuals
or entities "qualified to acquire lands of the public domain" (II Bernas, The Constitution of the
Philippines 439-440 [1988 ed.]).

The 1935 Constitution reserved the right to participate in the "disposition, exploitation,
development and utilization" of all "lands of the public domain and other natural resources of
the Philippines" for Filipino citizens or corporations at least sixty percent of the capital of
which was owned by Filipinos. Aliens, whether individuals or corporations, have been
disqualified from acquiring public lands; hence, they have also been disqualified from
acquiring private lands.

Petitioner Ong Ching Po was a Chinese citizen; therefore, he was disqualified from acquiring
and owning real property. Assuming that the genuineness and due execution of Exhibit "B"
has been established, the same is null and void, it being contrary to law.

On the other end of the legal spectrum, the deed of sale executed by Ong Joi Jong in favor
of private respondent (Exh. "A") is a notarized document.

To remove the mantle of validity bestowed by law on said document, petitioners claim that
private respondent admitted that she did not pay anything as consideration for the purported
sale in her favor. In the same breath, petitioners said that private respondent implied in her
deposition that it was her husband who paid for the property. It appears, therefore, that the
sale was financed out of conjugal funds and that it was her husband who handled the
transaction for the purchase of the property. Such transaction is a common practice in
Filipino-family affairs.

It is not correct to say that private respondent never took possession of the property. Under
the law, possession is transferred to the vendee by virtue of the notarized deed of
conveyance. Under Article 1498 of the Civil Code of the Philippines, "when the sale is made
through a public instrument, the execution thereof shall be equivalent to the delivery of the
object of the contract, if from the deed the contrary does not appear or cannot clearly be
inferred." If what petitioners meant was that private respondent never lived in the building
constructed on said land, it was because her family had settled in Iloilo.

There is no document showing the establishment of an express trust by petitioner Ong Ching
Po as trustor and private respondent as trustee. Not even Exhibit "B" can be considered as
such a document because private respondent, the registered owner of the property subject
of said "deed of sale," was not a party thereto. The oral testimony to prove the existence of
the express trust will not suffice. Under Article 1443 of the Civil Code of the Philippines, "No
express trust concerning an immovable or any interest therein may be proved by parole
evidence."

Undaunted, petitioners argue that if they cannot prove an express trust in writing, they can
prove an implied trust orally. While an implied trust may be proved orally (Civil Code of the
Philippines, Art. 1457), the evidence must be trustworthy and received by the courts with
extreme caution, because such kind of evidence may be easily fabricated (Salao v. Salao,
70 SCRA 65 [1976]). It cannot be made to rest on vague and uncertain evidence or on loose,
equivocal or indefinite declarations (Cf. De Leon v. Molo-Peckson, et al., 116 Phil. 1267
[1962]). Petitioners do not claim that Ong Yee was not in a financial position to acquire the
land and to introduce the improvements thereon. On the other hand, Yu Siok Lian, the wife
of petitioner Ong Ching Po, admitted in her testimony in court that Ong Yee was a
stockholder of Lam Sing Corporation and was engaged in business.

The Court of Appeals did not give any credence to Exhibit "B" and its translation, Exhibit "C",
because these documents had not been properly authenticated.

Under Section 4, Rule 130 of the Revised Rules of Court:

Secondary Evidence when Original is lost or destroyed. When the original writing has been
lost or destroyed, or cannot be produced in court, upon proof of its execution and lost or
destruction, or unavailability, its contents may be proved by a copy, or by a recital of its
contents in some authentic document, or by the recollection of the witnesses.
Secondary evidence is admissible when the original documents were actually lost or
destroyed. But prior to the introduction of such secondary evidence, the proponent must
establish the former existence of the document. The correct order of proof is as follows:
existence; execution; loss; contents. This order may be changed if necessary in the
discretion of the court (De Vera v. Aguilar, 218 SCRA 602 [1993]).

Petitioners failed to adduce evidence as to the genuineness and due execution of the deed
of sale, Exhibit "B".

The due execution of the document may be established by the person or persons who
executed it; by the person before whom its execution was acknowledged; or by any person
who was present and saw it executed or who after its execution, saw it and recognized the
signatures; or by a person to whom the parties to the instrument had previously confessed
the execution thereof (De Vera v. Aguilar, supra).

Petitioner Yu Siok Lian testified that she was present when said document was executed,
but the trial court rejected her claim and held:

If it is true that she was present, why did she not sign said document, even merely as a
witness? Her oral testimony is easy to concoct or fabricate. Furthermore, she was married
only on September 6, 1946 to the plaintiff, Ong Ching Po, in Baguio City where she
apparently resided, or after the deed of sale was executed. The Court does not believe that
she was present during the execution and signing of the deed of sale involved therein,
notwithstanding her pretensions to the contrary (Decision p. 6, Records p. 414).

As to the contention of petitioners that all the tax receipts, tax declaration, rental receipts,
deed of sale (Exh. "B") and transfer certificate of title were in their possession, private
respondent explained that she and her husband entrusted said lot and building to petitioners
when they moved to Iloilo.

As observed by the Court of Appeals:

We find, however, that these acts, even if true, are not necessarily reflective of dominion, as
even a mere administrator or manager may lawfully perform them pursuant to his
appointment or employment (Rollo,
p. 10).

It is markworthy that all the tax receipts were in the name of private respondent and her
husband. The rental receipts were also in the name of her husband.
WHEREFORE, the petition is DISMISSED.

SO ORDERED.

SECOND DIVISION
[G.R. No. 126006. January 29, 2004]

LAPULAPU FOUNDATION, INC. and ELIAS Q. TAN, petitioners, vs. COURT OF APPEALS
(Seventeenth Division) and ALLIED BANKING CORP., respondents
DECISION
CALLEJO, SR., J.:

Before the Court is the petition for review on certiorari filed by the Lapulapu Foundation, Inc.
and Elias Q. Tan seeking to reverse and set aside the Decision[1] dated June 26, 1996 of
the Court of Appeals (CA) in CA-G.R. CV No. 37162 ordering the petitioners, jointly and
solidarily, to pay the respondent Allied Banking Corporation the amount of P493,566.61 plus
interests and other charges. Likewise, sought to be reversed and set aside is the appellate
courts Resolution dated August 19, 1996 denying the petitioners motion for reconsideration.

The case stemmed from the following facts:

Sometime in 1977, petitioner Elias Q. Tan, then President of the co-petitioner Lapulapu
Foundation, Inc., obtained four loans from the respondent Allied Banking Corporation
covered by four promissory notes in the amounts of P100,000 each. The details of the
promissory notes are as follows:

P/N No. Date of P/N Maturity Date Amount as of 1/23/79

BD No. 504 Nov. 7, 1977 Feb. 5, 1978 P123,377.76

BD No. 621 Nov. 28, 1977 Mar. 28, 1978 P123,411.10

BD No. 716 Dec. 12, 1977 Apr. 11, 1978 P122,322.21

BD No. 839 Jan. 5, 1978 May 5, 1978 P120,455.54[2]

As of January 23, 1979, the entire obligation amounted to P493,566.61 and despite
demands made on them by the respondent Bank, the petitioners failed to pay the same. The
respondent Bank was constrained to file with the Regional Trial Court of Cebu City, Branch
15, a complaint seeking payment by the petitioners, jointly and solidarily, of the sum of
P493,566.61 representing their loan obligation, exclusive of interests, penalty charges,
attorneys fees and costs.

In its answer to the complaint, the petitioner Foundation denied incurring indebtedness from
the respondent Bank alleging that the loans were obtained by petitioner Tan in his personal
capacity, for his own use and benefit and on the strength of the personal information he
furnished the respondent Bank. The petitioner Foundation maintained that it never
authorized petitioner Tan to co-sign in his capacity as its President any promissory note and
that the respondent Bank fully knew that the loans contracted were made in petitioner Tans
personal capacity and for his own use and that the petitioner Foundation never benefited,
directly or indirectly, therefrom. The petitioner Foundation then interposed a cross-claim
against petitioner Tan alleging that he, having exceeded his authority, should be solely liable
for said loans, and a counterclaim against the respondent Bank for damages and attorneys
fees.

For his part, petitioner Tan admitted that he contracted the loans from the respondent Bank
in his personal capacity. The parties, however, agreed that the loans were to be paid from
the proceeds of petitioner Tans shares of common stocks in the Lapulapu Industries
Corporation, a real estate firm. The loans were covered by promissory notes which were
automatically renewable (rolled-over) every year at an amount including unpaid interests,
until such time as petitioner Tan was able to pay the same from the proceeds of his aforesaid
shares.

According to petitioner Tan, the respondent Banks employee required him to affix two
signatures on every promissory note, assuring him that the loan documents would be filled
out in accordance with their agreement. However, after he signed and delivered the loan
documents to the respondent Bank, these were filled out in a manner not in accord with their
agreement, such that the petitioner Foundation was included as party thereto. Further, prior
to its filing of the complaint, the respondent Bank made no demand on him.

After due trial, the court a quo rendered judgment the dispositive portion of which reads:

WHEREFORE, in view of the foregoing evidences [sic], arguments and considerations, this
court hereby finds the preponderance of evidence in favor of the plaintiff and hereby renders
judgment as follows:

1. Requiring the defendants Elias Q. Tan and Lapulapu Foundation, Inc. [the petitioners
herein] to pay jointly and solidarily to the plaintiff Allied Banking Corporation [the respondent
herein] the amount of P493,566.61 as principal obligation for the four promissory notes,
including all other charges included in the same, with interest at 14% per annum, computed
from January 24, 1979, until the same are fully paid, plus 2% service charges and 1%
monthly penalty charges.

2. Requiring the defendants Elias Q. Tan and Lapulapu Foundation, Inc., to pay jointly and
solidarily, attorneys fees in the equivalent amount of 25% of the total amount due from the
defendants on the promissory notes, including all charges;

3. Requiring the defendants Elias Q. Tan and Lapulapu Foundation, Inc., to pay jointly and
solidarily litigation expenses of P1,000.00 plus costs of the suit.[3]

On appeal, the CA affirmed with modification the judgment of the court a quo by deleting the
award of attorneys fees in favor of the respondent Bank for being without basis.

The appellate court disbelieved petitioner Tans claim that the loans were his personal loans
as the promissory notes evidencing them showed upon their faces that these were
obligations of the petitioner Foundation, as contracted by petitioner Tan himself in his official
and personal character. Applying the parol evidence rule, the CA likewise rejected petitioner
Tans assertion that there was an unwritten agreement between him and the respondent
Bank that he would pay the loans from the proceeds of his shares of stocks in the Lapulapu
Industries Corp.

Further, the CA found that demand had been made by the respondent Bank on the
petitioners prior to the filing of the complaint a quo. It noted that the two letters of demand
dated January 3, 1979[4] and January 30, 1979[5] asking settlement of the obligation were
sent by the respondent Bank. These were received by the petitioners as shown by the
registry return cards[6] presented during trial in the court a quo.

Finally, like the court a quo, the CA applied the doctrine of piercing the veil of corporate entity
in holding the petitioners jointly and solidarily liable. The evidence showed that petitioner Tan
had represented himself as the President of the petitioner Foundation, opened savings and
current accounts in its behalf, and signed the loan documents for and in behalf of the latter.
The CA, likewise, found that the petitioner Foundation had allowed petitioner Tan to act as
though he had the authority to contract the loans in its behalf. On the other hand, petitioner
Tan could not escape liability as he had used the petitioner Foundation for his benefit.

Aggrieved, the petitioners now come to the Court alleging that:

I. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE LOANS

SUBJECT MATTER OF THE INSTANT PETITION ARE ALREADY DUE AND
DEMANDABLE DESPITE ABSENCE OF PRIOR DEMAND.
II. THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THE PAROL EVIDENCE
RULE AND THE DOCTRINE OF PIERCING THE VEIL OF CORPORATE ENTITY AS BASIS
FOR ADJUDGING JOINT AND SOLIDARY LIABILITY ON THE PART OF PETITIONERS
ELIAS Q. TAN AND LAPULAPU FOUNDATION, INC.[7]

The petitioners assail the appellate courts finding that the loans had become due and
demandable in view of the two demand letters sent to them by the respondent Bank. The
petitioners insist that there was no prior demand as they vigorously deny receiving those
letters. According to petitioner Tan, the signatures on the registry return cards were not his.

The petitioners denial of receipt of the demand letters was rightfully given scant
consideration by the CA as it held:

Exhibits R and S are two letters of demand, respectively dated January 3, 1979 and January
30, 1979, asking settlement of the obligations covered by the promissory notes. The first
letter was written by Ben Tio Peng Seng, Vice-President of the bank, and addressed to
Lapulapu Foundation, Inc., attention of Mr. Elias Q. Tan, President, while the second was a
final demand written by the appellees counsel, addressed to both defendants-appellants,
and giving them five (5) days from receipt within which to settle or judicial action would be
instituted against them. Both letters were duly received by the defendants, as shown by the
registry return cards, marked as Exhibits R-2 and S-1, respectively. The allegation of Tan
that he does not know who signed the said registry return receipts merits scant
consideration, for there is no showing that the addresses thereon were wrong. Hence, the
disputable presumption that a letter duly directed and mailed was received in the regular
course of mail (per par. V, Section 3, Rule 131 of the Revised Rules on Evidence) still holds.
[8]

There is no dispute that the promissory notes had already matured. However, the petitioners
insist that the loans had not become due and demandable as they deny receipt of the
respondent Banks demand letters. When presented the registry return cards during the trial,
petitioner Tan claimed that he did not recognize the signatures thereon. The petitioners
allegation and denial are self-serving. They cannot prevail over the registry return cards
which constitute documentary evidence and which enjoy the presumption that, absent clear
and convincing evidence to the contrary, these were regularly issued by the postal officials in
the performance of their official duty and that they acted in good faith.[9] Further, as the CA
correctly opined, mails are presumed to have been properly delivered and received by the
addressee in the regular course of the mail.[10] As the CA noted, there is no showing that
the addresses on the registry return cards were wrong. It is the petitioners burden to
overcome the presumptions by sufficient evidence, and other than their barefaced denial, the
petitioners failed to support their claim that they did not receive the demand letters;
therefore, no prior demand was made on them by the respondent Bank.
Having established that the loans had become due and demandable, the Court shall now
resolve the issue of whether the CA correctly held the petitioners jointly and solidarily liable
therefor.

In disclaiming any liability for the loans, the petitioner Foundation maintains that these were
contracted by petitioner Tan in his personal capacity and that it did not benefit therefrom. On
the other hand, while admitting that the loans were his personal obligation, petitioner Tan
avers that he had an unwritten agreement with the respondent Bank that these loans would
be renewed on a year-to-year basis and paid from the proceeds of his shares of stock in the
Lapulapu Industries Corp.

These contentions are untenable.

The Court particularly finds as incredulous petitioner Tans allegation that he was made to
sign blank loan documents and that the phrase IN MY OFFICIAL/PERSONAL CAPACITY
was superimposed by the respondent Banks employee despite petitioner Tans protestation.
The Court is hard pressed to believe that a businessman of petitioner Tans stature could
have been so careless as to sign blank loan documents.

In contrast, as found by the CA, the promissory notes[11] clearly showed upon their faces
that they are the obligation of the petitioner Foundation, as contracted by petitioner Tan in his
official and personal capacity.[12] Moreover, the application for credit accommodation,[13]
the signature cards of the two accounts in the name of petitioner Foundation,[14] as well as
New Current Account Record,[15] all accompanying the promissory notes, were signed by
petitioner Tan for and in the name of the petitioner Foundation.[16] These documentary
evidence unequivocally and categorically establish that the loans were solidarily contracted
by the petitioner Foundation and petitioner Tan.

As a corollary, the parol evidence rule likewise constrains this Court to reject petitioner Tans
claim regarding the purported unwritten agreement between him and the respondent Bank
on the payment of the obligation. Section 9, Rule 130 of the of the Revised Rules of Court
provides that [w]hen the terms of an agreement have been reduced to writing, it is to be
considered as containing all the terms agreed upon and there can be, between the parties
and their successors-in-interest, no evidence of such terms other than the contents of the
written agreement.[17]

In this case, the promissory notes are the law between the petitioners and the respondent
Bank. These promissory notes contained maturity dates as follows: February 5, 1978, March
28, 1978, April 11, 1978 and May 5, 1978, respectively. That these notes were to be paid on
these dates is clear and explicit. Nowhere was it stated therein that they would be renewed
on a year-to-year basis or rolled-over annually until paid from the proceeds of petitioner Tans
shares in the Lapulapu Industries Corp. Accordingly, this purported unwritten agreement
could not be made to vary or contradict the terms and conditions in the promissory notes.
Evidence of a prior or contemporaneous verbal agreement is generally not admissible to
vary, contradict or defeat the operation of a valid contract.[18] While parol evidence is
admissible to explain the meaning of written contracts, it cannot serve the purpose of
incorporating into the contract additional contemporaneous conditions which are not
mentioned at all in writing, unless there has been fraud or mistake.[19] No such allegation
had been made by the petitioners in this case.

Finally, the appellate court did not err in holding the petitioners jointly and solidarily liable as
it applied the doctrine of piercing the veil of corporate entity. The petitioner Foundation
asserts that it has a personality separate and distinct from that of its President, petitioner
Tan, and that it cannot be held solidarily liable for the loans of the latter.

The Court agrees with the CA that the petitioners cannot hide behind the corporate veil
under the following circumstances:

The evidence shows that Tan has been representing himself as the President of Lapulapu
Foundation, Inc. He opened a savings account and a current account in the names of the
corporation, and signed the application form as well as the necessary specimen signature
cards (Exhibits A, B and C) twice, for himself and for the foundation. He submitted a
notarized Secretarys Certificate (Exhibit G) from the corporation, attesting that he has been
authorized, inter alia, to sign for and in behalf of the Lapulapu Foundation any and all
checks, drafts or other orders with respect to the bank; to transact business with the Bank,
negotiate loans, agreements, obligations, promissory notes and other commercial
documents; and to initially obtain a loan for P100,000.00 from any bank (Exhibits G-1 and G-
2). Under these circumstances, the defendant corporation is liable for the transactions
entered into by Tan on its behalf.[20]

Per its Secretarys Certificate, the petitioner Foundation had given its President, petitioner
Tan, ostensible and apparent authority to inter alia deal with the respondent Bank.
Accordingly, the petitioner Foundation is estopped from questioning petitioner Tans authority
to obtain the subject loans from the respondent Bank. It is a familiar doctrine that if a
corporation knowingly permits one of its officers, or any other agent, to act within the scope
of an apparent authority, it holds him out to the public as possessing the power to do those
acts; and thus, the corporation will, as against anyone who has in good faith dealt with it
through such agent, be estopped from denying the agents authority.[21]

In fine, there is no cogent reason to deviate from the CAs ruling that the petitioners are
jointly and solidarily liable for the loans contracted with the respondent Bank.

WHEREFORE, premises considered, the petition is DENIED and the Decision dated June
26, 1996 and Resolution dated August 19, 1996 of the Court of Appeals in CA-G.R. CV No.
37162 are AFFIRMED in toto.
SO ORDERED.

FIRST DIVISION
[G.R. No. 103959. August 21, 1997]

SPOUSES REGALADO SANTIAGO and ROSITA PALABYAB, JOSEFINA ARCEGA,

petitioners, vs. THE HON. COURT OF APPEALS; THE HON. CAMILO C. MONTESA, JR.,
Presiding Judge of the RTC of Malolos, Bulacan, Branch 19, and QUIRICO ARCEGA,
respondents.
DECISION
HERMOSISIMA, JR., J.:

Assailed in this petition for review under Rule 45 is the November 8, 1991 Decision of
respondent Court of Appeals in CA-G.R. CV No. 25069. It affirmed in toto the judgment of
Branch 19, Regional Trial Court of Malolos, Bulacan, in Civil Case No. 8470-M. The action
therein sought to declare null and void the Kasulatan ng Bilihang Tuluyan ng Lupa executed
on July 18, 1971 by the late Paula Arcega, sister of private respondent, in favor of herein
petitioners over a parcel of land consisting of 927 square meters, situated in Barangay
Tabing Ilog, Marilao, Bulacan.

Paula Arcega was the registered owner of that certain parcel of land covered by Transfer
Certificate of Title No. T-115510. Her residential house stood there until 1970 when it was
destroyed by a strong typhoon.

On December 9, 1970, Paula Arcega executed what purported to be a deed of conditional

sale over the land in favor of Josefina Arcega and the spouses Regalado Santiago and
Rosita Palabyab, the petitioners herein, for and in consideration of P20,000.00. The vendees
were supposed to pay P7,000.00 as downpayment. It was expressly provided that the
vendor would execute and deliver to the vendees an absolute deed of sale upon full
payment by the vendees of the unpaid balance of the purchase price of P13,000.00.

Subsequently, on July 18, 1971, supposedly upon payment of the remaining balance, Paula
Arcega executed a deed of absolute sale of the same parcel of land in favor of petitioners.
Thereupon, on July 20, 1971, TCT No. T-115510, in the name of Paula Arcega, was
cancelled and a new title, TCT No. T-148989 was issued in the name of petitioners.

On April 10, 1985, Paula Arcega died single and without issue, leaving as heirs her two
brothers, Narciso Arcega[1] and private respondent Quirico Arcega.
Incidentally, before Paula Arcega died, a house of four bedrooms with a total floor area of
225 square meters was built over the parcel of land in question. Significantly, the master's
bedroom, with toilet and bath, was occupied by Paula Arcega until her death despite the
execution of the alleged deed of absolute sale. The three other bedrooms, smaller than the
master's bedroom, were occupied by the petitioners who were the supposed vendees in the
sale.

Private respondent Quirico Arcega, as heir of his deceased sister, filed on October 24, 1985
Civil Case No. 8470-M before the RTC of Malolos, Bulacan, seeking to declare null and void
the deed of sale executed by his sister during her lifetime in favor of the petitioners on the
ground that said deed was fictitious since the purported consideration therefor of P20,000.00
was not actually paid by the vendees to his sister.

Answering the complaint before the RTC, petitioner spouses averred that private
respondent's cause of action was already barred by the statute of limitations considering that
the disputed deed of absolute sale was executed in their favor on July 18, 1971, by which
TCT No. 148989 was issued on July 20, 1971, while private respondent's complaint was filed
in court only on October 24, 1985 or more than fourteen (14) years from the time the cause
of action accrued. Petitioners also deny that the sale was fictitious. They maintain that the
purchase price was actually paid to Paula Arcega and that said amount was spent by the
deceased in the construction of her three-door apartment on the parcel of land in question.

Josefina Arcega, the other petitioner, was declared in default for failure to file her answer
within the reglementary period.

After trial, the RTC rendered judgment in favor of private respondent Quirico Arcega, viz.:

"(a) Declaring as null and void and without legal force and effect the 'Kasulatan Ng Bilihang
Tuluyan ng Lupa' dated July 18, 1971 executed by the deceased Paula Arcega covering a
parcel of land embraced under TCT No. T-115510 in favor of the defendants;

(b) Declaring TCT No. T-148989 issued and registered in the names of defendants Josefina
Arcega and spouses Regalado Santiago and Rosita Palabyab as null and void;

(c) Ordering the reconveyance of the property including all improvements thereon covered
by TCT No. T-115510, now TCT No. T-148989, to the plaintiff, subject to real estate
mortgage with the Social Security System; and

(d) To pay jointly and severally the amount of P10,000.00 as attorney's fees.
On the counterclaim, the same is hereby dismissed for lack of legal and/or factual basis (p.
6, decision, pp. 295-300, rec.)."[2]

In ruling for private respondent, the trial court, as affirmed in toto by the public respondent
Court of Appeals, found that:

"On the basis of the evidence adduced, it appears that plaintiff Quirico Arcega and his
brother Narciso Arcega are the only surviving heirs of the deceased Paula Arcega who on
April 10, 1985 died single and without issue. Sometime in 1970, a strong typhoon destroyed
the house of Paula Arcega and the latter together with the defendants decided to construct a
new house. All the defendants[3] being members of the SSS, Paula deemed it wise to lend
her title to them for purposes of loan with the SSS. She executed a deed of sale to effect the
transfer of the property in the name of the defendants and thereafter the latter mortgaged
the same for P30,000.00 but the amount actually released was only P25,000.00. Paula
Arcega spent the initial amount of P30,000.00 out of her savings for the construction of the
house sometime in 1971 and after the same and the proceeds of the loan were exhausted,
the same was not as yet completed. Paula Arcega and her brothers sold the property which
they inherited for P45,000.00 and the same all went to the additional construction of the
house, however, the said amount is not sufficient. Thereafter, Paula Arcega and her brothers
sold another property which they inherited for P805,950.00 and one-third (1/3) thereof went
to Paula Arcega which she spent a portion of which for the finishing touches of the house.
The house as finally finished in 1983 is worth more than P100,000.00 with a floor area of
225 square meters consisting of four bedrooms . A big master's bedroom complete with a
bath and toilet was occupied by Paula Arcega up to the time of her death on April 10, 1985
and the other three smaller bedrooms are occupied by spouses, defendants Regalado
Santiago and Rosita Palabyab, and Josefina Arcega. After the death of Paula Arcega
defendant Josefina Arcega and Narciso Arcega constructed their own house at back portion
of the lot in question.

There is clear indication that the deed of sale, which is unconscionably low for 937 square
meters in favor of the defendants sometime on July 18, 1971 who are all members of SSS,
is merely designed as an accommodation for purposes of loan with the SSS. Paula Arcega
cognizant of the shortage of funds in her possession in the amount of P30,000.00, deemed it
wise to augment her funds for construction purposes by way of a mortgage with the SSS
which only defendants could possibly effect they being members of the SSS. Since the SSS
requires the collateral to be in the name of the mortgagors, Paula Arcega executed a
simulated deed of sale (Kasulatan ng Bilihang Tuluyan ng Lupa) for P20,000.00 dated July
18, 1971 in favor of the defendants and the same was notarized by Atty. Luis Cuvin who
emphatically claimed that no money was involved in the transaction as the parties have
other agreement. The allegations of the defendants that the property was given to them
(Kaloob) by the deceased has no evidentiary value. While it is true that Rosita Palabyab
stayed with the deceased since childhood, the same cannot be said with respect to
defendant Josefina Arcega, distant relative and a niece of the wife of Narciso Arcega, who
stayed with deceased sometime in 1966 at the age of 19 years and already working as a
saleslady in Manila. Did the deceased indeed give defendant Josefina Arcega half of her
property out of love and gratitude? Such circumstance appears illogical if not highly
improbable. As a matter of fact defendant Josefina Arcega in her unguarded moment
unwittingly told the truth that couple (Regalado Santiago and Rosita Palabyab) had indeed
borrowed the title and then mortgaged the same with the SSS as shown in her direct
testimony which reads:

'Atty Villanueva:

Q- Why did you say that the house is owned by spouses Santiago but the lot is bought by
you and Rosita?

A- Because at that time, the couple[4] borrowed the title and then mortgaged the property
with the SSS. There is only one title but both of us owned it. (TSN dtd. 19 Oct. '88, p. 5)"[5]

On appeal, the public respondent Court of Appeals dismissed the same, affirming in all
respects the RTC judgment.

Hence, this petition.

The petition is unmeritorious.

Verily, this case is on all fours with Suntay v. Court of Appeals.[6] There, a certain Federico
Suntay was the registered owner of a parcel of land in Sto. Nino, Hagonoy, Bulacan. A rice
miller, Federico applied on September 30, 1960 as a miller-contractor of the then National
Rice and Corn Corporation (NARIC), but his application was disapproved because he was
tied up with several unpaid loans. For purposes of circumvention, he thought of allowing his
nephew-lawyer, Rafael Suntay, to make the application for him. To achieve this Rafael
prepared a notarized Absolute Deed of Sale whereby Federico, for and in consideration of
P20,000.00, conveyed to Rafael said parcel of land with all its existing structures. Upon the
execution and registration of said deed, Certificate of Title No. 0-2015 in the name of
Federico was cancelled and, in lieu thereof, TCT No. T-36714 was issued in the name of
Rafael. Sometime in the months of June to August, 1969,[7] Federico requested Rafael to
deliver back to him the owner's duplicate of the transfer certificate of title over the properties
in question for he intended to use the property as collateral in securing a bank loan to
finance the expansion of his rice mill. Rafael, however, without just cause, refused to deliver
the title insisting that said property was "absolutely sold and conveyed [to him] xxx for a
consideration of P20,000.00, Philippine currency, and for other valuable consideration." We
therein ruled in favor of Federico Suntay and found that the deed of sale in question was
merely an absolutely simulated contract for the purpose of accommodation and therefore
void. In retrospect, we observed in that case:

"Indeed the most protuberant index of simulation is the complete absence of an attempt in
any manner on the part of the late Rafael to assert his rights of ownership over the land and
rice mill in question. After the sale, he should have entered the alnd and occupied the
premises thereof. He did not even attempt to. If he stood as owner, he would have collected
rentals from Federico for the use and occupation of the land and its improvements. All that
the late Rafael had was a title in his name.

xxx xxx xxx

xxx The fact that, notwithstanding the title transfer, Federico remained in actual possession,
cultivation and occupation of the disputed lot from the time the deed of sale was executed
until the present, is a circumstance which is unmistakably added proof of the fictitiousness of
the said transfer, the same being contrary to the principle of ownership." [8]

In the case before us, while petitioners were able to occupy the property in question, they
were relegated to a small bedroom without bath and toilet,[9] while Paula Arcega remained
virtually in full possession of the completed house and lot using the big master's bedroom
with bath and toilet up to the time of her death on April 10, 1985.[10] If, indeed, the
transaction entered into by the petitioner's and the late Paula Arcega on July 18, 1971 was a
veritable deed of absolute sale, as it was purported to be, then Ms. Arcega had no business
whatsoever remaining in the property and, worse, to still occupy the big master's bedroom
with all its amenities until her death on April 10, 1985. Definitely, any legitimate vendee of
real property who paid for the property with good money wil not accede to an arrangement
whereby the vendor continues occupying the most favored room in the house while he or
she, as new owner, endures the disgrace and absurdity of having to sleep in a small
bedroom without bath and toilet as if he or she is a guest or a tenant in the house. In any
case, if petitioners really stood as legitimate owners of the property, they would have
collected rentals from Paula Arcega for the use and occupation of the master's bedroom as
she would then be a mere lessee of the property in question. However, not a single piece of
evidence was presented to show that this was the case. All told, the failure of petitioners to
take exclusive possession of the property allegedly sold to them, or in the alternative, to
collect rentals from the alleged vendee Paula Arcega, is contrary to the principle of
ownership and a clear badge of simulation that renders the whole transaction void and
without force and effect, pursuant to Article 1409 of the New Civil Code:

"The following contracts are inexistent and void from the beginning:

xxx xxx xxx

(2) Those which are absolutely simulated or fictitious;

xxx xxx xxx."

The conceded fact that subject deed of absolute sale executed by Paula Arcega in favor of
petitioners is a notarized document does not justify the petitioners' desired conclusion that
said sale is undoubtedly s true conveyance to which the parties thereto are irrevocably and
undeniably bound. To be considered with great significance is the fact that Atty. Luis Cuvin
who notarized the deed disclaimed the truthfulness of the document when he testified that
"NO MONEY WAS INVOLVED IN THE TRANSACTION."[11] Furthermore, though the
notarization of the deed of sale in question vests in its favor the presumption of regularity, it
is not the intention nor the function of the notary public to validate and make binding an
instrument never, in the first place, intended to have any binding legal effect upon the parties
thereto. The intention of the parties still is and always will be the primary consideration in
determining the true nature of a contract. Here, the parties to the "Kasulatan ng Bilihang
Tuluyan ng Lupa," as shown by the evidence and accompanying circumstances, never
intended to convey the property thereto from one party to the other for valuable
consideration. Rather, the transaction was merely used to facilitate a loan with the SSS with
petitioners-mortgagors using the property in question, the title to which they were able to
register in their names through the simulated sale, as collateral.

The fact that petitioners were able to secure a title in their names, TCT No. 148989, did not
operate to vest upon petitioners ownership over Paula Arcega's property. That act has never
been recognized as a mode of acquiring ownership. As a matter of fact, even the original
registration of immovable property does not vest title thereto.[12] The Torrens system does
not create or vest title. It only confirms and records title already existing and vested. It does
not protect a usurper from the true owner. It cannot be a shield for the commission of fraud.
It does not permit one to enrich himself at the expense of another.[13] Where one does not
have any rightful claim over a real property, the Torrens system of registration can confirm or
record nothing.

Petitioners, nevertheless, insist that both the trial court and the respondent court should
have followed the Parole Evidence Rule and prevented evidence, like the testimony of
Notary Public, Atty. Luis Cuvin, private respondent Quirico Arcega, among others, which
impugned the two notarized deeds of sale.

The rule on parole evidence under Section 9, Rule 130 is qualified by the following
exceptions:

However, a party may present evidence to modify, explain or add to the terms of the written
agreement if he puts in issue in his pleading;

(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;

(b) The failure of the written agreement to express the true intent and agreement of the
parties thereto;

(c) The validity of the written agreement; or

(d) The existence of other terms agreed to by the parties or their successors in interest after
the execution of the written agreement.

The term agreement includes wills.

In this case, private respondent Quirico Arcega was able to put in issue in his complaint
before the Regional Trial Court the validity of the subject deeds of sale for being a simulated
transaction:

6. That in 1971, the defendants, who by then were already employed in private firms and
had become members of the Social Security System by virtue of their respective
employments, decided among themselves to build a new house on the property of PAULA
ARCEGA above described and to borrow money from the Social Security System to finance
the proposed construction.

7. That in order to secure the loan from the Social Security System it was necessary that the
lot on which the proposed house would be erected should be registered and titled in the
names of the defendants.

xxx xxx xxx

9. That in conformity with the above plans and schemes of the defendants, they made
PAULA ARCEGA execute and sign a fictitious, hence null and void KASULATAN NG
BILIHANG TULUYAN NG LUPA on July 18, 1971, before Notary Public LUIS CUVIN, of
Bulacan and entered in his register as Doc. No. 253, Page No. 52, Book No. XIX, Series of
1971, by which PAULA ARCEGA purportedly convyed(sic) in favor of the defendants
JOSEFINA ARCEGA and the spouses REGALADO SANTIAGO and ROSITA PALABYAB,
the whole parcel of land above described for the sum of TWENTY THOUSAND
(P20,000.00), as consideration which was not actually, then or thereafter paid either wholly
or partially. A copy of said document is hereto attached as Annex B and made integral part
hereof.

10. That defendants pursuing their unlawful scheme registered the said void and inexistent
KASULATAN NG BILIHANG TULUYAN NG LUPA with the office of the Register of Deeds of
Bulacan, procured the cancellation of Transfer Certificate of Title No. 115510, in the name of
PAULA ARCEGA and the issuance of Transfer Certificate of Title No. 148989, in their names,
a xeroxed copy of which is hereto attached as Annex C and made integral part hereof.

11. That still in furtherance of their unjust and unlawful schemes, defendants secured a loan
from Social Security System in the amount of P30,000.00, securing the payment thereof with
a Real Estate Mortgage on the above-described property then already titled in their names
as aforestated (pp. 2-3, complaint, pp. 1-5, rec.).[14]
Moreover, the parol evidence rule may be waived by failure to invoke it, as by failure to
object to the introduction of parol evidence. And, where a party who is entitled to the benefit
of the rule waives the benefit thereof by allowing such evidence to be received without
objection and without any effort to have it stricken from the minutes or disregarded by the
trial court, he cannot, after the trial has closed and the case has been decided against him,
invoke the rule in order to secure a reversal of the judgment by an appellate court.[15] Here,
the records are devoid of any indication that petitioners ever objected to the admissibility of
parole evidence introduced by private respondent in open court. The court cannot disregard
evidence which would ordinarily be incompetent under the rules but has been rendered
admissible by the failure of party to object thereto.[16] Petitioners have no one to blame but
themselves in this regard.

Finally, petitioners argue that private respondents complaint filed before the trial court on
October 24, 1985 is already barred by the statute of limitations and laches considering that
the deed of absolute sale was executed in their favor by the deceased Paula Arcega on July
20, 1971. Indeed, more than fourteen (14) years had elapsed from the time his cause of
action accrued to the time that the complaint was filed. Articles 1144 and 1391 of the New
Civil Code provide:

ART. 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.

ART. 1391. The action for annulment shall be brought within four years.

This period shall begin:

In cases of intimidation, violence or undue influence, from the time the defect of the consent
ceases.

In cases of mistake or fraud, from the time of the discovery of the same.

And when the action refers to contracts entered into by minors or other incapacitated
persons, from the time the guardianship ceases.
This submission is utterly without merit, the pertinent provision being Article 1410 of the New
Civil Code which provides unequivocably that [T]he action or defense for the declaration of
the inexistence of a contract does not prescribe.[17]

As for laches, its essence is the 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 the negligence or omission to assert a right within a reasonable time, warranting
a presumption that the party entitled to assert it either has abandoned it or declined to assert
it.[18] But there is, to be sure, no absolute rule as to what constitutes laches or staleness of
demand; each case is to be determined according to its particular circumstances. The
question of laches is addressed to the sound discretion of the court, and since laches is an
equitable doctrine, its application is controlled by equitable considerations. It cannot be
worked to defeat justice or to perpetrate fraud and injustice.[19] In the case under
consideration, it would not only be impractical but well-nigh unjust and patently inequitous to
apply laches against private respondent and vest ownership over a valuable piece of real
property in favor of petitioners by virtue of an absolutely simulated deed of sale never, in the
first place, meant to convey any right over the subject property. It is the better rule that
courts, under the principle of equity, will not be guided or bound strictly by the statute of
limitations or the doctrine of laches when to do so, manifest wrong or injustice would result.
[20]

WHEREFORE, premises considered, the petition is hereby DENIED with costs against
petitioners.

SO ORDERED.