G.R. No. 138953. June 6, 2002.
* On June 17, 1982, the Bureau of Lands approved and granted the
CASTORIO ALVARICO, petitioner, vs. AMELITA L. SOLA, respondent.
Land Registration; Notarial Law; The execution of public documents, as in the case of
Affidavits of Adjudication, is entitled to the presumption of regularity, hence convincing
evidence is required to assail and controvert them; It requires more than a party’s bare
allegation to defeat the Original Certificate of Title which on its face enjoys the legal
presumption of regularity of issuance.—Petitioner claims that respondent was in bad faith
when she registered the land in her name and, based on the abovementioned rules, he has
a better right over the property because he was first in material possession in good faith.
However, this allegation of bad faith on the part of Amelita Sola in acquiring the title is
devoid of evidentiary support. For one, the execution of public documents, as in the case
of Affidavits of Adjudication, is entitled to the presumption of regularity, hence convincing
evidence is required to assail and controvert them. Second, it is undisputed that OCT No.
3439 was issued in 1989 in the name of Amelita. It requires more than petitioner’s bare
allegation to defeat the Original Certificate of Title which on its face enjoys the legal
presumption of regularity of issuance. A Torrens title, once registered, serves as notice to
the whole world. All persons must take notice and no one can plead ignorance of its
registration.
Same; Actions; Reversion; Only the State can institute reversion proceedings under
Section 101 of the Public Land Act.—Even assuming that respondent Amelita Sola acquired
title to the disputed property in bad faith, only the State can institute reversion
proceedings under Sec. 101 of the Public Land Act. Thus: Sec. 101.—All actions for
reversion to the Government of lands of the public domain or improvements thereon shall
be instituted by the Solicitor General or the officer acting in his stead, in the proper courts,
in the name of the Republic of the Philippines.
Same; Same; Same; A private individual may not bring an action for reversion or any
action which would have the effect of canceling a free patent and the corresponding
certificate of title issued on the basis thereof, such that the land covered thereby will again
form part of the public domain.—In other words, a private individual may not bring an
action for reversion or any action which would have the effect of canceling a free patent
and the corresponding certificate of title issued on the basis thereof, such that the land
covered thereby will again form part of the public domain. Only the Solicitor General or
the officer acting in his stead may do so. Since Amelita Sola’s title originated from a grant
by the government, its cancellation is a matter between the grantor and the grantee.
Clearly then, petitioner has no standing at all to question the validity of Amelita’s title. It
follows that he cannot “recover” the property because, to begin with, he has not shown
that he is the rightful owner thereof.
This is a petition for review on certiorari of the decision dated March 23, 1999 of the
Court of Appeals in CA-G.R. CV No. 54624, reversing the decision of the Regional Trial
Court of Cebu City, Branch 10, for reconveyance. Also sought to be reversed is the CA
resolution dated June 8, 1999 denying petitioner's motion for
reconsideration.1âwphi1.nêt
The facts of this case are as follows:
Petitioner Castorio Alvarico is the natural father of respondent Amelita Sola
while Fermina Lopez is petitioner's aunt, and also Amelita's adoptive mother.
Miscellaneous Sales Application (MSA) of Fermina over Lot 5, SGS-3451,
with an area of 152 sq. m. at the Waterfront, Cebu City.1
On May 28, 1983,2 Fermina executed a Deed of Self-Adjudication and Transfer of
Rights3 over Lot 5 in favor of Amelita, who agreed to assume all the obligations, duties,
and conditions imposed upon Fermina under MSA Application No. V-81066. The
document of transfer was filed with the Bureau of Lands.4 The pertinent portions of the
deed provide:
xxx
That I, FERMINA A. LOPEZ, of legal age, Filipino, widow of Pedro C. Lopez
and a resident of Port San Pedro, Cebu City, Philippines, am the AWARDEE
of Lots Nos. 4, 5, 3-B, 3-C and 6-B, Sgs-3451 And being the winning bidder
at the auction sale of these parcels by the Bureau of Lands held on May 12,
1982, at the price of P150.00 per square meter taking a purchase price of
P282,900.00 for the tract; That I have made as my partial payment the sum
of P28,290.00 evidenced by Official Receipt No. 1357764-B representing ten
(10%) per cent of my bid, leaving a balance of P254,610.00 that shall be in
not more than ten (10) years at an equal installments of P25,461.00
beginning June 17, 1983 until the full amount is paid.
… the Transferee Mrs. Amelita L. Sola, agrees to assume, all the
obligations, duties and conditions imposed upon the Awardee in relation to
the MSA Application No. V-81066 entered in their records as Sales Entry No.
20476.
… [I] hereby declare that I accept this Deed of Self-Adjudication and
Transfer of Rights and further agree to all conditions provided therein. 5
Amelita assumed payment of the lot to the Bureau of Lands. She paid a total amount
of P282,900.6
On April 7, 1989, the Bureau of Lands issued an order approving the transfer of rights
and granting the amendment of the application from Fermina to Amelita. 7 On May 2,
1989, Original Certificate of Title (OCT) No. 3439 was issued in favor of Amelita.8
On June 24, 1993,9 herein petitioner filed Civil Case No. CEB-1419110 for
reconveyance against Amelita. He claimed that on January 4, 1984, Fermina donated
the land to him11 and immediately thereafter, he took possession of the same. He
averred that the donation to him had the effect of withdrawing the earlier transfer to
Amelita.12
For her part, Amelita maintained that the donation to petitioner is void because Fermina
was no longer the owner of the property when it was allegedly donated to petitioner,
the property having been transferred earlier to her. 13 She added that the donation was
void because of lack of approval from the Bureau of Lands, and that she had validly
acquired the land as Fermina's rightful heir. She also denied that she is a trustee of the
land for petitioner.14
After trial, the RTC rendered a decision in favor of petitioner, the decretal portion of
which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor
of plaintiff and against the defendant. Lot 5, Sgs-3451, is hereby declared as
lawfully owned by plaintiff and defendant is directed to reconvey the same to
the former.
No pronouncement as to damages and attorney's fees, plaintiff having opted
to forego such claims.
SO ORDERED.15
On appeal, the Court of Appeals in its decision dated March 23, 1999 reversed the
RTC. Thus:
WHEREFORE, foregoing considered, the appealed decision is hereby
REVERSED and SET ASIDE. The complaint filed by plaintiff-appellee
against defendant-appellant is hereby DISMISSED.
Costs against plaintiff-appellee.
SO ORDERED.16
Petitioner sought reconsideration, but it was denied by the CA. 17
Hence, the instant petition for certiorari seasonably filed on the following grounds:
I.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS
ERROR, REFLECTIVE OF UNMINDFUL RECKLESSNESS WHICH IS THE
VERY OPPOSITE OF JUDICIAL CIRCUMSPECTION, IN DECLARING
THAT THE DEED OF DONATION DATED JANUARY 4, 1984 (ANNEX "C")
IN FAVOR OF PETITIONER WAS EMBODIED ONLY IN A PRIVATE
DOCUMENT (Page 6, Decision, Annex "A"), ALTHOUGH, BY A MERE
CASUAL LOOK AT THE DOCUMENT, IT CAN BE READILY DISCERNED
THAT IT IS NOTARIZED;
II.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR
IN APPLYING ON THE CASE AT BAR THE PRINCIPLE IN LAW THAT IT
IS REGISTRATION OF THE SALES PATENT THAT CONSTITUTE THE
OPERATIVE ACT THAT WOULD CONVEY OWNERSHIP OF THE LAND
TO THE APPLICANT (Pp. 3-6, Decision, Annex "A") BECAUSE THE LEGAL
CONTROVERSY BETWEEN PETITIONER AND RESPONDENT DOES
NOT INVOLVE CONFLICTING CLAIMS ON SALES PATENT
APPLICATIONS;
III.
THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS
DISCRETION AND COMMITTED SERIOUS ERROR IN MAKING A
FINDING THAT RESPONDENT ACQUIRED THE LAND IN QUESTION, IN
GOOD FAITH (Page 7, Decision, Annex "A"), ALTHOUGH THERE IS NO
BASIS NOR NEED TO MAKE SUCH A FINDING; and
IV.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR
IN ENUNCIATING THAT POSSESSION MENTIONED IN ARTICLE 1544
OF THE NEW CIVIL CODE INCLUDE SYMBOLIC POSSESSION, UPON
WHICH THE APPELLATE COURT BASED ITS CONCLUSION THAT
RESPONDENT WAS FIRST IN POSSESSION BECAUSE THE DEED OF
SELF-ADJUDICATION AND TRANSFER OF RIGHTS IN FAVOR OF
RESPONDENT DATED MAY 28, 1983 WAS EXECUTED MUCH EARLIER
THAN THE DEED OF DONATION IN FAVOR OF PETITIONER DATED
JANUARY 4, 1984 (Pages 7-8, Decision, Annex "A").18
The crucial issue to be resolved in an action for reconveyance is: Who between
petitioner and respondent has a better claim to the land?
To prove she has a better claim, respondent Amelita Sola submitted a copy of OCT No.
3439 in her name and her husband's,19 a Deed of Self-Adjudication and Transfer of
Rights20 over the property dated 1983 executed by Fermina in her favor, and a
certification from the municipal treasurer that she had been declaring the land as her
and her husband's property for tax purposes since 1993.21
For his part, petitioner Castorio Alvarico presented a Deed of Donation 22 dated January
4, 1984, showing that the lot was given to him by Fermina and according to him, he
immediately took possession in 1985 and continues in possession up to the present.23
Petitioner further contests the CA ruling that declared as a private document said Deed
of Donation dated January 4, 1984, despite the fact that a certified true and correct
copy of the same was obtained from the Notarial Records Office, Regional Trial Court,
Cebu City on June 11, 1993 and acknowledged before Atty. Numeriano
Capangpangan, then Notary Public for Cebu.24
Given the circumstances in this case and the contentions of the parties, we find that no
reversible error was committed by the appellate court in holding that herein petitioner's
complaint against respondent should be dismissed. The evidence on record and the
applicable law indubitably favor respondent.
Petitioner principally relies on Articles 744 and 1544 of the New Civil Code, which
provide:
Art. 744. Donations of the same thing to two or more different donees shall
be governed by the provisions concerning the sale of the same thing to two
or more different persons.
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. (Emphasis
supplied.)
Petitioner claims that respondent was in bad faith when she registered the land in her
name and, based on the abovementioned rules, he has a better right over the property
because he was first in material possession in good faith. However, this allegation of
bad faith on the part of Amelita Sola in acquiring the title is devoid of evidentiary support.
For one, the execution of public documents, as in the case of Affidavits of Adjudication,
is entitled to the presumption of regularity, hence convincing evidence is required to
assail and controvert them.25 Second, it is undisputed that OCT No. 3439 was issued
in 1989 in the name of Amelita. It requires more than petitioner's bare allegation to
defeat the Original Certificate of Title which on its face enjoys the legal presumption of
regularity of issuance.26 A Torrens title, once registered, serves as notice to the whole
world. All persons must take notice and no one can plead ignorance of its registration.27
Even assuming that respondent Amelita Sola acquired title to the disputed property in
bad faith, only the State can institute reversion proceedings under Sec. 101 of the
Public Land Act.28 Thus:
Sec. 101.—All actions for reversion to the Government of lands of the public
domain or improvements thereon shall be instituted by the Solicitor General
or the officer acting in his stead, in the proper courts, in the name of the
Republic of the Philippines.
In other words, a private individual may not bring an action for reversion or any action
which would have the effect of canceling a free patent and the corresponding certificate
of title issued on the basis thereof, such that the land covered thereby will again form
part of the public domain. Only the Solicitor General or the officer acting in his stead
may do so.29 Since Amelita Sola's title originated from a grant by the government, its
cancellation is a matter between the grantor and the grantee. 30 Clearly then, petitioner
has no standing at all to question the validity of Amelita's title. It follows that he cannot
"recover" the property because, to begin with, he has not shown that he is the rightful
owner thereof.1âwphi1.nêt
Anent petitioner's contention that it was the intention of Fermina for Amelita to hold the
property in trust for him, we held that if this was really the intention of Fermina, then
this should have been clearly stated in the Deed of Self-Adjudication executed in 1983,
in the Deed of Donation executed in 1984, or in a subsequent instrument. Absent any
persuasive proof of that intention in any written instrument, we are not prepared to
accept petitioner's bare allegation concerning the donor's state of mind.
WHEREFORE, the appealed decision of the Court of Appeals in CA-G.R. CV No.
54624 is hereby AFFIRMED. The complaint filed by herein petitioner against
respondent in Civil Case No. CEB-14191 is declared properly DISMISSED. Costs
against petitioner.
SO ORDERED.
G.R. No. 172720. September 14, 2015.*
ELISEO MALTOS and ROSITA P. MALTOS, petitioners, vs. HEIRS OF EUSEBIO
BORROMEO, respondents.
Civil Law; Property; Homestead; The five (5)-year period prohibiting the sale of land
obtained under homestead or free patent is provided under Section 118 of the Public Land
Act (PLA).—The five-year period prohibiting the sale of land obtained under homestead
or free patent is provided under Section 118 of the Public Land Act, which states: SECTION
118. Except in favor of the Government or any of its branches, units, or institutions, or
legally constituted banking corporations, lands acquired under free patent or homestead
provisions shall not be subject to encumbrance or alienation from the date of the approval
of the application and for a term of five years from and after the date of issuance of the
patent or grant, nor shall they become liable to the satisfaction of any debt contracted prior
to the expiration of said period; but the improvements or crops on the land may be
mortgaged or pledged to qualified persons, associations, or corporations.
Remedial Law; Civil Procedure; Counterclaims; The general rule is that “a compulsory
counterclaim . . . not set up shall be barred.”—The general rule is that “[a] compulsory
counterclaim . . . not set up shall be barred.” Further, the computation of the value of the
improvements on the land entails findings of fact. In any case, the Court of Appeals did not
err when it stated in its Resolution dated April 7, 2006 that: With respect to Appellees’
claim for the reimbursement of the improvements on the land in question, they are hereby
declared to have lost and forfeited the value of the necessary improvements that they
made thereon in the same manner that Appellants should lose the value of the products
gathered by the Appellees from the said land.
Same; Same; Reversion; The purpose of reversion is “to restore public land fraudulently
awarded and disposed of to private individuals or corporations to the mass of public
domain.”—The purpose of reversion is “to restore public land fraudulently awarded and
disposed of to private individuals or corporations to the mass of public domain.” The
general rule is that reversion of lands to the state is not automatic, and the Office of the
Solicitor General is the proper party to file an action for reversion.
Same; Same; Same; Since an action for reversion presupposes that the property in
dispute is owned by the state, it is proper that the action be filed by the Office of the Solicitor
General (OSG), being the real party-in-interest.—We clarify that the remedy of reversion is
not the same as the remedy of declaration of nullity of free patents and certificate of title.
In reversion, the “allegations in the complaint would admit State ownership of the
disputed land[,]” while in an action for the declaration of nullity of free patent and
certificate of title, the allegations would include “plaintiff’s ownership of the contested lot
prior to the issuance of [the] free patent and certificate of title[.]” Since an action for
reversion presupposes that the property in dispute is owned by the state, it is proper that
the action be filed by the Office of the Solicitor General, being the real party-in-interest.
The sale of a parcel of agricultural land covered by a free patent during the
five-year prohibitory period under the Public Land Act is void. Reversion of
the parcel of land is proper. However, reversion under Section 101 of the
Public Land Act is not automatic. The Office of the Solicitor General must
first file an action for reversion.
On February 13, 1979, Eusebio Borromeo was issued Free Patent No.
586681 over a piece of agricultural land located in San Francisco, Agusan
del Sur, covered by Original Certificate of Title No. P-9053.1
On June 15, 1983, well within the five-year prohibitory period, Eusebio
Borromeo sold the land to Eliseo Maltos.2
Eusebio Borromeo died on January 16, 1991. His heirs claimed that prior
to his death, he allegedly told his wife, Norberta Borromeo,3 and his
children to nullify the sale made to Eliseo Maltos and have the Transfer
Certificate of Title No. T-5477 cancelled because the sale was within the
five-year prohibitory period.4
On June 23, 1993, Norberta Borromeo and her children (heirs of
Borromeo) filed a Complaint for Nullity of Title and Reconveyance of Title
against Eliseo Maltos, Rosita Maltos, and the Register of Deeds of Agusan
del Sur.5 The case was docketed as Civil Case No. 946.6
Eliseo Maltos and Rosita Maltos (Maltos Spouses) filed their Answer,
arguing that the sale was made in good faith and that in purchasing the
property, they relied on Eusebio Borromeo's title. Further, the parties were
in pari delicto. Since the sale was made during the five-year prohibitory
period, the land would revert to the public domain and the proper party to
institute reversion proceedings was the Office of the Solicitor General.7
The Register of Deeds of Agusan del Sur also filed an Answer, arguing that
the deed of sale was presented for Registration after the five-year
prohibitory period, thus, it was ministerial on its part to register the deed.8
The heirs of Borromeo countered that good faith was not a valid defense
because the prohibitory period appeared on the face of the title of the
property.9
The Regional Trial Court10 of Prosperidad, Agusan del Sur narrowed down
the issues to the following:
1. Whether or not the herein plaintiffs are the legal heirs of the late
Eusebio Borromeo.
2. Whether or not the sale of the disputed property within the prohibitory
period is valid or binding.11
The trial court dismissed the Complaint on the ground of failure to state a
cause of action.12 Also, the heirs of Borromeo did not have a right of action
because they were unable to establish their status as heirs of the late
Eusebio Borromeo.13 They may have declared themselves the legal heirs of
Eusebio Borromeo, but they did not present evidence to prove their
allegation.14 Further, the determination of their rights to succession must
be established in special proceedings.15
The trial court also ruled that "[t]he sale was null and void because it was
within the five (5) year prohibitionary [sic] period"16 under the Public Land
Act.17 The defense of indefeasibility of title was unavailing because the title
to the property stated that it was "subject to the provisions of Sections
118, 119, 121, 122 and 124"18 of the Public Land Act.19 Since the property
was sold within the five-year prohibitory period, such transfer "result[ed]
in the cancellation of the grant and the reversion of the land to the public
domain."20
As to the defense of in pari delicto, the trial court ruled against its
applicability,21 citing Egao v. Court of Appeals (Ninth Division).22
The rule of pari delicto non oritur action (where two persons are equally at
fault neither party may be entitled to relief under the law), admits of
exceptions and does not apply to an inexistent contract, such as, a sale
void ab initio under the Public Land Act, when its enforcement or
application runs counter to the public policy of preserving the grantee's
right to the land under the homestead law.23 (Citation
omitted)ChanRoblesVirtualawlibrary
The trial court further held that since the sale was null and void, no title
passed from Eusebio Borromeo to Eliseo Maltos.24 The dispositive portion
of the trial court's Decision states:
WHEREFORE, for lack of merit, the complaint under consideration is
hereby ordered DISMISSED. No pronouncement as to costs.
SO ORDERED.25
On appeal, the heirs of Borromeo argued that they were able to prove
their status as heirs through the testimony of their mother, Norberta
Borromeo.26
The heirs of Borromeo also argued that the trial court should have ordered
the "revival of [Original Certificate of Title] No. P-9053 in the name of the
Heirs of EUSEBIO BORROMEO."27
The Court of Appeals28 reversed the Decision of the trial court and held
that since Eusebio Borromeo sold his property within the five-year
prohibitory period, the property should revert to the state.29 However, the
government has to file an action for reversion because "reversion is not
automatic."30 While there is yet no action for reversion instituted by the
Office of the Solicitor General, the property should be returned to the heirs
of Borromeo.31 The dispositive portion of the Court of Appeals' Decision
states:
WHEREFORE, premises considered, the instant Appeal is GRANTED. The
Decision of the court a quo in Civil Case No. 946 is hereby SET ASIDE and
another one is entered (1) ordering Appellee ELISEO MALTOS to reconvey
the property subject matter of this litigation to Appellants upon the refund
by the latter to Appellee ELISEO MALTOS the sum of P36,863.00, all
expenses for the reconveyance to be borne by the buyer, ELISEO MALTOS,
herein Appellee and (2) ordering the Register of Deeds of Prosperidad,
Agusan del Sur to cancel TCT No. T-5477 and revive OCT No. P-9053.
Let a copy of this Decision be furnished! the Office of the Solicitor General
(OSG) for its information and appropriate action and to inform this court
within a period of thirty (30) days from receipt hereof of the action done
under the premises.
SO ORDERED.32 (Emphasis supplied)
The Maltos Spouses filed a Motion for Reconsideration, arguing that since
the prohibition on transfers of property is provided by law, only the heirs
of Borromeo should be punished.33 Punishment, in this case, would come
in the form of preventing the heirs of Borromeo from re-acquiring the
land.34 Instead, the land should revert back to the state.35 The Maltos
Spouses also prayed that they be reimbursed for the improvements they
introduced on the land.36 Assuming that they would be found to be also at
fault, the principle of in pari delicto should apply.37
The Court of Appeals38 denied the Motion for Reconsideration,39 reasoning
that it could not rule on the issue of who between the parties had the
better right to the property.40 Also, it was the government who should
decide whether the heirs of Borromeo "should retain ownership of the
land."41 With regard to the applicability of the in pari delicto doctrine, the
Court of Appeals held that in pari delicto does not apply in cases where its
application will violate the policy of the state.42
On May 10, 2006, the Maltos Spouses |filed a Petition43 for Review before
this court, questioning the Decision and Resolution of the Court of Appeals
in CA-G.R. CV No. 77142.44
This court, in a Resolution45 dated July 5, 2006, required the heirs of
Borromeo to file their Comment.
The heirs of Borromeo filed their Comment,46 which was noted by this
court in a Resolution47 dated September 25, 2006. In the same Resolution,
this court required the Maltos Spouses to file their Reply.48
In a Resolution dated March 28, 2007, this court required Attys. Ma.
Cherell L. De Castro and Gener C. Sansaet, counsels for the Maltos
Spouses, to show cause why they should not be disciplinarily dealt with for
their failure to file a Reply. They were also required to comply with the
Resolution dated September 25, 2006.50
Counsels for the Maltos Spouses filed a] Compliance,51 together with the
Reply.52 In a Resolution53 dated August 15, 2007, this court noted and
accepted the Compliance, and also noted the Reply.
I
The Maltos Spouses argue that the heirs of Borromeo did not present
evidence to prove that they are indeed the heirs of Eusebio Borromeo. The
heirs of Borromeo did not present the death certificate of Eusebio
Borromeo, the marriage certificate of Eusebio Borromeo and Norberta
Borromeo, or any of the birth certificates of the children of Eusebio.54
While Norberta Borromeo and two of her children testified,55 their
testimonies should be considered as self-serving.56 The Maltos Spouses
cite Article 17257 of the Family Code, which enumerates how filiation may
be established.58
The Maltos Spouses also contest the Court of Appeals' ruling stating that
they did not rebut the testimonies of the heirs of Borromeo because they
continuously argued that the heirs of Borromeo were unable to prove their
status as heirs.59
The Maltos Spouses further argue that it was error for the Court of Appeals
not to apply the in pari delicto rule, considering that the sale violated
Section 11860 of the Public Land Act.61 Since both parties are at fault, it
follows that Article 141262 of the Civil Code applies.63
In addition, the Maltos Spouses pray for the reimbursement of the value of
the improvements on the property to prevent unjust enrichment on the
part of the heirs of Borromeo.64 The Maltos Spouses enumerate the
following circumstances to show why they should be reimbursed:
a. EUSEBIO has already long received and enjoyed the amount of the
purchase price of the subject land from petitioners.
b. The value of the purchase price of PHP36,863.00 paid in 1983 have
since then greatly depreciated. If petitioners had deposited that money in
bank or loaned it to another person instead of purchasing EUSEBIO's
property, it would have at least earned some interest. However, the Court
of Appeals incorrectly assumed that the return of the purchase price would
be sufficient compensation to the petitioners.
c. The value of the improvements introduced by petitioners on the subject
property is much greater than the purchase price that they initially paid on
the land. Petitioners estimate the value of the improvements, including
hundreds of various fruit-bearing trees and four residential houses, to be
at least PHP900,000.00. Because of these improvements, not only can
respondents sell the land at a much higher price, they can even sell the
improvements and profit from them. It would be the height of injustice if
all the petitioners would receive in turning over the subject property to the
respondents is the purchase price that was previously paid EUSEBIO under
the deed of sale.65ChanRoblesVirtualawlibrary
On the other hand, the heirs of Borromeo argue that the testimonies of
Norberta Borromeo and Susan Borromeo Morales on their relationship to
Eusebio Borromeo were not refuted by the Malios Spouses. Thus, they
were able to prove their status as heirs.66
The heirs of Borromeo also argue that the in pari delicto rule is not
applicable because in Santos v. Roman Catholic Church of Midsayap, et
al.,67 this court stated that the in pari delicto rule does not apply if its
application will have the effect of violating public policy.68
With regard to the claim for reimbursements, the heirs of Borromeo argue
that the Maltos Spouses did not raise their claim for reimbursement in
their Answer to the Complaint. They are now barred from claiming
reimbursement since this was not raised at the first instance.69
Based on the arguments of the parties, the issues for resolution are:
First, whether the Court of Appeals erred in reversing the Decision of the
trial court and ordering the reconveyance of the property from petitioners
Spouses Eliseo Maltos and Rosita Maltos to respondents heirs of Eusebio
Borromeo;cralawlawlibrary
Second, whether the Court of Appeals erred in not applying the doctrine of
in pari delicto; and
Finally, whether the Court of Appeals erred in ruling that petitioners
Spouses Eliseo Maltos and Rosita Maltos are not entitled to reimbursement
for the improvements they introduced on the land.
II
The five-year period prohibiting the sale of land obtained under homestead
or free patent is provided under Section 118 of the Public Land Act, which
states:
SECTION 118. Except in favor of the Government or any of its branches,
units, or institutions, or legally constituted banking corporations, lands
acquired under free patent or homestead provisions shall not be subject to
encumbrance or alienation from the date of the approval of the application
and for a term of five years from and after the date of issuance1 of the
patent or grant, nor shall they become liable to the satisfaction of any debt
contracted prior to the expiration of said period; but the improvements or
crops on the land may be mortgaged] or pledged to qualified persons,
associations, or corporations.
The reason for prohibiting the alienation or encumbrance of properties
covered by patent or grant was explained in Metropolitan Bank and Trust
Company v. Viray.70
In Metropolitan Bank, Edgardo D. Viray and his wife contracted several
loans with Metrobank which they failed to pay.71 Metrobank filed a
Complaint for sum of money before the Regional Trial Court in Manila.72 In
1982, during the pendency of the case, free patents over three parcels of
land were issued in favor of Viray.73 The Complaint for sum of money was
decided in 1983 in favor of Metrobank.74 In 1984, the trial court issued a
writ of execution over the parcels of land.75 An auction sale was held, and
Metrobank emerged as the winning bidder.76 Viray filed an action for
annulment of sale.77 This court ruled that the auction sale was made within
the five-year prohibitory period78 and explained that:
[T]he main purpose in the grant of a freq patent of homestead is to
preserve and keep in the family of the homesteader that portion of public
land which the State has given to him so he may have a place to live with
his family and become a happy citizen and a useful member of the society.
In Jocson v. Soriano, we held that the conservation of a family home is the
purpose of homestead laws. The policy of the state is to foster, families as
the foundation of society, and thus promote general welfare. . . .
Section 118 of CA 141, therefore, is predicated on public policy. Its
violation gives rise to the cancellation of the grant and the reversion of the
land and its improvements to the government at the instance of the latter.
The provision that "nor shall they become liable to the satisfaction of any
debt contracted prior to that expiration of the five-year period" is
mandatory and any sale made in violation of such provision is void and
produces no effect whatsoever, just like what transpired in this case.
Clearly, it is not within the competence of any citizen to barter away what
public policy by law seeks to preserve.79 (Citations omitted)
In Republic v. Court of Appeals,80 Josefina L. Morato applied for free patent
over a parcel which was granted.81 Morato mortgaged and leased a portion
of the land within the five-year prohibitory period.82 Later on, it would also
be discovered that Morato's land formed part of Calauag Bay.83 The
Republic filed a Complaint for cancellation of title and reversion of the
parcel of land.84 This court held that "lease" and "mortgage" were
encumbrances on the parcel of land.85 This court also discussed the policy
behind the five-year prohibitory period:
It is well-known that the homestead laws were designed to distribute
disposable agricultural lots of the State to land-destitute citizens for their
home and cultivation. Pursuant to such benevolent intention the State
prohibits the sale or encumbrance of the homestead (Section 116) within
five years after the grant of the patent. After that five-year period the law
impliedly permits alienation of the homestead; but in line with the
primordial purpose to favor the homesteader and his family the statute
provides that such alienation or conveyance (Section 117) shall be subject
to the right of repurchase by the homesteader, his widow or heirs within
five years. This section 117 is undoubtedly a complement of Section 116.
It aims to preserve and keep in the family of the homesteader that portion
of public land which the State had gratuitously given to him. It would,
therefore, be in keeping with this fundamental idea to hold, as we hold,
that the right to repurchase exists not only when the original homesteader
makes the conveyance, but also when it is made by his widow or heirs.
This construction is clearly deducible from the terms of the
statute.ChanRoblesVirtualawlibrary
The effect of violating the five-year prohibitory period is provided under
Section 124 of the Public Land Act, which provides:
SECTION 124. Any acquisition, conveyance, alienation, transfer, or other
contract made or executed in violation of any of the provisions of sections
one hundred and eighteen, one hundred and twenty, one hundred and
twenty-one, one hundred and twenty-two, and one hundred and twenty-
three of this. Act shall be unlawful and null and void from its execution and
shall produce the effect of annulling and cancelling the grant, title, patent,
or permit originally issued, recognized or confirmed, actually or
presumptively, and cause the reversion of the property and its
improvements to the State.
In this case, Section 10187 of the Public Land Act is applicable since title
already vested in Eusebio Borromeo's name. Both the trial court and the
Court of Appeals found that the sale was made within the five-year
prohibitory period. Thus, there is sufficient cause to revert the property in
favor of the state. However, this court cannot declare reversion of the
property in favor of the state in view of the limitation imposed by Section
101 that an action for reversion must first be filed by the Office of the
Solicitor General.
III
The doctrine of in pari delicto non oritur actio is inapplicable when public
policy will be violated.
constitute criminal offenses.
The in pari delicto rule is provided under Articles 1411 and 1412 of the
Civil Code. Article 1411 pertains to acts that constitute criminal offenses,
while Article 1412 pertains to acts that do not These provisions state:
ART. 1411. When the nullity proceeds from the illegality of the cause or
object of the contract, and the act constitutes a criminal offense, both
parties being in pari delicto, they shall have no action against each other,
and both shall be prosecuted. Moreover, the provisions of the Penal Code
relative to the disposal of effects or instruments of a crime shall be
applicable to the things or the price of the contract.
This rule shall be applicable when only one of the parties is guilty; but the
innocent one may claim what he has given, and shall not be bound to
comply with his promise.
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;cralawlawlibrary
(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 fulfilment 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.
Santos involved the sale of a parcel of land within the five-year prohibitory
period.88 The Roman Catholic Church raised the defense of in pari delicto.89
It was also argued by the Rornan Catholic Church that the effect of the
sale would be the reversion of the] property to the state.90 This court held
that:
Section 124 of the Public Land Act indeed provides that any acquisition,
conveyance or transfer executed in violation of any of its provisions shall
be null and void and shall produce the effect of annulling and cancelling
the grant or patent and cause the reversion of the property to the State,
and the principle of pari delicto has been applied by this Court in a number
of cases wherein the parties to a transaction have proven to be guilty of
effected the transaction with knowledge of the cause of its invalidity. But
we doubt if these principles can now be invoked considering the philosophy
and the policy behind the approval of the Public Land Act. The principle
underlying pari delicto as known here and in the United States is not
absolute in its application. It recognizes certain exceptions one of them
being when its enforcement or application runs counter to an avowed
fundamental policy or to public interest. As stated by us in the Rellosa
case, "This doctrine is subject to one important limitation, namely,
[']whenever public policy is considered advanced by allowing either party
to sue for relief against the transaction[']"
The case under consideration comes within the exception above adverted
to. Here appellee desires to nullify a transaction which was done in
violation of the law. Ordinarily the principle of pari delicto would apply to
her because her predecessor-in-interest has carried out the sale with the
presumed knowledge of its illegality, but because the subject of the
transaction is a piece of public land, public policy requires that she, as
heir, be not prevented from re-acquiring it because it was given by law to
her family for her home and cultivation. This is the policy on which our
homestead law is predicated. This right cannot be waived. "It is not within
the competence of any citizen to barter away what public policy by law
seeks to preserve." We are, therefore, constrained to hold that appellee
can maintain the present action it being in furtherance of this fundamental
aim of our homestead law.91 (Emphasis supplied, citations omitted)
The non-application of the in pari delicto rule where public policy would be
violated has also been applied in other cases.
In Pajuyo v. Court of Appeals,92 this court held that in pari delicto "is not
[applicable to [e]jectment [c]ases"93 and cited Drilon v. Gaurana,94 which
discussed the policy behind ejectment cases:
It must be stated that the purpose of an action of forcible entry and
detainer is that, regardless of the actual condition of the title to the
property, the party in peaceable quiet possession shall not be turned out
by strong hand, violence or terror. In affording this remedy of restitution
the object of the statute is to prevent breaches of the peace and criminal
disorder which would ensue from the withdrawal of the remedy, and the
reasonable hope such withdrawal would create that some advantage must
accrue to those persons who, believing themselves entitled to
the possession of property, resort to force to gain possession rather than
to some appropriate action in the courts to assert their
claims.95ChanRoblesVirtualawlibrary
This court elucidated that:
Clearly, the application of the principle of pari delicto to a case of
ejectment between squatters is fraught with danger. To shut out relief to
squatters on the ground of pari delicto would openly invite mayhem and
lawlessness. A squatter would oust another squatter from possession of
the lot that the latter had illegally occupied, emboldened by the knowledge
that the courts would leave them where they are. Nothing would then
stand in the way of the ousted squatter from re-claiming his prior
possession at all cost.
Petty warfare over possession of properties is precisely what ejectment
cases or actions for recovery of possession seek to prevent. Even the
owner who has title over the disputed property cannot take the law into
his own hands to regain possession of his property. The owner must go to
court.96 (Citation omitted)
In Loria v. Muñoz, Jr.,97 Carlos Loria asked Ludolfo Muñoz, Jr. "to advance
[P]2,000,000.00 for a subcontract of a [P]50,000,000.00 river-dredging
project in Guinobatan."98 Loria informed Muñoz that the project would be
awarded to Sunwest Construction and Development Corporation, and
Sunwest would subcontract to Muñoz.99 Muñoz agreed to Loria's
proposal.100 When the river-dredging project was finished, Loria did not
return the P2,000,000.00 despite Muñoz's demand.101 Complaint for sum
of money.102 Loria raised the argument that Muñoz "should not be allowed
to recover the money"103 since they were in pari delicto.104 This court held
that under the principle of unjust enrichment, the sum of money should be
returned.105 In so ruling, this court cited Gonzalo v. Tarnate, Jr.106 where it
was explained that:
. . . the application of the doctrine of in pari delicto is not always rigid. An
accepted exception arises when its application contravenes well-
established public policy. In this jurisdiction, public policy has been defined
as "that principle of the law which holds that no subject or citizen can
lawfully do that which has a tendency to hi injurious to the public or
against the public good."ChanRoblesVirtualawlibrary
Unjust enrichment exists, according to Hulst v. PR Builders, Inc., "when a
person unjustly retains a benefit at the loss of another, or when a person
retains money or property of another against the fundamental principles of
justice, equity and good conscience." The prevention of unjust enrichment
is a recognized public policy of the State, for Article 22 of the Civil Code
explicitly provides that "[e]very person who through an act of performance
by another, or any other meins, acquires or comes into possession of
something at the expense of the latter without just or legal ground, shall
return the same to him." It is wel I to note that Article 22 "is part of the notwithstanding the fact that they have a little amount and out of pity
chapter of the Civil Code on Human Relations, the provisions of which were bought the said land.112ChanRoblesVirtualawlibrary
formulated as basic principles to be observed for the rightful relationship
between human beings and for the stability of the social order; designed to
In the Reply, respondents alleged:
indicate certain norms that spring from the fountain of good conscience;
guides for human conduct that should run as golden threads through
The allegation that the late Eusebio Borrjomeo and his wife went to
society to the end that law may approach its supreme ideal which is the
Bayugan II, San Francisco, Agusan del Sur in order to sell the land to the
sway and dominance of justice."107ChanRoblesVirtualawlibrary
defendant Eliseo Maltos has no factual basis, the truth of the matter is that
the late Eusebio Borromeo, together with defendant Eliseo Maltos went to
As the in pari delicto rule is not applicable, the question now arises as to Esperanza, Sultan Kudarat to secure the signature of the wife.113
who between the parties have a better right to possess the subject parcel
of land. This issue was addressed in Santos:
In addition, when petitioner Eliseo Maltos was presented in court, he
identified the signatures of the witnesses on the deed of sale as the
What is important to consider now is who of the parties is the better
signatures of Eusebio Borromeo's children, namely, Susan, Ana, and
entitled to the possession of the land while the government does not take
Nicolas Borromeo.114
steps to assert its title to the homestead. Upon annulment of the sale, the
purchaser's claim is reduced to the purchase price and its interest. As
Respondents' allegation that they are the heirs of Borromeo is admitted by
against the vendor or his heirs, the purchaser is no more entitled to keep
petitioners. Thus, the Court of Appeals did not err in ruling that "the fact
the land than any intruder. Such is the situation of the appellants. Their
that Appellants [referring to respondents] are the spouse and children of
right to remain in possession of the land is no better than that of appellee
the late EUSEBIO remains unrebutted."115
and, therefore, they should not be allowed to remain in it to the prejudice
of appellee during and until the government takes steps toward its
IV
reversion to the State.108 (Emphasis supplied, citation omitted)
With regard to the claim for reimbursement, respondents argue that it was
In Binayug v. Ugaddan,109 which involved the sale of two properties not raised as a counterclaim in the Answer to the Complaint.
covered by a homestead patent,110 this court cited jurisprudence showing
that in cases involving the sale of a property covered by the five-year During trial, petitioner Eliseo Maltos testified that when he entered the
prohibitory period, the property should be returned to the grantee.111 land, there were around 100 trees, including coconut trees and a few
banana trees. He then planted additional coconut trees which, at the time
Applying the ruling in Santos and Binayug, this court makes it clear that of the trial, were already bearing fruit.116 Petitioner Eliseo Maltos'
petitioners have no better right to remain in possession of the property testimony was not rebutted by respondents.
against respondents.
The general rule is that "[a] compulsory counterclaim . . . not set up shall
Hence, the Court of Appeals did not err in ruling that while there is yet no be barred."117 Further, the computation of the value of the improvements
action for reversion filed by the Office of the Solicitor General, the property on the land entails findings of fact.
should be conveyed by petitioners to respondents.
In any case, the Court of Appeals did not err when it stated in its
III Resolution dated April 7, 2006 that:

Petitioners' argument that respondents failed to establish their status as
heirs is belied by their admissions during trial and in their pleadings.
Petitioners t know the identity of Eusebio Borromeo's wife. As quoted in
the trial court's Decision, petitioners alleged in their Answer that:
[I]t was the late Eusebio Borromeo and his wife who came along in
Bayugan 2, San Francisco, Agusan del Sur, requesting the said defendants
to purchase their land because they badly need money and
With respect to Appellees' claim for the reimbursement of the
improvements on the land in question, they are hereby declared to have
lost and forfeited the value of the necessary improvements that they made
thereon in the same manner that Appellants should lose the value of the
products gathered by the Appellees from the said land.118
The Court of Appeals cited Angeles, et at v. Court of Appeals, et al.119 and
Arsenal v. Intermediate Appellate Court.120 In Angeles, this court discussed
that:
The question that now poses is whether the return of the value of the
products gathered from the land by the defendants and the expenses
incurred in the construction of the dike—all useful and necessary
expenses—should be ordered to be returned by the defendants to the
plaintiffs. While we believe that the rule of in pari delicto should not apply
to the sale of the homestead, because such sale is contrary to the public
policy enunciated in the homestead law, the loss of the products realized
by the defendants and the value of the necessary improvements made by
them on the land should not be excepted from the application of the said
rule because no cause or reason can be cited to justify an exception. It has
been held that the rule of in pari delicto is inapplicable only where the
same violates a well-established public policy.
....
We are constrained to hold that the heirs of the homesteader should be
declared to have lost and forfeited the value of the products gathered
from the land, and so should the defendants lose the value of the
necessary improvements that they have made
thereon.121ChanRoblesVirtualawlibrary
In Arsenal, the property covered by a homestead patent had been sold to
Suralta in 1957,122 while the Complaint was filed before the trial court in
1974.123 The case was decided by this court in 1986.124 Thus, Suralta had
been in possession of the property for approximately 17 years before a
Complaint was filed. This court held that:
The value of any improvements made on the land and the interests on the
purchase price are compensated by the fruits the respondent Suralta and
his heirs received from their long possession of the
homestead.125ChanRoblesVirtualawlibrary
Angeles and Arsenal both involved the sale of a parcel of land covered by a
homestead patent within the five-year prohibitory period. These cases also
involved the introduction of improvements on the parcel of land by the
buyer.
Restating the rulings in Angeles and Arsenal, this court finds that while the
rule on in pari delicto does not apply policy, if its effect is to violate public
policy it is applicable with regard to value of the improvements introduced
by petitioner Eliseo Maltos. Petitioners had been in possession of the land
for 20 years before the heirs of Borromeo filed a Complaint. The expenses
incurred by petitioners in introducing improvements on the land for which
they seek reimbursement should already be compensated by the fruits
they received from the improvements.
V
Reversion is a remedy provided under Section 101 of the Public Land Act:
SECTION 101. All actions for the reversion to the Government of lands of
the public domain or improvements thereon shall be instituted by the
Solicitor-General or the officer acting in his stead, in the proper courts, in
the name of Commonwealth of the Philippines.
The purpose of reversion is "to restore public land fraudulently awarded
and disposed of to private individuals or corporations to the mass of public
domain."126
The general rule is that reversion of lands to the state is not automatic,
and the Office of the Solicitor General is the proper party to file an action
for reversion.
In Villacorta v. Ulanday,127 defendant-appellee Vicente Ulanday admitted
that his purchase of a parcel of land covered by a homestead patent was
made within the five-year prohibitory period, but argued that since the
sale was in violation of law,128 the property should automatically revert to
the state.129 This court held that reversion was not automatic, and
government must file an appropriate action so that the land may be
reverted to the state.130
Ortega v. Tan131 involved the sale and mortgage of a parcel of land
covered by a free patent.132 The series of transactions for the sale and
mortgage of the property had been initiated within the five-year
prohibitory period but was finalized after the prohibitory period.133 This
court held that the sale and mortgage violated Section 118 of the Public
Land Act and that reversion was proper.134 This court also clarified that:
[Reversion] is not automatic. The government has to take action to cancel
the patent and the certificate of title in order that the land involved may
be reverted to it. Correspondingly, any new transaction would be subject
to whatever steps the government may take for the reversion to it.135
(Citation omitted)ChanRoblesVirtualawlibrary
Alvarico v. Solau136 involved a miscellaneous sales application over a
parcel of land by Fermina Lopez.137 Subsequently, Lopez executed a deed
of self-adjudication and transfer of rights in favor of Amelita Sola.138 The
Bureau of Lands approved the transfer of rights, and title was issued in
Sola's name.139 Castorio Alvarico then filed an action for reconveyance,
claiming that the parcel of land was donated to him.140 He also alleged that
Sola acquired the property in bad faith.141 This court held that Alvarico's
allegation of bad faith was not supported by evidence and that in any case,
"only the State can institute reversion proceedings under Sec[tion] 101 of
the Public Land Act."142 This court restated Section 101 of the Public Land
Act:
[A] private individual may not bring an action for reversion or any action
which would have the effect of canceling a free patent and the
corresponding certificate of title issued on the basis thereof, such that the
land covered thereby will again form part of the public domain. Only the
Solicitor General or the officer acting in his stead may do so. Since [the]
title originated from a grant by the government, its cancellation is a matter
between the grantor and the grantee.143 (Citations
omitted)ChanRoblesVirtualawlibrary
The rule in Alvarico was cited in Cawis, et al. v. Hon. Cerilles, et al.144 In
Cawis, the validity of a sales patent and original certificate of title over a
parcel of land in Baguio was questioned.145 This court denied the
Petition146 and ruled that the Complaint was actually a reversion suit,
which can be filed only by the Office of the Solicitor General or a person
acting in its stead.147
It was also discussed in Cawis that:
The objective of an action for reversion of public land is the cancellation of
the certificate of title an|l the resulting reversion of the land covered by
the title to the State| This is why an action for reversion is oftentimes
designated asj an annulment suit or a cancellation suit.148
We clarify that the remedy of reversion is not the same as the remedy of
declaration of nullity of free patents and certificate of title. In reversion,
the "allegations in the complaint would admit State ownership of the
disputed land[,]"149 while in an action for the declaration of nullity of free
patent and certificate of title, the allegations would include "plaintiffs
ownership of the contested lot prior to the issuance of [the] free patent
and certificate of title[.]"150
Since an action for reversion presupposes that the property in dispute is
owned by the state, it is proper that the action be filed by the Office of the
Solicitor General, being the real party-in-interest.
There is, however, an exception to the rule that reversion is not automatic.
Section 29 of the Public Land Act provides:
SECTION 29. After the cultivation of the land has begun, the purchaser,
with the approval of the Secretary of Agriculture and Commerce, may
convey or encumber his rights to any person, corporation, or association
legally qualified under this Act to purchase agricultural public lands,
provided such conveyance or encumbrance does not affect any right or
interest of the Government in the land: And provided, further, That the
transferee is not delinquent in the payment of any installment due and
payable. Any sale and encumbrance made without the previous approval
of the Secretary of Agriculture and Commerce shall be null and void and
shall produce the effect of annulling the acquisition and reverting the
property and all rights to the State, and all payments on the purchase
price theretofore made to the Government shall be forfeited. After the sale
has been approved, the vendor shall not lose his right to acquire
agricultural public lands under the provisions of this Act, provided he has
the necessary qualifications. (Emphasis supplied)
In Francisco v. Rodriguez, et al,151 this court differentiated reversion under
Sections 29 and 101 of the Public Land Act.152 This court explained that
reversion under Section 29 is self-operative, unlike Section 101 which
requires the Office of the Solicitor General to institute reversion
proceedings.153 Also, Section 101 applies in cases where "title has already
vested in the individual[.]"154 The Director of Lands sought to execute the
Decision in Francisco v. Rodriguez which petitioner Ursula Francisco
opposed, arguing that only 29 hectares were reverted to the state since
she was in possession of the remaining four hectares.155 This court held
that the entire property reverted to the state.156 This court also explained
why Francisco v. Rodriguez was covered by Section 29 and not Section
101 of the Public Land Act:
By transgressing the law, i.e., allowing herself to be a dummy in the
acquisition of the land and selling the same without the previous approval
of the Secretary of Agriculture and Natural Resources, plaintiff-appellant
herself [referring to Ursula Francisco] has eliminated the very source
(Sales Application) of her claim to Lot No. 595, as a consequence of which,
she cannot later assert any right or interest thereon. This is the imperative
import of the pronouncements in G.R. No. L-8263 and in G.R. No. L-15605
that the invalidity of the conveyance by plaintiff-appellant "produced as a
consequence the reversion of the property with all rights thereto to the
State." As a matter of fact, Section 29 of the Public Land Law
(Commonwealth Act No. 141) expressly ordains that any sale and
encumbrance made without the previous approval of the Secretary of
Agriculture and Natural Resources "shall be null and void and shall produce
the effect of annulling the acquisition and reverting property and all rights
thereto to the State, and all payments on the purchase price theretofore
made to the Government shall be forfeited." . . . .
In fact, even if a sales application were already given due course by the
Director of Lands, the applicant is not thereby conferred any right over the
land covered by the application. It is the award made by the Director to
the applicant (if he is the highest bidder) that confers upon him a certain
right over the land, namely, "to take possession of the land so that he
could comply with the requirements prescribed by law." It is at this stage,
when the award is made, that the land can be considered "disposed of by
the Government," since the aforestated right of the applicant has the
effect of withdrawing the land from the public domain that is "disposable"
by the Director of Lands under the provisions of the Public Land Act. . . .
However, the disposition is merely provisional because the applicant has
still to comply with the requirements prescribed by law before . . . . any
patent is issued. After the requisites of the law are complied with by the
applicant to the satisfaction of the Director [of] Lands, the patent is
issued. It is then that the land covered by the application may be
considered "permanently disposed of by the Government."157 (Citations
omitted)
In this case, a free patent over the subject parcel of land was issued to
Eusebio Borromeo. This shows that he already had title to the property when
he sold it to petitioner Eliseo Maltos. Thus, Section 101 of the Public Land
Act applies.
WHEREFORE, the Petition is denied, and the Decision and Resolution of the
Court of Appeals in CA-G.R. CV No. 77142 are AFFIRMED, without prejudice
to the appropriate institution of a case for reversion.
Let a copy of this Decision be furnished the Office of the Solicitor General
for its appropriate action with respect to the reversion of the land in
question.
SO ORDERED.chanroblesvirtuallawlibrary
G.R. No. 147148. January 13, 2003.*
PILAR GOYENA, petitioner, vs. AMPARO LEDESMA-GUSTILO, respondent.
Remedial Law; Certiorari; Questions of fact are not proper subjects of appeal by
certiorari under Rule 45 of the Rules of Court as this mode of appeal is confined to questions
of law.—It is well-entrenched doctrine that questions of fact are not proper subjects of
appeal by certiorari under Rule 45 of the Rules of Court as this mode of appeal is confined
to questions of law. The test of whether the question is one of law or of fact is whether the
appellate court can determine the issue raised without reviewing or evaluating the
evidence, in which case it is a question of law; otherwise, it is a question of fact.
Same; Same; Court cannot be tasked to go over the proofs presented by the parties and
analyze, assess and weigh them to ascertain if the trial court and appellate court were
correct in according them superior credit.—Clearly, the issues raised and arguments in
support of petitioner’s position require a review of the evidence, hence, not proper for
consideration in the petition at bar. This Court cannot thus be tasked to go over the proofs
presented by the parties and analyze, assess, and weigh them to ascertain if the trial court
and appellate court were correct in according them superior credit.
Same; Guardianship; In the selection of a guardian, a large discretion must be allowed
the judge who deals directly with the parties.—In the selection of a guardian, a large
discretion must be allowed the judge who deals directly with the parties. As this Court
said: As a rule, when it appears that the judge has exercised care and diligence in selecting
the guardian, has given due consideration to the reasons for and against his action which
are urged by the interested parties, his action should not be disturbed unless it is made very
clear that he has fallen into grievous error. In the case at bar, petitioner has not shown that
the lower courts committed any error.
From the Court of Appeals June 19, 2000 Decision which affirmed that of the Regional
Trial Court (RTC) of Makati, Branch 149 in Special Proceeding No. N-4375 appointing
herein respondent Amparo Ledesma Gustilo as guardian over the person and property
of her sister Julieta Ledesma, Pilar Y. Goyena, Julieta's close friend and companion of
more than 60 years, comes to this Court on petition for review on certiorari.
On July 8, 1996, respondent filed at the RTC of Makati a "PETITION FOR LETTERS
OF GUARDIANSHIP"1 over the person and properties of her sister Julieta, the pertinent
allegations of which read:
2. That for the most part during the year 1995 and 1996, Julieta Ledesma
has been a patient in the Makati Medical Center where she is under medical
attention for old age, general debility, and a "mini"-stroke which she suffered
in the United States in early 1995;
3. That Julieta Ledesma is confined to her bed and can not get up from bed
without outside assistance, and she has to be moved by wheel chair;
4. That Julieta Ledesma owns real estate and personal properties in Metro
Manila and in Western Visayas, with an aggregate estimated assessed and
par value of P1 Million Pesos[;]
5. That Julieta Ledesma is not in a position to care for herself, and that she
needs the assistance of a guardian to manage her interests in on-going
corporate and agricultural enterprises;
6. That the nearest of kin of Julieta Ledesma are her sisters of the full blood,
namely, petitioner Amparo Ledesma Gustilo, Teresa Ledesma (aka. Sister
Cristina of the Religious of the Assumption, and Loreto Ledesma Mapa, all of
whom have given their consent to the filing of this petition as shown by their
signatures at the bottom of this petition[;]
7. That petitioner has extensive experience in business management of
commercial, agricultural and corporate enterprises, many of which are in the
same entities where Julieta Ledesma holds an interest, and that she is in a
position to monitor and supervise the delivery of vitally needed medical
services to Julieta Ledesma whether in the Metro Manila area, or elsewhere.
Petitioner filed an Opposition to the petition for letters of guardianship. She later filed
an Amended Opposition on August 15, 1996 reading in part:
2.03 The petition lacked factual and legal basis in that Julieta Ledesma is
competent and sane and there is absolutely no need to appoint a guardian to
take charge of her person/property. She is very able to take charge of her
affairs, and this is clearly evident from her letters to the petitioner. Copies of
her recent letters are herewith attached as Annexes "A" to "E."
xxx xxx xxx
 2.05 Petitioner is not fit to be appointed as the guardian of Julieta Ledesma
since their interests are antagonistic (Sudler v. Sudler, 121 Md. 46. 49 L.R.A.
800, as cited in vol. V-B Francisco Revised Rules of Court, Rule 93, Section
4, p. 414).
xxx xxx xxx
3.01 The above captioned petition should be dismissed for utter lack of legal
and/or factual basis.
3.02 In the remote event that this Honorable Court should find that Julieta
Ledesma is incompetent and resolve that there is need to appoint a guardian
over her person and property, this Honorable Court should appoint as such
guardian:
1. Oppositor Goyena;
2. Bart Lacson;
3. Fely Montelibano;
4. Jose T. Revilla; or
5. a qualified and reputable person as may be determined fit by this
Honorable Court.
By Decision2 of October 4, 1996, the trial court found Julieta "incompetent and
incapable of taking care of herself and her property" and appointed respondent as
guardian of her person and properties, ratiocinating as follows:
A perusal of the records shows that petitioner (Amparo) is 72 years of age,
the youngest sister of Julieta. Admittedly, the Oppositor Pilar Goyena, 90
years of age has been the close friend and companion of Julieta for 61
years. Julieta was with Oppositor when she suffered her first stroke in Makati
in 1991 which was the reason why Julieta had to give up the management of
their hacienda in Bacolod. It is also not disputed that Julieta was with Pilar
when she had her second stroke in the U.S. In short, the special bond of
friendship existing between Julieta and the Oppositor cannot be denied. Now
that Julieta is unable to manage her personal life and business concerns due
to senility and "vascular dementia," the oppositor wants to be appointed her
guardian or else Bart Lacson, Fely Montelibano and Jose T. Revilla.
It is interesting to note that the oppositor has interposed her objection to the
appointment of Amparo as guardian because she thinks that the latter
dislikes her. She further added that there were a number of letters allegedly
written by Julieta to Amparo which showed Julieta's sentiments regarding
certain matters. Nevertheless, not one of the nearest of kin of Julieta
opposed the petition. As a matter of fact, her sisters signified their conformity
thereto. Thus, Ms. Goyena's mere conjecture that Amparo dislikes her is no
sufficient reason why the petition should be denied. Neither does it make
Amparo unsuitable and unfit to perform the duties of a guardian. On the
contrary, it is Ms. Goyena who could be considered as to have an adverse
interest to that of Julieta if it is true that 50% of Julieta's holdings at the
Makati Medical Center has been transferred to her as alleged in Exhibit 1
and Exhibit A.
By and large, the qualification of Amparo to act as guardian over the person
and properties of Julieta has been duly established. As a sister, she can best
take care of Julieta's concerns and well being. Now that Julieta is in the
twilight of her life, her family should be given the opportunity to show their
love and affection for her without however denying Pilar Goyena access to
her considering the special bond of friendship between the two. Needless to
say, the oppositor at 90 years of age could not be said to be physically fit to
attend to all the needs of Julieta.
WHEREFORE, petitioner Amparo Gustilo, is hereby appointed guardian over
the person and property of Julieta Ledesma, an incompetent with all the
powers and duties specified under the law.
Accordingly, let letters of guardianship issue to petitioner upon her filing of a
bond in the amount of P200,000.00 to guarantee the performance of the
obligations prescribed for general guardians.
SO ORDERED. (Emphasis supplied)
Petitioner's Motion for Reconsideration of the trial court's decision was, by Order of
November 4, 19963 , denied in this wise:
Acting on the Motion for Reconsideration filed by the Oppositor thru counsel,
and finding no merits on the ground stated therein, considering that
petitioner appears to be most qualified and suitable to act as Julieta
Ledesma's guardian after taking into consideration the qualifications of the
oppositor and her other recomendees [sic], aside from the fact that
petitioner's appointment as such was not objected to by any of her nearest
kin, in contrast to the hostile interest of oppositor, the same is hereby
DENIED.
SO ORDERED.
On appeal of petitioner, the Court of Appeals affirmed the trial court's decision on the
following ratiocination:4
Indeed, oppositor-appellant (Pilar) has not shown the authenticity and due
execution of the letters which purport to show the existence of a rift between
Julieta and her family and dissatisfaction as to how the businesses were
managed. At any rate, while it is correct to say that no person should be
appointed guardian if his interest conflict with those of the ward (Guerrero vs.
 Teran, 13 Phil. 212), there are really no antagonistic interests to speak of
between petitioner [Amparo] and Julieta, they being co-owners of certain
properties. There is also no showing that petitioner's business decisions in
the past had resulted in the prejudice of Julieta.
While the oppositor may have been very close to Julieta, there is no
sufficient showing that petitioner is hostile to the best interests of the latter.
On the contrary, it was the petitioner who, realizing the need for the
appointment of a person to guard her sister's interests, initiated the petition
for guardianship. We see no indication that petitioner is animated by a
desire to prejudice Julieta's health as well as financial interests. In
point of fact, it was oppositor-appellant who had initially concealed the
deteriorating state of mind of Julieta from the court. Oppositor's
advanced age of 90 years also militate against her assuming the
guardianship of the incompetent. The oppositor has declared that she is
not interested to be appointed legal guardian (p. 21[,] Appellant's Brief,
Rollo, p. 59). But the persons that she points to as being better choices as
Julieta's guardian over the appellee have not acted, nor even indicated, their
desire to act as such. In any case, We see no cogent reason why We should
reverse the well-reasoned disquisition of the trial court.
WHEREFORE, finding no error in the appealed decision, the same is hereby
AFFIRMED.
SO ORDERED. (Emphasis supplied)
Petitioner's Motion for Reconsideration of the Court of Appeals decision having been
denied, she filed the present petition which proffers that:
THE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE
IN A WAY NOT IN ACCORD WITH LAW AND APPLICABLE DECISIONS
OF THIS HONORABLE COURT.
THE COURT OF APPEALS HAS DEPARTED FROM THE ACCEPTED AND
USUAL COURSE OF JUDICIAL PROCEEDINGS IN AFFIRMING THE
TRIAL COURT'S DECISION DATED OCTOBER 4, 1996 AND IN ISSUING
THE RESOLUTIONS DATED JUNE 29, 2000 AND FEBRUARY 9, 2001.
The petition fails.
It is well-entrenched doctrine that questions of fact are not proper subjects of appeal by
certiorari under Rule 45 of the Rules of Court as this mode of appeal is confined to
questions of law.5 The test of whether the question is one of law or of fact is whether
the appellate court can determine the issue raised without reviewing or evaluating
the evidence, in which case it is a question of law; otherwise, it is question of fact.6
In the case at bar, the only issue before this Court is whether or not the appellate court
and the trial court erred in finding that respondent is not unsuitable for appointment as
guardian of the person and properties of Julieta. In support of an affirmative answer,
petitioner posits as follows:
1. The Court of Appeals' basis for its decision that there are no antagonistic
interests between [her] and [respondent] is contrary to the evidence on
record,7
2. The Court of Appeals' erred in holding that there is no showing that
[respondent] is hostile to the best interest of Julieta,8 and
3. Julieta Ledesma's appointed representatives are most suitable to be
appointed as her guardian.9
Clearly, the issues raised and arguments in support of petitioner's position require a
review of the evidence, hence, not proper for consideration in the petition at bar. This
Court cannot thus be tasked to go over the proofs presented by the parties and analyze,
assess, and weigh them to ascertain if the trial court and appellate court were correct
in according them superior credit.10
That the issues raised are factual is in fact admitted by petitioner in her Reply dated
August 30, 2001:11
Although the general rule is that this Honorable Court is not a trier of facts,
its jurisdiction being limited to reviewing and revising only errors of law, it is
nonetheless subject to the following exceptions which have been laid down
in a number of decisions of this Honorable Court:
(1) When the conclusion is a finding grounded entirely on
speculation, surmises and conjectures; (2) When the inference
made is manifestly mistaken, absurd or impossible; (3) When there
is grave abuse of discretion; (4) When the judgment is based on a
misapprehension of facts; (5) When the findings of facts are
conflicting; (6) When the Court of Appeals, in making its findings,
went beyond the issues of the case and the same is contrary to the
admissions of both appellants and appellee; (7) When the findings
of the Court of Appeals are contrary to those of the trial court; (8)
When the findings of facts are conclusions without citation of
specific evidence on which they are based; (9) When the facts set
forth in the petition as well as in the petitioners' main and reply
briefs are not disputed by the respondents; and (10) When the
findings of fact of the Court of Appeals is premised on the supposed
absence of evidence and is contradicted by the evidence on record
(Emphasis supplied); (Rollo, 350–351)
Petitioner claims that "there is no doubt that the instant petition falls within the above-
stated exceptions because the findings of the Court of Appeals are clearly belied by the
evidence on record."12
In the selection of a guardian, a large discretion must be allowed the judge who deals
directly with the parties.13 As this Court said:
As a rule, when it appears that the judge has exercised care and diligence in selecting
the guardian, and has given due consideration to the reasons for and against his action
which are urged by the interested parties, his action should not be disturbed unless
it is made very clear that he has fallen into grievous error.14
In the case at bar, petitioner has not shown that the lower courts committed any error.
Petitioner cannot rely on Garchitorena v. Sotelo15 with respect to the existence of
antagonistic interests between respondent and Julieta. In that case, the interest of
Perfecto Gabriel as creditor and mortgagee of the minor-wards' properties (a house
and lot) is antagonistic to the interest of the wards as mortgagors, hence, Gabriel's
appointment as guardian was erroneous. For while he sought to foreclose the wards'
properties as creditor and mortgagee on one hand, he had to, on the other hand,
endeavor to retain them for the wards as their guardian. Added to that was Gabriel's
appointment as guardian without him informing the guardianship court that he held a
mortgage on the properties. Furthermore, he deliberately misinformed the said court
that the first mortgagee was the Santa Clara Monastery when it was him. None of the
said circumstances obtain in the present case.
Petitioner can neither rely on certain letters of Julieta to establish her claim that there
existed16 a rift between the two which amounts to antagonistic interests. The first letter 17
sent by Julieta to respondent which reads:
x x x So if you (appellee) do not agree with me (Julieta) my decision is right
to let us divide as soon as possible, so we will have capital each of us to
work, and keep the Hda, for [sic] generation to generation.
xxx xxx xxx
For the last time I will repeat even if I have to kneel before you and Carlos I
have no interest anymore in any future investment due to my age and being
single and alone in life. I would like to be able to enjoy whatever monies that
correspond to me. I would like to have enough money as a reserve for any
future need that I might have like hospitalization, travel, buying whatever I
like, etc. etc. (Letter to appellee; Exhibit "2")
merely shows Julieta's lack of interest in future investments, not necessarily a business
disagreement, and certainly not per se amounting to antagonistic interests between her
and respondent to render the latter unsuitable for appointment as guardian.
The second letter18 which reads:
My mind is still clear to tell you about Fortuna when I had my stroke I was
confined in MMC for one month. If I am not mistaken you did not visit
me. One day Carlos came to visit me and asked me this question. Do you
think you will be able to continue managing the Hda? I answered him I don't
know it all depends on my sickness. Carlos said who do you want to take
your place? I said I want Cheling Zabaljauregui. Then Carlos said O.K. He
asked Pilar can you contact Cheling? Tell him to call me or see me. The
nephew of Cheling was a resident in MMC through him Pilar was able to
contact Cheling and gave him Carlo's message. So I thought all the time it
was agreeable. I left for USA for treatment. To my surprise when I came
back from USA it was not Cheling, but you (appellee) took over the
management as you requested. Carlos did not tell me but decided in your
favor. . . . (Letter to appellee; Exhibit "3"; emphasis supplied)
shows that: 1) respondent did not visit Julieta when she was confined at the Makati
Medical Center on account of her stroke, 2) there was disagreement as to who should
run the hacienda, with Julieta favoring a certain Cheling Zabaljaurigue, and 3)
respondent took over management of the hacienda with their brother Carlos (Ledesma)
supporting her. No inference as to the existence of antagonistic interests between
respondent and Julieta can thus be made.
The third letter19 which reads:
. . . Carlos went to the house before I left and asked from me twenty
thousand (20,000) shares of San Carlos Milling which you gave because I
wanted to sell all. . . . If he does not sell or cannot sell, just arrange to send
them back to me. Amparing since I came here to America and Vancouver
my requests have been ignored. Everyone is suspecting that Pilar is the one
ordering or commanding me that is not true. What I asked from Julio is just
to report to me or send me reports so I can follow up from here. But up to
now he has ignored my requests x x x . (Letter to appellee Exhibit "4")
has no relevance to the issue of whether or not the lower courts erred in finding that
respondent is not unsuitable for appointment as guardian. The letter in fact discloses,
that it was Julieta's nephew Julio Ledesma, and not respondent, who ignored the
"request."
As for the fourth letter20 which reads:
I want all of you to know that whatever decision now and in the future I want
to do nobody can stop me especially regarding my properties, money, etc. I
will be the only one to dispose of it because it is mine. You said to Raul you
are going to court, you are most welcome x x x . (Letter to Connie, Exhibit
"5")
it has also no relevance to the issue in the case at bar. The letter is not even addressed
to respondent but to a certain Connie (a sister-in-law of Julieta).
Petitioner's assertion that respondent's intent in instituting the guardianship
proceedings is to take control of Julieta's properties and use them for her own benefit 21
is purely speculative and finds no support from the records.
The claim that respondent is hostile to the best interests of Julieta also lacks merit. That
respondent removed Julieta from the Makati Medical Center where she was confined
after she suffered a stroke does not necessarily show her hostility towards Julieta, given
the observation by the trial court, cited in the present petition, that Julieta was still
placed under the care of doctors22 after she checked out and was returned to the
hospital when she suffered another stroke.
Finally, this Court notes two undisputed facts in the case at bar, to wit: 1) Petitioner
opposed the petition for the appointment of respondent as guardian before the trial
court because, among other reasons, she felt she was disliked by respondent, 23 a
ground which does not render respondent unsuitable for appointment as guardian, and
2) Petitioner concealed the deteriorating state of mind of Julieta before the trial court,
24 which is reflective of a lack of good faith.
Discussion of the third argument is unnecessary, the suitability of Amparo for
appointment as guardian not having been successfully contested.
ACCORDINGLY, for lack of merit, the petition is hereby DISMISSED.
SO ORDERED.
G.R. No. 110427. February 24, 1997.*
The Incompetent, CARMEN CAÑIZA, represented by her legal guardian, AMPARO
EVANGELISTA, petitioner, vs. COURT OF APPEALS (SPECIAL FIRST DIVISION),
PEDRO ESTRADA and his wife, LEONORA ESTRADA, respondents.
Actions; Pleadings and Practice; What determines the nature of an action as well as
which court has jurisdiction over it are the allegations of the complaint and the character of
the relief sought.—It is axiomatic that what determines the nature of an action as well as
which court has jurisdiction over it, are the allegations of the complaint and the character
of the relief sought. An inquiry into the averments of the amended complaint in the Court
of origin is thus in order.
Same; Same; Ejectment; Unlawful Detainer; A complaint for unlawful detainer is
sufficient if it alleges that the withholding of possession or the refusal to vacate is unlawful
without necessarily employing the terminology of the law.—Undoubtedly, a cause of action
for desahucio has been adequately set out. It is settled that in an action for unlawful
detainer, to allege that the defendant is unlawfully withholding possession from the
plaintiff is deemed sufficient, and a complaint for unlawful detainer is sufficient if it alleges
that the withholding of possession or the refusal to vacate is unlawful without necessarily
employing the terminology of the law.
Same; Same; Same; Same; An owner’s act of allowing another to occupy her house, rent-
free, does not create a permanent and indefeasible right of possession in the latter’s favor.—
The argument is arrant sophistry. Cañiza’s act of allowing the Estradas to occupy her
house, rent-free, did not create a permanent and indefeasible right of possession in the
latter’s favor. Common sense, and the most rudimentary sense of fairness clearly require
that that act of liberality be implicitly, but no less certainly, accompanied by the necessary
burden on the Estradas of returning the house to Cañiza upon her demand. More than once
has this Court adjudged that a person who occupies the land of another at the latter’s
tolerance or permission without any contract between them is necessarily bound by an
implied promise that he will vacate upon demand, failing which a summary action for
ejectment is the proper remedy against him. The situation is not much different from that
of a tenant whose lease expires but who continues in occupancy by tolerance of the owner,
in which case there is deemed to be an unlawful deprivation or withholding of possession
as of the date of the demand to vacate. In other words, one whose stay is merely tolerated
becomes a deforciant illegally occupying the land or property the moment he is required
to leave.
Same; Same; Same; Same; Where there had been more than one demand to vacate, the
one-year period for filing the complaint for unlawful detainer must be reckoned from the
date of the last demand, the reason being that the lessor has the option to waive his right of
action based on previous demands and let the lessee remain meanwhile in the premises.—It
may not be amiss to point out in this connection that where there had been more than one
demand to vacate, the one-year period for filing the complaint for unlawful detainer must
be reckoned from the date of the last demand, the reason being that the lessor has the
option to waive his right of action based on previous demands and let the lessee remain
meanwhile in the premises. Now, the complaint filed by Cañiza’s guardian alleges that the
same was “filed within one (1) year from the date of the first letter of demand dated
February 3, 1990.” Although this averment is not in accord with law because there is in
fact a second letter of demand to vacate, dated February 27, 1990, the mistake is
inconsequential, since the complaint was actually filed on September 17, 1990, well within
one year from the second (last) written demand to vacate.
Same; Same; Same; Same; Guardianship; A judicial guardian is clothed with authority
to withdraw the ward’s earlier express permission given to third persons to occupy a certain
property.—The Estradas’ possession of the house stemmed from the owner’s express
permission. That permission was subsequently withdrawn by the owner, as was her right;
and it is immaterial that the withdrawal was made through her judicial guardian, the latter
being indisputably clothed with authority to do so. Nor is it of any consequence that
Carmen Cañiza had executed a will bequeathing the disputed property to the Estradas;
that circumstance did not give them the right to stay in the premises after demand to
vacate on the theory that they might in the future become owners thereof, that right of
ownership being at best inchoate, no transfer of ownership being possible unless and until
the will is duly probated.
Same; Same; Same; Same; Where the issue is possession de facto, not de jure, the proper
remedy is ejectment, not accion publiciana.—In any case, the only issue that could
legitimately be raised under the circumstances was that involving the Estradas’ possession
by tolerance, i.e., possession de facto, not de jure. It is therefore incorrect to postulate that
the proper remedy for Cañiza is not ejectment but accion publiciana, a plenary action in
the RTC or an action that is one for recovery of the right to possession de jure.
Wills and Succession; A will is essentially ambulatory—at any time prior to the
testator’s death, it may be changed or revoked, and until admitted to probate, it has no effect
whatever and no right can be claimed thereunder; An owner’s intention to confer title in the
future to persons possessing property by his tolerance is not inconsistent with the former’s
taking back possession in the meantime for any reason deemed sufficient.—A will is
essentially ambulatory; at any time prior to the testator’s death, it may be changed or
revoked; and until admitted to probate, it has no effect whatever and no right can be
claimed thereunder, the law being quite explicit: “No will shall pass either real or personal
property unless it is proved and allowed in accordance with the Rules of Court” (ART. 838,
id.). An owner’s intention to confer title in the future to persons possessing property by
his tolerance, is not inconsistent with the former’s taking back possession in the meantime
for any reason deemed sufficient. And that in this case there was sufficient cause for the
owner’s resumption of possession is apparent: she needed to generate income from the
house on account of the physical infirmities afflicting her, arising from her extreme age.
Guardianship; The ward has no right to possession or control of his property during his
or her incompetency.—Amparo Evangelista was appointed by a competent court the
general guardian of both the person and the estate of her aunt, Carmen Cañiza. Her Letters
of Guardianship dated December 19, 1989 clearly installed her as the “guardian over the
person and properties of the incompetent CARMEN CAÑIZA with full authority to take
possession of the property of said incompetent in any province or provinces in which it may
be situated and to perform all other acts necessary for the management of her properties
**.” By that appointment, it became Evangelista’s duty to care for her aunt’s person, to
attend to her physical and spiritual needs, to assure her well-being, with right to custody
of her person in preference to relatives and friends. It also became her right and duty to
get possession of, and exercise control over, Cañiza’s property, both real and personal, it
being recognized principle that the ward has no right to possession or control of his
property during her incompetency. That right to manage the ward’s estate carries with it
the right to take possession thereof and recover it from anyone who retains it, and bring
and defend such actions as may be needful for this purpose.
Actions; Ejectment; Even when, in forcible entry and unlawful detainer cases, the
defendant raises the question of ownership in his pleadings and the question of possession
cannot be resolved without deciding the issue of ownership, the Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts nevertheless have the undoubted
competence to resolve the issue of ownership only to determine the issue of possession.—It
may be pointed out in relation to the Estrada’s defenses in the ejectment action, that as the
law now stands, even when, in forcible entry and unlawful detainer cases, the defendant
raises the question of ownership in his pleadings and the question of possession cannot
be resolved without deciding the issue of ownership, the Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts nevertheless have the
undoubted competence to resolve “the issue of ownership ** only to determine the issue
of possession.”
Same; Same; Parties; An ejectment case survives the death of a party.—To be sure, an
ejectment case survives the death of a party. Cañiza’s demise did not extinguish the
desahucio suit instituted by her through her guardian. That action, not being a purely
personal one, survived her death; her heirs have taken her place and now represent her
interests in the appeal at bar.
On November 20, 1989, being then ninety-four (94) years of age, Carmen Cañiza, a spinster, a
retired pharmacist, and former professor of the College of Chemistry and Pharmacy of the
University of the Philippines, was declared incompetent by judgment 1 of the Regional Trial
Court of Quezon City, Branch 107,2 in a guardianship proceeding instituted by her niece,
Amparo A. Evangelista.3 She was so adjudged because of her advanced age and physical
infirmities which included cataracts in both eyes and senile dementia. Amparo A. Evangelista
was appointed legal guardian of her person and estate.
Cañiza was the owner of a house and lot at No. 61 Tobias St., Quezon City. On September 17,
1990, her guardian Amparo Evangelista commenced a suit in the Metropolitan Trial Court
(MetroTC) of Quezon City (Branch 35) to eject the spouses Pedro and Leonora Estrada from
said premises.4 The complaint was later amended to identify the incompetent Cañiza as plaintiff,
suing through her legal guardian, Amparo Evangelista.
The amended Complaint5 pertinently alleged that plaintiff Cañiza was the absolute owner of the
property in question, covered by TCT No. 27147; that out of kindness, she had allowed the
Estrada Spouses, their children, grandchildren and sons-in-law to temporarily reside in her
house, rent-free; that Cañiza already had urgent need of the house on account of her advanced
age and failing health, "so funds could be raised to meet her expenses for support, maintenance
and medical treatment;" that through her guardian, Cañiza had asked the Estradas verbally and
in writing to vacate the house but they had refused to do so; and that "by the defendants' act of
unlawfully depriving plaintiff of the possession of the house in question, they . . (were) enriching
themselves at the expense of the incompetent, because, while they . . (were) saving money by
not paying any rent for the house, the incompetent . . (was) losing much money as her house
could not be rented by others." Also alleged was that the complaint was "filed within one (1)
year from the date of of first letter of demand dated February 3, 1990."
In their Answer with Counterclaim, the defendants declared that they had been living in Cañiza's
house since the 1960's; that in consideration of their faithful service they had been considered
by Cañiza as her own family, and the latter had in fact executed a holographic will on September
4, 1988 by which she "bequeathed" to the Estradas the house and lot in question.
Judgment was rendered by the MetroTC on April 13, 1992 in Cañiza's favor,6 the Estradas being
ordered to vacate the premises and pay Cañiza P5,000.00 by way of attorney's fees.
But on appeal,8 the decision was reversed by the Quezon City Regional Trial Court, Branch 96.9
By judgment rendered on October 21, 1992, 10 the RTC held that the "action by which the issue
of defendants' possession should be resolved is accion publiciana, the obtaining factual and
legal situation . . demanding adjudication by such plenary action for recovery of possession
cognizable in the first instance by the Regional Trial Court."
Cañiza sought to have the Court of Appeals reverse the decision of October 21, 1992, but failed
in that attempt. In a decision 11 promulgated on June 2, 1993, the Appellate Court 12 affirmed
the RTC's judgment in toto. It ruled that (a) the proper remedy for Cañiza was indeed an accion
publiciana in the RTC, not an accion interdictal in the MetroTC, since the "defendants have not
been in the subject premises as mere tenants or occupants by tolerance, they have been there as
a sort of adopted family of Carmen Cañiza," as evidenced by what purports to be the holographic
will of the plaintiff; and (b) while "said will, unless and until it has passed probate by the proper
court, could not be the basis of defendants' claim to the property, . . it is indicative of intent and
desire on the part of Carmen Cañiza that defendants are to remain and are to continue in their
occupancy and possession, so much so that Cañiza's supervening incompetency can not be said
to have vested in her guardian the right or authority to drive the defendants out." 13
Through her guardian, Cañiza came to this Court praying for reversal of the Appellate Court's
judgment. She contends in the main that the latter erred in (a) holding that she should have
pursued an accion publiciana, and not an accion interdictal; and in (b) giving much weight to
"a xerox copy of an alleged holographic will, which is irrelevant to this case." 14
In the responsive pleading filed by them on this Court's requirement, 15 the Estradas insist that
the case against them was really not one of unlawful detainer; they argue that since possession
of the house had not been obtained by them by any "contract, express or implied," as
contemplated by Section 1, Rule 70 of the Rules of Court, their occupancy of the premises could
not be deemed one "terminable upon mere demand (and hence never became unlawful) within
the context of the law." Neither could the suit against them be deemed one of forcible entry,
they add, because they had been occupying the property with the prior consent of the "real
owner," Carmen Cañiza, which "occupancy can even ripen into full ownership once the
holographic will of petitioner Carmen Cañiza is admitted to probate." They conclude, on those
postulates, that it is beyond the power of Cañiza's legal guardian to oust them from the disputed
premises.
Carmen Cañiza died on March 19, 1994, 16 and her heirs — the aforementioned guardian,
Amparo Evangelista, and Ramon C. Nevado, her niece and nephew, respectively — were by
this Court's leave, substituted for her. 17
Three issues have to be resolved: (a) whether or not an ejectment action is the appropriate
judicial remedy for recovery of possession of the property in dispute; (b) assuming desahucio
to be proper, whether or not Evangelista, as Cañiza's legal guardian had authority to bring said
action; and (c) assuming an affirmative answer to both questions, whether or not Evangelista
may continue to represent Cañiza after the latter's death.
I
It is axiomatic that what determines the nature of an action as well as which court has jurisdiction
over it, are the allegations of the complaint and the character of the relief sought. 18 An inquiry
into the averments of the amended complaint in the Court of origin is thus in order. 19
The amended Complaint alleges: 20
6. That the plaintiff Carmen Cañiza, is the sole and absolute owner of a
house and lot at No. 61 Scout Tobias, Quezon City, which property is now
the subject of this complaint;
xxx xxx xxx
9. That the defendants, their children, grandchildren and sons-in-law, were
allowed to live temporarily in the house of plaintiff Carmen Cañiza, for free,
out of her kindness;
10. That the plaintiff, through her legal guardian, has duly notified the
defendants, for them to vacate the said house, but the two (2) letters of
demand were ignored and the defendants refused to vacate the same. . .
11. That the plaintiff, represented by her legal guardian, Amparo
Evangelista, made another demand on the defendants for them to vacate the
premises, before Barangay Captain Angelina A. Diaz of Barangay Laging
Handa, Quezon City, but after two (2) conferences, the result was negative
and no settlement was reached. A photocopy of the Certification to File
Action dated July 4, 1990, issued by said Barangay Captain is attached,
marked Annex "D" and made an integral part hereof;
12. That the plaintiff has given the defendants more than thirty (30) days to
vacate the house, but they still refused to vacate the premises, and they are
up to this time residing in the said place;
13. That this complaint is filed within one (1) year from the date of first
letter of demand dated February 3, 1990 (Annex "B") sent by the plaintiff
to the defendants, by her legal guardian — Amparo Evangelista;
14. By the defendants' act of unlawfully depriving the plaintiff of the
possession of the house in question, they are enriching themselves at the
expense of the incompetent plaintiff because, while they are saving money
by not paying any rent for the house, the plaintiff is losing much money as
her house could not be rented by others;
15. That the plaintiff's health is failing and she needs the house urgently, so
that funds could be raised to meet her expenses for her support, maintenance
and medical treatment;
16. That because of defendants' refusal to vacate the house at No. 61 Scout
Tobias, Quezon City, the plaintiff, through her legal guardian, was
compelled to go to court for justice, and she has to spend P10,000.00 as
attorney's fees.
Its prayer 21 is quoted below:
WHEREFORE, in the interest of justice and the rule of law, plaintiff,
Carmen Cañiza, represented by her legal guardian, Amparo Evangelista,
respectfully prays to this Honorable Court, to render judgment in favor of
plaintiff and against the defendants as follows:
1. To order the defendants, their children, grandchildren, sons-in-law and
other persons claiming under them, to vacate the house and premises at No.
6 1 Scout Tobias, Quezon City, so that its possession can be restored to the
plaintiff Carmen Cañiza; and
2. To pay attorney's fees in the amount of P10,000.00;
3. To pay the costs of the suit.
In essence, the amended complaint states:
1) that the Estradas were occupying Cañiza's house by tolerance — having
been "allowed to live temporarily . . (therein) for free, out of . . (Cañiza's)
kindness;"
 2) that Cañiza needed the house "urgently" because her "health . . (was)
failing and she . . (needed) funds . . to meet her expenses for her support,
maintenance and medical treatment;"
3) that through her general guardian, Cañiza requested the Estradas several
times, orally and in writing, to give back possession of the house;
4) that the Estradas refused and continue to refuse to give back the house to
Cañiza, to her continuing prejudice; and
5) that the action was filed within one (1) year from the last demand to
vacate.
Undoubtedly, a cause of action for desahucio has been adequately set out. It is settled that in an
action for unlawful detainer, it suffices to allege that the defendant is unlawfully withholding
possession from the plaintiff is deemed sufficient, 22 and a complaint for unlawful detainer is
sufficient if it alleges that the withholding of possession or the refusal to vacate is unlawful
without necessarily employing the terminology of the law. 23
The Estradas' first proffered defense derives from a literal construction of Section 1, Rule 70 of
the Rules of Court which inter alia authorizes the institution of an unlawful detainer suit when
"the possession of any land or building is unlawfully withheld after the expiration or termination
of the right to hold possession, by virtue of any contract, express or implied." They contend that
since they did not acquire possession of the property in question "by virtue of any contract,
express or implied" — they having been, to repeat, "allowed to live temporarily . . (therein) for
free, out of . . (Cañiza's) kindness" — in no sense could there be an "expiration or termination
of . . (their) right to hold possession, by virtue of any contract, express or implied." Nor would
an action for forcible entry lie against them, since there is no claim that they had "deprived
(Cañiza) of the possession of . . (her property) by force, intimidation, threat, strategy, or stealth.
The argument is arrant sophistry. Cañiza's act of allowing the Estradas to occupy her house,
rent-free, did not create a permanent and indefeasible right of possession in the latter's favor.
Common sense, and the most rudimentary sense of fairness clearly require that that act of
liberality be implicitly, but no less certainly, accompanied by the necessary burden on the
Estradas of returning the house to Cañiza upon her demand. More than once has this Court
adjudged that a person who occupies the land of another at the latter's tolerance or permission
without any contract between them is necessarily bound by an implied promise that he will
vacate upon demand, failing which a summary action for ejectment is the proper remedy against
him. 24 The situation is not much different from that of a tenant whose lease expires but who
continues in occupancy by tolerance of the owner, in which case there is deemed to be an
unlawful deprivation or withholding of possession as of the date of the demand to vacate. 25 In
other words, one whose stay is merely tolerated becomes a deforciant illegally occupying the
land or property the moment he is required to leave. 26 Thus, in Asset Privatization Trust vs.
Court of Appeals, 27 where a company, having lawfully obtained possession of a plant upon its
undertaking to buy the same, refused to return it after failing to fulfill its promise of payment
despite demands, this Court held that "(a)fter demand and its repudiation, . . (its) continuing
possession . . became illegal and the complaint for unlawful detainer filed by the
. . (plant's owner) was its proper remedy.
It may not be amiss to point out in this connection that where there had been more than one
demand to vacate, the one-year period for filing the complaint for unlawful detainer must be
reckoned from the date of the last demand, 28 the reason being that the lessor has the option to
waive his right of action based on previous demands and let the lessee remain meanwhile in the
premises. 29 Now, the complaint filed by Cañiza's guardian alleges that the same was "filed
within one (1) year from the date of the first letter of demand dated February 3, 1990." Although
this averment is not in accord with law because there is in fact a second letter of demand to
vacate, dated February 27, 1990, the mistake is inconsequential, since the complaint was
actually filed on September 17, 1990, well within one year from the second (last) written
demand to vacate.
The Estradas' possession of the house stemmed from the owner's express permission. That
permission was subsequently withdrawn by the owner, as was her right; and it is immaterial that
the withdrawal was made through her judicial guardian, the latter being indisputably clothed
with authority to do so. Nor is it of any consequence that Carmen Cañiza had executed a will
bequeathing the disputed property to the Estradas; that circumstance did not give them the right
to stay in the premises after demand to vacate on the theory that they might in future become
owners thereof, that right of ownership being at best inchoate, no transfer of ownership being
possible unless and until the will is duly probated.
Thus, at the time of the institution of the action of desahucio, the Estradas had no legal right to
the property, whether as possessors by tolerance or sufferance, or as owners. They could not
claim the right of possession by sufferance; that had been legally ended. They could not assert
any right of possession flowing from their ownership of the house; their status as owners is
dependent on the probate of the holographic will by which the property had allegedly been
bequeathed to them — an event which still has to take place; in other words, prior to the probate
of the will, any assertion of possession by them would be premature and inefficacious.
In any case, the only issue that could legitimately be raised under the circumstances was that
involving the Estradas' possession by tolerance, i.e., possession de facto, not de jure. It is
therefore incorrect to postulate that the proper remedy for Cañiza is not ejectment but accion
publiciana, a plenary action in the RTC or an action that is one for recovery of the right to
possession de jure.
II
The Estradas insist that the devise of the house to them by Cañiza clearly denotes her intention
that they remain in possession thereof, and legally incapacitated her judicial guardian, Amparo
Evangelista, from evicting them therefrom, since their ouster would be inconsistent with the
ward's will.
A will is essentially ambulatory; at any time prior to the testator's death, it may be changed or
revoked; 30 and until admitted to probate, it has no effect whatever and no right can be claimed
thereunder, the law being quite explicit: "No will shall pass either real or personal property
unless it is proved and allowed in accordance with the Rules of Court" (ART. 838, id.). 31 An
owner's intention to confer title in the future to persons possessing property by his tolerance, is
not inconsistent with the former's taking back possession in the meantime for any reason deemed
sufficient. And that in this case there was sufficient cause for the owner's resumption of
possession is apparent: she needed to generate income from the house on account of the physical
infirmities afflicting her, arising from her extreme age.
Amparo Evangelista was appointed by a competent court the general guardian of both the person
and the estate of her aunt, Carmen Cañiza. Her Letters of Guardianship 32 dated December 19,
1989 clearly installed her as the "guardian over the person and properties of the incompetent
CARMEN CANIZA with full authority to take possession of the property of said incompetent
in any province or provinces in which it may be situated and to perform all other acts necessary
for the management of her properties . . " 33 By that appointment, it became Evangelista's duty
to care for her aunt's person, to attend to her physical and spiritual needs, to assure her well-
being, with right to custody of her person in preference to relatives and friends. 34 It also became
her right and duty to get possession of, and exercise control over, Cañiza's property, both real
and personal, it being recognized principle that the ward has no right to possession or control of
his property during her incompetency. 35 That right to manage the ward's estate carries with it
the right to take possession thereof and recover it from anyone who retains it, 36 and bring and
defend such actions as may be needful for this purpose. 37
Actually, in bringing the action of desahucio, Evangelista was merely discharging the duty to
attend to "the comfortable and suitable maintenance of the ward" explicitly imposed on her by
Section 4, Rule 96 of the Rules of Court, viz.:
Sec. 4. Estate to be managed frugally, and proceeds applied to maintenance
of ward. — A guardian must manage the estate of his ward frugally and
without waste, and apply the income and profits thereof, so far as maybe
necessary, to the comfortable and suitable maintenance of the ward and his
family, if there be any; and if such income and profits be insufficient for
that purpose, the guardian may sell or encumber the real estate, upon being
authorized by order to do so, and apply to such of the proceeds as may be
necessary to such maintenance.
Finally, it may be pointed out in relation to the Estradas's defenses in the ejectment action, that
as the law now stands, even when, in forcible entry and unlawful detainer cases, the defendant
raises the question of ownership in his pleadings and the question of possession cannot be
resolved without deciding the issue of ownership, the Metropolitan Trial Courts, Municipal Trial
Courts, and Municipal Circuit Trial Courts nevertheless have the undoubted competence to
resolve "the issue of ownership . . only to determine the issue of possession." 38
III
As already stated, Carmen Cañiza passed away during the pendency of this appeal. The Estradas
thereupon moved to dismiss the petition, arguing that Cañiza's death automatically terminated
the guardianship, Amaparo Evangelista lost all authority as her judicial guardian, and ceased to
have legal personality to represent her in the present appeal. The motion is without merit.
While it is indeed well-established rule that the relationship of guardian and ward is necessarily
terminated by the death of either the guardian or the ward, 39 the rule affords no advantage to
the Estradas. Amparo Evangelista, as niece of Carmen Cañiza, is one of the latter's only two (2)
surviving heirs, the other being Cañiza's nephew, Ramon C. Nevado. On their motion and by
Resolution of this Court 40 of June 20, 1994, they were in fact substituted as parties in the appeal
at bar in place of the deceased, in accordance with Section 17, Rule 3 of the Rules of Court, viz.:
41
Sec. 18. Death of a party. — After a party dies and the claim is not thereby
extinguished, the court shall order, upon proper notice, the legal
representative of the deceased to appear and be substituted for the deceased
within a period of thirty (30) days, or within such time as may be granted.
If the legal representative fails to appear within said time, the court may
order the opposing party to procure the appointment of a legal representative
of the deceased within a time to be specified by the court, and the
representative shall immediately appear for and on behalf of the interest of
the deceased. The court charges involved in procuring such appointment, if
defrayed by the opposing party, may be recovered as costs. The heirs of the
deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator and the court
may appoint guardian ad litem for the minor heirs.
To be sure, an ejectment case survives the death of a party. Cañiza's demise did not extinguish
the desahucio suit instituted by her through her guardian. 42 That action, not being a purely
personal one, survived her death; her heirs have taken her place and now represent her interests
in the appeal at bar.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals promulgated
on June 2, 1993 — affirming the Regional Trial Court's judgment and dismissing petitioner's
petition for certiorari — is REVERSED and SET ASIDE, and the Decision dated April 13,
1992 of the Metropolitan Trial Court of Quezon City, Branch 35, in Civil Case No. 3410 is
REINSTATED and AFFIRMED. Costs against private respondents.
SO ORDERED.
G.R. No. 194366. October 10, 2012.*
NAPOLEON D. NERI, ALICIA D. NERI-MONDEJAR, VISMINDA D. NERI-CHAMBERS,
ROSA D. NERI-MILLAN, DOUGLAS D. NERI, EUTROPIA D. ILLUT-COCKINOS and
VICTORIA D. ILLUT-PIALA, petitioners, vs. HEIRS OF HADJI YUSOP UY and
JULPHA** IBRAHIM UY, respondents.
Civil Law; Succession; Legitimate Children; Legitimate children from the first and
second marriages are entitled to inherit pursuant to Articles 979 and 980 of the Civil Code.―It
bears to stress that all the petitioners herein are indisputably legitimate children of
Anunciacion from her first and second marriages with Gonzalo and Enrique, respectively,
and consequently, are entitled to inherit from her in equal shares, pursuant to Articles 979
and 980 of the Civil Code which read: ART. 979. Legitimate children and their descendants
succeed the parents and other ascendants, without distinction as to sex or age, and even if
they should come from different marriages. xxx ART. 980. The children of the deceased
shall always inherit from him in their own right, dividing the inheritance in equal shares.
Same; Extrajudicial Settlement of Estates; No extrajudicial settlement shall be binding
upon any person who has not participated therein or had no notice thereof.―In the execution
of the Extra-Judicial Settlement of the Estate with Absolute Deed of Sale in favor of spouses
Uy, all the heirs of Anunciacion should have participated. Considering that Eutropia and
Victoria were admittedly excluded and that then minors Rosa and Douglas were not
properly represented therein, the settlement was not valid and binding upon them and
consequently, a total nullity. Section 1, Rule 74 of the Rules of Court provides: SECTION 1.
Extrajudicial settlement by agreement between heirs.―x x x The fact of the extrajudicial
settlement or administration shall be published in a newspaper of general circulation in
the manner provided in the next succeeding section; but no extrajudicial settlement shall
be binding upon any person who has not participated therein or had no notice thereof.
Same; Guardianship; A father or mother, as the natural guardian of the minor under
parental authority, does not have the power to dispose or encumber the property of the latter.
Such power is granted by law only to a judicial guardian of the ward’s property and even
then only with courts’ prior approval secured in accordance with the proceedings set forth
by the Rules of Court.―Administration includes all acts for the preservation of the property
and the receipt of fruits according to the natural purpose of the thing. Any act of
disposition or alienation, or any reduction in the substance of the patrimony of child,
exceeds the limits of administration. Thus, a father or mother, as the natural guardian of
the minor under parental authority, does not have the power to dispose or encumber the
property of the latter. Such power is granted by law only to a judicial guardian of the
ward’s property and even then only with courts’ prior approval secured in accordance
with the proceedings set forth by the Rules of Court.
Same; Ratification; Words and Phrases; Ratification means that one under no disability
voluntarily adopts and gives sanction to some unauthorized act or defective proceeding,
which without his sanction would not be binding on him.―Ratification means that one under
no disability voluntarily adopts and gives sanction to some unauthorized act or defective
proceeding, which without his sanction would not be binding on him. It is this voluntary
choice, knowingly made, which amounts to a ratification of what was theretofore
unauthorized, and becomes the authorized act of the party so making the ratification. Once
ratified, expressly or impliedly such as when the person knowingly received benefits from
it, the contract is cleansed from all its defects from the moment it was constituted, as it has
a retroactive effect.
Same; Sales; A person can only sell what he owns, or is authorized to sell and the buyer
can as a consequence acquire no more than what the seller can legally transfer.―“A person
can only sell what he owns, or is authorized to sell and the buyer can as a consequence
acquire no more than what the seller can legally transfer.” On this score, Article 493 of the
Civil Code is relevant, which provides: Each co-owner shall have the full ownership of his
part and of 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.
Same; Prescription; An action or defense for the declaration of the inexistence of a
contract does not prescribe in accordance with Article 1410 of the Civil Code.―On the issue
of prescription, the Court agrees with petitioners that the present action has not
prescribed in so far as it seeks to annul the extrajudicial settlement of the estate. Contrary
to the ruling of the CA, the prescriptive period of 2 years provided in Section 1 Rule 74 of
the Rules of Court reckoned from the execution of the extrajudicial settlement finds no
application to petitioners Eutropia, Victoria and Douglas, who were deprived of their
lawful participation in the subject estate. Besides, an “action or defense for the declaration
of the inexistence of a contract does not prescribe” in accordance with Article 1410 of the
Civil Code.
Same; Same; The action to recover property held in trust prescribes after 10 years from
the time the cause of action accrues, which is from the time of actual notice in case of
unregistered deed.―The action to recover property held in trust prescribes after 10 years
from the time the cause of action accrues, which is from the time of actual notice in case of
unregistered deed. In this case, Eutropia, Victoria and Douglas claimed to have knowledge
of the extrajudicial settlement with sale after the death of their father, Enrique, in 1994
which spouses Uy failed to refute. Hence, the complaint filed in 1997 was well within the
prescriptive period of 10 years.
In this Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, petitioners
Napoleon D. Neri (Napoleon), Alicia D. Neri-Mondejar (Alicia), Visminda D. Neri-
Chambers (Visminda), Rosa D. Neri-Millan (Rosa), Douglas D. Neri (Douglas), Eutropia
D. Illut-Cockinos (Eutropia), and Victoria D. Illut-Piala (Victoria) seek to reverse and set
aside the April 27, 2010 Decision2 and October 18, 2010 Resolution3 of the Court of
Appeals (CA) in CA-G.R. CV No. 01031-MIN which annulled the October 25, 2004
Decision4 of the Regional Trial Court (RTC) of Panabo City, Davao del Norte and
instead, entered a new one dismissing petitioners’ complaint for annulment of sale,
damages and attorney’s feesagainst herein respondents heirs of spouses Hadji Yusop
Uy and Julpha Ibrahim Uy (heirs of Uy).
The Facts
During her lifetime, Anunciacion Neri (Anunciacion) had seven children, two (2) from
her first marriage with Gonzalo Illut (Gonzalo), namely: Eutropia and Victoria, and five
(5) from her second marriage with Enrique Neri (Enrique), namely: Napoleon, Alicia,
Visminda, Douglas and Rosa. Throughout the marriage of spouses Enrique and
Anunciacion, they acquired several homestead properties with a total area of 296,555
square meters located in Samal, Davao del Norte, embraced by Original Certificate of
Title (OCT) Nos. (P-7998) P-21285 , (P-14608) P-51536 and P-20551 (P-8348)7 issued
on February 15, 1957, August 27, 1962 and July 7, 1967, respectively.
On September 21, 1977, Anunciacion died intestate. Her husband, Enrique, in his
personal capacity and as natural guardian of his minor children Rosa and Douglas,
together with Napoleon, Alicia, and Vismindaexecuted an Extra-Judicial Settlement of
the Estate with Absolute Deed of Sale8 on July 7, 1979, adjudicating among themselves
the said homestead properties, and thereafter, conveying themto the late spouses Hadji
Yusop Uy and Julpha Ibrahim Uy (spouses Uy)for a consideration of ₱ 80,000.00.
On June 11, 1996, the children of Enrique filed a complaint for annulment of saleof the
said homestead properties against spouses Uy (later substituted by their heirs)before
the RTC, docketed as Civil Case No.96-28, assailing the validity of the sale for having
been sold within the prohibited period. Thecomplaint was later amended to include
Eutropia and Victoriaas additional plaintiffs for having been excluded and deprived of
their legitimes as childrenof Anunciacion from her first marriage.
In their amended answer with counterclaim, the heirs of Uy countered that the sale took
place beyond the 5-year prohibitory period from the issuance of the homestead patents.
They also denied knowledge of Eutropia and Victoria’s exclusionfrom the extrajudicial
settlement and sale of the subject properties, and interposed further the defenses of
prescription and laches.
The RTC Ruling
On October 25, 2004, the RTC rendered a decision ordering, among others, the
annulment of the Extra-Judicial Settlement of the Estate with Absolute Deed of Sale. It
ruled that while the sale occurred beyond the 5-year prohibitory period, the sale is still
void because Eutropia and Victoria were deprived of their hereditary rights and that
Enrique had no judicial authority to sell the shares of his minor children, Rosa and
Douglas.
Consequently, it rejected the defenses of laches and prescription raised by spouses
Uy, who claimed possession of the subject properties for 17 years, holding that co-
ownership rights are imprescriptible.
The CA Ruling
On appeal, the CAreversed and set aside the ruling of the RTC in its April 27, 2010
Decision and dismissed the complaint of the petitioners. It held that, while Eutropia and
Victoria had no knowledge of the extrajudicial settlement and sale of the subject
properties and as such, were not bound by it, the CA found it unconscionable to permit
the annulment of the sale considering spouses Uy’s possession thereof for 17 years,
and thatEutropia and Victoriabelatedlyfiled their actionin 1997, ormore than two years
fromknowledge of their exclusion as heirs in 1994 when their stepfather died. It,
however, did not preclude the excluded heirs from recovering their legitimes from their
co-heirs.
Similarly, the CA declared the extrajudicial settlement and the subsequent saleas valid
and binding with respect to Enrique and hischildren, holding that as co-owners, they
have the right to dispose of their respective shares as they consider necessary or
fit.While recognizing Rosa and Douglas to be minors at that time, they were deemed to
have ratified the sale whenthey failed to question it upon reaching the age of
majority.Italso found laches to have set in because of their inaction for a long period of
time.
The Issues
In this petition, petitioners imputeto the CA the following errors:
I. WHEN IT UPHELDTHE VALIDITY OF THE "EXTRA JUDICIAL SETTLEMENT OF
THE ESTATE WITH ABSOLUTE DEED OF SALE" AS FAR AS THE SHARES OF
EUTROPIA AND VICTORIA WERE CONCERNED, THEREBY DEPRIVING THEM
OF THEIR INHERITANCE;
II. WHEN IT DID NOT NULLIFY OR ANNUL THE "EXTRA JUDICIAL SETTLEMENT
OF THE ESTATE WITH ABSOLUTE DEED OF SALE" WITH RESPECT TO THE
SHARESOF ROSA AND DOUGLAS, THEREBY DEPRIVING THEM OF THEIR
INHERITANCE; and
III. WHEN IT FOUND THAT LACHES OR PRESCRIPTION HAS SET IN.
The Ruling of the Court
The petitionis meritorious.
It bears to stress that all the petitioners herein are indisputably legitimate children of
Anunciacion from her first and second marriages with Gonzalo and Enrique,
respectively, and consequently, are entitled to inherit from her in equal shares, pursuant
to Articles 979 and 980 of the Civil Code which read:
ART. 979. Legitimate children and their descendants succeed the parents and other
ascendants, without distinction as to sex or age, and even if they should come from
different marriages.
xxx
ART. 980. The children of the deceased shall always inherit from him in their own
right, dividing the inheritance in equal shares.
As such, upon the death of Anunciacion on September 21, 1977, her children and
Enrique acquired their respective inheritances,9 entitling them to their pro indiviso
shares in her whole estate, as follows:
Enrique 9/16 (1/2 of the conjugal assets + 1/16)
Eutropia 1/16
Victoria 1/16
Napoleon 1/16
Alicia 1/16
Visminda 1/16
Rosa 1/16
Douglas 1/16
Hence, in the execution of the Extra-Judicial Settlement of the Estate with Absolute
Deed of Sale in favor of spouses Uy, all the heirs of Anunciacionshould have
participated. Considering that Eutropia and Victoria were admittedly excluded and that
then minors Rosa and Douglas were not properly represented therein, the settlement
was not valid and binding uponthem and consequently, a total nullity.
Section 1, Rule 74 of the Rules of Court provides:
SECTION 1. Extrajudicial settlement by agreement between heirs. – x x x
The fact of the extrajudicial settlement or administration shall be published in a
newspaper of general circulation in the manner provided in the next succeeding
section; but no extrajudicial settlement shall be binding upon any person who has not
participated therein or had no notice thereof. (Underscoring added)
The effect of excluding the heirs in the settlement of estate was further elucidated in
Segura v. Segura,10 thus:
It is clear that Section 1 of Rule 74 does not apply to the partition in question which
was null and void as far as the plaintiffs were concerned. The rule covers only valid
partitions. 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 extrajudicial 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 from its execution…
However, while the settlement of the estate is null and void, the subsequent sale of the
subject propertiesmade by Enrique and his children, Napoleon, Alicia and Visminda, in
favor of the respondents isvalid but only with respect to their proportionate shares
therein.It cannot be denied that these heirs have acquired their respective shares in the
properties of Anunciacion from the moment of her death 11 and that, as owners thereof,
they can very well sell their undivided share in the estate. 12
With respect to Rosa and Douglas who were minors at the time of the execution of the
settlement and sale, their natural guardian and father, Enrique, represented them in the
transaction. However, on the basis of the laws prevailing at that time, Enrique was
merely clothed with powers of administration and bereft of any authority to dispose of
their 2/16 shares in the estate of their mother, Anunciacion.
Articles 320 and 326 of the Civil Code, the laws in force at the time of the execution of
the settlement and sale, provide:
ART. 320. The father, or in his absence the mother, is the legal administrator of the
property pertaining to the child under parental authority. If the property is worth more
than two thousand pesos, the father or mother shall give a bond subject to the
approval of the Court of First Instance.
ART. 326. When the property of the child is worth more than two thousand pesos, the
father or mother shall be considered a guardian of the child’s property, subject to the
duties and obligations of guardians under the Rules of Court.
Corollarily, Section 7, Rule 93 of the Rules of Court also provides:
SEC. 7. Parents as Guardians. – When the property of the child under parental
authority is worth two thousand pesos or less, the father or the mother, without the
necessity of court appointment, shall be his legal guardian. When the property of the
child is worth more than two thousand pesos, the father or the mother shall be
considered guardian of the child’s property, with the duties and obligations of
guardians under these Rules, and shall file the petition required by Section 2 hereof.
For good reasons, the court may, however, appoint another suitable persons.
Administration includes all acts for the preservation of the property and the receipt of
fruits according to the natural purpose of the thing. Any act of disposition or alienation,
or any reduction in the substance of the patrimony of child, exceeds the limits of
administration.13 Thus, a father or mother, as the natural guardian of the minor under
parental authority, does not have the power to dispose or encumber the property of the
latter. Such power is granted by law only to a judicial guardian of the ward’s property
and even then only with courts’ prior approval secured in accordance with the
proceedings set forth by the Rules of Court.14
Consequently, the disputed sale entered into by Enrique in behalf of his minor children
without the proper judicial authority, unless ratified by them upon reaching the age of
majority,15 is unenforceable in accordance with Articles 1317 and 1403(1) of the Civil
Code which provide:
ART. 1317. No one may contract in the name of another without being authorized by
the latter or unless he has by law a right to represent him.
A contract entered into in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers, shall be unenforceable, unless it
is ratified, expressly or impliedly, by the person on whose behalf it has been
executed, before it is revoked by the other contracting party.
ART. 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into the name of another person by one who has been given no
authority or legal representation, or who has acted beyond his powers;
xxx
Ratification means that one under no disability voluntarily adopts and gives sanction to
some unauthorized act or defective proceeding, which without his sanction would not
be binding on him. It is this voluntary choice, knowingly made, which amounts to a
ratification of what was theretofore unauthorized, and becomes the authorized act of
the party so making the ratification.16 Once ratified, expressly or impliedly such as when
the person knowingly received benefits from it, the contract is cleansed from all its
defects from the moment it was constituted,17 as it has a retroactive effect.
Records, however, show that Rosa had ratified the extrajudicial settlement of the estate
with absolute deed of sale. In Napoleon and Rosa’s Manifestation 18 before the RTC
dated July 11, 1997,they stated:
"Concerning the sale of our parcel of land executed by our father, Enrique Neri
concurred in and conformed to by us and our other two sisters and brother (the other
plaintiffs), in favor of Hadji Yusop Uy and his spouse Hadja Julpa Uy on July 7, 1979,
we both confirmed that the same was voluntary and freely made by all of us and
therefore the sale was absolutely valid and enforceable as far as we all plaintiffs in
this case are concerned;" (Underscoring supplied)
In their June 30, 1997 Joint-Affidavit,19 Napoleon and Rosa also alleged:
"That we are surprised that our names are included in this case since we do not have
any intention to file a case against Hadji Yusop Uy and Julpha Ibrahim Uy and their
family and we respect and acknowledge the validity of the Extra-Judicial Settlement of
the Estate with Absolute Deed of Sale dated July 7, 1979;" (Underscoring supplied)
Clearly, the foregoing statements constitutedratification of the settlement of the estate
and the subsequent sale, thus, purging all the defects existing at the time of its
execution and legitimizing the conveyance of Rosa’s 1/16 share in the estate of
Anunciacion to spouses Uy. The same, however, is not true with respect to Douglas for
lack of evidence showing ratification.
Considering, thus, that the extrajudicial settlement with sale is invalid and therefore, not
binding on Eutropia, Victoria and Douglas, only the shares ofEnrique, Napoleon, Alicia,
Visminda and Rosa in the homestead properties have effectivelybeen disposed in favor
of spouses Uy. "A person can only sell what he owns, or is authorized to sell and the
buyer can as a consequence acquire no more than what the sellercan legally
transfer."20 On this score, Article 493 of the Civil Codeis relevant, which provides:
Each co-owner shall have the full ownership of his part and of 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.
Consequently, spouses Uy or their substituted heirs became pro indiviso co-owners of
the homestead properties with Eutropia, Victoria and Douglas, who retained title to their
respective 1/16 shares. They were deemed to be holding the 3/16 shares of Eutropia,
Victoria and Douglas under an implied constructive trust for the latter’s benefit,
conformably with Article 1456 of the Civil Code which states:"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." As
such, it is only fair, just and equitable that the amount paid for their shares equivalent
to ₱ 5,000.0021 each or a total of ₱ 15,000.00 be returned to spouses Uy with legal
interest.
On the issue of prescription, the Court agrees with petitioners that the present action
has not prescribed in so far as it seeks to annul the extrajudicial settlement of the estate.
Contrary to the ruling of the CA, the prescriptive period of 2 years provided in Section
1 Rule 74 of the Rules of
Court reckoned from the execution of the extrajudicial settlement finds no application
to petitioners Eutropia, Victoria and Douglas, who were deprived of their lawful
participation in the subject estate. Besides, an "action or defense for the declaration of
the inexistence of a contract does not prescribe" in accordance with Article 1410 of the
Civil Code.
However, the action to recover property held in trust prescribes after 10 years from the
time the cause of action accrues,22 which is from the time of actual notice in case of
unregistered deed.23 In this case, Eutropia, Victoria and Douglas claimed to have
knowledge of the extrajudicial settlement with sale after the death of their father,
Enrique, in 1994 which spouses Uy failed to refute. Hence, the complaint filed in 1997
was well within the prescriptive period of 10 years.
WHEREFORE, the instant petition is GRANTED. The April 27, 2010 Decision and
October 18, 2010 Resolution of the Court of Appeals are REVERSED and SET ASIDE
and a new judgment is entered:
1. Declaring the Extra-Judicial Settlement of the Estate of Anunciacion Neri
NULL and VOID;
2. Declaring the Absolute Deed of Sale in favor of the late spouses Hadji
Yusop Uy and Julpha Ibrahim Uy as regards the 13/16 total shares of the
late Enrique Neri, Napoleon Neri, Alicia D. Neri-Mondejar, Visminda D. Neri-
Chambers and Rosa D. Neri-Millan VALID;
3. Declaring Eutropia D. Illut-Cockinos, Victoria D. Illut-Piala and Douglas D.
Neri as the LAWFUL OWNERS of the 3/16 portions of the subject
homestead properties, covered by Original Certificate of Title Nos. (P-7998)
P-2128, (P-14608) P-5153 and P-20551 (P-8348); and
4. Ordering the estate of the late Enrique Neri, as well as Napoleon Neri,
Alicia D. Neri-Mondejar, Visminda D. Neri-Chambers and Rosa D. Neri-
Millan to return to the respondents jointly and solidarily the amount paid
corresponding to the 3/16 shares of Eutropia, Victoria and Douglas in the
total amount of ₱ 15,000.00, with legal interest at 6% per annum computed
from the time of payment until finality of this decision and 12% per annum
thereafter until fully paid.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 184528. April 25, 2012.*
NILO OROPESA, petitioner, vs. CIRILO OROPESA, respondent.
Remedial Law; Special Proceedings; Guardianship; A guardianship is a trust relation of
the most sacred character, in which one person, called a “guardian” acts for another called
the “ward” whom the law regards as incapable of managing his own affairs.—In Francisco
v. Court of Appeals, 127 SCRA 371 (1984), we laid out the nature and purpose of
guardianship in the following wise: A guardianship is a trust relation of the most sacred
character, in which one person, called a “guardian” acts for another called the “ward”
whom the law regards as incapable of managing his own affairs. A guardianship is
designed to further the ward’s well-being, not that of the guardian. It is intended to
preserve the ward’s property, as well as to render any assistance that the ward may
personally require. It has been stated that while custody involves immediate care and
control, guardianship indicates not only those responsibilities, but those of one in loco
parentis as well. In a guardianship proceeding, a court may appoint a qualified guardian if
the prospective ward is proven to be a minor or an incompetent.
Same; Same; Same; Incompetents; A reading of Section 2, Rule 92 of the Rules of Court
tells us that persons who, though of sound mind but by reason of age, disease, weak mind or
other similar causes, are incapable of taking care of themselves and their property without
outside aid are considered as incompetents who may properly be placed under
guardianship.—A reading of Section 2, Rule 92 of the Rules of Court tells us that persons
who, though of sound mind but by reason of age, disease, weak mind or other similar
causes, are incapable of taking care of themselves and their property without outside aid
are considered as incompetents who may properly be placed under guardianship. The full
text of the said provision reads: Sec. 2. Meaning of the word “incompetent.”—Under this
rule, the word “incompetent” includes persons suffering the penalty of civil interdiction or
who are hospitalized lepers, prodigals, deaf and dumb who are unable to read and write,
those who are of unsound mind, even though they have lucid intervals, and persons not
being of unsound mind, but by reason of age, disease, weak mind, and other similar causes,
cannot, without outside aid, take care of themselves and manage their property, becoming
thereby an easy prey for deceit and exploitation.
Same; Civil Procedure; Petition for Review on Certiorari; Appeals; As a general rule,
“only questions of law may be raised in a petition for review on certiorari because the Court
is not a trier of facts.”—It is axiomatic that, as a general rule, “only questions of law may be
raised in a petition for review on certiorari because the Court is not a trier of facts.” We
only take cognizance of questions of fact in certain exceptional circumstances; however,
we find them to be absent in the instant case. It is also long settled that “factual findings of
the trial court, when affirmed by the Court of Appeals, will not be disturbed by this Court.
As a rule, such findings by the lower courts are entitled to great weight and respect, and
are deemed final and conclusive on this Court when supported by the evidence on record.”
We therefore adopt the factual findings of the lower court and the Court of Appeals and
rule that the grant of respondent’s demurrer to evidence was proper under the
circumstances obtaining in the case at bar.
Same; Same; Demurrer to Evidence; A demurrer to evidence is defined as “an objection
by one of the parties in an action, to the effect that the evidence which his adversary produced
is insufficient in point of law, whether true or not, to make out a case or sustain the issue.”—
A demurrer to evidence is defined as “an objection by one of the parties in an action, to the
effect that the evidence which his adversary produced is insufficient in point of law,
whether true or not, to make out a case or sustain the issue.” We have also held that a
demurrer to evidence “authorizes a judgment on the merits of the case without the
defendant having to submit evidence on his part, as he would ordinarily have to do, if
plaintiff’s evidence shows that he is not entitled to the relief sought.”
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure of the Decision1 dated February 29, 2008, as well as the Resolution 2 dated
September 16, 2008, both rendered by the Court of Appeals in CA-G.R. CV No. 88449,
entitled "NILO OROPESA vs. CIRILO OROPESA." The Court of Appeals’ issuances
affirmed the Order3 dated September 27, 2006 and the Order4 dated November 14,
2006 issued by the Regional Trial Court (RTC) of Parañaque City, Branch 260 in SP.
Proc. Case No. 04-0016, which dismissed petitioner Nilo Oropesa’s petition for
guardianship over the properties of his father, respondent Cirilo Oropesa (a widower),
and denied petitioner’s motion for reconsideration thereof, respectively.
The facts of this case, as summed in the assailed Decision, follow:
On January 23, 2004, the (petitioner) filed with the Regional Trial Court of Parañaque
City, a petition for him and a certain Ms. Louie Ginez to be appointed as guardians over
the property of his father, the (respondent) Cirilo Oropesa. The case was docketed as
SP Proc. No. 04-0016 and raffled off to Branch 260.
In the said petition, it is alleged among others that the (respondent) has been afflicted
with several maladies and has been sickly for over ten (10) years already having
suffered a stroke on April 1, 2003 and June 1, 2003, that his judgment and memory
[were] impaired and such has been evident after his hospitalization; that even before
his stroke, the (respondent) was observed to have had lapses in memory and judgment,
showing signs of failure to manage his property properly; that due to his age and
medical condition, he cannot, without outside aid, manage his property wisely, and has
become an easy prey for deceit and exploitation by people around him, particularly Ms.
Ma. Luisa Agamata, his girlfriend.
In an Order dated January 29, 2004, the presiding judge of the court a quo set the case
for hearing, and directed the court social worker to conduct a social case study and
submit a report thereon.
Pursuant to the abovementioned order, the Court Social Worker conducted her social
case study, interviewing the (petitioner) and his witnesses. The Court Social Worker
subsequently submitted her report but without any finding on the (respondent) who
refused to see and talk to the social worker.
On July 6, 2004, the (respondent) filed his Opposition to the petition for guardianship.
On August 3, 2004, the (respondent) filed his Supplemental Opposition.
Thereafter, the (petitioner) presented his evidence which consists of his testimony, and
that of his sister Gianina Oropesa Bennett, and the (respondent’s) former nurse, Ms.
Alma Altaya.
After presenting evidence, the (petitioner) filed a manifestation dated May 29, 2006
resting his case. The (petitioner) failed to file his written formal offer of evidence.
Thus, the (respondent) filed his "Omnibus Motion (1) to Declare the petitioner to have
waived the presentation of his Offer of Exhibits and the presentation of his Evidence
Closed since they were not formally offered; (2) To Expunge the Documents of the
Petitioner from the Record; and (3) To Grant leave to the Oppositor to File Demurrer to
Evidence.
In an Order dated July 14, 2006, the court a quo granted the (respondent’s) Omnibus
Motion. Thereafter, the (respondent) then filed his Demurrer to Evidence dated July 23,
2006.5 (Citations omitted.)
The trial court granted respondent’s demurrer to evidence in an Order dated September
27, 2006. The dispositive portion of which reads:
WHEREFORE, considering that the petitioner has failed to provide sufficient evidence
to establish that Gen. Cirilo O. Oropesa is incompetent to run his personal affairs and
to administer his properties, Oppositor’s Demurrer to Evidence is GRANTED, and the
case is DISMISSED.6
Petitioner moved for reconsideration but this was denied by the trial court in an Order
dated November 14, 2006, the dispositive portion of which states:
WHEREFORE, considering that the Court record shows that petitioner-movant has
failed to provide sufficient documentary and testimonial evidence to establish that Gen.
Cirilo Oropesa is incompetent to run his personal affairs and to administer his
properties, the Court hereby affirms its earlier Order dated 27 September 2006.
Accordingly, petitioner’s Motion for Reconsideration is DENIED for lack of merit.7
Unperturbed, petitioner elevated the case to the Court of Appeals but his appeal was
dismissed through the now assailed Decision dated February 29, 2008, the dispositive
portion of which reads:
WHEREFORE, premises considered the instant appeal is DISMISSED. The assailed
orders of the court a quo dated September 27, 2006 and November 14, 2006 are
AFFIRMED.8
A motion for reconsideration was filed by petitioner but this was denied by the Court of
Appeals in the similarly assailed Resolution dated September 16, 2008. Hence, the
instant petition was filed.
Petitioner submits the following question for consideration by this Court:
WHETHER RESPONDENT IS CONSIDERED AN "INCOMPETENT" PERSON AS
DEFINED UNDER SECTION 2, RULE 92 OF THE RULES OF COURT WHO SHOULD
BE PLACED UNDER GUARDIANSHIP9
After considering the evidence and pleadings on record, we find the petition to be
without merit.
Petitioner comes before the Court arguing that the assailed rulings of the Court of
Appeals should be set aside as it allegedly committed grave and reversible error when
it affirmed the erroneous decision of the trial court which purportedly disregarded the
overwhelming evidence presented by him showing respondent’s incompetence.
In Francisco v. Court of Appeals,10 we laid out the nature and purpose of guardianship
in the following wise:
A guardianship is a trust relation of the most sacred character, in which one person,
called a "guardian" acts for another called the "ward" whom the law regards as
incapable of managing his own affairs. A guardianship is designed to further the ward’s
well-being, not that of the guardian. It is intended to preserve the ward’s property, as
well as to render any assistance that the ward may personally require. It has been
stated that while custody involves immediate care and control, guardianship indicates
not only those responsibilities, but those of one in loco parentis as well. 11
In a guardianship proceeding, a court may appoint a qualified guardian if the
prospective ward is proven to be a minor or an incompetent.
A reading of Section 2, Rule 92 of the Rules of Court tells us that persons who, though
of sound mind but by reason of age, disease, weak mind or other similar causes, are
incapable of taking care of themselves and their property without outside aid are
considered as incompetents who may properly be placed under guardianship. The full
text of the said provision reads:
Sec. 2. Meaning of the word "incompetent." – Under this rule, the word "incompetent"
includes persons suffering the penalty of civil interdiction or who are hospitalized lepers,
prodigals, deaf and dumb who are unable to read and write, those who are of unsound
mind, even though they have lucid intervals, and persons not being of unsound mind,
but by reason of age, disease, weak mind, and other similar causes, cannot, without
outside aid, take care of themselves and manage their property, becoming thereby an
easy prey for deceit and exploitation.
We have held in the past that a "finding that a person is incompetent should be
anchored on clear, positive and definite evidence." 12 We consider that evidentiary
standard unchanged and, thus, must be applied in the case at bar.
In support of his contention that respondent is incompetent and, therefore, should be
placed in guardianship, petitioner raises in his Memorandum13 the following factual
matters:
a. Respondent has been afflicted with several maladies and has been sickly
for over ten (10) years already;
b. During the time that respondent was hospitalized at the St. Luke’s Medical
Center after his stroke, he purportedly requested one of his former
colleagues who was visiting him to file a loan application with the Armed
Forces of the Philippines Savings and Loan Association, Inc. (AFPSLAI) for
payment of his hospital bills, when, as far as his children knew, he had
substantial amounts of money in various banks sufficient to cover his
medical expenses;
c. Respondent’s residence allegedly has been left dilapidated due to lack of
care and management;
d. The realty taxes for respondent’s various properties remain unpaid and
therefore petitioner and his sister were supposedly compelled to pay the
necessary taxes;
 e. Respondent allegedly instructed petitioner to sell his Nissan Exalta car for
the reason that the former would be purchasing another vehicle, but when
the car had been sold, respondent did not procure another vehicle and
refused to account for the money earned from the sale of the old car;
f. Respondent withdrew at least $75,000.00 from a joint account under his
name and his daughter’s without the latter’s knowledge or consent;
g. There was purportedly one occasion where respondent took a kitchen
knife to stab himself upon the "orders" of his girlfriend during one of their
fights;
h. Respondent continuously allows his girlfriend to ransack his house of
groceries and furniture, despite protests from his children. 14
Respondent denied the allegations made by petitioner and cited petitioner’s lack of
material evidence to support his claims. According to respondent, petitioner did not
present any relevant documentary or testimonial evidence that would attest to the
veracity of his assertion that respondent is incompetent largely due to his alleged
deteriorating medical and mental condition. In fact, respondent points out that the only
medical document presented by petitioner proves that he is indeed competent to run
his personal affairs and administer his properties. Portions of the said document,
entitled "Report of Neuropsychological Screening," 15 were quoted by respondent in his
Memorandum16 to illustrate that said report in fact favored respondent’s claim of
competence, to wit:
General Oropesa spoke fluently in English and Filipino, he enjoyed and participated
meaningfully in conversations and could be quite elaborate in his responses on many
of the test items. He spoke in a clear voice and his articulation was generally
comprehensible. x x x.
xxxx
General Oropesa performed in the average range on most of the domains that were
tested. He was able to correctly perform mental calculations and keep track of number
sequences on a task of attention. He did BEST in visuo-constructional tasks where he
had to copy geometrical designs using tiles. Likewise, he was able to render and read
the correct time on the Clock Drawing Test. x x x.
xxxx
x x x Reasoning abilities were generally intact as he was able to suggest effective
solutions to problem situations. x x x.17
With the failure of petitioner to formally offer his documentary evidence, his proof of his
father’s incompetence consisted purely of testimonies given by himself and his sister
(who were claiming interest in their father’s real and personal properties) and their
father’s former caregiver (who admitted to be acting under their direction). These
testimonies, which did not include any expert medical testimony, were insufficient to
convince the trial court of petitioner’s cause of action and instead lead it to grant the
demurrer to evidence that was filed by respondent.
Even if we were to overlook petitioner’s procedural lapse in failing to make a formal
offer of evidence, his documentary proof were comprised mainly of certificates of title
over real properties registered in his, his father’s and his sister’s names as co-owners,
tax declarations, and receipts showing payment of real estate taxes on their co-owned
properties, which do not in any way relate to his father’s alleged incapacity to make
decisions for himself. The only medical document on record is the aforementioned
"Report of Neuropsychological Screening" which was attached to the petition for
guardianship but was never identified by any witness nor offered as evidence. In any
event, the said report, as mentioned earlier, was ambivalent at best, for although the
report had negative findings regarding memory lapses on the part of respondent, it also
contained findings that supported the view that respondent on the average was indeed
competent.
In an analogous guardianship case wherein the soundness of mind of the proposed
ward was at issue, we had the occasion to rule that "where the sanity of a person is at
issue, expert opinion is not necessary [and that] the observations of the trial judge
coupled with evidence establishing the person’s state of mental sanity will suffice." 18
Thus, it is significant that in its Order dated November 14, 2006 which denied
petitioner’s motion for reconsideration on the trial court’s unfavorable September 27,
2006 ruling, the trial court highlighted the fatal role that petitioner’s own documentary
evidence played in disproving its case and, likewise, the trial court made known its own
observation of respondent’s physical and mental state, to wit:
The Court noted the absence of any testimony of a medical expert which states that
Gen. Cirilo O. Oropesa does not have the mental, emotional, and physical capacity to
manage his own affairs. On the contrary, Oppositor’s evidence includes a
Neuropsychological Screening Report which states that Gen. Oropesa, (1) performs on
the average range in most of the domains that were tested; (2) is capable of mental
calculations; and (3) can provide solutions to problem situations. The Report concludes
that Gen. Oropesa possesses intact cognitive functioning, except for mildly impaired
abilities in memory, reasoning and orientation. It is the observation of the Court that
oppositor is still sharp, alert and able.19 (Citation omitted; emphasis supplied.)
It is axiomatic that, as a general rule, "only questions of law may be raised in a petition
for review on certiorari because the Court is not a trier of facts." 20 We only take
cognizance of questions of fact in certain exceptional circumstances; 21 however, we
find them to be absent in the instant case. It is also long settled that "factual findings of
the trial court, when affirmed by the Court of Appeals, will not be disturbed by this Court.
As a rule, such findings by the lower courts are entitled to great weight and respect,
and are deemed final and conclusive on this Court when supported by the evidence on
record."22 We therefore adopt the factual findings of the lower court and the Court of
Appeals and rule that the grant of respondent’s demurrer to evidence was proper under
the circumstances obtaining in the case at bar.
Section 1, Rule 33 of the Rules of Court provides:
Section 1. Demurrer to evidence. – After the plaintiff has completed the presentation of
his evidence, the defendant may move for dismissal on the ground that upon the facts
and the law the plaintiff has shown no right to relief. If his motion is denied, he shall
have the right to present evidence. If the motion is granted but on appeal the order of
dismissal is reversed he shall be deemed to have waived the right to present evidence.
A demurrer to evidence is defined as "an objection by one of the parties in an action,
to the effect that the evidence which his adversary produced is insufficient in point of
law, whether true or not, to make out a case or sustain the issue." 23 We have also held
that a demurrer to evidence "authorizes a judgment on the merits of the case without
the defendant having to submit evidence on his part, as he would ordinarily have to do,
if plaintiff’s evidence shows that he is not entitled to the relief sought."24 1âwphi1
There was no error on the part of the trial court when it dismissed the petition for
guardianship without first requiring respondent to present his evidence precisely
because the effect of granting a demurrer to evidence other than dismissing a cause of
action is, evidently, to preclude a defendant from presenting his evidence since, upon
the facts and the law, the plaintiff has shown no right to relief.
WHEREFORE, premises considered, the petition is hereby DENIED. The assailed
Decision dated February 29, 2008 as well as the Resolution dated September 16, 2008
of the Court of Appeals in CA-G.R. CV No. 88449 are AFFIRMED.
SO ORDERED.
G.R. No. 191993. December 5, 2012.*
EDUARDO T. ABAD, petitioner, vs. LEONARDO BIASON and GABRIEL A. MAGNO,
respondents.
Remedial Law; Civil Procedure; Moot and Academic; An issue or a case becomes moot
and academic when it ceases to present a justiciable controversy, so that a determination of
the issue would be without practical use and value.―An issue or a case becomes moot and
academic when it ceases to present a justiciable controversy, so that a determination of
the issue would be without practical use and value. In such cases, there is no actual
substantial relief to which the petitioner would be entitled and which would be negated
by the dismissal of the petition.
Same; Special Proceedings; Guardianship; The relationship of guardian and ward is
necessarily terminated by the death of either the guardian or the ward.―It is a well-
established rule that the relationship of guardian and ward is necessarily terminated by
the death of either the guardian or the ward. The supervening event of death rendered it
pointless to delve into the propriety of Biason’s appointment since the juridical tie
between him and Maura has already been dissolved. The petition, regardless of its
disposition, will not afford Abad, or anyone else for that matter, any substantial relief.
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court seeking to annul and set aside the Decision 1 dated August 28, 2009 and
Resolution2 dated April 19, 2010 of the Court of Appeals (CA) in CA-G.R. CV No; 90145.
The facts show that on March 19, 2007, petitioner Eduardo Abad (Abad) filed a petition
for guardianship over the person and properties of Maura B. Abad (Maura) with the
Regional Trial Court (RTC), Dagupan City, Branch 42, which was docketed as Sp. Proc.
No. 2007-0050-D. In support thereof, Abad alleged that he maintains residence at No.
14 B St. Paul Street, Horseshoe Village, Quezon City and that he is Maura’s nephew.
He averred that Maura, who is single, more than ninety (90) years old and a resident of
Rizal Street, Poblacion, Mangaldan, Pangasinan, is in dire need of a guardian who will
look after her and her business affairs. Due to her advanced age, Maura is already
sickly and can no longer manage to take care of herself and her properties unassisted
thus becoming an easy prey of deceit and exploitation. 3
Finding the petition sufficient in form and substance, the RTC gave due course to the
same and scheduled it for hearing. When the petition was called for hearing on April
27, 2007, nobody entered an opposition and Abad was allowed to present evidence ex
parte. After Abad formally offered his evidence and the case was submitted for decision,
Atty. Gabriel Magno filed a Motion for Leave to Intervene, together with an Oppositionin-
Intervention. Subsequently, on June 14, 2007, Leonardo Biason (Biason) filed a Motion
for Leave to File Opposition to the Petition and attached therewith his Opposition to the
Appointment of Eduardo Abad as Guardian of the Person and Properties of Maura B.
Abad. Specifically, Biason alleged that he is also a nephew of Maura and that he was
not notified of the pendency of the petition for the appointment of the latter’s guardian.
He vehemently opposed the appointment of Abad as Maura’s guardian as he cannot
possibly perform his duties as such since he resides in Quezon City while Maura
maintains her abode in Mangaldan, Pangasinan. Biason prayed that he be appointed
as Maura’s guardian since he was previously granted by the latter with a power of
attorney to manage her properties.4
On September 26, 2007, the RTC rendered a Decision,5 denying Abad’s petition and
appointing Biason as Maura’s guardian. The RTC disposed thus:
WHEREFORE, the petition is hereby denied. Petitioner Eduardo T. Abad is found to be
disqualified to act as guardian of incompetent Maura B. Abad. Oppositor Leonardo A.
Biason is established by this Court to be in a better position to be the guardian of said
incompetent Maura B. Abad.
The Court hereby fixes the guardianship bond at [P]500,000.00 and the letters of
guardianship shall be issued only upon the submission of the bond, conditioned on the
following provisions of the Rule 94[,] Section 1, of the 1997 Rules of Civil Procedure:
a. To make and return to the Court within three (3) months true and
complete inventory of all the estate, real and personal, of his ward which
shall come to his possession or knowledge or to the possession or
knowledge of any other person for him;
b. To faithfully execute the duties of his trust, to manage and dispose of the
estate according to these rules for the best interests of the ward, and to
provide for the proper care, custody x x x of the ward;
 c. To render a true and just account of all the estate of the ward in his hands,
and of all proceeds or interest derived therefrom, and of the management
and disposition of the same, at the time designated by these rules and such
other times as the court directs, and at the expiration of his trust to settle his
accounts with the court and deliver and pay over all the estate, effects, and
moneys remaining in his hands, or due from him on such settlement, to the
person lawfully entitled thereto;
d. To perform all orders of the court by him to be performed.
SO ORDERED.6
Unyielding, Abad filed a motion for reconsideration of the foregoing decision but the
RTC denied the same in an Order dated December 11, 2007.
Abad filed an appeal to the CA. He argued that the RTC erred in disqualifying him from
being appointed as Maura’s guardian despite the fact that he has all the qualifications
stated under the Rules. That he was not a resident of Mangaldan, Pangasinan should
not be a ground for his disqualification as he had actively and efficiently managed the
affairs and properties of his aunt even if he is residing in Metro Manila. Moreover, he
was expressly chosen by Maura to be her guardian. 7
Abad further averred that no hearing was conducted to determine the qualifications of
Biason prior to his appointment as guardian. He claimed that the RTC also overlooked
Maura’s express objection to Biason’s appointment.8
On August 28, 2009, the CA issued a Decision,9 affirming the decision of the RTC, the
pertinent portions of which read:
The petitioner-appellant may have been correct in arguing that there is no legal
requirement that the guardian must be residing in the same dwelling place or
municipality as that of the ward or incompetent, and that the Vancil vs. Belmes case
cited by the court a quo which held that "courts should not appoint as guardians persons
who are not within the jurisdiction of our courts" pertains to persons who are not
residents of the country.
However, we do not find that the court a quo, by deciding to appoint the oppositor-
appellee as guardian, has fallen into grievous error.
For one, the oppositor-appellee, like petitioner-appellant, is also a relative, a nephew
of the incompetent. There are no vices of character which have been established as to
disqualify him from being appointed as a guardian.
xxxx
Anent the claim of the petitioner-appellant that he has been expressly chosen by her
aunt to be her guardian as evidenced by her testimony, although it could be given
weight, the same could not be heavily relied upon, especially considering the alleged
mental state of the incompetent due to her advanced age.
xxxx
WHEREFORE, premises considered, the instant petition is DISMISSED for lack of
merit. The assailed decision of the Regional Trial Court of Dagupan City, Branch 42 is
AFFIRMED IN TOTO.
SO ORDERED.[10
Dissatisfied, Abad filed a motion for reconsideration but the CA denied the same in a
Resolution11 dated April 19, 2010, the dispositive portion of which reads:
WHEREFORE, premises considered, the Motion for Reconsideration is DENIED for
lack of merit.
SO ORDERED.12
On June 7, 2010, Abad filed a Petition for Review on Certiorari with this Court.
Subsequently, Maura filed a Motion for Leave to Intervene,13 together with a Petition-
in-Intervention.14
The instant petition raises the following assignment of errors:
I
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT
DENIED THE PETITIONER’S APPEAL AND AFFIRMED THE TRIAL
COURT’S DECISION DESPITE VERY CLEAR VIOLATIONS OF DUE
PROCESS, DISREGARD OF THE RULES, AND IRREGULARITIES IN THE
APPOINTMENT OF RESPONDENT BIASON AS GUARDIAN;
II
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT
DENIED THE PETITIONER’S APPEAL AND ERRONEOUSLY UPHELD
RESPONDENT BIASON’S APPOINTMENT AS GUARDIAN BASED ON
SOLE GROUND OF RESIDENCE, AND FAILED TO CONSIDER THE
REQUIREMENTS AND QUALIFICATIONS PRESCRIBED BY THE
SUPREME COURT FOR THE APPOINTMENT OF GUARDIAN.15
Abad contends that that CA erred in affirming the RTC’s decision despite the fact that
it did not hold any hearing to determine whether Biason possessed all the qualifications
for a guardian as provided by law. Further, he was not given the opportunity to submit
evidence to controvert Biason’s appointment.16
Abad also bewails his disqualification as guardian on the sole basis of his residence.
He emphasizes that it is not a requirement for a guardian to be a resident of the same
locality as the ward, or to be living with the latter under the same roof in order to qualify
for the appointment. The more significant considerations are that the person to be
appointed must be of good moral character and must have the capability and sound
judgment in order that he may be able to take care of the ward and prudently manage
his assets.17
Unfortunately, pending the resolution of the instant petition, Biason died. On May 11,
2012, Maura filed a Manifestation and Motion,18 informing this Court that Biason passed
away on April 3, 2012 at SDS Medical Center, Marikina City due to multiple organ
failure, septic shock, community acquired pneumonia high risk, prostate CA with
metastasis, and attached a copy of his Death Certificate.19 Maura averred that Biason’s
death rendered moot and academic the issues raised in the petition. She thus prayed
that the petition be dismissed and the guardianship be terminated.
On June 20, 2012, this Court issued a Resolution,20 requiring Abad to comment on the
manifestation filed by Maura. Pursuant to the Resolution, Abad filed his Comment 21 on
August 9, 2012 and expressed his acquiescence to Maura’s motion to dismiss the
petition. He asseverated that the issues raised in the petition pertain to the irregularity
in the appointment of Biason as guardian which he believed had been rendered moot
and academic by the latter’s death. He also supported Maura’s prayer for the
termination of the guardianship by asseverating that her act of filing of a petition-in-
intervention is indicative of the fact that she is of sound mind and that she can
competently manage her business affairs.
We find Maura’s motion meritorious.
An issue or a case becomes moot and academic when it ceases to present a justiciable
controversy, so that a determination of the issue would be without practical use and
value. In such cases, there is no actual substantial relief to which the petitioner would
be entitled and which would be negated by the dismissal of the petition. 22
In his petition, Abad prayed for the nullification of the CA Decision dated August 28,
2009 and Resolution dated April 19, 2010, which dismissed his appeal from the
Decision dated September 26, 2007 of the RTC and denied his motion for
reconsideration, respectively. Basically, he was challenging Biason’s qualifications and
the procedure by which the RTC appointed him as guardian for Maura. However, with
Biason’s demise, it has become impractical and futile to proceed with resolving the
merits of the petition. It is a well-established rule that the relationship of guardian and
ward is necessarily terminated by the death of either the guardian or the ward. 23 The
supervening event of death rendered it pointless to delve into the propriety of Biason’s
appointment since the juridical tie between him and Maura has already been dissolved.
The petition, regardless of its disposition, will not afford Abad, or anyone else for that
matter, any substantial relief.1âwphi1
Moreover, Abad, in his Comment, shared Maura’s belief that the petition has lost its
purpose and even consented to Maura’s prayer for the dismissal of the petition.
WHEREFORE, in consideration of the foregoing disquisitions, the petition is hereby
DISMISSED.
SO ORDERED.
G.R. No. 183050. January 25, 2012.*
ADVENT CAPITAL AND FINANCE CORPORATION, petitioner, vs. NICASIO I.
ALCANTARA and EDITHA I. ALCANTARA, respondents.
Mercantile Law; Banks and Banking; Trusts; The practice in the case of banks is that
they automatically collect their management fees from the funds that their clients entrust to
them for investment or lending to others.—The practice in the case of banks is that they
automatically collect their management fees from the funds that their clients entrust to
them for investment or lending to others. But the banks can freely do this since it holds or
has control of their clients’ money and since their trust agreement authorized the
automatic collection. If the depositor contests the deduction, his remedy is to bring an
action to recover the amount he claims to have been illegally deducted from his account.
Same; Same; Same; The real owner of the trust property is the trustor-beneficiary.—
The real owner of the trust property is the trustor-beneficiary. In this case, the trustors-
beneficiaries are the Alcantaras. Thus, Advent Capital could not dispose of the Alcantaras’
portfolio on its own. The income and principal of the portfolio could only be withdrawn
upon the Alcantaras’ written instruction or order to Advent Capital. The latter could not
also assign or encumber the portfolio or its income without the written consent of the
Alcantaras. All these are stipulated in the Trust Agreement. Same; Same; Corporation Law;
Rehabilitation Proceedings; Rehabilitation proceedings are summary and non-adversarial in
nature, and do not contemplate adjudication of claims that must be threshed out in ordinary
court proceedings.—Rehabilitation proceedings are summary and non-adversarial in
nature, and do not contemplate adjudication of claims that must be threshed out in
ordinary court proceedings. Adversarial proceedings similar to that in ordinary courts are
inconsistent with the commercial nature of a rehabilitation case. The latter must be
resolved quickly and expeditiously for the sake of the corporate debtor, its creditors and
other interested parties. Thus, the Interim Rules “incorporate the concept of prohibited
pleadings, affidavit evidence in lieu of oral testimony, clarificatory hearings instead of the
traditional approach of receiving evidence, and the grant of authority to the court to decide
the case, or any incident, on the basis of affidavits and documentary evidence.”
This case is about the validity of a rehabilitation court’s order that compelled a third
party, in possession of money allegedly belonging to the debtor of a company under
rehabilitation, to deliver such money to its court-appointed receiver over the debtor’s
objection.
The Facts and the Case
On July 16, 2001 petitioner Advent Capital and Finance Corporation (Advent Capital)
filed a petition for rehabilitation1 with the Regional Trial Court (RTC) of Makati City.2
Subsequently, the RTC named Atty. Danilo L. Concepcion as rehabilitation receiver.3
Upon audit of Advent Capital’s books, Atty. Concepcion found that respondents Nicasio
and Editha Alcantara (collectively, the Alcantaras) owed Advent Capital
₱27,398,026.59, representing trust fees that it supposedly earned for managing their
several trust accounts.4
Prompted by this finding, Atty. Concepcion requested Belson Securities, Inc. (Belson)
to deliver to him, as Advent Capital’s rehabilitation receiver, the ₱7,635,597.50 in cash
dividends that Belson held under the Alcantaras’ Trust Account 95-013. Atty.
Concepcion claimed that the dividends, as trust fees, formed part of Advent Capital’s
assets. Belson refused, however, citing the Alcantaras’ objections as well as the
absence of an appropriate order from the rehabilitation court.5
Thus, Atty. Concepcion filed a motion before the rehabilitation court to direct Belson to
release the money to him. He said that, as rehabilitation receiver, he had the duty to
take custody and control of Advent Capital’s assets, such as the sum of money that
Belson held on behalf of Advent Capital’s Trust Department.6
The Alcantaras made a special appearance before the rehabilitation court7 to oppose
Atty. Concepcion’s motion. They claimed that the money in the trust account belonged
to them under their Trust Agreement8 with Advent Capital. The latter, they said, could
not claim any right or interest in the dividends generated by their investments since
Advent Capital merely held these in trust for the Alcantaras, the trustors-beneficiaries.
For this reason, Atty. Concepcion had no right to compel the delivery of the dividends
to him as receiver. The Alcantaras concluded that, under the circumstances, the
rehabilitation court had no jurisdiction over the subject dividends.
On February 5, 2007 the rehabilitation court granted Atty. Concepcion’s motion. 9 It held
that, under Rule 59, Section 6 of the Rules of Court, a receiver has the duty to
immediately take possession of all of the corporation’s assets and administer the same
for the benefit of corporate creditors. He has the duty to collect debts owing to the
corporation, which debts form part of its assets. Complying with the rehabilitation court’s
order and Atty. Concepcion’s demand letter, Belson turned over the subject dividends
to him.
Meanwhile, the Alcantaras filed a special civil action of certiorari before the Court of
Appeals (CA), seeking to annul the rehabilitation court’s order. On January 30, 2008
the CA rendered a decision,10 granting the petition and directing Atty. Concepcion to
account for the dividends and deliver them to the Alcantaras. The CA ruled that the
Alcantaras owned those dividends. They did not form part of Advent Capital’s assets
as contemplated under the Interim Rules of Procedure on Corporate Rehabilitation
(Interim Rules).
The CA pointed out that the rehabilitation proceedings in this case referred only to the
assets and liabilities of the company proper, not to those of its Trust Department which
held assets belonging to other people. Moreover, even if the Trust Agreement provided
that Advent Capital, as trustee, shall have first lien on the Alcantara’s financial portfolio
for the payment of its trust fees, the cash dividends in Belson’s care cannot be
summarily applied to the payment of such charges. To enforce its lien, Advent Capital
has to file a collection suit. The rehabilitation court cannot simply enforce the latter’s
claim by ordering Belson to deliver the money to it. 11
The CA denied Atty. Concepcion and Advent Capital’s motion for reconsideration, 12
prompting the filing of the present petition for review under Rule 45.
The Issue Presented
The sole issue in this case is whether or not the cash dividends held by Belson and
claimed by both the Alcantaras and Advent Capital constitute corporate assets of the
latter that the rehabilitation court may, upon motion, require to be conveyed to the
rehabilitation receiver for his disposition.
Ruling of the Court
Advent Capital asserts that the cash dividends in Belson’s possession formed part of
its assets based on paragraph 9 of its Trust Agreement with the Alcantaras, which
states:
9. Trust Fee: Other Expenses – As compensation for its services hereunder, the
TRUSTEE shall be entitled to a trust or management fee of 1 (one) % per annum based
on the quarterly average market value of the Portfolio or a minimum annual fee of
₱5,000.00, whichever is higher. The said trust or management fee shall automatically
be deducted from the Portfolio at the end of each calendar quarter. The TRUSTEE shall
likewise be reimbursed for all reasonable and necessary expenses incurred by it in the
discharge of its powers and duties under this Agreement, and in all cases, the
TRUSTEE shall have a first lien on the Portfolio for the payment of the trust fees and
other reimbursable expenses.
According to Advent Capital, it could automatically deduct its management fees from
the Alcantaras’ portfolio that they entrusted to it. Paragraph 9 of the Trust Agreement
provides that Advent Capital could automatically deduct its trust fees from the
Alcantaras’ portfolio, "at the end of each calendar quarter," with the corresponding duty
to submit to the Alcantaras a quarterly accounting report within 20 days after. 13
But the problem is that the trust fees that Advent Capital’s receiver was claiming were
for past quarters. Based on the stipulation, these should have been deducted as they
became due. As it happened, at the time Advent Capital made its move to collect its
supposed management fees, it neither had possession nor control of the money it
wanted to apply to its claim. Belson, a third party, held the money in the Alcantaras’
names. Whether it should deliver the same to Advent Capital or to the Alcantaras is not
clear. What is clear is that the issue as to who should get the same has been seriously
contested.
The practice in the case of banks is that they automatically collect their management
fees from the funds that their clients entrust to them for investment or lending to others.
But the banks can freely do this since it holds or has control of their clients’ money and
since their trust agreement authorized the automatic collection. If the depositor contests
the deduction, his remedy is to bring an action to recover the amount he claims to have
been illegally deducted from his account.
Here, Advent Capital does not allege that Belson had already deducted the
management fees owing to it from the Alcantaras’ portfolio at the end of each calendar
quarter. Had this been done, it may be said that the money in Belson’s possession
would technically be that of Advent Capital. Belson would be holding such amount in
trust for the latter. And it would be for the Alcantaras to institute an action in the proper
court against Advent Capital and Belson for misuse of its funds.
But the above did not happen. Advent Capital did not exercise its right to cause the
automatic deduction at the end of every quarter of its supposed management fee when
it had full control of the dividends. That was its fault. For their part, the Alcantaras had
the right to presume that Advent Capital had deducted its fees in the manner stated in
the contract. The burden of proving that the fees were not in fact collected lies with
Advent Capital.
Further, Advent Capital or its rehabilitation receiver cannot unilaterally decide to apply
the entire amount of cash dividends retroactively to cover the accumulated trust fees.
Advent Capital merely managed in trust for the benefit of the Alcantaras the latter’s
portfolio, which under Paragraph 214 of the Trust Agreement, includes not only the
principal but also its income or proceeds. The trust property is only fictitiously attributed
by law to the trustee "to the extent that the rights and powers vested in a nominal owner
shall be used by him on behalf of the real owner." 15
The real owner of the trust property is the trustor-beneficiary. In this case, the trustors-
beneficiaries are the Alcantaras. Thus, Advent Capital could not dispose of the
Alcantaras’ portfolio on its own. The income and principal of the portfolio could only be
withdrawn upon the Alcantaras’ written instruction or order to Advent Capital. 16 The
latter could not also assign or encumber the portfolio or its income without the written
consent of the Alcantaras.17 All these are stipulated in the Trust Agreement.
Ultimately, the issue is what court has jurisdiction to hear and adjudicate the conflicting
claims of the parties over the dividends that Belson held in trust for their owners.
Certainly, not the rehabilitation court which has not been given the power to resolve
ownership disputes between Advent Capital and third parties. Neither Belson nor the
Alcantaras are its debtors or creditors with interest in the rehabilitation.
Advent Capital must file a separate action for collection to recover the trust fees that it
allegedly earned and, with the trial court’s authorization if warranted, put the money in
escrow for payment to whoever it rightly belongs. Having failed to collect the trust fees
at the end of each calendar quarter as stated in the contract, all it had against the
Alcantaras was a claim for payment which is a proper subject for an ordinary action for
collection. It cannot enforce its money claim by simply filing a motion in the rehabilitation
case for delivery of money belonging to the Alcantaras but in the possession of a third
party.
Rehabilitation proceedings are summary and non-adversarial in nature, and do not
contemplate adjudication of claims that must be threshed out in ordinary court
proceedings. Adversarial proceedings similar to that in ordinary courts are inconsistent
with the commercial nature of a rehabilitation case. The latter must be resolved quickly
and expeditiously for the sake of the corporate debtor, its creditors and other interested
parties. Thus, the Interim Rules "incorporate the concept of prohibited pleadings,
affidavit evidence in lieu of oral testimony, clarificatory hearings instead of the traditional
approach of receiving evidence, and the grant of authority to the court to decide the
case, or any incident, on the basis of affidavits and documentary evidence." 18
Here, Advent Capital’s claim is disputed and requires a full trial on the merits.1âwphi1
It must be resolved in a separate action where the Alcantaras’ claim and defenses may
also be presented and heard. Advent Capital cannot say that the filing of a separate
action would defeat the purpose of corporate rehabilitation. In the first place, the Interim
Rules do not exempt a company under rehabilitation from availing of proper legal
procedure for collecting debt that may be due it. Secondly, Court records show that
Advent Capital had in fact sought to recover one of its assets by filing a separate action
for replevin involving a car that was registered in its name. 19
WHEREFORE, the petition is DENIED for lack of merit and the assailed decision and
resolution of the Court of Appeals in CA-G.R. SP 98692 are AFFIRMED, without
prejudice to any action that petitioner Advent Capital and Finance Corp. or its
rehabilitation receiver might institute regarding the trust fees subject of this case.
SO ORDERED.
G.R. No. 166884. June 13, 2012.*
LAND BANK OF THE PHILIPPINES, petitioner, vs. LAMBERTO C. PEREZ, NESTOR C.
KUN, MA. ESTELITA P. ANGELES-PANLILIO, and NAPOLEON O. GARCIA, respondents.
Civil Law; Trusts; Under the Trust Receipts Law, intent to defraud is presumed when
(1) the entrustee fails to turn over the proceeds of the sale of goods covered by the trust
receipt to the entruster; or (2) when the entrustee fails to return the goods under trust, if they
are not disposed of in accordance with the terms of the trust receipts.—There are two
obligations in a trust receipt transaction. The first is covered by the provision that refers
to money under the obligation to deliver it (entregarla) to the owner of the merchandise
sold. The second is covered by the provision referring to merchandise received under the
obligation to return it (devolvera) to the owner. Thus, under the Trust Receipts Law, intent
to defraud is presumed when (1) the entrustee fails to turn over the proceeds of the sale
of goods covered by the trust receipt to the entruster; or (2) when the entrustee fails to
return the goods under trust, if they are not disposed of in accordance with the terms of
the trust receipts.
Same; Same; In all trust receipt transactions, both obligations on the part of the trustee
exist in the alternative—the return of the proceeds of the sale or the return or recovery of the
goods, whether raw or processed.—In all trust receipt transactions, both obligations on the
part of the trustee exist in the alternative—the return of the proceeds of the sale or the
return or recovery of the goods, whether raw or processed. When both parties enter into
an agreement knowing that the return of the goods subject of the trust receipt is not
possible even without any fault on the part of the trustee, it is not a trust receipt
transaction penalized under Section 13 of P.D. 115; the only obligation actually agreed
upon by the parties would be the return of the proceeds of the sale transaction. This
transaction becomes a mere loan, where the borrower is obligated to pay the bank the
amount spent for the purchase of the goods.
Same; Contracts; Article 1371 of the Civil Code provides that “[i]n order to judge the
intention of the contracting parties, their contemporaneous and subsequent acts shall be
principally considered.”—Article 1371 of the Civil Code provides that “[i]n order to judge
the intention of the contracting parties, their contemporaneous and subsequent acts shall
be principally considered.” Under this provision, we can examine the contemporaneous
actions of the parties rather than rely purely on the trust receipts that they signed in order
to understand the transaction through their intent.
Criminal Law; Estafa; Trust Receipts Law; Elements of estafa under Article 315,
paragraph 1(b) of the Revised Penal Code, in relation with Section 13 of the Trust Receipts
Law.—In order that the respondents “may be validly prosecuted for estafa under Article
315, paragraph 1(b) of the Revised Penal Code, in relation with Section 13 of the Trust
Receipts Law, the following elements must be established: (a) they received the subject
goods in trust or under the obligation to sell the same and to remit the proceeds thereof
to [the trustor], or to return the goods if not sold; (b) they misappropriated or converted
the goods and/or the proceeds of the sale; (c) they performed such acts with abuse of
confidence to the damage and prejudice of Metrobank; and (d) demand was made on them
by [the trustor] for the remittance of the proceeds or the return of the unsold goods.”
Office of the Government Corporate Counsel (OGCC); The mandate given to the Office
of the Government Corporate Counsel is limited to the civil liabilities arising from the crime,
and is subject to the control and supervision of the public prosecutor.—If we look at the
mandate given to the Office of the Government Corporate Counsel, we find that it is limited
to the civil liabilities arising from the crime, and is subject to the control and supervision
of the public prosecutor. Section 2, Rule 8 of the Rules Governing the Exercise by the Office
of the Government Corporate Counsel of its Authority, Duties and Powers as Principal Law
Office of All Government Owned or Controlled Corporations, filed before the Office of the
National Administration Register on September 5, 2011, reads: Section 2. Extent of legal
assistance—The OGCC shall represent the complaining GOCC in all stages of the criminal
proceedings. The legal assistance extended is not limited to the preparation of appropriate
sworn statements but shall include all aspects of an effective private prosecution including
recovery of civil liability arising from the crime, subject to the control and supervision of
the public prosecutor. Based on jurisprudence, there are two exceptions when a private
party complainant or offended party in a criminal case may file a petition with this Court,
without the intervention of the OSG: (1) when there is denial of due process of law to the
prosecution, and the State or its agents refuse to act on the case to the prejudice of the
State and the private offended party; and (2) when the private offended party questions
the civil aspect of a decision of the lower court.
Before this Court is a petition for review on certiorari, 1 under Rule 45 of the Rules of
Court, assailing the decision2 dated January 20, 2005 of the Court of Appeals in CA-
G.R. SP No. 76588. In the assailed decision, the Court of Appeals dismissed the
criminal complaint for estafa against the respondents, Lamberto C. Perez, Nestor C.
Kun, Ma. Estelita P. Angeles-Panlilio and Napoleon Garcia, who allegedly violated
Article 315, paragraph 1(b) of the Revised Penal Code, in relation with Section 13 of
Presidential Decree No. (P.D.) 115 – the "Trust Receipts Law."
Petitioner Land Bank of the Philippines (LBP) is a government financial institution and
the official depository of the Philippines.3 Respondents are the officers and
representatives of Asian Construction and Development Corporation (ACDC), a
corporation incorporated under Philippine law and engaged in the construction
business.4
On June 7, 1999, LBP filed a complaint for estafa or violation of Article 315, paragraph
1(b) of the Revised Penal Code, in relation to P.D. 115, against the respondents before
the City Prosecutor’s Office in Makati City. In the affidavit-complaint5 of June 7, 1999,
the LBP’s Account Officer for the Account Management Development, Edna L. Juan,
stated that LBP extended a credit accommodation to ACDC through the execution of
an Omnibus Credit Line Agreement (Agreement)6 between LBP and ACDC on October
29, 1996. In various instances, ACDC used the Letters of Credit/Trust Receipts Facility
of the Agreement to buy construction materials. The respondents, as officers and
representatives of ACDC, executed trust receipts7 in connection with the construction
materials, with a total principal amount of ₱52,344,096.32. The trust receipts matured,
but ACDC failed to return to LBP the proceeds of the construction projects or the
construction materials subject of the trust receipts. LBP sent ACDC a demand letter, 8
dated May 4, 1999, for the payment of its debts, including those under the Trust
Receipts Facility in the amount of ₱66,425,924.39. When ACDC failed to comply with
the demand letter, LBP filed the affidavit-complaint.
The respondents filed a joint affidavit9 wherein they stated that they signed the trust
receipt documents on or about the same time LBP and ACDC executed the loan
documents; their signatures were required by LBP for the release of the loans. The trust
receipts in this case do not contain (1) a description of the goods placed in trust, (2)
their invoice values, and (3) their maturity dates, in violation of Section 5(a) of P.D. 115.
Moreover, they alleged that ACDC acted as a subcontractor for government projects
such as the Metro Rail Transit, the Clark Centennial Exposition and the Quezon Power
Plant in Mauban, Quezon. Its clients for the construction projects, which were the
general contractors of these projects, have not yet paid them; thus, ACDC had yet to
receive the proceeds of the materials that were the subject of the trust receipts and
were allegedly used for these constructions. As there were no proceeds received from
these clients, no misappropriation thereof could have taken place.
On September 30, 1999, Makati Assistant City Prosecutor Amador Y. Pineda issued a
Resolution10 dismissing the complaint. He pointed out that the evidence presented by
LBP failed to state the date when the goods described in the letters of credit were
actually released to the possession of the respondents. Section 4 of P.D. 115 requires
that the goods covered by trust receipts be released to the possession of the entrustee
after the latter’s execution and delivery to the entruster of a signed trust receipt. He
adds that LBP’s evidence also fails to show the date when the trust receipts were
executed since all the trust receipts are undated. Its dispositive portion reads:
WHEREFORE, premises considered, and for insufficiency of evidence, it is respectfully
recommended that the instant complaints be dismissed, as upon approval, the same
are hereby dismissed.11
LBP filed a motion for reconsideration which the Makati Assistant City Prosecutor
denied in his order of January 7, 2000.12
On appeal, the Secretary of Justice reversed the Resolution of the Assistant City
Prosecutor. In his resolution of August 1, 2002,13 the Secretary of Justice pointed out
that there was no question that the goods covered by the trust receipts were received
by ACDC. He likewise adopted LBP’s argument that while the subjects of the trust
receipts were not mentioned in the trust receipts, they were listed in the letters of credit
referred to in the trust receipts. He also noted that the trust receipts contained maturity
dates and clearly set out their stipulations. He further rejected the respondents’ defense
that ACDC failed to remit the payments to LBP due to the failure of the clients of ACDC
to pay them. The dispositive portion of the resolution reads:
WHEREFORE, the assailed resolution is REVERSED and SET ASIDE. The City
Prosecutor of Makati City is hereby directed to file an information for estafa under Art.
315 (1) (b) of the Revised Penal Code in relation to Section 13, Presidential Decree
No. 115 against respondents Lamberto C. Perez, Nestor C. Kun, [Ma. Estelita P.
Angeles-Panlilio] and Napoleon O. Garcia and to report the action taken within ten (10)
days from receipt hereof.14
The respondents filed a motion for reconsideration of the resolution dated August 1,
2002, which the Secretary of Justice denied.15 He rejected the respondents’ submission
that Colinares v. Court of Appeals16 does not apply to the case. He explained that in
Colinares, the building materials were delivered to the accused before they applied to
the bank for a loan to pay for the merchandise; thus, the ownership of the merchandise
had already been transferred to the entrustees before the trust receipts agreements
were entered into. In the present case, the parties have already entered into the
Agreement before the construction materials were delivered to ACDC.
Subsequently, the respondents filed a petition for review before the Court of Appeals.
After both parties submitted their respective Memoranda, the Court of Appeals
promulgated the assailed decision of January 20, 2005.17 Applying the doctrine in
Colinares, it ruled that this case did not involve a trust receipt transaction, but a mere
loan. It emphasized that construction materials, the subject of the trust receipt
transaction, were delivered to ACDC even before the trust receipts were executed. It
noted that LBP did not offer proof that the goods were received by ACDC, and that the
trust receipts did not contain a description of the goods, their invoice value, the amount
of the draft to be paid, and their maturity dates. It also adopted ACDC’s argument that
since no payment for the construction projects had been received by ACDC, its officers
could not have been guilty of misappropriating any payment. The dispositive portion
reads:
WHEREFORE, in view of the foregoing, the Petition is GIVEN DUE COURSE. The
assailed Resolutions of the respondent Secretary of Justice dated August 1, 2002 and
February 17, 2003, respectively in I.S. No. 99-F-9218-28 are hereby REVERSED and
SET ASIDE.18
LBP now files this petition for review on certiorari, dated March 15, 2005, raising the
following error:
THE COURT OF APPEALS GRAVELY ERRED WHEN IT REVERSED AND SET
ASIDE THE RESOLUTIONS OF THE HONORABLE SECRETARY OF JUSTICE BY
APPLYING THE RULING IN THE CASE OF COLINARES V. COURT OF APPEALS,
339 SCRA 609, WHICH IS NOT APPLICABLE IN THE CASE AT BAR.19
On April 8, 2010, while the case was pending before this Court, the respondents filed
a motion to dismiss.20 They informed the Court that LBP had already assigned to
Philippine Opportunities for Growth and Income, Inc. all of its rights, title and interests
in the loans subject of this case in a Deed of Absolute Sale dated June 23, 2005
(attached as Annex "C" of the motion). The respondents also stated that Avent Holdings
Corporation, in behalf of ACDC, had already settled ACDC’s obligation to LBP on
October 8, 2009. Included as Annex "A" in this motion was a certification 21 issued by
the Philippine Opportunities for Growth and Income, Inc., stating that it was LBP’s
successor-in-interest insofar as the trust receipts in this case are concerned and that
Avent Holdings Corporation had already settled the claims of LBP or obligations of
ACDC arising from these trust receipts.
We deny this petition.
The disputed transactions are not trust receipts.
Section 4 of P.D. 115 defines a trust receipt transaction in this manner:
Section 4. What constitutes a trust receipt transaction. A trust receipt transaction, within
the meaning of this Decree, is any transaction by and between a person referred to in
this Decree as the entruster, and another person referred to in this Decree as entrustee,
whereby the entruster, who owns or holds absolute title or security interests over certain
specified goods, documents or instruments, releases the same to the possession of the
entrustee upon the latter's execution and delivery to the entruster of a signed document
called a "trust receipt" wherein the entrustee binds himself to hold the designated
goods, documents or instruments in trust for the entruster and to sell or otherwise
dispose of the goods, documents or instruments with the obligation to turn over to the
entruster the proceeds thereof to the extent of the amount owing to the entruster or as
appears in the trust receipt or the goods, documents or instruments themselves if they
are unsold or not otherwise disposed of, in accordance with the terms and conditions
specified in the trust receipt, or for other purposes substantially equivalent to any of the
following:
1. In the case of goods or documents, (a) to sell the goods or procure their sale; or (b)
to manufacture or process the goods with the purpose of ultimate sale: Provided, That,
in the case of goods delivered under trust receipt for the purpose of manufacturing or
processing before its ultimate sale, the entruster shall retain its title over the goods
whether in its original or processed form until the entrustee has complied fully with his
obligation under the trust receipt; or (c) to load, unload, ship or tranship or otherwise
deal with them in a manner preliminary or necessary to their sale[.]
There are two obligations in a trust receipt transaction. The first is covered by the
provision that refers to money under the obligation to deliver it (entregarla) to the owner
of the merchandise sold. The second is covered by the provision referring to
merchandise received under the obligation to return it (devolvera) to the owner. Thus,
under the Trust Receipts Law,22 intent to defraud is presumed when (1) the entrustee
fails to turn over the proceeds of the sale of goods covered by the trust receipt to the
entruster; or (2) when the entrustee fails to return the goods under trust, if they are not
disposed of in accordance with the terms of the trust receipts.23
In all trust receipt transactions, both obligations on the part of the trustee exist in the
alternative – the return of the proceeds of the sale or the return or recovery of the goods,
whether raw or processed.24 When both parties enter into an agreement knowing that
the return of the goods subject of the trust receipt is not possible even without any fault
on the part of the trustee, it is not a trust receipt transaction penalized under Section
13 of P.D. 115; the only obligation actually agreed upon by the parties would be the
return of the proceeds of the sale transaction. This transaction becomes a mere loan, 25
where the borrower is obligated to pay the bank the amount spent for the purchase of
the goods.
Article 1371 of the Civil Code provides that "[i]n order to judge the intention of the
contracting parties, their contemporaneous and subsequent acts shall be principally
considered." Under this provision, we can examine the contemporaneous actions of the
parties rather than rely purely on the trust receipts that they signed in order to
understand the transaction through their intent.
We note in this regard that at the onset of these transactions, LBP knew that ACDC
was in the construction business and that the materials that it sought to buy under the
letters of credit were to be used for the following projects: the Metro Rail Transit Project
and the Clark Centennial Exposition Project.26 LBP had in fact authorized the delivery
of the materials on the construction sites for these projects, as seen in the letters of
credit it attached to its complaint.27 Clearly, they were aware of the fact that there was
no way they could recover the buildings or constructions for which the materials subject
of the alleged trust receipts had been used. Notably, despite the allegations in the
affidavit-complaint wherein LBP sought the return of the construction materials, 28 its
demand letter dated May 4, 1999 sought the payment of the balance but failed to ask,
as an alternative, for the return of the construction materials or the buildings where
these materials had been used.29
The fact that LBP had knowingly authorized the delivery of construction materials to a
construction site of two government projects, as well as unspecified construction sites,
repudiates the idea that LBP intended to be the owner of those construction materials.
As a government financial institution, LBP should have been aware that the materials
were to be used for the construction of an immovable property, as well as a property of
the public domain. As an immovable property, the ownership of whatever was
constructed with those materials would presumably belong to the owner of the land,
under Article 445 of the Civil Code which provides:
Article 445. Whatever is built, planted or sown on the land of another and the
improvements or repairs made thereon, belong to the owner of the land, subject to the
provisions of the following articles.
Even if we consider the vague possibility that the materials, consisting of cement, bolts
and reinforcing steel bars, would be used for the construction of a movable property,
the ownership of these properties would still pertain to the government and not remain
with the bank as they would be classified as property of the public domain, which is
defined by the Civil Code as:
Article 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks, shores, roadsteads, and
others of similar character;
(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national
wealth.
In contrast with the present situation, it is fundamental in a trust receipt transaction that
the person who advanced payment for the merchandise becomes the absolute owner
of said merchandise and continues as owner until he or she is paid in full, or if the goods
had already been sold, the proceeds should be turned over to him or to her. 30
Thus, in concluding that the transaction was a loan and not a trust receipt, we noted in
Colinares that the industry or line of work that the borrowers were engaged in was
construction. We pointed out that the borrowers were not importers acquiring goods for
resale.31 Indeed, goods sold in retail are often within the custody or control of the trustee
until they are purchased. In the case of materials used in the manufacture of finished
products, these finished products – if not the raw materials or their components –
similarly remain in the possession of the trustee until they are sold. But the goods and
the materials that are used for a construction project are often placed under the control
and custody of the clients employing the contractor, who can only be compelled to
return the materials if they fail to pay the contractor and often only after the requisite
legal proceedings. The contractor’s difficulty and uncertainty in claiming these materials
(or the buildings and structures which they become part of), as soon as the bank
demands them, disqualify them from being covered by trust receipt agreements.
Based on these premises, we cannot consider the agreements between the parties in
this case to be trust receipt transactions because (1) from the start, the parties were
aware that ACDC could not possibly be obligated to reconvey to LBP the materials or
the end product for which they were used; and (2) from the moment the materials were
used for the government projects, they became public, not LBP’s, property.
Since these transactions are not trust receipts, an action for estafa should not be
brought against the respondents, who are liable only for a loan. In passing, it is useful
to note that this is the threat held against borrowers that Retired Justice Claudio
Teehankee emphatically opposed in his dissent in People v. Cuevo, 32 restated in Ong
v. CA, et al.:33
The very definition of trust receipt x x x sustains the lower court’s rationale in dismissing
the information that the contract covered by a trust receipt is merely a secured loan.
The goods imported by the small importer and retail dealer through the bank’s financing
remain of their own property and risk and the old capitalist orientation of putting them
in jail for estafa for non-payment of the secured loan (granted after they had been fully
investigated by the bank as good credit risks) through the fiction of the trust receipt
device should no longer be permitted in this day and age.
As the law stands today, violations of Trust Receipts Law are criminally punishable, but
no criminal complaint for violation of Article 315, paragraph 1(b) of the Revised Penal
Code, in relation with P.D. 115, should prosper against a borrower who was not part of
a genuine trust receipt transaction.
Misappropriation or abuse of confidence is absent in this case.
Even if we assume that the transactions were trust receipts, the complaint against the
respondents still should have been dismissed. The Trust Receipts Law punishes the
dishonesty and abuse of confidence in the handling of money or goods to the prejudice
of another, regardless of whether the latter is the owner or not. The law does not
singularly seek to enforce payment of the loan, as "there can be no violation of [the]
right against imprisonment for non-payment of a debt."34
In order that the respondents "may be validly prosecuted for estafa under Article 315,
paragraph 1(b) of the Revised Penal Code,35 in relation with Section 13 of the Trust
Receipts Law, the following elements must be established: (a) they received the subject
goods in trust or under the obligation to sell the same and to remit the proceeds thereof
to [the trustor], or to return the goods if not sold; (b) they misappropriated or converted
the goods and/or the proceeds of the sale; (c) they performed such acts with abuse of
confidence to the damage and prejudice of Metrobank; and (d) demand was made on
them by [the trustor] for the remittance of the proceeds or the return of the unsold
goods."36
In this case, no dishonesty or abuse of confidence existed in the handling of the
construction materials.
In this case, the misappropriation could be committed should the entrustee fail to turn
over the proceeds of the sale of the goods covered by the trust receipt transaction or
fail to return the goods themselves. The respondents could not have failed to return the
proceeds since their allegations that the clients of ACDC had not paid for the projects
it had undertaken with them at the time the case was filed had never been questioned
or denied by LBP. What can only be attributed to the respondents would be the failure
to return the goods subject of the trust receipts.
We do not likewise see any allegation in the complaint that ACDC had used the
construction materials in a manner that LBP had not authorized. As earlier pointed out,
LBP had authorized the delivery of these materials to these project sites for which they
were used. When it had done so, LBP should have been aware that it could not possibly
recover the processed materials as they would become part of government projects,
two of which (the Metro Rail Transit Project and the Quezon Power Plant Project) had
even become part of the operations of public utilities vital to public service. It clearly
had no intention of getting these materials back; if it had, as a primary government
lending institution, it would be guilty of extreme negligence and incompetence in not
foreseeing the legal complications and public inconvenience that would arise should it
decide to claim the materials. ACDC’s failure to return these materials or their end
product at the time these "trust receipts" expired could not be attributed to its volition.
No bad faith, malice, negligence or breach of contract has been attributed to ACDC, its
officers or representatives. Therefore, absent any abuse of confidence or
misappropriation on the part of the respondents, the criminal proceedings against them
for estafa should not prosper.
In Metropolitan Bank,37 we affirmed the city prosecutor’s dismissal of a complaint for
violation of the Trust Receipts Law. In dismissing the complaint, we took note of the
Court of Appeals’ finding that the bank was interested only in collecting its money and
not in the return of the goods. Apart from the bare allegation that demand was made
for the return of the goods (raw materials that were manufactured into textiles), the bank
had not accompanied its complaint with a demand letter. In addition, there was no
evidence offered that the respondents therein had misappropriated or misused the
goods in question.
The petition should be dismissed because the OSG did not file it and the civil liabilities
have already been settled.
The proceedings before us, regarding the criminal aspect of this case, should be
dismissed as it does not appear from the records that the complaint was filed with the
participation or consent of the Office of the Solicitor General (OSG). Section 35,
Chapter 12, Title III, Book IV of the Administrative Code of 1987 provides that:
Section 35. Powers and Functions. — The Office of the Solicitor General shall represent
the Government of the Philippines, its agencies and instrumentalities and its officials
and agents in any litigation, proceedings, investigation or matter requiring the services
of lawyers. x x x It shall have the following specific powers and functions:
(1) Represent the Government in the Supreme Court and the Court of Appeals in all
criminal proceedings; represent the Government and its officers in the Supreme Court,
the Court of Appeals and all other courts or tribunals in all civil actions and special
proceedings in which the Government or any officer thereof in his official capacity is a
party. (Emphasis provided.)
In Heirs of Federico C. Delgado v. Gonzalez,38 we ruled that the preliminary
investigation is part of a criminal proceeding. As all criminal proceedings before the
Supreme Court and the Court of Appeals may be brought and defended by only the
Solicitor General in behalf of the Republic of the Philippines, a criminal action brought
to us by a private party alone suffers from a fatal defect. The present petition was
brought in behalf of LBP by the Government Corporate Counsel to protect its private
interests. Since the representative of the "People of the Philippines" had not taken any
part of the case, it should be dismissed.1âwphi1
On the other hand, if we look at the mandate given to the Office of the Government
Corporate Counsel, we find that it is limited to the civil liabilities arising from the crime,
and is subject to the control and supervision of the public prosecutor. Section 2, Rule 8
of the Rules Governing the Exercise by the Office of the Government Corporate
Counsel of its Authority, Duties and Powers as Principal Law Office of All Government
Owned or Controlled Corporations, filed before the Office of the National Administration
Register on September 5, 2011, reads:
Section 2. Extent of legal assistance – The OGCC shall represent the complaining
GOCC in all stages of the criminal proceedings. The legal assistance extended is not
limited to the preparation of appropriate sworn statements but shall include all aspects
of an effective private prosecution including recovery of civil liability arising from the
crime, subject to the control and supervision of the public prosecutor.

Based on jurisprudence, there are two exceptions when a private party complainant or
offended party in a criminal case may file a petition with this Court, without the
intervention of the OSG: (1) when there is denial of due process of law to the
prosecution, and the State or its agents refuse to act on the case to the prejudice of the
State and the private offended party;39 and (2) when the private offended party
questions the civil aspect of a decision of the lower court.40

In this petition, LBP fails to allege any inaction or refusal to act on the part of the OSG,
tantamount to a denial of due process. No explanation appears as to why the OSG was
not a party to the case. Neither can LBP now question the civil aspect of this decision
as it had already assigned ACDC’s debts to a third person, Philippine Opportunities for
Growth and Income, Inc., and the civil liabilities appear to have already been settled by
Avent Holdings Corporation, in behalf of ACDC. These facts have not been disputed
by LBP. Therefore, we can reasonably conclude that LBP no longer has any claims
against ACDC, as regards the subject matter of this case, that would entitle it to file a
civil or criminal action.

WHEREFORE, we DENY the petition and AFFIRM the January 20, 2005 decision of
the Court of Appeals in CA-G.R. SP No. 76588. No costs.

SO ORDERED.