WHEREFORE, the petition is hereby DENIED DUE COURSE and is
AMELITA DOLFO, petitioner, vs. THE REGISTER OF DEEDS FOR
THE PROVINCE OF CAVITE, TRECE MARTIRES CITY,
THE REPUBLIC OF THE PHILIPPINES, LAND
REGISTRATION AUTHORITY, CESAR E. CASAL,
RUSTICO A. CASAL, ERNESTO A. CASAL, RODOLFO A.
CASAL, ALFREDO A. CASAL, JR., EMMANUEL A. B.
CASAL, RAFAEL S. CASAL, JR., C. JOSEFINA S. CASAL,
CELEDONIA S. CASAL, WILHELMINA S. CASAL,
MELANIO MEDINA, ADELAIDA MEDINA, AURORA
MEDINA, C. P. G. AGRICOM CORPORATION and HEIRS
OF DAMIAN ERMITANIO and CELEDONIA
MARTINEZ, respondents.
This is a petition for review on certiorari of the decision[1] of the
Sixteenth Division of the Court of Appeals in CA-G.R. SP No. 41896 entitled,
"Amelita Dolfo v. Hon. Novato T. Cajigal, et al." Said decision upheld the
orders dated May 7, 1996 and August 22, 1996 of the Regional Trial Court,
Branch 19, Bacoor, Cavite, in LRC Case Nos. B-89-14 and B-90-6 denying
petitioner's motion for leave to intervene and/or admit complaint in intervention
as well as her motion for reconsideration. The petition likewise assails the
appellate court's resolution denying petitioner's motion for reconsideration and
the trial court's joint decision recognizing the rights of private respondents over
a parcel of land located in Barangay Lantic, Carmona, Cavite which is the
subject of the abovesaid LRC Cases.
The pertinent facts are as follows:
On March 5, 1996, petitioner and Yangtze Properties, Inc. (Yangtze)
filed a motion for leave to file and/or admit complaint-in-intervention in LRC
Cases Nos. B-94-60, B-89-14 and B-90-6 pending before the Regional Trial
Court, Branch 19, Bacoor, Cavite. The first case is for reconstitution of Original
Certificate of Title No. 362 purportedly covering the subject real property,
while the last two were cases for registration of title. Petitioner alleged that she
is the registered owner of the real property subject of the said LRC Cases as
shown by Transfer Certificate of Title No. T-320601 issued in her name by the
Register of Deeds of Trece Martires City. Yangtze, petitioner's co-movant, had
earlier entered into a Contract to Sell with petitioner over the said property.[2] In
its order dated May 7, 1996, the trial court denied the aforementioned motion
on the grounds that: 1) it is a procedural error to file a complaint for intervention
in cases involving original application for land registration, the proceedings
therein being in rem; and 2) there had already been an order of general default
entered by the court against those who failed to oppose the applications. The
trial court noted petitioner's failure to exercise any act of dominion over the
subject property consistent with her allegation of ownership. [3] On May 15,
1996, petitioner and Yangtze filed a motion for reconsideration of the May 7,
1996 order. The trial court, treating the motion as a motion to lift the order of
general default, denied the same in its order dated August 22, 1996. The trial
court gave greater weight to the report of the Land Registration Authority
(LRA) that petitioner's certificate of title was issued without any legal basis and
the report of the National Bureau of Investigation (NBI) that the signature of
Antonia Cabuco, the Register of Deeds of the Province of Cavite signatory on
the certificate, was a forgery. This is notwithstanding the documents proffered
by petitioner allegedly showing the genuineness of the signature of Antonia
Cabuco on the certificate of title. The trial court opined that petitioner's title
over the subject property was of doubtful nature and that allowing her to
intervene in the LRC cases would unduly delay the proceedings. [4]
Meanwhile, on August 1, 1996, Atty. Artemio Caa, in his capacity as
Acting Register of Deeds of the Province of Cavite, filed a complaint for the
annulment of petitioner's certificate of title before the Regional Trial Court,
Branch 89, Bacoor, Cavite.[5] The matter remains pending in that court.
On the other hand, the Regional Trial Court, Branch 19, Bacoor, Cavite
rendered a joint decision recognizing and confirming the rights of private
respondents over the litigated property and ordered the issuance of a Decree of
Registration in their favor.[6]
Later, petitioner filed before the Court of Appeals a petition
for certiorari and mandamus to annul and set aside the above orders of the
Regional Trial Court, Branch 19, Bacoor, Cavite.Petitioner also prayed that the
latter be compelled to give due course to her motion for leave to intervene
and/or admit complaint-in-intervention. The petition was later amended to
include the LRA as party respondent.[7]
On October 20, 1997, the Court of Appeals rendered its decision denying
the petition due course, the dispositive portion of which reads:
DISMISSED. Costs against petitioner.
SO ORDERED.[8]
The Court of Appeals likewise denied petitioner's motion for
reconsideration in its resolution dated April 21, 1998.[9]
Petitioner now contends that:
I. THE RESPONDENT COURT OF APPEALS GRAVELY
ERRED IN HOLDING THAT THE PROPER REMEDY IN
THE LAND REGISTRATION CASES IS AN
OPPOSITION TO THE APPLICATION OF THE
APPLICANTS, AND NOT A MOTION TO INTERVENE
IN THE PROCEEDINGS BEFORE THE TRIAL COURT.
II. THE RESPONDENT COURT OF APPEALS SERIOUSLY
ERRED IN NOT HOLDING THAT THE RESPONDENT
TRIAL COURT GRAVELY ERRED IN NOT ADMITTING
PETITIONER'S MOTION FOR INTERVENTION ON THE
BASIS OF PETITIONER'S POSSESSION OF HER
INDEFEASIBLE TITLE OVER THE SUBJECT
PROPERTIES.
III. THE RESPONDENT COURT OF APPEALS SERIOUSLY
ERRED IN NOT UPHOLDING THE TITLE OF THE
PETITIONER, TCT NO. T-320601, OVER THE
PROPERTIES IN QUESTION DESPITE PETITIONER'S
OVERWHELMING EVIDENCE TO PROVE THE
GENUINENESS AND DUE EXECUTION OF HER TITLE,
AND DESPITE ITS EXPRESS AND CATEGORICAL
ACKNOWLEDGMENT OF THE FACT THAT
PETITIONER INDEED PRESENTED NUMEROUS
DOCUMENTS TO PROVE THE AUTHENTICITY OF
HER TITLE.
We find petitioner's contentions unmeritorious.
First. The provisions of 14 and 25 of P.D. No. 1529 (Property
Registration Decree) show that the applicant and the oppositor are the only
parties in cases of original applications for land registration, unlike in ordinary
civil actions where parties may include the plaintiff, the defendant, third party
complainants, cross-claimants, and intervenors.
It is now settled that a motion to intervene in a land registration case
cannot be allowed. A party wishing to be heard should ask for the lifting of the
order of general default, and then if lifted, file an opposition to the application
for registration. This is so because proceedings in land registration are in
rem and not in personam, the sole object being the registration applied for, not
the determination of any right connected with the registration. [10]
Second. Both the trial court and the Court of Appeals made a factual
finding that petitioner's title to the land is of doubtful authenticity.
Having jurisdiction only to resolve questions of law, this Court is bound
by the factual findings of the trial court and the Court of Appeals. [11] Even if
intervention is allowed in cases of original registration of title, petitioner cannot
rely on her certificate of title in view of the evidence respecting its
genuineness. As correctly held by the Court of Appeals:
Moreover, even if intervention is proper, petitioner's reliance on her title is
infirm. While she presented numerous documents to prove its authenticity,
however, they have been disputed by Benjamin Flestado, Chief of the
Inspection and Investigation Division of the Land Registration Authority
(LRA), in his Report showing that her T.C.T. No. T-320601 was
issued without legal basis and that no document was on file with the Primary
Entry Book of the Registry of Deeds of Trece Martires City to support the
issuance thereof. This Report concludes that petitioner's T.C.T. No. T-320601
is spurious. Such finding is reinforced by the NBI Report dated June 20, 1996
showing that the signature of Register of Deeds Antonia Cabuco appearing on
petitioner's title is a forgery. Consequently, Atty. Artemio Cana, Acting
Register of Deeds of Cavite, filed a complaint with the Regional Trial Court,
Branch 89 at Bacoor for annulment of petitioner's title.[12]
1
 The rule that a title issued under the Torrens System is presumed valid
and, hence, is the best proof of ownership of a piece of land does not apply
where the certificate itself is faulty as to its purported origin. [13]
In this case, petitioner anchors her arguments on the premise that her title
to the subject property is indefeasible because of the presumption that her
certificate of title is authentic.However, this presumption is overcome by the
evidence presented, consisting of the LRA report dated May 24, 1996 [14] that
TCT No. T-320601 was issued without legal basis and the NBI report dated
June 20, 1996[15] that the signature of Antonia Cabuco was a forgery. Although
petitioner submitted documents purporting to show the genuineness of Antonia
Cabuco's signature, she has not refuted the findings contained in the LRA report
that her certificate of title has no legal basis. Thus, in its report, the LRA stated:
Verification conducted in the Registry of Deeds of Cavite Province on 21 May
1996 disclosed that there is no document on file in the registry vault to support
the issuance of TCT No.T-320601 in favor of Amelita Dolfo. Even the
Primary Entry Book for Act 496 under the date 18 November 1991 does not
indicate that a document was presented for registration in favor of Amelita
Dolfo affecting TCT No. 11520 which resulted in the issuance of TCT No. T-
320601. Instead, page 232 of the Primary Entry Book, Volume 47 (Annex
"B") shows that under the date - 18 November 1991 there appears no
document entered therein at 11:05 a.m. in favor of Amelita Dolfo or in her
behalf affecting the parcel of land described in TCT No. T-320601.
This Investigator also failed to locate despite the thorough search of the vault
clerks, TCT No. 11520 the supposed title from whence the subject TCT No.
T-320601 was derived. What are filed in the title volume are certificates of
titles, including TCT No. T-11519 and TCT No. T-11521 both issued by RD
Cuevas on 5 November 1964 at 9:00 a.m. (see Annexes "C" & "C-1"). In
other words, TCT No. 11520 was supposed to have been issued by RD Cuevas
in November 1964. In the absence of the title, it cannot however be
determined if TCT No. T-11520 covers the same parcel of land in the subject
title of Amelita Dolfo.
Records of this Authority show that Judicial Forms 109 and 109-D (CB
printed) with Serial No. 2061717 were requisitioned by and issued to Cavite
Registry of Deeds on 21 October 1991. There appears no report of consumption
pertaining to those title-forms was submitted by the Cavite Registry of Deeds
(see Annexes "D" to "D-5").
On the other hand, records of the Cavite Registry of Deeds show that Judicial
Forms 109-109-D with Serial No. 2061717 were consumed and used for a
certificate and of title, TCT No. 322182, in favor of Manuel dela Cruz and not
for issuance of TCT No. T-320601 in favor of Amelita Dolfo. This is
confirmed by the Certification of Deputy Register of Deeds, dated 21 May
1996 (Annex "E"), which attests:
This is to certify that as per records on file in the issuance book dated October
25, 1991, Judicial Form 109-109-D with Serial No. 2061717 was issued to
Manuel dela Cruz with corresponding TCT No. 322182 and not TCT No. T-
320601 in favor of Amelita Dolfo.
It is, however, also unfortunate that TCT No. 322182 (with Serial No.
2061717) and the certificate of title with Serial No. 2061716 are not also filed
in the corresponding title (book) volume. What are filed therein are
certificates of title, including TCT No. T-322180 (with Serial No. 2061715)
and TCT No. T-322183 (with Serial No. 2061718) both issued by RD Cabuco
on 8 August 1993 and 25 October 1991, respectively (see Annexes "F" & "F-
1").
The Issuance Book of title-forms on file in the Cavite RD, particularly page
134 (Annex "G"), also confirms that Judicial Form 2061717 was issued or
released for TCT No. 322182 and not for TCT No. T-320601.
Furthermore, registry records show, particularly the same Issuance Book of
title-forms, page 88 (Annex "H"), that the Judicial Forms 109 and 109-D used
for the genuine TCT No. 320601 were with Serial No. 2037534 (erroneously
typed in the certification as 2037519); and that the said TCT No. 320601 was
issued in the name of Molino Homes and not in favor of Amelita Dolfo. This
is confirmed by the Certification of DRD Diosdado A. Concepcion, dated 21
May 1996, which states (Annex "H-1"):
This is to certify that as per records on file in this registry, dated October 8,
1991 Judicial Form 109-109-D with Serial Number 2037519 TCT No. 320601
Book No. 1701 Page 101 issued in the name of Molino Homes and was
received by Amania Jimenez.
When interviewed, DRD Concepcion disclosed to this Investigator that the
supposed original of TCT No. T-320601 in the name of Amelita Dolfo is
detached from the title volume. He could not tell where it is now, not even the
vault clerks of the registry. However, Atty. Concepcion surmised that the
same is in the possession/custody of Ms. Melany Victoria, OIC Deputy
Registry of Deeds. Atty. Concepcion furnished this Investigator a certified
copy (of a xerox copy in his file) of the subject TCT No. T-320601 (see
Annex "I"). He further intimated that based on his own personal verification
he believes that the supposed title in the name of Amelita Dolfo is of doubtful
authenticity. In fact, Atty. Concepcion further averred, that former Register of
Deeds Antonia Cabuco disowned the signature above the typewritten name
"Antonia B. Cabuco, Register of Deeds" in the subject TCT No.T-320601.[16]
In an effort to remove any doubt on the veracity of her certificate of title,
petitioner questioned the credibility of Atty. Artemio Caa who filed an action
for annulment of her title. However, her evidence to prove the genuineness of
her certificate of title was the letter of the LRA Administrator, Reynaldo Maulit,
who, in declaring the existence of TCT No. T-320601 in the vaults of the
Register of Deeds of the Province of Cavite, referred to the letter-report of the
same Atty. Artemio Caa dated April 30, 1996.[17]
Thus, petitioner cannot invoke the indefeasibility of her certificate of
title. It bears emphasis that the Torrens system does not create or vest title but
only confirms and records one already existing and vested. [18] Thus, while it
may be true, as petitioner argues, that a land registration court has no
jurisdiction over parcels of land already covered by a certificate of title, it is
equally true that this rule applies only where there exists no serious controversy
as to the authenticity of the certificate.
Fourth. Indeed, to allow petitioner to intervene in the LRC cases would
not avoid multiplicity of suits in view of the case for annulment and cancellation
of TCT No. T-320601 now pending before the Regional Trial Court, Branch
89, Bacoor, Cavite. It is premature for petitioner to intervene in the LRC cases
because her certificate of title, supposedly her best proof of ownership over the
property described therein, is questionable. Besides, inasmuch as the
authenticity of her certificate of title is also being questioned in the LRC cases,
the evidence that she will present to the prove the contrary would be the same
evidence she will present in the case for annulment of title. At this point, where
there is already a decree of registration issued in favor of private respondents,
it is moot and academic to allow petitioner to participate in the LRC cases for
the purpose of preventing possible double titling of property. As the trial court
correctly stated, petitioner is not left without remedy even if she was not
allowed to intervene. If it is shown that her certificate of title is genuine and that
she is the true owner of the litigated property, the proceedings in the land
registration cases would then be null and void because the trial court has no
jurisdiction on the matter. Otherwise, she could sue for damages.
WHEREFORE, the petition is DENIED and the decision and the
resolution of the Court of Appeals are AFFIRMED. Costs against petitioner.
SO ORDERED.
AUTOCORP GROUP and AUTOGRAPHICS, INC., petitioners, vs. Hon.
COURT OF APPEALS and KEPPEL MONTE BANK
(formerly Promulgated: Monte de Piedad and Savings
Bank), respondents.
DECISION
PUNO, J.:
Petitioners are before us on a Petition for Review on Certiorari assailing
the decision[1] and resolution[2] of the Court of Appeals in CA-G.R. SP No.
59004, which set aside the order[3]and resolution[4] of the Regional Trial Court
(RTC) of Cebu City, Branch 5, granting a writ of preliminary injunction against
the respondent Keppel Monte Bank and the Register of Deeds of Cebu City.
The records show that respondent bank extended a loan of eighty-five
million pesos (P85,000,000.00) in favor of petitioner Autocorp Group
(Autocorp). The loan is embodied in an Agreement[5] dated December 16, 1994
which was secured by pledge and real estate mortgage on several properties,
among which, were lots in Cebu City, co-owned by petitioner Autographics,
2
Inc., and covered by Transfer Certificates of Title (TCT) Nos. 72002, 72132,
85737, and 102042, and lots in Lapu-lapu City, registered under the name of
Eurasia Heavy Industries, Inc., and covered by TCT Nos. 19135 and 19136.
The Agreement provided that the CREDITOR may, at its sole discretion, treat
the whole obligation, its principal and accrued interest and other charges, as
immediately due, payable and defaulted, without necessity of any demand,
presentment or notice by the CREDITOR to the DEBTOR in any event of
default, such as, when [t]he DEBTOR fails to pay the principal loan, interests,
and other fees and charges, or any part thereof as they fall due.
Petitioner Autocorp failed to pay the loan. Despite its failure, it asked for
an additional loan of P48,800,000.00 payable in one year at 20% interest per
annum. Of this additional loan, P17,000,000.00 was applied partially against
the original loan. Autocorp was again unable to pay both accounts
totaling P116,800,000.00, despite repeated demands and various requests for
extension.[6]
Hence, in a notarized letter[7] dated September 8, 1997, addressed to the
Office of the Provincial Sheriff of Cebu City, respondent bank requested for the
sale of the six (6) mortgaged lots at a public auction, for the satisfaction of
petitioner Autocorps obligations, which, as of July 15, 1997, allegedly
amounted to P143,871,904.00, and a sum equivalent to 10% as attorneys fees.
The letter was filed with the Office of the Clerk of Court Ex Oficio Provincial
Sheriff of Cebu City on September 12, 1997, and raffled to Deputy Sheriff
Jessie Belarmino on September 15, 1997, for implementation.[8]
Before Deputy Sheriff Belarmino could prepare the requisite publication
and notice, the petitioners filed a complaint for Annulment of Loan Agreement
and Real Estate Mortgage/ Declaration of Unenforceability of Loan Agreement
and Real Estate Mortgage with ex parte Restraining Order, Preliminary
Injunction and Damages[9] against respondent bank, the Clerk of Court Ex
Oficio Provincial Sheriff of Cebu, and Deputy Sheriff Belarmino. Summons
and notice of raffle were served on respondent bank and its co-defendants on
September 24, 1997. The case was raffled to Branch 23 of the RTC of Cebu
City. On October 1, 1997, the trial court issued a Temporary Restraining Order
(TRO) effective for seventy-two (72) hours. After a summary hearing on
October 3, 1997, the TRO was extended for twenty (20) days. [10]
On October 16, 1997, the trial court issued a writ of preliminary
injunction,[11] conditioned on petitioners filing of a bond of two million pesos
(P2,000,000.00). It also set the pre-trial hearing of the case. The respondent
bank sought a reconsideration of the order but in vain.
Respondent bank filed a petition for certiorari under Rule 65 of the
Rules of Court with the Court of Appeals, to annul the order and resolution of
the trial court. It contended that the preliminary injunction was issued without
the requisite prior notice and hearing, provided under Section 5, Rule 58 of the
1997 Rules of Court. The Court of Appeals granted the petition on November
12, 1998, after finding that the summary hearing conducted by the trial court
was insufficient. The decision was held to be without prejudice to his (the trial
court judges) conducting the required hearing to determine whether preliminary
injunction should be issued.[12]
The counsel for respondent bank immediately informed Deputy Sheriff
Belarmino of the Court of Appeals favorable decision. In a letter[13] dated
November 25, 1998, said counsel furnished Deputy Sheriff Belarmino with a
copy of the November 12, 1998 Decision of the Court of Appeals and requested
him to proceed with the foreclosure.
In response, Deputy Sheriff Belarmino prepared and served the Notice
of Extrajudicial Sale.[14] He scheduled the extrajudicial sale on January 7, 1999
at 10:00 a.m. Before the notice could be published, petitioners filed an Urgent
Motion to Hold in Abeyance the Extrajudicial Sale in Case No. EJF-2397-
CEB[15] dated December 7, 1997 with Branch 5[16] of the RTC of Cebu City. In
addition, it filed a Very Urgent Motion for Issuance of an Order of Status
Quo[17] with the Court of Appeals on December 17, 1998.
In its Resolution[18] dated December 22, 1998, the Court of Appeals
denied the motion of the petitioners. It ruled that its November 12, 1998
Decision had become final and executory, hence, the motion of petitioners
should be resolved by the trial court. On January 6, 1999, the RTC of Cebu City,
Branch 5, also denied petitioners motion to hold the extrajudicial sale in
abeyance on the ground that petitioners violated the rule against forum-
shopping.[19] Petitioners filed a motion for the reconsideration of the trial courts
decision but without any success.
The extrajudicial sale proceeded on January 7, 1999 at 10:00 a.m. and
closed at 10:45 a.m. The six (6) properties were awarded to respondent bank as
the lone bidder. Deputy Sheriff Belarmino issued a Certificate of Sale dated
January 7, 1999 with the approval of Executive Judge Priscila Agana. [20]
On January 13, 1999, petitioners filed a motion to admit their
Amended/Supplemental Complaint with a prayer for the issuance of an ex
parte Temporary Restraining Order and an Order for Preliminary
Injunction[21] with the RTC of Cebu City, Branch 5. It aimed to stop the Register
of Deeds of Cebu from registering the Certificate of Sale in the name of
respondent bank and the latter from taking possession of the properties subject
of the foreclosure. In addition, the amended complaint sought the annulment of
the extrajudicial foreclosure due to several alleged irregularities in the conduct
of the sale.
On January 21, 1999 at 4:30 p.m., respondent bank presented the sheriffs
certificate of sale to the Register of Deeds of Cebu City, involving the four (4)
properties located in Cebu Citycovered by TCT Nos. 72002, 72132, 85737, and
102042. On the same date, the certificate was entered in the primary entry book
of the Register of Deeds of Cebu. However, the entry fee of P30.00 and the
registration fee of P154,923.00 were paid only the following day or on January
22, 1999 as the cashier in charge of receiving payment had already
left. Respondent bank also presented the sheriffs certificate of sale to the
Register of Deeds of Lapu-lapu City with respect to the two (2) subject lots,
covered by TCT Nos. 19135 and 19136, located therein. [22]The certificate of
sale was duly annotated at the back of the transfer certificates of title of the
subject lots with a note that this include[s] four (4) other lots situated
in Cebu City.[23]
On January 25, 1999, the RTC of Cebu City, Branch 5, admitted the
amended/supplemental complaint of petitioners and granted their prayer for the
issuance of a TRO, directing the Office of the Register of Deeds to refrain from
registering the assailed sheriffs certificate of sale and also respondent bank from
taking possession of the properties subject of the certificate of sale. It required
the respondent bank to file its answer to the amended/supplemental complaint,
within ten (10) days from receipt of the order, and set a hearing on the propriety
of issuing a writ of preliminary injunction on February 15, 1999. [24]
Respondent banks counsel failed to appear on the scheduled February
15, 1999 hearing despite due notice. Petitioners presented their evidence ex
parte. As the TRO it issued was to expire on the same day, the trial court issued
the preliminary injunction on the basis of the evidence adduced by
petitioners. The dispositive portion of the order states:
WHEREFORE, in view of the foregoing, the court hereby grants the
preliminary injunction and let a writ issue after the plaintiffs shall have put up
a bond of ONE HUNDRED THOUSAND (P100,000.00) Pesos conditioned
that the applicant will pay the adverse party of all damages which it may
sustain by reason of the injunction if the court will finally decide that the
applicant is not entitled thereto.Consequently, the Office of the Register of
Deeds, Cebu City is enjoined not to register the Certificate of Sale, dated
January 7, 1999, and likewise defendant Monte de Piedad is directed not to
take possession or do any act related thereto on the properties subject of said
Certificate of [S]ale until further orders from this court.[25]
Respondent banks motion for reconsideration was denied in an Order
dated March 9, 1999.[26]
On May 29, 2000, respondent bank filed a petition for certiorari[27] under
Rule 65 of the Rules of Court with the Court of Appeals, seeking to annul the
orders of the trial court dated February 15, 1999 and March 9, 1999. Respondent
bank contended that the entry of the certificate of sale in the primary entry book
on January 21, 1999 was equivalent to registration.Hence, the TRO dated
January 25, 1999 and the preliminary injunction dated February 15, 1999, were
issued with grave abuse of discretion, the registration of the certificate of sale
having already become fait accompli at the time. Respondent bank also faulted
the part of the order prohibiting petitioner from taking possession of the
properties as it has not even filed a petition for a writ of possession at the time
as required by Section 7 of Act No. 3135.
On August 16, 2002, the Court of Appeals rendered its first assailed
decision,[28] annulling and setting aside the trial courts February 15, 1999 Order
and April 28, 2000 Resolution. It held that the entry of the certificate of sale in
the primary entry book was equivalent to registration, citing Section 56 of
Presidential Decree (P.D.) No. 1529, also known as the Property Registration
Decree, and the case of DBP vs. Acting Register of Deeds of Nueva
Ecija.[29] The Court of Appeals held that the failure of respondent bank to pay
the entry and registration fees, on the same day that the sheriffs certificate of
sale was presented and entered in the primary entry book, was not respondents
3
fault but due to the absence of the cashier. In any case, it ruled that the payment
by respondent bank the following day cured the defect. The Court of Appeals
also found as premature the injunction to stop respondent bank from taking
possession of the properties.
Petitioners motion for reconsideration was denied by the Court of
Appeals in a Resolution dated March 17, 2003.[30]
Hence, this petition where petitioners raise the following issues:
I registration of a voluntary instrument, it is necessary not only to register the
ARE THE QUESTIONED DECISION OF THE COURT OF APPEALS AND
ITS RESOLUTION DATED AUGUST 16, 2002 AND MARCH 17, 2003 IN
CA-G.R. SP. NO. 59004 IN ACCORD WITH THE LAW AND
JURISPRUDENCE THEREON?
II
CAN THE COURT OF APPEALS IN A PETITION FOR CERTIORARI
PASS UPON AND REVERSE THE FINDINGS OF FACT AND LAW OF
THE TRIAL COURT MADE IN THE EXERCISE OF ITS
JURISDICTION?[31]
Petitioners contend that payment of the entry fee is a condition sine qua
non before any valid entry can be made in the primary entry book. Allegedly,
the Court of Appeals resorted to judicial legislation when it held that the
subsequent payment of the entry fee was curative and a substantial compliance
with the law. Petitioners claim that the ruling in DBP vs. Acting Register of
Deeds of Nueva Ecija does not apply to this case. As there was no valid
registration, petitioners conclude that the order of the trial court issuing a writ
of preliminary injunction was proper, considering the irregularities present in
the conduct of the extrajudicial foreclosure such as: (a) the petition for
extrajudicial foreclosure was not filed with the executive judge of the RTC of
Cebu City but only with the Clerk of Court Ex Oficio Sheriff, Atty. Jeffrey
Joaquino; (b) the notice of extrajudicial foreclosure was made three (3) days
ahead of the finality of the November 12, 1998 Decision of the Court of Appeals
in CA-G.R. SP No. 48305, which dissolved the first writ of preliminary
injunction issued by the court a quo; and (c) the extrajudicial foreclosure sale
on January 7, 1999 was not supervised by the Clerk of Court Ex Oficio Sheriff,
as required under Administrative Order No. 3-98 of this Court.[32]
We find the petition bereft of merit.
First. The objection as to the payment of the requisite fees is
unavailing. There is no question that the fees were
paid, albeit belatedly. Respondent bank presented the certificate of sale to the
Office of the Register of Deeds of Cebu City for registration on January 21,
1999 at 4:30 p.m. As the cashier had already left, the Office could not receive
the payment for entry and registration fees, but still, the certificate of sale was
entered in the primary entry book. The following day, respondent bank paid the
requisite entry and registration fees. Given the peculiar facts of the case, we
agree with the Court of Appeals that the payment of respondent bank must be
deemed to be substantial compliance with the law; and, the entry of the
instrument the day before, should not be invalidated. In any case, even if we
consider the entry to have been made on January 22, the important fact is that
the entry in the primary entry book was done prior to the issuance of the writ of
injunction by the trial court.
Section 56 of P.D. No. 1529 provides:
SEC. 56. Primary Entry Book; fees; certified copies. Each Register of Deeds
shall keep a primary entry book in which, upon payment of the entry fee, he
shall enter, in the order of their reception, all instruments including copies of
writs and processes filed with him relating to registered land. He shall, as a
preliminary process in registration, note in such book the date, hour and
minute of reception of all instruments, in the order in which they were
received. They shall be regarded as registered from the time so noted, and
the memorandum of each instrument, when made on the certificate of title to
which it refers, shall bear the same date: Provided, that the national
government as well as the provincial and city governments shall be exempt
from the payment of such fees in advance in order to be entitled to entry and
registration. (emphasis ours)
Second. Petitioners contend that the aforecited case of DBP is not
apropos to the case at bar. Allegedly, in DBP, the bank not only paid the
registration fees but also presented the owners duplicate certificate of title. We
find no merit in petitioners posture. They fail to consider the voluntary or
involuntary nature of the instrument subject of registration. A voluntary
instrument is a willful act of the registered owner of the land to be affected by
registration,[33] while an involuntary instrument is one pertaining to a
transaction affecting lands in which the registered owners cooperation is not
needed and which transaction may even be done against his will.[34] For the
deed, instrument or assignment, mortgage, or lease in the entry book of the
register of deeds, but a memorandum thereof must also be made on the owners
duplicate and on its original.The mere entry by the register of deeds in the entry
or diary book, without the presentation of the owners duplicate certificate of
title for corresponding annotation of the conveyance, does not have the effect
of a conveyance of the property.[35] On the other hand, for the registration of an
involuntary instrument, the law does not require the presentation of the owners
duplicate certificate of title and considers the annotation of such instrument
upon the entry book, as sufficient to affect the real estate to which it
relates.[36] The reason for the difference is obvious. In a voluntary instrument,
the registered owner of the land to be affected by registration is presumed to be
interested in registering the instrument and would willingly surrender, present
or produce his duplicate certificate of title to the register of deeds in order to
accomplish such registration. On the other hand, as the registration of an
involuntary instrument is contrary to the interest of the registered owner or will
affect him adversely, it is but natural that he will not willingly present or
produce his duplicate certificate or at least delay the production as long as
possible.[37]
Like in DBP vs. Acting Register of Deeds of Nueva Ecija, [38] the
instrument involved in the case at bar, is a sheriffs certificate of sale. We hold
now, as we held therein, that the registrant is under no necessity to present the
owners duplicates of the certificates of title affected, for purposes of primary
entry, as the transaction sought to be recorded is an involuntary transaction.
Registration is merely a specie of notice.[39] It is a ministerial act by
which an instrument is sought to be inscribed in the records of the Office of the
Register of Deeds and annotated at the back of the certificate of title covering
the land subject of the instrument. It is not a declaration by the State that such
an instrument is a valid and subsisting interest in the land.[40] The law on
registration does not require that only valid instruments shall be registered. The
purpose of registration is merely to give notice.[41]
It is a ministerial duty on the part of the Register of Deeds to annotate
the instrument on the certificate of sale after a valid entry in the primary entry
book. P.D. No. 1524 provides:
SEC. 63. Foreclosure of Mortgage. x x x
(b) If the mortgage was foreclosed extrajudicially, a certificate of sale
executed by the officer who conducted the sale shall be filed with the Register
of Deeds who shall make a brief memorandum thereof on the certificate of
title. (emphases ours)
In fine, petitioners prayer for the issuance of a writ of injunction, to
prevent the register of deeds from registering the subject certificate of sale, had
been rendered moot and academic by the valid entry of the instrument in the
primary entry book. Such entry is equivalent to registration. Injunction would
not lie anymore, as the act sought to be enjoined had already become a fait
accompli or an accomplished act.
Third. As to the writ of injunction preventing respondent bank from
possessing the subject lands, Act No. 3135 provides:
SECTION 7. In any sale made under the provisions of this Act, the purchaser
may petition the Court of First Instance of the province or place where the
property or any part thereof is situated, to give him possession thereof during
the redemption period, furnishing bond in an amount equivalent to the use of
the property for a period of twelve months, to indemnify the debtor in case it
be shown that the sale was made without violating the mortgage or without
complying with the requirements of this Act. Such petition shall be made
under oath and filed in form of an ex parte motion in the registration or
cadastral proceedings if the property is registered, or in special proceedings in
the case of property registered under the Mortgage Law or under section one
hundred and ninety-four of the Administrative Code, or of any other real
property encumbered with a mortgage duly registered in the office of any
4
register of deeds in accordance with any existing law, and in each case the
clerk of the court shall, upon the filing of such petition, collect the fees
specified in paragraph eleven of section one hundred and fourteen of Act
Numbered Four hundred and ninety-six, as amended by Act Numbered
Twenty-eight hundred and sixty-six, and the court shall, upon approval of the
bond, order that a writ of possession issue, addressed to the sheriff of the
province in which the property is situated, who shall execute said order
immediately.
A writ of possession is generally understood to be an order whereby a
sheriff is commanded to place a person in possession of a real or personal
property, such as, when a property is extrajudicially foreclosed. It has been
consistently held that during the period of redemption after the registration of
the sale, a writ of possession issues as a matter of course upon the filing of the
proper motion and the approval of a bond. A writ of possession may also be
issued after consolidation of ownership of the property in the name of the
purchaser. It is settled that the buyer in a foreclosure sale, who becomes the
absolute owner of the property if the same is not redeemed during the one-year
redemption period after the registration of the sale, is entitled to the possession
of the property and can demand it at any time, following the consolidation of
ownership in his name and the issuance to him of a new transfer certificate of
title. To underscore the writs ministerial character, we have disallowed
injunction to prohibit its issuance, just as we have held that issuance of the same
may not be stayed by a pending action for annulment of the mortgage or the
foreclosure itself.[42]
The preliminary injunction issued by the trial court to prevent respondent
bank from taking possession of the subject lots, was properly set aside by the
Court of Appeals, as the trial court judge acted with grave abuse of discretion
when it issued the same. It was not alleged that respondent bank committed acts
of possession over the properties before it could file a petition for a writ of
possession during the redemption period. If the trial court cannot refuse to issue
a writ of possession in the event that respondent bank complies with the
requisites for its issuance, with more reason that the trial court cannot issue an
injunction, preempting respondent bank from filing a petition or application for
a writ of possession, over the properties subject of the certificate of sale.
IN VIEW WHEREOF, the petition is dismissed. The assailed decision
and resolution of the Court of Appeals are affirmed.
Cost against petitioners.
SO ORDERED.
OSCAR R. AMPIL, Petitioner,
vs.
THE HON. OFFICE OF THE OMBUDSMAN, POLICARPIO L.
ESPENESIN, Registrar, Register of Deeds, Pasig City, FRANCIS
SERRANO, YVONNE S. YUCHENGCO, and GEMA O.
CHENG, Respondents.
x-----------------------x
G.R. No. 199115
OSCAR R. AMPIL, Petitioner,
vs.
POLICARPIO L. ESPENESIN, Respondent.
No less than the Constitution maps out the wide grant of investigatory powers
to the Ombudsman.1 Hand in hand with this bestowal, the Ombudsman is
mandated to investigate and prosecute, for and in behalf of the people,
criminal and administrative offenses committed by government officers and
employees, as well as private persons in conspiracy with the former. 2 There
can be no equivocation about this power-and-duty function of the
Ombudsman.
Before us are consolidated petitions separately filed by Oscar R. Ampil
(Ampil): (1) one is for certiorari under Rule 65 of the Rules of Court docketed
as G.R. No. 192685; and (2) the other is for review on certiorari under Rule 45
of the Rules of Court docketed as G.R. No. 199115.
Challenged in the petition for certiorari is the Resolution3 of the Ombudsman
in OMB-C-C-07-0444-J, dismissing the criminal complaint filed by Ampil
against respondents Policarpio L. Espenesin (Espenesin), Francis Serrano
(Serrano), Yvonne S. Yuchengco (Yuchengco) and Gema O. Cheng (Cheng),
and the Order4 denying Ampil’s motion for reconsideration thereof. Ampil’s
complaint charged respondents with Falsification of Public Documents under
Article 171(6) of the Revised Penal Code and violation of Sections 3(a) and
(e) of Republic Act No. 3019, The Anti-Graft and Corrupt Practices Act, as
amended.
The appeal by certiorari, on the other hand, assails the Decision of the Court
of Appeals in CA G.R. SP No. 113171, which affirmed the Order dated 13
July 2009 of the Ombudsman in OMB-C-A-07-0474-J on the administrative
aspect of the mentioned criminal complaint for Falsification and violation of
Republic Act No. 3019 against the Registrar of Deeds, respondent Espenesin.
Initially, the Ombudsman issued a Decision dated 30 April 2008, finding
Espenesin guilty of Simple Misconduct and meting on Espenesin the penalty
of one (1) month suspension. On motion for reconsideration of Ampil, the
Ombudsman favored Espenesin’s arguments in his Opposition, and recalled
the one-month suspension the Ombudsman had imposed on the latter.
These consolidated cases arose from the following facts.
On 9 November 1995, ASB Realty Corporation (ASB) and Malayan Insurance
Company (MICO) entered into a Joint Project Development Agreement
(JPDA) for the construction of a condominium building to be known as "The
Malayan Tower." Under the JPDA, MICO shall provide the real property
located at the heart of the Ortigas Business District, Pasig City, while ASB
would construct, and shoulder the cost of construction and development of the
condominium building.
A year thereafter, on 20 November 1996, MICO and ASB entered into another
contract, with MICO selling to ASB the land it was contributing under the
JPDA. Under the Contract to Sell, ownership of the land will vest on ASB
only upon full payment of the purchase price.
Sometime in 2000, ASB, as part of the ASB Group of Companies, filed a
Petition for Rehabilitation with Prayer for Suspension of Actions and
Proceedings before the Securities and Exchange Commission (SEC). As a
result, the SEC issued a sixty (60) day Suspension Order (a) suspending all
actions for claims against the ASB Group of Companies pending or still to be
filed with any court, office, board, body, or tribunal; (b) enjoining the ASB
Group of Companies from disposing of their properties in any manner, except
in the ordinary course of business, and from paying their liabilities
outstanding as of the date of the filing of the petition; and (c) appointing Atty.
Monico V. Jacob as interim receiver of the ASB Group of
Companies.5 Subsequently, the SEC, over the objections of creditors,
approved the Rehabilitation Plan submitted by the ASB Group of Companies,
thus:
PREMISES CONSIDERED, the objections to the rehabilitation plan raised by
the creditors are hereby considered unreasonable.
Accordingly, the Rehabilitation Plan submitted by petitioners is hereby
APPROVED, except those pertaining to Mr. Roxas’ advances, and the ASB-
Malayan Towers. Finally, Interim Receiver Mr. Fortunato Cruz is appointed
as Rehabilitation Receiver.6 (Emphasis supplied).
Because of the obvious financial difficulties, ASB was unable to perform its
obligations to MICO under the JPDA and the Contract to Sell. Thus, on 30
April 2002, MICO and ASB executed their Third contract, a Memorandum of
Agreement (MOA),7 allowing MICO to assume the entire responsibility for
the development and completion of The Malayan Tower. At the time of the
execution of the MOA, ASB had already paid MICO ₱427,231,952.32 out of
the ₱640,847,928.48 purchase price of the realty.8
The MOA specifies the entitlement of both ASB and MICO to net saleable
areas of The Malayan Tower representing their investments. It provides, in
pertinent part:
Section 4. Distribution and Disposition of Units. (a) As a return of its capital
investment in the Project, each party shall be entitled to such portion of all the
net saleable area of the Building that their respective contributions to the
Project bear to the actual construction cost. As of the date of the execution
5
hereof, and on the basis of the total costs incurred to date in relation to the
Remaining Construction Costs (as defined in Section 9(a) hereof), the parties
shall respectively be entitled to the following (which entitlement shall be
conditioned on, and subject to, adjustments as provided in sub-paragraph (b)
of Section 4 in the event that the actual remaining cost of construction exceeds
the Remaining Construction Cost):
(i) MICO – the net saleable area particularly described in Schedule 2 hereof.
(ii) ASB – the following net saleable area:
(A) the net saleable area which ASB had pre-sold for an aggregate purchase
price of ₱640,085,267.30 as set forth in Schedule 1 (including all paid and
unpaid proceeds of said presales);
(B) the net saleable area particularly described in Schedule 3 hereof which
shall be delivered to ASB upon completion of the Project; and,
(C) provided that the actual remaining construction costs do not exceed the
Remaining Construction Cost, the net saleable area particularly described in
Schedule 4 hereof which shall be delivered to ASB upon completion of the
Project and determination of its actual construction costs. If the actual
remaining construction costs exceed the Remaining Construction Cost, sub-
paragraph (b) of this Section 4 shall apply.
(b) In the event that the actual remaining construction costs exceed the
Remaining Construction Cost as represented and warranted by ASB to MICO
under Section 9(a) hereof, and MICO pays for such excess, the pro-rata
sharing in the net saleable area of the Building, as provided in sub-paragraph
(a) of this Section 4 shall be adjusted accordingly. In such event, MICO shall
be entitled to such net saleable area in Schedule 4 that corresponds to the
excess of the actual remaining cost over the Remaining Construction Cost.
(c) To ensure the viability of the Project, the parties agree on a single pricing
system, which MICO shall have the exclusive right to fix and periodically
adjust based on prevailing market conditions in consultation with, but without
need of consent of, ASB, for each party’s primary sale or other disposition of
its share in the net saleable area of the Building. In accordance with the
immediately preceding provision, MICO hereby adopts the selling prices set
forth in Schedule 5 hereof. Each party or its officers, employees, agents or
representatives shall not sell or otherwise dispose any share of said party in
the net saleable area of the Building below the prices fixed by MICO in
accordance with this Section 4 (c). MICO shall have the exclusive right to
adopt financing and discounting schemes to enhance marketing and sales of
units in the Project and such right of MICO shall not be restricted or otherwise
limited by the foregoing single pricing system provision.
(d) Each party shall bear the profits earned and losses incurred as well as any
and all taxes and other expenses in connection with the allocation or sale of, or
other transaction relating to, the units allotted to each party. 9
On 11 March 2005, Condominium Certificates of Title (CCTs) for 38
units10 and the allotted parking spaces were issued in the name of ASB. On
even date but prior to its release, another set of CCTs covering the same
subject units but with MICO as registered owner thereof, was signed by
Espenesin in his capacity as Registrar of Deeds of Pasig City. Notably,
Espenesin had likewise signed the CCTs which were originally issued in
ASB’s name.
On 2 April 2006, counsel for ASB wrote Espenesin calling his attention to the
supposed amendment in the CCTs which he had originally issued in ASB’s
name.11 Counsel for ASB demanded that Espenesin effect in the second set of
CCTs, the registration of the subject units in The Malayan Tower back to
ASB’s name.
On 17 May 2006, Espenesin replied and explained, thus:
The registration of the Malayan-ASB Realty transaction, from its inception up
to the issuance of titles, were all handled by respondent Atty. Francis Serrano.
He therefore appeared and we have considered him the legitimate
representative of both parties (sic). His representation, we gathered, covers the
interest of both MICO and ASB in as far as the titling of the condominium
units are concerned.
Sometime ago Serrano requested that condominium titles over specified units
be issued in consonance with the sharing in the joint venture MOA. Titles
were correspondingly issued as per request, some in the name of MICO and
some in the name of ASB. Before its release to the parties, Atty. Serrano came
back and requested that some titles issued in the name of ASB be changed to
MICO because allegedly there was error in the issuance.
Believing it was a simple error and on representation of the person we came to
know and considered the representative of both parties, we erased the name
ASB Realty Corporation on those specified titles and placed instead the name
Malayan Insurance Company.
To our mind, the purpose was not to transfer ownership but merely to rectify
an error committed in the issuance of titles. And since they were well within
our capacity to do, the titles not having been released yet to its owner, we did
what we believed was a simple act of rectifying a simple mistake. 12
After learning of the amendment in the CCTs issued in ASB’s name, Ampil,
on 23 January 2007, wrote respondents Yuchengco and Cheng, President and
Chief Financial Officer of MICO, respectively, introducing himself as an
unsecured creditor of ASB Holdings, Inc., one of the corporations forming
part of the ASB Group of Companies.13Ampil averred that MICO had illegally
registered in its name the subject units at The Malayan Tower which were
reserved for ASB under the MOA, and actually, already registered in ASB’s
name with the Register of Deeds of Pasig City. Ampil pointed out that the
"condominium units should have benefited him and other unsecured creditors
of ASB because the latter had categorically informed them previously that the
same would be contributed to the Asset Pool created under the Rehabilitation
Plan of the ASB Group of Companies." Ultimately, Ampil demanded that
Yuchengco and Cheng rectify the resulting error in the CCTs, and facilitate
the registration of the subject units back to ASB’s name.
Respondents paid no heed to ASB’s and Ampil’s demands.
As previously adverted to, Ampil charged respondents with Falsification of
Public Documents under Article 171(6) of the Revised Penal Code and
violation of Sections 3(a) and (e) of Republic Act No. 3019 before the Office
of the Ombudsman, alleging the following:
1. Respondents, in conspiracy, erased the name of ASB, and intercalated and
substituted the name of MICO under the entry of registered owner in the
questioned CCTs covering the subject units of The Malayan Tower;
2. The alterations were done without the necessary order from the proper
court, in direct violation of Section 10814 of Presidential Decree No. 1529;
3. Respondents violated Article 171(6) of the Revised Penal Code by:
3.1 Altering the CCTs which are public documents;
3.2 Effecting the alterations on genuine documents;
3.3 Changing the meaning of the CCTs with MICO
now appearing as registered owner of the subject units
in Malayan Tower; and
3.4 Effectively, making the documents speak something
false when ASB is the true owner of the subject units,
and not MICO.
4. Ampil, as unsecured creditor of ASB, was unjustly prejudiced
by the felonious acts of respondents;
5. Respondents violated Sections 3(a) and (e) of Republic Act No.
3019:
5.1 Respondent Espenesin, as Registrar of the Pasig
City Registry of Deeds, committed an offense in
connection with his official duties by allowing himself
to be persuaded, induced or influenced by respondent
Serrano into altering the questioned CCTs; and
5.2 The actions of respondent Espenesin demonstrate
manifest partiality, evident bad faith and/or, at the least,
gross inexcusable negligence.
6. Respondents Yuchengco and Cheng, being responsible officers
of MICO, as principals by inducement and conspirators of
6
 Espenesin and Serrano, are likewise liable for falsification of the
CCTs and violation of Sections 3(a) and (e) of Republic Act No.
3019.15
As required by the Ombudsman, respondents filed their counter-affidavits:
Espenesin and Serrano filed individually, while Yuchengco and Cheng filed
jointly. Respondents’ respective counter-affidavits uniformly denied
petitioner’s charges and explicated as follows:
Respondent Espenesin countered, among others, (i) that their intention was
only to cause the necessary rectification on certain errors made on the CCTs in
issue; (ii) that since the CCTs were not yet issued and released to the parties, it
is still within his authority, as part of the registration process, to make the
necessary amendments or corrections thereon; (iii) that no court order would
be necessary to effect such changes, the CCTs still being within the control of
the Register of Deeds and have not yet been released to the respective owners;
(iv) that the amendments were made not for the purpose of falsifying the
CCTs in issue but to make the same reflect and declare the truth; and (v) that
he merely made the corrections in accordance with the representations of
respondent Serrano who he believed to be guarding and representing both the
interests of MICO and ASB.
Respondent Serrano, on the other hand, argued: (i) that the units in issue are
not yet owned by ASB; (ii) that these units were specifically segregated and
reserved for MICO in order to answer for any excess in the estimated cost that
it will expend in the completion of the Malayan Tower; (iii) that ASB is only
entitled to these reserved units only after the Malayan Tower is completed and
that the units are not utilized to cover for the increase in the cost expended by
MICO pursuant to Section 4(c) of the MOA; (iv) that the Malayan Tower was
still incomplete at the time when the alterations were made on the CCT,
hence, the claim of ownership of ASB over the reserved units is premature
and totally baseless; (v) that prior to the fulfillment of the resolutory
condition, that is, after the completion of the Malayan Tower and there
remains a balance in the Remaining Construction Cost, the units still rightfully
belongs to MICO; and (vi) that the alteration was made merely for the purpose
of correcting an error.
Respondents Cheng and Yuchengco, while adopting the foregoing arguments
of Espenesin and Serrano, further averred that: (i) Ampil has no legal
personality to file this suit, he being merely an unsecured creditor of ASB
whose interest was not definitively shown to have been damaged by the
subject controversy; (ii) that their participation as respondents and alleged co-
conspirators of Serrano and Espenesin was not clearly shown and defined in
the complaint; (iii) the CCTs issued in the name of ASB have not yet been
entered in the Registration Book at the time when the alterations were
effected, hence, the same could still be made subject of appropriate
amendments; (iv) that the CCTs in issue named in favor of ASB were mere
drafts and cannot legally be considered documents within the strict definition
of the law; (v) that court order authorizing to amend a title is necessary only if
the deed or document sought to be registered has already been entered in the
registration book; and (vi) that MICO is the duly registered owner of the land
on which Malayan Tower stands and ASB was merely referred to as the
developer.16
Thereafter, the Ombudsman issued the assailed Resolution in G.R. No.
192685 dismissing Ampil’s complaint. For the Ombudsman, the resolution of
whether respondents falsified the CCTs must be prefaced by a determination
of who, between MICO and ASB, is the rightful owner of the subject units.
The Ombudsman held that it had no authority to interpret the provisions of the
MOA and, thus, refrained from resolving the preliminary question of
ownership. Given the foregoing, the Ombudsman was hard pressed to make a
categorical finding that the CCTs were altered to speak something false. In
short, the Ombudsman did not have probable cause to indict respondents for
falsification of the CCTs because the last element of the crime, i.e., that the
change made the document speak something false, had not been established.
Significantly, the Ombudsman did not dispose of whether probable cause
exists to indict respondents for violation of Sections 3(a) and (e) of Republic
Act No. 3019.
Ampil filed a Motion for Reconsideration. However, in yet another setback,
the Ombudsman denied Ampil’s motion and affirmed the dismissal of his
complaint.
On the administrative litigation front and as previously narrated, the
Ombudsman found Espenesin liable for Simple Misconduct. However, on
motion for reconsideration of Ampil praying for a finding of guilt against
Espenesin for Grave Misconduct and Dishonesty, the Ombudsman
reconsidered its earlier resolution and recalled the one-month suspension
meted on Espenesin.
Thereafter, Ampil filed a petition for review under Rule 43 of the Rules of
Court before the appellate court. And as already stated, the appellate court
affirmed the Ombudsman’s resolution absolving Espenesin of not just Grave
Misconduct and Dishonesty, but also of Simple Misconduct.
Hence, this dual recourse by Ampil: first, alleging grave abuse of discretion in
the Ombudsman’s failure to find probable cause to indict respondents for
Falsification of Public Documents under Article 171(6) of the Revised Penal
Code, and for their commission of corrupt practices under
Sections 3(a) and (e) of Republic Act No. 3019; and second, raising grievous
error of the Court of Appeals in affirming the Ombudsman’s absolution of
Espenesin from administrative liability.
To obviate confusion, we shall dispose of the first issue, i.e., whether probable
cause exists to indict respondents for Falsification of Public Documents under
Article 171(6) of the Revised Penal Code and for their commission of corrupt
practices under Sections 3(a) and (e) of Republic Act No. 3019.
Despite the Ombudsman’s categorical dismissal of his complaint, Ampil is
adamant on the existence of probable cause to bring respondents to trial for
falsification of the CCTs, and for violation of Sections 3(a) and (e) of
Republic Act No. 3019. In fact, he argues that Espenesin has been held
administratively liable by the Ombudsman for altering the CCTs. At the time
of the filing of G.R. No. 192685, the Ombudsman had not yet reversed its
previous resolution finding Espenesin liable for simple misconduct. He insists
that the admission by respondents Espenesin and Serrano that they altered the
CCTs should foreclose all questions on all respondents’ (Espenesin’s,
Serrano’s, Yuchengco’s and Cheng’s) liability for falsification and their
commission of corrupt practices, under the Revised Penal Code and Republic
Act No. 3019, respectively. In all, Ampil maintains that the Ombudsman’s
absolution of respondents is tainted with grave abuse of discretion.
G.R. No. 192685 is partially impressed with merit. Accordingly, we find
grave abuse of discretion in the Ombudsman’s incomplete disposition of
Ampil’s complaint.
That the Ombudsman is a constitutional officer duty bound to "investigate on
its own, or on complaint by any person, any act or omission of any public
official, employee, office or agency, when such act or omission appears to be
illegal, unjust, improper, or inefficient"17 brooks no objection. The
Ombudsman’s conduct of preliminary investigation is both power and duty.
Thus, the Ombudsman and his Deputies, are constitutionalized as protectors of
the people, who "shall act promptly on complaints filed in any form or manner
against public officials or employees of the government x x x, and shall, x x x
notify the complainants of the action taken and the result thereof."18
The raison d'être for its creation and endowment of broad investigative
authority is to insulate the Office of the Ombudsman from the long tentacles
of officialdom that are able to penetrate judges’ and fiscals’ offices, and others
involved in the prosecution of erring public officials, and through the
execution of official pressure and influence, quash, delay, or dismiss
investigations into malfeasances and misfeasances committed by public
officers.19
Plainly, the Ombudsman has "full discretion," based on the attendant facts and
circumstances, to determine the existence of probable cause or the lack
thereof.20 On this score, we have consistently hewed to the policy of non-
interference with the Ombudsman’s exercise of its constitutionally mandated
powers.21 The Ombudsman’s finding to proceed or desist in the prosecution of
a criminal case can only be assailed through certiorari proceedings before this
Court on the ground that such determination is tainted with grave abuse of
discretion which contemplates an abuse so grave and so patent equivalent to
lack or excess of jurisdiction.22
7
However, on several occasions, we have interfered with the Ombudsman’s also by inducement, who being responsible officers of MICO ultimately
discretion in determining probable cause: benefited from said unlawful act.26 and the pith of the Resolution which
carefully and meticulously dissected the presence of the first three definitive
elements of the crime of falsification under Article 171(6) of the Revised
(a) To afford protection to the constitutional rights of the accused;
Penal Code:
(b) When necessary for the orderly administration of justice or to
avoid oppression or multiplicity of actions;
(c) When there is a prejudicial question which is sub judice; The first three definitive elements of the crime, albeit present, are defeated by
(d) When the acts of the officer are without or in excess of the absence of the fourth.
authority;
(e) Where the prosecution is under an invalid law, ordinance or
The respondents readily admitted that an alteration was indeed made on the
regulation;
CCTs in issue allegedly for the purpose of correcting a mistake in the name of
(f) When double jeopardy is clearly apparent;
the registered owner of the condominium units involved. Said alteration had
(g) Where the court has no jurisdiction over the offense;
obviously changed the tenor of the CCTs considering that ASB, the initially
(h) Where it is a case of persecution rather than prosecution;
named owner, was changed into MICO. The first and third elements are
(i) Where the charges are manifestly false and motivated by the
undeniably present.
lust for vengeance.23 (Emphasis supplied).

Anent the second element, the respondents argued that the CCTs in issue were
The fourth circumstance is present in G.R. No. 192685.
mere drafts and are not legally considered "genuine documents" within the
strict definition of the law. Albeit the contention is partially true, no proof has
While we agree with the Ombudsman’s disquisition that there is no probable been shown to prove that the CCTs issued in favor of ASB were mere drafts.
cause to indict respondents for Falsification of Public Documents under
Article 171(6) of the Revised Penal Code, we are puzzled why the
The CCTs of ASB are obviously complete. If we are to compare it with the
Ombudsman completely glossed over Ampil’s charge that respondents
appearance and contents of the CCTs issued in favor of MICO, one will notice
committed prohibited acts listed in Sections 3(a) and (e) of Republic Act No.
no definitive difference between the two except that one set was named in
3019. Nowhere in the Resolution or in the Order denying reconsideration
favor of ASB and the other set, in favor of MICO. Nothing is shown that will
thereof did the Ombudsman tackle and resolve the issue of whether
clearly prove that the former were mere drafts and the latter are the final
respondents violated the particular provisions of Republic Act No. 3019.
copies. As far as the appearance of the CCTs of ASB is concerned, all appear
to be complete and genuine. Proof to the contrary must be shown to prove
Curiously, the Ombudsman docketed Ampil’s complaint-affidavit as one "for: otherwise.
Falsification of Public Documents and Violation of Sections 3(a) and (e) of
Republic Act No. 3019, as amended."24 The Ombudsman even prefaced the
Delivery of the titles to the named owners is not a pre-requisite before all
Resolution, thus: "this has reference to the complaint filed by Oscar Ampil on
these CCTs can be legally categorized as genuine documents. The fact that the
17 September 2007 against respondents, for Falsification of Public Documents
same had already been signed by respondent Espenesin in his capacity as
and Violation of Sections 3, paragraphs (a) and (e) of Republic Act No. 3019,
Registrar of Deeds of Pasig City and the notations imprinted thereon appeared
otherwise known as the Anti-Graft and Corrupt Practices Act, as amended."25
to have been entered on March 11, 2005 at 11:55 a.m. at the Registry Books
of Pasig City, the CCTs in issue are bound to be treated as genuine documents
The Ombudsman’s silence on the component anti-graft charges is pointed up drafted and signed in the regular performance of duties of the officer whose
by the specific allegations in Ampil’s complaint-affidavit that: signature appears thereon.27

18. The acts of ATTY. ESPENESIN and his co-conspirators are clear
violations of Section 3 paragraph (a) and/or (e) of Republic Act No. 3019
otherwise known as the Anti-Graft and Corrupt Practices Act x x x;
xxxx
On the whole, the Ombudsman’s discussion was straightforward and
categorical, and ultimately established that Espenesin, at the urging of
Serrano, altered the CCTs issued in ASB’s name resulting in these CCTs
ostensibly declaring MICO as registered owner of the subject units at The
Malayan Tower.

Despite the admission by Espenesin that he had altered the CCTs and the
19. On the basis of the evidence x x x and the admissions of the conspirators
Ombudsman’s findings thereon, the Ombudsman abruptly dismissed Ampil’s
themselves, ATTY. ESPENESIN is liable under both pars. (a) and (e) thereof
complaint-affidavit, resolving only one of the charges contained therein with
or either of the two. By maliciously and feloniously altering the subject CCT’s
nary a link regarding the other charge of violation of Sections 3(a) and (e) of
(sic), contrary to law and to the prejudice of ASB and Ampil, ATTY.
Republic Act No. 3019. Indeed, as found by the Ombudsman, the 4th element
ESPENESIN committed an offense in connection with his official duties and
of the crime of Falsification of Public Documents is lacking, as the actual
he admitted having done so in conspiracy with his co-respondents. x x x
ownership of the subject units at The Malayan Tower has yet to be resolved.
ATTY. ESPENESIN allowed himself to be persuaded, induced or influenced
Nonetheless, this circumstance does not detract from, much less diminish,
into committing such violation or offense which is the substance of par. (a) of
Ampil’s charge, and the evidence pointing to the possible commission, of
RA 3019;
offenses under Sections 3(a) and (e) of the Anti-Graft and Corrupt Practices
Act.
20. In committing such unauthorized and unlawful alterations on the subject
CCT’s (sic), ATTY. ESPENESIN caused undue injury to ASB and to AMPIL
Sections 3(a) and (e) of Republic Act No. 3019 reads:
as an unsecured creditor, who is ultimately one of the beneficiaries of said
CCT from the ASSET POOL created by the SEC, and gave MICO
unwarranted benefits, advantage or preference in the discharge of his official Section 3. Corrupt practices of public officers. – In addition to acts or
duties as Register of Deeds of Pasig City. Such acts were admitted by ATTY. omissions of public officers already penalized by existing law, the following
ESPENESIN in his letter to ASB x x x. Such acts, taken together with his shall constitute corrupt practices of any public officer and are hereby declared
admission, indubitably show ATTY. ESPENESIN’s manifest partiality, to be unlawful:
evident bad faith and/or, at the least, his gross inexcusable negligence in doing
the same;
(a) Persuading, inducing or influencing another public officer to perform an
act constituting a violation of rules and regulations duly promulgated by
21. ATTY. ESPENESIN is liable under Section 3 pars. (a) and/or (e) of RA competent authority or an offense in connection with the official duties of the
3019, as well as under Article 171 par. 6 of the RPC. ATTY. SERRANO, latter, or allowing himself to be persuaded, induced, or influenced to commit
YVONNE S. YUCHENGCO and (sic) GEMMA O. CHENG are also liable such violation or offense.
for violation of the said provisions of law in conspiracy with ATTY.
ESPENESIN, the latter as a principal via direct participation, ATTY.
xxxx
SERRANO, as principal by inducement and YUCHENGCO and CHENG,

8
(e) Causing any undue injury to any party, including the Government, or
giving any private party any unwarranted benefits, advantage or preference in
the discharge of his official, administrative or judicial functions through
manifest partiality, evident bad faith or gross inexcusable negligence. This
provision shall apply to officers and employees of offices or government
corporations charged with the grant of licenses or permits or other
concessions.
The elements of Section 3(a) of Republic Act No. 3019 are:
(1) the offender is a public officer;
(2) the offender persuades, induces, or influences another public
officer to perform an act or the offender allows himself to be
persuaded, induced, or influenced to commit an act;
(3) the act performed by the other public officer or committed by
the offender constitutes a violation of rules and regulations duly
promulgated by competent authority or an offense in connection
with the official duty of the latter. (Emphasis supplied).
Whereas, paragraph (e) of the same section lists the following elements:
(1) the offender is a public officer;
(2) the act was done in the discharge of the public officer’s official,
administrative or judicial functions;
(3) the act was done through manifest partiality, evident bad faith,
or gross inexcusable negligence; and
(4) the public officer caused any undue injury to any party,
including the Government, or gave any unwarranted benefits,
advantage or preference.28
As Registrar of the Registry of Deeds of Pasig City, Espenesin is tasked,
among others, to review deeds and other documents for conformance with the
legal requirements of registration.29 Section 10 of Presidential Decree No.
1529, Amending and Codifying the Laws Relative to Registration of Property
and for Other Purposes provides:
Section 10. General functions of Registers of Deeds. – The office of the
Register of Deeds constitutes a public repository of records of instruments
affecting registered or unregistered lands and chattel mortgages in the
province or city wherein such office is situated.
It shall be the duty of the Register of Deeds to immediately register an
instrument presented for registration dealing with real or personal property
which complies with all the requisites for registration. He shall see to it that
said instrument bears the proper documentary and science stamps and that the
same are properly cancelled. If the instrument is not registerable, he shall
forthwith deny registration thereof and inform the presentor of such denial in
writing, stating the ground or reason therefore, and advising him of his right to
appeal by consulta in accordance with Section 117 of the Decree.
Most importantly, a Registrar of the Registry of Deeds is charged with
knowledge of Presidential Decree No. 1529, specifically Sections 5730 and
108.31
In the instant case, the elements of the offenses under Sections 3(a) and (e) of
Republic Act No. 3019, juxtaposed against the functions of a Registrar of the
Registry of Deeds establish a prima facie graft case against Espenesin and
Serrano only. Under Section 3(a) of Republic Act No. 3019, there is a prima
facie case that Espenesin, at the urging of Serrano, allowed himself to be
persuaded to alter the CCTs originally issued in ASB’s name, against the
procedure provided by law for the issuance of CCTs and registration of
property. In addition, under Section 3(e) of the same law, there is likewise a
prima facie case that Espenesin, through gross inexcusable negligence, by
simply relying on the fact that all throughout the transaction to register the
subject units at The Malayan Tower he liaised with Serrano, gave MICO an
unwarranted benefit, advantage or preference in the registration of the subject
units.
In Sison v. People of the Philippines, we expounded on Section 3(e) of
Republic Act No. 3019:
The third element of Section 3 (e) of RA 3019 may be committed in three
ways, i.e., through manifest partiality, evident bad faith or gross inexcusable
negligence. Proof of any of these three in connection with the prohibited acts
mentioned in Section 3(e) of RA 3019 is enough to convict.
Explaining what "partiality," "bad faith" and "gross negligence" mean, we
held:
"Partiality" is synonymous with "bias" which "excites a disposition to see and
report matters as they are wished for rather than as they are." "Bad faith does
not simply connote bad judgment or negligence; it imputes a dishonest
purpose or some moral obliquity and conscious doing of a wrong; a breach of
sworn duty through some motive or intent or ill will; it partakes of the nature
of fraud." "Gross negligence has been so defined as negligence characterized
by the want of even slight care, acting or omitting to act in a situation where
there is a duty to act, not inadvertently but willfully and intentionally with a
conscious indifference to consequences in so far as other persons may be
affected. It is the omission of that care which even inattentive and thoughtless
men never fail to take on their own property."
In the instant case, petitioner was grossly negligent in all the purchases that
were made under his watch. Petitioner’s admission that the canvass sheets sent
out by de Jesus to the suppliers already contained his signatures because he
pre-signed these forms only proved his utter disregard of the consequences of
his actions. Petitioner also admitted that he knew the provisions of RA 7160
on personal canvass but he did not follow the law because he was merely
following the practice of his predecessors. This was an admission of a
mindless disregard for the law in a tradition of illegality. This is totally
unacceptable, considering that as municipal mayor, petitioner ought to
implement the law to the letter. As local chief executive, he should have been
the first to follow the law and see to it that it was followed by his
constituency. Sadly, however, he was the first to break it.
Petitioner should have complied with the requirements laid down by RA 7160
on personal canvass, no matter how strict they may have been. Dura lex sed
lex. The law is difficult but it is the law. These requirements are not empty
words but were specifically crafted to ensure transparency in the acquisition of
government supplies, especially since no public bidding is involved in
personal canvass. Truly, the requirement that the canvass and awarding of
supplies be made by a collegial body assures the general public that despotic,
irregular or unlawful transactions do not occur. It also guarantees that no
personal preference is given to any supplier and that the government is given
the best possible price for its procurements.
The fourth element is likewise present. While it is true that the prosecution
was not able to prove any undue injury to the government as a result of the
purchases, it should be noted that there are two ways by which Section 3(e) of
RA 3019 may be violated—the first, by causing undue injury to any party,
including the government, or the second, by giving any private party any
unwarranted benefit, advantage or preference. Although neither mode
constitutes a distinct offense, an accused may be charged under either mode or
both. The use of the disjunctive "or’ connotes that the two modes need not be
present at the same time. In other words, the presence of one would suffice for
conviction.
Aside from the allegation of undue injury to the government, petitioner was
also charged with having given unwarranted benefit, advantage or preference
to private suppliers. Under the second mode, damage is not required.
The word "unwarranted" means lacking adequate or official support;
unjustified; unauthorized or without justification or adequate reason.
"Advantage" means a more favorable or improved position or condition;
benefit, profit or gain of any kind; benefit from some course of action.
"Preference" signifies priority or higher evaluation or desirability; choice or
estimation above another.
In order to be found guilty under the second mode, it suffices that the accused
has given unjustified favor or benefit to another, in the exercise of his official,
administrative or judicial functions. Petitioner did just that. The fact that he
repeatedly failed to follow the requirements of RA 7160 on personal canvass
proves that unwarranted benefit, advantage or preference was given to the
winning suppliers. These suppliers were awarded the procurement contract
without the benefit of a fair system in determining the best possible price for
the government. The private suppliers, which were all personally chosen by
respondent, were able to profit from the transactions without showing proof
that their prices were the most beneficial to the government. For that,
petitioner must now face the consequences of his acts.32 (Emphasis supplied).
9
We stress that the Ombudsman did not find probable cause to indict
respondents for falsification simply because the Ombudsman could not
categorically declare that the alteration made the CCT speak falsely as the
ownership of the subject units at The Malayan Tower had yet to be
determined. However, its initial factual findings on the administrative
complaint categorically declared, thus:
x x x Espenesin justified his action by asseverating that since the CCTs were
still under the possession and control of the Register of Deeds and have not
yet been distributed to the owners, amendments can still be made thereon.
It is worthy to note that the CCTs of ASB, at the time when the amendment
was made, were obviously complete. From its face, we can infer that all have
attained the character of a binding public document. The signature of
Espenesin is already affixed thereon, and on its face, it was explicitly declared
that the titles have already been entered in the Registration Book of the
Register of Deeds of Pasig City on March 11, 2005 at 11:55 a.m. Allegations
to the contrary must be convincingly and positively proven, otherwise, the
presumption holds that the CCTs issued in the name of ASB were regular and
the contents thereon binding.
Stated in a different light, delivery of the titles to the named owners is not a
pre-requisite before all these CCTs can be legally categorized as genuine
documents. The fact that the same had already been signed by x x x Espenesin
in his capacity as Register of Deeds of Pasig City and the notations imprinted
thereon appeared to have been entered on March 11, 2005 at 11:55 a.m. at the
Registry Books of Pasig City, the CCTs in issue are bound to be treated as
genuine documents drafted and signed in the regular performance of duties of
the officer whose signature appears thereon. The law has made it so clear that
it is the entry of the title in the Registration Book that controls the discretion
of the Register of Deeds to effect the necessary amendments and not the actual
delivery of the titles to the named owners.
This being the case, strict compliance with the mandates of Section 108 of
P.D. 1529 is strictly called for. The provision is clear that upon entry of a
certificate of title (which definitely includes Condominium Certificate of
Title) attested to by the Register of Deeds, no amendment shall be effected
thereon except upon lawful order of the court.
In the instant case, it became obvious that after the CCTs of ASB were entered
in the Registration Book on March 11, 2005 at exactly 11:55 a.m., the
notations thereon were thereafter amended by Espenesin when Atty. Serrano
purportedly informed him of the alleged error inscribed therein. The proper
remedy that should have been undertaken by Espenesin soon after he was
informed of the error is to either initiate the appropriate petition himself or to
suggest to the parties to the MOA to file said petition in court for the
amendment of the CCTs. An amendment by way of a shortcut is not allowed
after entry of the title in the Registration Book.
xxxx
If the Regional Trial Court sitting as a land registration court is not legally
authorized to determine the respective rights of the parties to the MOA when
deciding on the petition for amendment and cancellation of title, all the more
with the Registrar of Deeds who is legally not empowered to make such
determination and to cause an automatic amendment of entries in the
Registration Book on the basis of his unauthorized determination.
Espenesin’s liability is grounded on the untimely and unauthorized
amendment of the CCTs in issue. This is regardless of whether the amendment
had made the CCTs speak of either a lie or the truth. What defines his error is
his inability to comply with the proper procedure set by law. 33 (Emphasis
supplied).
We likewise stress that the determination of probable cause does not require
certainty of guilt for a crime. As the term itself implies, probable cause is
concerned merely with probability and not absolute or even moral
certainty;34 it is merely based on opinion and reasonable belief.35 It is
sufficient that based on the preliminary investigation conducted, it is believed
that the act or omission complained of constitutes the offense charged. Well-
settled in jurisprudence, as in Raro v. Sandiganbayan,36 that:
x x x Probable cause has been defined as the existence of such facts and
circumstances as would excite the belief, in a reasonable mind, acting on the
facts within the knowledge of the prosecutor, that the person charged was
guilty of the crime for which he was prosecuted.37
Probable cause is a reasonable ground for presuming that a matter is or may
be well-founded on such state of facts in the prosecutor's mind as would lead a
person of ordinary caution and prudence to believe — or entertain an honest
or strong suspicion — that it is so.38
A finding of probable cause needs only to rest on evidence showing that more
likely than not a crime has been committed and there is enough reason to
believe that it was committed by the accused. It need not be based on clear
and convincing evidence of guilt, neither on evidence establishing absolute
certainty of guilt.39
A finding of probable cause does not require an inquiry into whether there is
sufficient evidence to procure a conviction. It is enough that it is believed that
the act or omission complained of constitutes the offense charged. Precisely,
there is a trial for the reception of evidence of the prosecution in support of the
charge.40
A finding of probable cause merely binds over the suspect to stand trial. It is
not a pronouncement of guilt.
The term does not mean "actual and positive cause" nor does it import
absolute certainty. It is merely based on opinion and reasonable belief. x x x
Probable cause does not require an inquiry into whether there is sufficient
evidence to procure a conviction.41 (Emphasis and italics supplied).
In this instance, Espenesin explains and categorically admits that he altered,
nay corrected, 38 certificates of title which we again reproduce for easy
reference:
Sometime ago Serrano requested that condominium titles over specified units
be issued in consonance with the sharing in the joint venture MOA. Titles
were correspondingly issued as per request, some in the name of MICO and
some in the name of ASB. Before its release to the parties, Atty. Serrano came
back and requested that some titles issued in the name of ASB be changed to
MICO because allegedly there was error in the issuance.
Believing it was a simple error and on representation of the person we came to
know and considered the representative of both parties, we erased the name
ASB Realty Corporation on those specified titles and placed instead the name
Malayan Insurance Company.
To our mind, the purpose was not to transfer ownership but merely to rectify
an error committed in the issuance of titles. And since they were well within
our capacity to do, the titles not having been released yet to its owner, we did
what we believed was a simple act of rectifying a simple mistake. 42
The letter of Espenesin itself underscores the existence of a prima facie case
of gross negligence:
1. Serrano transacted the registration of the units in The Malayan Tower with
the Office of the Register of Deeds, Pasig City;
2. Serrano had previously presented a joint venture agreement, the MOA,
which Espenesin followed in the initial preparation and issuance of the titles;
3. Before some CCTs initially issued in ASB’s name were released, Serrano
returned and requested that some titles issued in the name of ASB be changed
to MICO because those titles were supposedly erroneously registered to ASB;
and
4. Just on Serrano’s utterance and declaration which Espenesin readily
believed because he considered Serrano the representative of both parties, and
without any other documentation to base the amendment on, Espenesin erased
the name of ASB on those specified titles and replaced it with the name of
MICO.
10
Espenesin, a Registrar of Deeds, relied on Serrano’s word alone that a
supposed error has been committed. Even if ownership of the units covered by
the amended CCTs has not been categorically declared as ASB’s given the
ongoing dispute between the parties, the MOA which Espenesin had
previously referred to, allocates those units to ASB:
Section 4. Distribution and Disposition of Units. (a) As a return of its capital
investment in the Project, each party shall be entitled to such portion of all the
net saleable area of the Building that their respective contributions to the
Project bear to the actual construction cost. As of the date of the execution
hereof, and on the basis of the total costs incurred to date in relation to the
Remaining Construction Costs (as defined in Section 9(a) hereof), the parties
shall respectively be entitled to the following (which entitlement shall be
conditioned on, and subject to, adjustments as provided in sub-paragraph (b)
of Section 4 in the event that the actual remaining cost of construction exceeds
the Remaining Construction Cost):
(i) MICO – the net saleable area particularly described in Schedule 2 hereof.
(ii) ASB – the following net saleable area:
(A) the net saleable area which ASB had pre-sold for an aggregate
purchase price of ₱640,085,267.30 as set forth in Schedule 1
(including all paid and unpaid proceeds of said pre-sales);
(B) the net saleable area particularly described in Schedule 3
hereof which shall be delivered to ASB upon completion of the
Project; and,
(C) provided that the actual remaining construction costs do not
exceed the Remaining Construction Cost, the net saleable area
particularly described in Schedule 4 hereof which shall be
delivered to ASB upon completion of the Project and
determination of its actual construction costs. If the actual
remaining construction costs exceed the Remaining Construction
Cost, sub-paragraph (b) of this Section 4 shall apply.43
The MOA even recognizes and specifies that:
E. ASB has pre-sold a number of condominium units in the Project to certain
buyers as set forth in Schedule 1 hereof, and in order to protect the interests of
these buyers and preserve the interest in the Project, the goodwill and business
reputation of Malayan, Malayan has proposed to complete the Project, and
ASB has accepted such proposal, subject to the terms and conditions
contained herein, including the contribution to the Project (a) by Malayan of
the Lot and (b) by ASB of its interest as buyer under the Contract to Sell.
xxxx
Section 3. Recognition of ASB’s Investment. The parties confirm that as of
the date hereof, ASB invested in the Project an amount equivalent to its
entitlement to the net saleable area of the Building under Section 4 below,
including ASB’s interest as buyer under the Contract to Sell.44
One fact deserves emphasis. The ownership of the condominium units remains
in dispute and, by necessary inference, does not lie as well in MICO. By his
baseless reliance on Serrano’s word and representation, Espenesin allowed
MICO to gain an unwarranted advantage and benefit in the titling of the 38
units in The Malayan Tower.
That a prima facie case for gross negligence amounting to violation of
Sections 3(a) and (e) of Republic Act No. 3019 exists is amply supported by
the fact that Espenesin disregarded the well-established practice necessitating
submission of required documents for registration of property in the
Philippines:
Documents Required for Registration of Real Property with the Register of
Deeds:
1. Common Requirements
o Original copy of the Deed or Instrument (Original Copy + 2
duplicate copies)If the original copy cannot be produced, the
duplicate original or certified true copy shall be presented
accompanied with a sworn affidavit executed by the interested
party why the original copy cannot be presented.
o Owner’s copy of the Certificate of Title or Co-owner’s copy if
one has been issued. (Original Copy + 2 duplicate copies)
o Latest Tax Declaration if the property is an unregistered land.
(Original Copy + 2 duplicate copies)
2. Specific Requirements
1. Deed of Sale/Transfer
 For Corporation
1. Secretary’s Certificate or Board Resolution to Sell or Purchase (Original
Copy + Duplicate Copy)
2. Articles of Incorporation (for transferee corporation) (1 Certified Copy of
the Original)
3. Certificate of the Securities and Exchange Commission (SEC) that the
Articles of Incorporation had been registered . (1 Certified Copy of the
Original)
4. For Condominium or Condominium Certificate of Transfer,
affidavit/certificate of the Condominium Corporation that the sale/transfer
does not violate the 60-40 rule.(Original Copy + 1 Duplicate Copy)
5. Subsequent transfer of CCT requires Certificate of the Condominium
Management. (Original Copy)
6. Sale by a Corporation Sole, court order is required.(Original copy of the
Court Order)
Additional Requirements
xxxx
11. Condominium Projects
 Master Deed (Original Copy + 1 Duplicate Copy)
 Declaration of Restriction (Original Copy + 1 Duplicate Copy)
 Diagrammatic Floor Plan (Original Copy + 1 Duplicate Copy)
If the Condominium Certificate of Title is issued for the first time in the name
of the registered owner, require the following:
o Certificate of Registration with the Housing and LandUse Regulatory Board
(Original Copy + 1 Duplicate Copy)
o Development Permit (Original Copy + 1 Duplicate Copy)
o License to Sell (Original Copy + 1 Duplicate Copy)45
Espenesin, by his own explanation, relied on nothing more than Serrano, who
he "came to know and considered as representative of both parties," and
Serrano’s interpretation of the MOA that Serrano had brought with him.
On the whole, there is sufficient ground to engender a well-founded belief that
respondents Espenesin and Serrano committed prohibited acts listed in
Sections 3(a) and (e) of Republic Act No. 3019.
As regards Yuchengco and Cheng, apart from Ampil’s general assertions that
the two, as officers of MICO, benefited from the alteration of the CCTs, there
is a dearth of evidence pointing to their collective responsibility therefor.
While the fact of alteration was admitted by respondents and was affirmed in
the Ombudsman’s finding of fact, there is nothing that directly links
Yuchengco and Cheng to the act.
We are aware that the calibration of evidence to assess whether a prima facie
graft case exists against respondents is a question of fact. We have
consistently held that the Supreme Court is not a trier of facts, more so in the
consideration of the extraordinary writ of certiorari where neither questions of
fact nor law are entertained, but only questions of lack or excess of
jurisdiction or grave abuse of discretion.46 In this case, however, certiorari will
lie, given that the Ombudsman made no finding at all on respondents possible
liability for violation of Sections 3(a) and (e) of Republic Act No. 3019.
We hasten to reiterate that we are only dealing herein with the preliminary
investigation aspect of this case. We do not adjudge respondents’ guilt or the
lack thereof. The assertions of Espenesin and Serrano on the former’s good
faith in effecting the alteration and the pending arbitration case before the
Construction Industry Arbitration Commission involving the correct division
11
of MICO’s and ASB’s net saleable areas in The Malayan Tower are matters of
defense which they should raise during trial of the criminal case.
As regards the administrative liability of Espenesin, the basic principle in the
law of public officers is the three-fold liability rule, which states that the
wrongful acts or omissions of a public officer, Espenesin in these cases, may
give rise to civil, criminal and administrative liability. An action for each can
proceed independently of the others.47
On this point, we find that the appellate court erred when it affirmed the
Ombudsman’s last ruling that Espenesin is not administratively liable.
Misconduct is a transgression of some established and definite rule of action,
more particularly, unlawful behavior or gross negligence by a public officer. 48
In Grave Misconduct, as distinguished from Simple Misconduct, the elements
of corruption, clear intent to violate the law or flagrant disregard of
established rules, must be manifest49 and established by substantial evidence.
Grave Misconduct necessarily includes the lesser offense of Simple
Misconduct.50 Thus, a person charged with Grave Misconduct may be held
liable for Simple Misconduct if the misconduct does not involve any of the
elements to qualify the misconduct as grave.51
In (G.R. No. 199115), the elements particular to Grave Misconduct are, by the
Ombudsman’s own finding, present. Corruption, as an element of Grave
Misconduct, consists in the act of an official or fiduciary person who
unlawfully and wrongfully uses his station or character to procure some
benefit for himself or for another person, contrary to duty and the rights of
others.52 This has already been demonstrated as discussed above. And, there is
here a manifest disregard for established rules on land registration by a
Register of Deeds himself. As he himself admits in his letter, Espenesin erased
the name of ASB on the specified CCTs because he believed that Serrano’s
request for the re-issuance thereof in MICO’s name constituted simple error.
Section 108 of Presidential Decree No. 1529 provides:
Section 108. Amendment and alteration of certificates. No erasure, alteration,
or amendment shall be made upon the registration book after the entry of a
certificate of title or of a memorandum thereon and the attestation of the same
be Register of Deeds, except by order of the proper Court of First Instance. A
registered owner of other person having an interest in registered property, or,
in proper cases, the Register of Deeds with the approval of the Commissioner
of Land Registration, may apply by petition to the court upon the ground that
the registered interests of any description, whether vested, contingent,
expectant or inchoate appearing on the certificate, have terminated and ceased;
or that new interest not appearing upon the certificate have arisen or been
created; or that an omission or error was made in entering a certificate or any
memorandum thereon, or, on any duplicate certificate; or that the same or any
person on the certificate has been changed; or that the registered owner has
married, or, if registered as married, that the marriage has been terminated and
no right or interests of heirs or creditors will thereby be affected; or that a
corporation which owned registered land and has been dissolved has not
convened the same within three years after its dissolution; or upon any other
reasonable ground; and the court may hear and determine the petition after
notice to all parties in interest, and may order the entry or cancellation of a
new certificate, the entry or cancellation of a memorandum upon a certificate,
or grant any other relief upon such terms and conditions, requiring security or
bond if necessary, as it may consider proper; Provided, however, That this
section shall not be construed to give the court authority to reopen the
judgment or decree of registration, and that nothing shall be done or ordered
by the court which shall impair the title or other interest of a purchaser
holding a certificate for value and in good faith, or his heirs and assigns,
without his or their written consent. Where the owner's duplicate certificate is
not presented, a similar petition may be filed as provided in the preceding
section.
The foregoing clearly speaks of a court order prior to any erasure, alteration or
amendment upon a certificate of title.
In reversing its prior ruling, the Ombudsman cavalierly dismisses the fact of
Espenesin already signing the CCTs issued in ASB’s name as "only a part of
the issuance process because the final step in the titling procedure is indeed
the release of the certificate of title."53 The Ombudsman further ruled:
Considering that prior to the release of titles, Espenesin merely rectified what
was represented to this office as error in the preparation of typing or the
certificates, hence, it is wrong to subject him to an administrative sanction.
This is bolstered by the fact that, at the time of release (and perhaps even up to
the present time), there was no final determination yet from the land
registration court as to who has a better right to the property in
question.54(Emphasis supplied).
This statement of the Ombudsman is virtually a declaration of Espenesin’s
misconduct. It highlights Espenesin’s awareness and knowledge that ASB and
MICO are two different and separate entities, albeit having entered into a joint
venture for the building of "The Malayan Tower."
As Registrar of Deeds, Espenesin was duty bound to inquire and ascertain the
reason for Serrano’s new instruction on those specific set of CCTs and not just
heed Serrano’s bidding. He heads the Office of Register of Deeds which is
constituted by law as "a public repository of records of instruments affecting
registered or unregistered lands x x x in the province or city wherein such
office is situated." He should not have so easily taken Serrano’s word that the
amendment Serrano sought was to correct simple and innocuous error.
Espenesin could have then easily asked, as he is obliged to, for a contract or
an authenticated writing to ascertain which units and parking slots were really
allotted for ASB and MICO. His actions would then be based on what is
documented and not merely by a lame claim of bona fides mistake.
Moreover, Espenesin was previously presented a MOA, and consulted this
same MOA, in the initial preparation and issuance of the 38 CCTs in ASB’s
name. Certainly, a Registrar of Deeds who is required by law to be a member
of the legal profession,55 possesses common sense and prudence to ask for
documents on which to base his corrections. Reliance on the mere word of
even the point person for the transaction, smacks of gross negligence when all
transactions with the Office of the Register of Deeds, involving as it does
registration of property, ought to be properly recorded and documented.
That the Office of the Register of Deeds requires documentation in the
registration of property, whether as an original or a subsequent registration,
brooks no argument. Again, and it cannot be overlooked that, Espenesin
initially referred to a MOA albeit Serrano worked on the registration
transaction for both ASB and MICO. Subsequently, Serrano returns, bearing
ostensible authority to transact even for ASB, and Espenesin fails to ask for
documentation for the correction Serrano sought to be made, and simply relies
on Serrano’s word.
We are baffled by the Registrar of Deeds’ failure to require documentation
which would serve as his basis for the correction. The amendment sought by
Serrano was not a mere clerical change of registered name; it was a substantial
one, changing ownership of 38 units in The Malayan Tower from one entity,
ASB, to another, MICO. Even just at Serrano’s initial request for correction of
the CCTs, a red flag should have gone up for a Registrar of Deeds.1âwphi1
Espenesin splits hairs when he claims that it is "in the Registration Book
where the prohibition to erase, alter, or amend, without court order, applies."
We disagree with Espenesin. Chapter IV on Certificate of Title of Presidential
Decree No. 1529,56 specifically Sections 40, 42 and 43 belie the claim of
Espenesin:
Section 40. Entry of Original Certificate of Title. Upon receipt by the Register
of Deeds of the original and duplicate copies of the original certificate of title
the same shall be entered in his record book and shall be numbered, dated,
signed and sealed by the Register of Deeds with the seal of his office. Said
certificate of title shall take effect upon the date of entry thereof. The Register
of Deeds shall forthwith send notice by mail to the registered owner that his
owner's duplicate is ready for delivery to him upon payment of legal fees.
Section 42. Registration Books. The original copy of the original certificate of
title shall be filed in the Registry of Deeds. The same shall be bound in
consecutive order together with similar certificates of title and shall constitute
the registration book for titled properties.
12
Section 43. Transfer Certificate of Title. The subsequent certificate of title that
may be issued by the Register of Deeds pursuant to any voluntary or
involuntary instrument relating to the same land shall be in like form, entitled
"Transfer Certificate of Title", and likewise issued in duplicate. The certificate
shall show the number of the next previous certificate covering the same land
and also the fact that it was originally registered, giving the record number,
the number of the original certificate of title, and the volume and page of the
registration book in which the latter is found.
Recording or entry of the titles, whether an original or a subsequent transfer
certificate of title in the record, is simultaneous with the signing by the
Register of Deeds. The signature on the certificate by the Registrar of Deeds is
accompanied by the dating, numbering and sealing of the certificate. All these
are part of a single registration process. Where there has been a completed
entry in the Record Book, as in this case where the Ombudsman found that
"the signature of Espenesin is already affixed on the CCTs, and on its face, it
was explicitly declared that the titles have already been entered in the
Registration Book of the Register of Deeds of Pasig City on March 11, 2005
at 11:55 a.m.," the Register of Deeds can no longer tamper with entries,
specially the very name of the titleholder. The law says that the certificate of
title shall take effect upon the date of entry thereof.
To further drive home the point, as Registrar of Deeds, Espenesin knew full
well that "there is no final determination yet from the land registration court as
to who has a better right to the property in question." Espenesin’s attempt to
minimize the significance of a Registrar of Deed’s signature on a CCT only
aggravates the lack of prudence in his action. The change in the titleholder in
the CCTs from ASB to MICO was an official documentation of a change of
ownership. It definitely cannot be characterized as simple error.
Grave misconduct, of which Espenesin has been charged, consists in a public
officer’s deliberate violation of a rule of law or standard of behavior. It is
regarded as grave when the elements of corruption, clear intent to violate the
law, or flagrant disregard of established rules are present.57 In particular,
corruption as an element of grave misconduct consists in the official’s
unlawful and wrongful use of his station or character to procure some benefit
for himself or for another person, contrary to duty and the rights of others. 58
In sum, the actions of Espenesin clearly demonstrate a disregard of well-
known legal rules.59 The penalty for Grave Misconduct is dismissalfrom
service with the accessory penalties of forfeiture of retirement benefits,
cancellation of eligibility, and perpetual disqualification from reemployment
in the government service, including government-owned or controlled
corporation.60
WHEREFORE, the petition in G.R. No. 192685 is PARTIALLY GRANTED.
The Resolution of the Ombudsman dated 30 April 2008 in OMB-C-C-07-
0444-J is REVERSED and SET ASIDE. The Ombudsman is hereby directed
to file the necessary Information for violation of Sections 3(a) and (e) of
Republic Act No. 3019 against public respondent Policarpio L. Espenesin and
private respondent Francis Serrano.
The petition in G.R. No. 199115 is GRANTED. The Decision of the Court of
Appeals dated 28 September 2011 in CA-G.R. SP No. 113171 and the Order
dated 13 July 2009 of the Ombudsman in OMB-C-A-07-0474-J are
REVERSED and SET ASIDE. Respondent Policarpio L. Espenesin is
GUlLTY of Grave Misconduct and we, thus, impose the penalty of
DIMISSAL from service. However, due to his retirement from the service, we
order forfeiture of all his retirement pay and benefits.
SO ORDERED.
ATTY. PLARIDEL M. MINGOA, petitioner,
vs.
LAND REGISTRATION ADMINISTRATOR, respondent.
The facts of this case are simple. A deed of donation of several parcels of land
was executed by petitioner in favor of his children on July 15, 1987. The deed
was forwarded to the Register of Deeds of Romblon for registration by
registered mail on September 9, 1988. It was entered in the primary entry
book of the Register of Deeds on September 20, 1988 under Entry No. 181.
Said Register of Deeds suspended registration of the donation until the
petitioner has secured the proper clearances from the Department of Agrarian
Reform on the ground that under Section 6 of Republic Act 6657, any
disposition of private agricultural lands made prior to June 15, 1988, when the
Act took effect, must be registered within three (3) months from said date or
on before September 13, 1988 to be valid.
The matter was elevated by petitioner en consulta with the Administrator of
the Land Registration Authority LTA. On November 27,1990 the LTA
Administrator issued a resolution sustaining the stand of the Register of Deeds
that unless the proper clearances from the Department of Agrarian Reform are
secured, the deed of donation may not be registered.
Hence this petition for certiorari whereby petitioner contends that Section 1,
Rule 13 of the Rules of Court should apply in a suppletory manner in that the
date of the mailing should be considered the date of filing of the document in
the office of the Register of Deeds.
The petition is impressed with merit.
Section 6 of Republic Act No. 6657 provides, among others:
SEC. 6. Retention Limits.—Except as otherwise provided in its Act, no person
may own or retain, directly or indirectly, any public or private agricultural
land, the size of which shall vary according to factors governing a viable
family-size farm, such as commodity produced, terrain, infrastructure, and soil
fertility as determined by the Presidential Agrarian Reform Council (PARC)
created hereunder, but in no case shall retention by the landowner exceed five
(5) hectares. Three (3) hectares may be awarded to each child of the
landowner, subject to the following qualifications: (1) that he is at least fifteen
(15) years of age, and (2) that he is actually tilling the land or directly
managing the farm: Provided, That landowners whose lands have been
covered by Presidential Decree No. 27 shall be allowed to keep the area
originally retained by them thereunder: Provided, further, That original
homestead grantees or their direct compulsory heirs who still own the original
homestead at the time of the approval of its Act shall retain the same areas as
long as they continue to cultivate said homestead.
The right to choose the area to be retained, which shall be compact or
contiguous, shall pertain to the landowner; Provided, however, That in case
the area selected for retention by the landowner is tenanted, the tenant shall
have the option to choose whether to remain therein or be a beneficiary in the
same or another agricultural land with similar or comparable features. In case
the tenant chooses to remain in the retained area, he shall be considered a
leaseholder and shall lose his right to be a beneficiary under this Act. In case
the tenant chooses to be a beneficiary in another agricultural land, he loses his
right as a leaseholder to the land retained by the landowner. The tenant must
exercise this option with a period of one (1) year from the time the landowner
manifests his choice of the area for retention.
In all cases the security of tenure of the farmers or farm workers on the land
prior to the approval of this Act shall be respected.
Upon the effectivity of this Act, any sale, disposition, lease, management
contract or transfer of possession of private lands executed by the original
landowner in violation of this Act shall be null and void; Provided, however,
That those executed prior to this Act shall be valid only when registered with
the Register of Deeds within a period of three (3) months after the effectivity
of this Act. Thereafter, all Registers of Deeds shall inform the Department of
Agrarian Reform (DAR) within thirty (30) days of any transaction involving
agricultural lands in excess of five (5) hectares. (Emphasis supplied)
The said law was approved by the President of the Philippines on June 10,
1988. Section 78 thereof provides that it "shall take effect immediately after
publication in at least two (2) national newspapers of general circulation." It
appears the law took effect on June 15, 1988.
Section 56 of Presidential Decree No. 1529 also provides:
SEC. 56. Primary Entry Book; fees; certified copies.—Each Register of Deeds
shall keep a primary entry book in which, upon payment of the entry fee, he
shall enter, in the order of their reception, all instruments including copies of
13
writs and processes filed with him relating to registered land. He shall, as a
preliminary process in registration, note in such book the date, hour and
minute of reception of all instruments, in the order in which they were
received. They shall be regarded as registered from the time so noted, and the
memorandum of each instrument, when made on the certificate of title to
which it refers, shall bear the same date: Provided, that the national
government as well as the provincial and city governments shall be exempt
from the payment of such fees in advance in order to be entitled to entry and
registration.
Every deed or other instrument, whether voluntary or involuntary, so filed
with the Register of Deeds shall be numbered and indexed and endorsed with
a reference to the proper certificate of title. All records and papers relative to
registered land in the office of the Register of Deeds shall be open to the
public in the same manner as court records, subject to such reasonable
relations as the Register of Deeds, No. 97282 under the direction of the
Commissioner of Land Registration, may prescribe.
All deeds and voluntary instruments shall be presented with their respective
copies and shall be attend and sealed by the Register of Deeds, endorsed with
the file number, and copies may be delivered to the person presenting them.
Certified copies of all instruments filed and registered may also be obtained
from the Register of Deeds upon payment of the prescribed fees.
The foregoing provision requires the Register of Deeds, upon payment of the
entry fees, to enter in the primary book of entry, in the order of reception, all
instruments including copies of writs and processes filed with him relative to
registered land; the date, hour and minute shall be noted in said book which
shall be regarded as the date of registration of the instrument; and the
memorandum of each instrument on the certificate of title shall bear the same
date.
Section 34 of Presidential Decree No. 1529 likewise provides:
SEC. 34. Rules of procedure.—The Rules of Court shall, insofar as not
inconsistent with the provisions of this Decree, be applicable to land
registration and cadastral cases by analogy or in a suppletory character and
whenever practicable and convenient.
Consequently, Section 1, Rule 13 of the Rules of Court is applicable to this
case in a suppletory character as it provides:
SEC. 1. Filing with the court, defined.—The filing of pleadings, appearances,
motions, notices, orders and other papers with the court as required by these
rules shall be made by filing them personally with the clerk of the court or by
sending them by registered mail. In the first case, the clerk shall endorse on
the pleading the date and hour of filing. In the second case, the date of the
mailing of motions, pleadings, or any other papers or payments or deposits as
shown by the post office stamp on the envelope or the registry receipt, shall be
considered as the date of their filing, payment, or deposit in court. The
envelope shall be attached to the record of the case.
The foregoing rule clearly provides that the date of mailing of the motion,
pleading, or any other papers, which may include instruments as the deed of
donation, is considered the date of filing as shown by the post office stamp on
the envelope or registry receipt.
The Court therefore finds and so holds that the date of mailing of an
instrument to the Register of Deeds for purposes of registration should be
considered the date of filing and receipt thereof by the Register of Deeds. It is
this date that should be entered in the primary entry book of the Register of
Deeds which shall be regarded as the date of its registration.
Since in this case, the deed of donation was admittedly sent by registered mail
to the Register of Deeds on September 9, 1988, said date is in effect the date
of filing, receipt and registration of the instrument, although the instrument
was actually received by said office only on September 20, 1988.
WHEREFORE, the petition is given due course and is hereby GRANTED.
The questioned resolution of the public respondent Administrator of the Land
Registration Authority dated November 27,1990 is hereby SET ASIDE and it
is hereby directed that the registration of deed of donation subject of this
petition be effected by the Register of Deeds of Romblon.
SO ORDERED.
HEIRS OF EDUARDO MANLAPAT, G.R. No. 125585
represented by GLORIA MANLAPAT-
BANAAG and LEON M. BANAAG, JR., Petitioners, Present:
PUNO, J.,*
Chairman,
- versus - AUSTRIA-MARTINEZ,
Acting Chairman,
CALLEJO, SR.,
TINGA, and
.
HON. COURT OF APPEALS,
RURAL BANK OF SAN PASCUAL,
INC., and JOSE B. SALAZAR,
CONSUELO CRUZ and Promulgated:
ROSALINA CRUZ-BAUTISTA,
and the REGISTER OF DEEDS of
Meycauayan, Bulacan, June 8, 2005
Respondents.
Before this Court is a Rule 45 petition assailing the Decision[1] dated
29 September 1994 of the Court of Appeals that reversed the Decision[2] dated
30 April 1991 of the Regional Trial Court (RTC) of Bulacan, Branch 6,
Malolos. The trial court declared Transfer Certificates of Title (TCTs) No. T-
9326-P(M) and No. T-9327-P(M) as void ab initio and ordered the restoration
of Original Certificate of Title (OCT) No. P-153(M) in the name of Eduardo
Manlapat (Eduardo), petitioners predecessor-in-interest.
The controversy involves Lot No. 2204, a parcel of land with an area
of 1,058 square meters, located at Panghulo, Obando, Bulacan. The property
had been originally in the possession of Jose Alvarez, Eduardos grandfather,
until his demise in 1916. It remained unregistered until 8 October 1976 when
OCT No. P-153(M) was issued in the name of Eduardo pursuant to a free patent
issued in Eduardos name[3] that was entered in the Registry of Deeds of
Meycauayan, Bulacan.[4] The subject lot is adjacent to a fishpond owned by one
Ricardo Cruz (Ricardo), predecessor-in-interest of respondents Consuelo Cruz
and Rosalina Cruz-Bautista (Cruzes).[5]
On 19 December 1954, before the subject lot was titled, Eduardo
sold a portion thereof with an area of 553 square meters to Ricardo. The sale is
evidenced by a deed of sale entitled Kasulatan ng Bilihang Tuluyan ng Lupang
Walang Titulo (Kasulatan)[6] which was signed by Eduardo himself as vendor
and his wife Engracia Aniceto with a certain Santiago Enriquez signing as
witness. The deed was notarized by Notary Public Manolo Cruz. [7] On 4 April
1963, the Kasulatan was registered with the Register of Deeds of Bulacan.[8]
On 18 March 1981, another Deed of Sale[9] conveying another
portion of the subject lot consisting of 50 square meters as right of way was
executed by Eduardo in favor of Ricardo in order to reach the portion covered
by the first sale executed in 1954 and to have access to his fishpond from the
provincial road.[10] The deed was signed by Eduardo himself and his wife
Engracia Aniceto, together with Eduardo Manlapat, Jr. and Patricio Manlapat.
The same was also duly notarized on 18 July 1981 by Notary Public Arsenio
Guevarra.[11]
In December 1981, Leon Banaag, Jr. (Banaag), as attorney-in-fact
of his father-in-law Eduardo, executed a mortgage with the Rural Bank of San
Pascual, Obando Branch (RBSP), for P100,000.00 with the subject lot as
collateral. Banaag deposited the owners duplicate certificate of OCT No. P-
153(M) with the bank.
14

On 31 August 1986, Ricardo died without learning of the prior
issuance of OCT No. P-153(M) in the name of Eduardo.[12] His heirs, the
Cruzes, were not immediately aware of the consummated sale between Eduardo
and Ricardo.
Eduardo himself died on 4 April 1987. He was survived by his heirs,
Engracia Aniceto, his spouse; and children, Patricio, Bonifacio, Eduardo,
Corazon, Anselmo, Teresita and Gloria, all surnamed Manlapat. [13] Neither did
the heirs of Eduardo (petitioners) inform the Cruzes of the prior sale in favor of
their predecessor-in-interest, Ricardo. Yet subsequently, the Cruzes came to
learn about the sale and the issuance of the OCT in the name of Eduardo.
Upon learning of their right to the subject lot, the Cruzes
immediately tried to confront petitioners on the mortgage and obtain the
surrender of the OCT. The Cruzes, however, were thwarted in their bid to see
the heirs. On the advice of the Bureau of Lands, NCR Office, they brought the
matter to the barangay captain of Barangay Panghulo, Obando, Bulacan.
During the hearing, petitioners were informed that the Cruzes had a legal right
to the property covered by OCT and needed the OCT for the purpose of securing
a separate title to cover the interest of Ricardo. Petitioners, however, were
unwilling to surrender the OCT.[14]
Having failed to physically obtain the title from petitioners, in July
1989, the Cruzes instead went to RBSP which had custody of the owners
duplicate certificate of the OCT, earlier surrendered as a consequence of the
mortgage. Transacting with RBSPs manager, Jose Salazar (Salazar), the Cruzes
sought to borrow the owners duplicate certificate for the purpose of
photocopying the same and thereafter showing a copy thereof to the Register of
Deeds. Salazar allowed the Cruzes to bring the owners duplicate certificate
outside the bank premises when the latter showed the Kasulatan.[15] The Cruzes
returned the owners duplicate certificate on the same day after having copied
the same. They then brought the copy of the OCT to Register of Deeds Jose
Flores (Flores) of Meycauayan and showed the same to him to secure his legal
opinion as to how the Cruzes could legally protect their interest in the property
and register the same.[16] Flores suggested the preparation of a subdivision plan
to be able to segregate the area purchased by Ricardo from Eduardo and have
the same covered by a separate title.[17]
Thereafter, the Cruzes solicited the opinion of Ricardo Arandilla
(Arandilla), Land Registration Officer, Director III, Legal Affairs Department,
Land Registration Authority at Quezon City, who agreed with the advice given
by Flores.[18] Relying on the suggestions of Flores and Arandilla, the Cruzes
hired two geodetic engineers to prepare the corresponding subdivision plan. The
subdivision plan was presented to the Land Management Bureau, Region III,
and there it was approved by a certain Mr. Pambid of said office on 21 July
1989.
After securing the approval of the subdivision plan, the Cruzes went
back to RBSP and again asked for the owners duplicate certificate from Salazar.
The Cruzes informed him that the presentation of the owners duplicate
certificate was necessary, per advise of the Register of Deeds, for the
cancellation of the OCT and the issuance in lieu thereof of two separate titles in
the names of Ricardo and Eduardo in accordance with the approved subdivision
plan.[19] Before giving the owners duplicate certificate, Salazar required the
Cruzes to see Atty. Renato Santiago (Atty. Santiago), legal counsel of RBSP,
to secure from the latter a clearance to borrow the title. Atty. Santiago would
give the clearance on the condition that only Cruzes put up a substitute
collateral, which they did.[20] As a result, the Cruzes got hold again of the
owners duplicate certificate.
After the Cruzes presented the owners duplicate certificate, along
with the deeds of sale and the subdivision plan, the Register of Deeds cancelled
the OCT and issued in lieu thereof TCT No. T-9326-P(M) covering 603 square
meters of Lot No. 2204 in the name of Ricardo and TCT No. T-9327-P(M)
covering the remaining 455 square meters in the name of Eduardo. [21]
On 9 August 1989, the Cruzes went back to the bank and
surrendered to Salazar TCT No. 9327-P(M) in the name of Eduardo and
retrieved the title they had earlier given as substitute collateral. After securing
the new separate titles, the Cruzes furnished petitioners with a copy of TCT No.
9327-P(M) through the barangay captain and paid the real property tax for
1989.[22]
The Cruzes also sent a formal letter to Guillermo Reyes, Jr.,
Director, Supervision Sector, Department III of the Central Bank of the
Philippines, inquiring whether they committed any violation of existing bank
laws under the circumstances. A certain Zosimo Topacio, Jr. of the Supervision
Sector sent a reply letter advising the Cruzes, since the matter is between them
and the bank, to get in touch with the bank for the final settlement of the case.[23]
In October of 1989, Banaag went to RBSP, intending to tender full
payment of the mortgage obligation. It was only then that he learned of the
dealings of the Cruzes with the bank which eventually led to the subdivision of
the subject lot and the issuance of two separate titles thereon. In exchange for
the full payment of the loan, RBSP tried to persuade petitioners to accept TCT
No. T-9327-P(M) in the name of Eduardo.[24]
As a result, three (3) cases were lodged, later consolidated, with the
trial court, all involving the issuance of the TCTs, to wit:
(1) Civil Case No. 650-M-89, for
reconveyance with damages filed by the heirs of Eduardo
Manlapat against Consuelo Cruz, Rosalina Cruz-
Bautista, Rural Bank of San Pascual, Jose Salazar and
Jose Flores, in his capacity as Deputy Registrar,
Meycauayan Branch of the Registry of Deeds of
Bulacan;
(2) Civil Case No. 141-M-90 for damages
filed by Jose Salazar against Consuelo Cruz, et. [sic] al.;
and
(3) Civil Case No. 644-M-89, for declaration
of nullity of title with damages filed by Rural Bank of
San Pascual, Inc. against the spouses Ricardo Cruz and
Consuelo Cruz, et al.[25]
After trial of the consolidated cases, the RTC of Malolos rendered a
decision in favor of the heirs of Eduardo, the dispositive portion of which reads:
WHEREFORE, premised from the
foregoing, judgment is hereby rendered:
1.Declaring Transfer
Certificates of Title Nos. T-9326-P(M) and
T-9327-P(M) as void ab initio and
ordering the Register of Deeds,
Meycauayan Branch to cancel said titles
and to restore Original Certificate of Title
No. P-153(M) in the name of plaintiffs
predecessor-in-interest Eduardo Manlapat;
2.-Ordering the defendants
Rural Bank of San Pascual, Jose Salazar,
Consuelo Cruz and Rosalina Cruz-
Bautista, to pay the plaintiffs Heirs of
Eduardo Manlapat, jointly and severally,
the following:
a)P200,000.00 as moral
damages;
b)P50,000.00 as exemplary
damages;
15
 c)P20,000.00 as attorneys fees;
and
d)the costs of the suit.
3.Dismissing the
counterclaims.
SO ORDERED.[26]
The trial court found that petitioners were entitled to the reliefs of reconveyance
and damages. On this matter, it ruled that petitioners were bona fide mortgagors
of an unclouded title bearing no annotation of any lien and/or encumbrance.
This fact, according to the trial court, was confirmed by the bank when it
accepted the mortgage unconditionally on 25 November 1981. It found that
petitioners were complacent and unperturbed, believing that the title to their
property, while serving as security for a loan, was safely vaulted in the
impermeable confines of RBSP. To their surprise and prejudice, said title was
subdivided into two portions, leaving them a portion of 455 square meters from
the original total area of 1,058 square meters, all because of the fraudulent and
negligent acts of respondents and RBSP. The trial court ratiocinated that even
assuming that a portion of the subject lot was sold by Eduardo to Ricardo,
petitioners were still not privy to the transaction between the bank and the
Cruzes which eventually led to the subdivision of the OCT into TCTs No. T-
9326-P(M) and No. T-9327-P(M), clearly to the damage and prejudice of
petitioners.[27]
Concerning the claims for damages, the trial court found the same
to be bereft of merit. It ruled that although the act of the Cruzes could be deemed
fraudulent, still it would not constitute intrinsic fraud. Salazar, nonetheless, was
clearly guilty of negligence in letting the Cruzes borrow the owners duplicate
certificate of the OCT. Neither the bank nor its manager had business entrusting
to strangers titles mortgaged to it by other persons for whatever reason. It was
a clear violation of the mortgage and banking laws, the trial court concluded.
The trial court also ruled that although Salazar was personally
responsible for allowing the title to be borrowed, the bank could not escape
liability for it was guilty of contributory negligence. The evidence showed that
RBSPs legal counsel was sought for advice regarding respondents request. This
could only mean that RBSP through its lawyer if not through its manager had
known in advance of the Cruzes intention and still it did nothing to prevent the
eventuality. Salazar was not even summarily dismissed by the bank if he was
indeed the sole person to blame. Hence, the banks claim for damages must
necessarily fail.[28]
The trial court granted the prayer for the annulment of the TCTs as a necessary
consequence of its declaration that reconveyance was in order. As to Flores, his
work being ministerial as Deputy Register of the Bulacan Registry of Deeds,
the trial court absolved him of any liability with a stern warning that he should
deal with his future transactions more carefully and in the strictest sense as a
responsible government official.[29]
Aggrieved by the decision of the trial court, RBSP, Salazar and the
Cruzes appealed to the Court of Appeals. The appellate court, however,
reversed the decision of the RTC. The decretal text of the decision reads:
THE FOREGOING CONSIDERED, the
appealed decision is hereby reversed and set aside, with
costs against the appellees.
SO ORDERED.[30]
The appellate court ruled that petitioners were not bona
fide mortgagors since as early as 1954 or before the 1981 mortgage, Eduardo
already sold to Ricardo a portion of the subject lot with an area of 553 square
meters. This fact, the Court of Appeals noted, is even supported by a document
of sale signed by Eduardo Jr. and Engracia Aniceto, the surviving spouse of
Eduardo, and registered with the Register of Deeds of Bulacan. The appellate
court also found that on 18 March 1981, for the second time, Eduardo sold to
Ricardo a separate area containing 50 square meters, as a road right-of-
way.[31] Clearly, the OCT was issued only after the first sale. It also noted that
the title was given to the Cruzes by RBSP voluntarily, with knowledge even of
the banks counsel.[32] Hence, the imposition of damages cannot be justified, the
Cruzes themselves being the owners of the property. Certainly, Eduardo misled
the bank into accepting the entire area as a collateral since the 603-square meter
portion did not anymore belong to him. The appellate court, however,
concluded that there was no conspiracy between the bank and Salazar. [33]
Hence, this petition for review on certiorari.
Petitioners ascribe errors to the appellate court by asking the
following questions, to wit: (a) can a mortgagor be compelled to receive from
the mortgagee a smaller portion of the originally encumbered title partitioned
during the subsistence of the mortgage, without the knowledge of, or authority
derived from, the registered owner; (b) can the mortgagee question the veracity
of the registered title of the mortgagor, as noted in the owners duplicate
certificate, and thus, deliver the certificate to such third persons, invoking an
adverse, prior, and unregistered claim against the registered title of the
mortgagor; (c) can an adverse prior claim against a registered title be noted,
registered and entered without a competent court order; and (d) can belief of
ownership justify the taking of property without due process of law?[34]
The kernel of the controversy boils down to the issue of whether the
cancellation of the OCT in the name of the petitioners predecessor-in-interest
and its splitting into two separate titles, one for the petitioners and the other for
the Cruzes, may be accorded legal recognition given the peculiar factual
backdrop of the case. We rule in the affirmative.
Private respondents (Cruzes) own
the portion titled in their names
Consonant with law and justice, the ultimate denouement of the
property dispute lies in the determination of the respective bases of the warring
claims. Here, as in other legal disputes, what is written generally deserves
credence.
A careful perusal of the evidence on record reveals that the Cruzes
have sufficiently proven their claim of ownership over the portion of Lot No.
2204 with an area of 553 square meters. The duly notarized instrument of
conveyance was executed in 1954 to which no less than Eduardo was a
signatory. The execution of the deed of sale was rendered beyond doubt by
Eduardos admission in his Sinumpaang Salaysay dated 24 April 1963.[35] These
documents make the affirmance of the right of the Cruzes ineluctable. The
apparent irregularity, however, in the obtention of the owners duplicate
certificate from the bank, later to be presented to the Register of Deeds to secure
the issuance of two new TCTs in place of the OCT, is another matter.
Petitioners argue that the 1954 deed of sale was not annotated on the
OCT which was issued in 1976 in favor of Eduardo; thus, the Cruzes claim of
ownership based on the sale would not hold water. The Court is not persuaded.
Registration is not a requirement for validity of the contract as
between the parties, for the effect of registration serves chiefly to bind third
persons.[36] The principal purpose of registration is merely to notify other
persons not parties to a contract that a transaction involving the property had
been entered into. Where the party has knowledge of a prior existing interest
which is unregistered at the time he acquired a right to the same land, his
knowledge of that prior unregistered interest has the effect of registration as to
him.[37]
Further, the heirs of Eduardo cannot be considered third persons for
purposes of applying the rule. The conveyance shall not be valid against any
16
person unless registered, except (1) the grantor, (2) his heirs and devisees, and
(3) third persons having actual notice or knowledge thereof. [38] Not only are
petitioners the heirs of Eduardo, some of them were actually parties to
the Kasulatan executed in favor of Ricardo. Thus, the annotation of the adverse
claim of the Cruzes on the OCT is no longer required to bind the heirs of
Eduardo, petitioners herein.
Petitioners had no right to constitute
mortgage over disputed portion
The requirements of a valid mortgage are clearly laid down in
Article 2085 of the New Civil Code, viz:
ART. 2085. The following requisites are essential to the contracts
of pledge and mortgage:
(1) That they be constituted to secure the fulfillment of a
principal obligation;
(2) That the pledgor or mortgagor be the absolute owner of the
thing pledged or mortgaged;
(3) That the persons constituting the pledge or mortgage have
the free disposal of their property, and in the absence thereof, that they be
legally authorized for the purpose.
Third persons who are not parties to the principal obligation may
secure the latter by pledging or mortgaging their own property. (emphasis
supplied)
For a person to validly constitute a valid mortgage on real estate, he must be the
absolute owner thereof as required by Article 2085 of the New Civil
Code.[39] The mortgagor must be the owner, otherwise the mortgage is
void.[40] In a contract of mortgage, the mortgagor remains to be the owner of the
property although the property is subjected to a lien.[41] A mortgage is regarded
as nothing more than a mere lien, encumbrance, or security for a debt, and
passes no title or estate to the mortgagee and gives him no right or claim to the
possession of the property.[42] In this kind of contract, the property mortgaged
is merely delivered to the mortgagee to secure the fulfillment of the principal
obligation.[43] Such delivery does not empower the mortgagee to convey any
portion thereof in favor of another person as the right to dispose is an attribute
of ownership.[44] The right to dispose includes the right to donate, to sell, to
pledge or mortgage. Thus, the mortgagee, not being the owner of the property,
cannot dispose of the whole or part thereof nor cause the impairment of the
security in any manner without violating the foregoing rule. [45] The mortgagee
only owns the mortgage credit, not the property itself. [46]
Petitioners submit as an issue whether a mortgagor may be
compelled to receive from the mortgagee a smaller portion of the lot covered
by the originally encumbered title, which lot was partitioned during the
subsistence of the mortgage without the knowledge or authority of the
mortgagor as registered owner. This formulation is disingenuous, baselessly
assuming, as it does, as an admitted fact that the mortgagor is the owner of the
mortgaged property in its entirety. Indeed, it has not become a salient issue in
this case since the mortgagor was not the owner of the entire mortgaged
property in the first place.
Issuance of OCT No. P-153(M), improper
It is a glaring fact that OCT No. P-153(M) covering the property
mortgaged was in the name of Eduardo, without any annotation of any prior
disposition or encumbrance. However, the property was sufficiently shown to
be not entirely owned by Eduardo as evidenced by the Kasulatan. Readily
apparent upon perusal of the records is that the OCT was issued in 1976, long
after the Kasulatan was executed way back in 1954. Thus, a portion of the
property registered in Eduardos name arising from the grant of free patent did
not actually belong to him. The utilization of the Torrens system to perpetrate
fraud cannot be accorded judicial sanction.
Time and again, this Court has ruled that the principle of
indefeasibility of a Torrens title does not apply where fraud attended the
issuance of the title, as was conclusively established in this case. The Torrens
title does not furnish a shied for fraud.[47] Registration does not vest title. It is
not a mode of acquiring ownership but is merely evidence of such title over a
particular property. It does not give the holder any better right than what he
actually has, especially if the registration was done in bad faith. The effect is
that it is as if no registration was made at all.[48] In fact, this Court has ruled that
a decree of registration cut off or extinguished a right acquired by a person when
such right refers to a lien or encumbrance on the landnot to the right of
ownership thereofwhich was not annotated on the certificate of title issued
thereon.[49]
Issuance of TCT Nos. T-9326-P(M)
and T-9327-P(M), Valid
The validity of the issuance of two TCTs, one for the portion sold to
the predecessor-in-interest of the Cruzes and the other for the portion retained
by petitioners, is readily apparent from Section 53 of the Presidential Decree
(P.D.) No. 1529 or the Property Registration Decree. It provides:
SEC 53. Presentation of owners duplicate upon entry of new
certificate. No voluntary instrument shall be registered by the Register of
Deeds, unless the owners duplicate certificate is presented with such instrument,
except in cases expressly provided for in this Decree or upon order of the court,
for cause shown.
The production of the owners duplicate certificate, whenever
any voluntary instrument is presented for registration, shall be conclusive
authority from the registered owner to the Register of Deeds to enter a new
certificate or to make a memorandum of registration in accordance with
such instrument, and the new certificate or memorandum shall be binding
upon the registered owner and upon all persons claiming under him, in favor of
every purchaser for value and in good faith.
In all cases of registration procured by fraud, the owner may pursue
all his legal and equitable remedies against the parties to such fraud without
prejudice, however, to the rights of any innocent holder of the decree of
registration on the original petition or application, any subsequent registration
procured by the presentation of a forged duplicate certificate of title, or a forged
deed or instrument, shall be null and void. (emphasis supplied)
Petitioners argue that the issuance of the TCTs violated the third
paragraph of Section 53 of P.D. No. 1529. The argument is baseless. It must be
noted that the provision speaks of forged duplicate certificate of title and forged
deed or instrument. Neither instance obtains in this case. What the Cruzes
presented before the Register of Deeds was the very genuine owners duplicate
certificate earlier deposited by Banaag, Eduardos attorney-in-fact, with RBSP.
Likewise, the instruments of conveyance are authentic, not forged. Section 53
has never been clearer on the point that as long as the owners duplicate
certificate is presented to the Register of Deeds together with the instrument of
conveyance, such presentation serves as conclusive authority to the Register of
Deeds to issue a transfer certificate or make a memorandum of registration in
accordance with the instrument.
The records of the case show that despite the efforts made by the
Cruzes in persuading the heirs of Eduardo to allow them to secure a separate
TCT on the claimed portion, their ownership being amply evidenced by
the Kasulatan and Sinumpaang Salaysay where Eduardo himself
acknowledged the sales in favor of Ricardo, the heirs adamantly rejected the
notion of separate titling. This prompted the Cruzes to approach the bank
manager of RBSP for the purpose of protecting their property right. They
succeeded in persuading the latter to lend the owners duplicate certificate.
Despite the apparent irregularity in allowing the Cruzes to get hold of the
owners duplicate certificate, the bank officers consented to the Cruzes plan to
register the deeds of sale and secure two new separate titles, without notifying
the heirs of Eduardo about it.
Further, the law on the matter, specifically P.D. No. 1529, has no
explicit requirement as to the manner of acquiring the owners duplicate for
purposes of issuing a TCT. This led the Register of Deeds of Meycauayan as
17
well as the Central Bank officer, in rendering an opinion on the legal feasibility
of the process resorted to by the Cruzes. Section 53 of P.D. No. 1529 simply
requires the production of the owners duplicate certificate, whenever any
voluntary instrument is presented for registration, and the same shall be
conclusive authority from the registered owner to the Register of Deeds to enter
a new certificate or to make a memorandum of registration in accordance with
such instrument, and the new certificate or memorandum shall be binding upon
the registered owner and upon all persons claiming under him, in favor of every
purchaser for value and in good faith.
Quite interesting, however, is the contention of the heirs of Eduardo
that the surreptitious lending of the owners duplicate certificate constitutes
fraud within the ambit of the third paragraph of Section 53 which could nullify
the eventual issuance of the TCTs. Yet we cannot subscribe to their position.
Impelled by the inaction of the heirs of Eduardo as to their claim,
the Cruzes went to the bank where the property was mortgaged. Through its
manager and legal officer, they were assured of recovery of the claimed parcel
of land since they are the successors-in-interest of the real owner thereof.
Relying on the bank officers opinion as to the legality of the means sought to
be employed by them and the suggestion of the Central Bank officer that the
matter could be best settled between them and the bank, the Cruzes pursued the
titling of the claimed portion in the name of Ricardo. The Register of Deeds
eventually issued the disputed TCTs.
The Cruzes resorted to such means to protect their interest in the
property that rightfully belongs to them only because of the bank officers
acquiescence thereto. The Cruzes could not have secured a separate TCT in the
name of Ricardo without the banks approval. Banks, their business being
impressed with public interest, are expected to exercise more care and prudence
than private individuals in their dealings, even those involving registered
lands.[50] The highest degree of diligence is expected, and high standards of
integrity and performance are even required of it.[51]
Indeed, petitioners contend that the mortgagee cannot question the
veracity of the registered title of the mortgagor as noted in the owners duplicate
certificate, and, thus, he cannot deliver the certificate to such third persons
invoking an adverse, prior, and unregistered claim against the registered title of
the mortgagor. The strength of this argument is diluted by the peculiar factual
milieu of the case.
A mortgagee can rely on what appears on the certificate of title
presented by the mortgagor and an innocent mortgagee is not expected to
conduct an exhaustive investigation on the history of the mortgagors title. This
rule is strictly applied to banking institutions. A mortgagee-bank must exercise
due diligence before entering into said contract. Judicial notice is taken of the
standard practice for banks, before approving a loan, to send representatives to
the premises of the land offered as collateral and to investigate who the real
owners thereof are.[52]
Banks, indeed, should exercise more care and prudence in dealing
even with registered lands, than private individuals, as their business is one
affected with public interest. Banks keep in trust money belonging to their
depositors, which they should guard against loss by not committing any act of
negligence that amounts to lack of good faith. Absent good faith, banks would
be denied the protective mantle of the land registration statute, Act 496, which
extends only to purchasers for value and good faith, as well as to mortgagees of
the same character and description.[53] Thus, this Court clarified that the rule
that persons dealing with registered lands can rely solely on the certificate of
title does notapply to banks.[54]
Bank Liable for Nominal Damages
Of deep concern to this Court, however, is the fact that the bank lent
the owners duplicate of the OCT to the Cruzes when the latter presented the
instruments of conveyance as basis of their claim of ownership over a portion
of land covered by the title. Simple rationalization would dictate that a
mortgagee-bank has no right to deliver to any stranger any property entrusted
to it other than to those contractually and legally entitled to its possession.
Although we cannot dismiss the banks acknowledgment of the Cruzes claim as
legitimized by instruments of conveyance in their possession, we nonetheless
cannot sanction how the bank was inveigled to do the bidding of virtual
strangers. Undoubtedly, the banks cooperative stance facilitated the issuance of
the TCTs. To make matters worse, the bank did not even notify the heirs of
Eduardo. The conduct of the bank is as dangerous as it is unthinkably negligent.
However, the aspect does not impair the right of the Cruzes to be recognized as
legitimate owners of their portion of the property.
Undoubtedly, in the absence of the banks participation, the Register
of Deeds could not have issued the disputed TCTs. We cannot find fault on the
part of the Register of Deeds in issuing the TCTs as his authority to issue the
same is clearly sanctioned by law. It is thus ministerial on the part of the
Register of Deeds to issue TCT if the deed of conveyance and the original
owners duplicate are presented to him as there appears on theface of the
instruments no badge of irregularity or
nullity.[55] If there is someone to blame for the shortcut resorted to by the
Cruzes, it would be the bank itself whose manager and legal officer helped the
Cruzes to facilitate the issuance of the TCTs.
The bank should not have allowed complete strangers to take
possession of the owners duplicate certificate even if the purpose is merely for
photocopying for a danger of losing the same is more than imminent. They
should be aware of the conclusive presumption in
Section 53. Such act constitutes manifest negligence on the part of the bank
which would necessarily hold it liable for damages under Article 1170 and other
relevant provisions of the Civil Code.[56]
In the absence of evidence, the damages that may be awarded may
be in the form of nominal damages. Nominal damages are adjudicated in order
that a right of the plaintiff, which has been violated or invaded by the defendant,
may be vindicated or recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.[57] This award rests on the mortgagors
right to rely on the banks observance of the highest diligence in the conduct of
its business. The act of RBSP of entrusting to respondents the owners duplicate
certificate entrusted to it by the mortgagor without even notifying the mortgagor
and absent any prior investigation on the veracity of respondents claim and
character is a patent failure to foresee the risk created by the act in view of the
provisions of Section 53 of P.D. No. 1529. This act runs afoul of every banks
mandate to observe the highest degree of diligence in dealing with its clients.
Moreover, a mortgagor has also the right to be afforded due process before
deprivation or diminution of his property is effected as the OCT was still in the
name of Eduardo. Notice and hearing are indispensable elements of this right
which the bank miserably ignored.
Under the circumstances, the Court believes the award
of P50,000.00 as nominal damages is appropriate.
Five-Year Prohibition against alienation
or encumbrance under the Public Land Act
One vital point. Apparently glossed over by the courts below and the
parties is an aspect which is essential, spread as it is all over the record and
intertwined with the crux of the controversy, relating as it does to the validity
of the dispositions of the subject property and the mortgage thereon. Eduardo
was issued a title in 1976 on the basis of his free patent application. Such
application implies the recognition of the public dominion character of the land
and, hence, the five (5)-year prohibition imposed by the Public Land Act against
alienation or encumbrance of the land covered by a free patent or
homestead[58] should have been considered.
18
 The deed of sale covering the fifty (50)-square meter right of way
executed by Eduardo on 18 March 1981 is obviously covered by the
proscription, the free patent having been issued on 8 October 1976. However,
petitioners may recover the portion sold since the prohibition was imposed in
favor of the free patent holder. In Philippine National Bank v. De los
Reyes,[59] this Court ruled squarely on the point, thus:
While the law bars recovery in a case where the object of the
contract is contrary to law and one or both parties acted in bad faith, we cannot
here apply the doctrine of in pari delicto which admits of an exception, namely,
that when the contract is merely prohibited by law, not illegal per se, and the
prohibition is designed for the protection of the party seeking to recover, he is
entitled to the relief prayed for whenever public policy is enhanced thereby.
Under the Public Land Act, the prohibition to alienate is predicated on the
fundamental policy of the State to preserve and keep in the family of the
homesteader that portion of public land which the State has gratuitously given
to him, and recovery is allowed even where the land acquired under the Public
Land Act was sold and not merely encumbered, within the prohibited period.[60]
The sale of the 553 square meter portion is a different story. It was
executed in 1954, twenty-two (22) years before the issuance of the patent in
1976. Apparently, Eduardo disposed of the portion even before he thought of
applying for a free patent. Where the sale or transfer took place before the filing
of the free patent application, whether by the vendor or the vendee, the
prohibition should not be applied. In such situation, neither the prohibition nor
the rationale therefor which is
to keep in the family of the patentee that portion of the public land which the
government has gratuitously given him, by shielding him from the temptation
to dispose of his landholding, could be relevant. Precisely, he had disposed of
his rights to the lot even before the government could give the title to him.
The mortgage executed in favor of RBSP is also beyond the pale of
the prohibition, as it was forged in December 1981 a few months past the period
of prohibition.
WHEREFORE, the Decision of the Court of Appeals is AFFIRMED, subject
to the modifications herein. Respondent Rural Bank of San Pascual is hereby
ORDERED to PAY petitioners Fifty Thousand Pesos (P50,000.00) by way of
nominal damages. Respondents Consuelo Cruz and Rosalina Cruz-Bautista are
hereby DIVESTED of title to, and respondent Register of Deeds of
Meycauayan, Bulacan is accordingly ORDERED to segregate, the portion of
fifty (50) square meters of the subject Lot No. 2204, as depicted in the approved
plan covering the lot, marked as Exhibit A, and to issue a new title covering the
said portion in the name of the petitioners at the expense of the petitioners. No
costs.
SO ORDERED.
G.R. No. L-17951 February 28, 1963
CONRADO C. FULE and LOURDES F. ARAGON, petitioners,
vs.
EMILIA E. DE LEGARE and COURT OF APPEALS, respondents.
Teehankee, Tanada & Carreon for petitioners.
Ignacio M. Orendain for respondents.
REGALA, J.:
This is a petition for certiorari to review the decision of the Court of Appeals,
promulgated on November 16, 1960, in Civil Case No. 15728-R, entitled"
Emilia E. Legare, plaintiff-appellant, versus Conrado C. Fule and Lourdes F.
Aragon, defendants-appellants..
The facts of this case as found by the Court of Appeals in its decision are as
follows:
This is an action for annulment of certain deeds of sale and conveyance
covering a parcel of land, together with the improvements existing thereon,
situated in the municipality of San Juan, province of Rizal, and for damages.
It appears in evidence that the plaintiff, Emilia E. de Legare, was the owner of
a parcel of land, together with a residential house erected thereon, situated at
No. 146 Sta. Mesa Boulevard Extension, San Juan, Rizal, her ownership being
evidenced by Transfer Certificate of Title No. 21253, issued by the Office of
the Register of Deeds of the province of Rizal. She was living in that house
together with defendant John W. Legare, her adopted son, and a maid named
Purita Tarrosa. On September 26, 1951, the plaintiff, thru a public deed,
constituted on the above mentioned house and lot a first class mortgage in
favor of defendant Tomas Q. Soriano to guarantee the payment of a loan in the
amount of P8,000.00. This deed of mortgage was on the same date recorded in
the Office of the Register of Deeds of the province of Rizal and annotated in
the memorandum of encumbrances of transfer certificate of title No. 21253.
On account of certain partial payments made by the plaintiff and the
contracting by the latter of additional loans in small amounts from Tomas Q.
Soriano the debt guaranteed by the above mentioned mortgage was reduced to
the sum of P7,000.00 as of February 23, 1953. These transactions, however,
were not annotated on the memorandum of encumbrances of the above
mentioned certificate of title.
At about 9:00 o'clock in the evening of March 29, 1953, while the plaintiff,
John W. Legare, and Purita Tarrosa were seated in the drawing room of the
house above referred to, an unknown man intruded into the room, approached
the plaintiff, covered her mouth, and, pressing a knife on her side, demanded
that she give him P10,000.00 if she did not like to be killed. The plaintiff
replied that she did not have that amount. Thereupon, the intruder told the
plaintiff to raise the necessary amount as he would come back the following
morning and once more threatened to kill her if she would fail to do so. After
having made that threat, the intruder left the house. John W. Legare did not
call for help nor made any attempt to defend his mother, and when Purita
Tarrosa stood up to go down the house to call for a policeman, he held the
latter by the hand and slapped her on the face when she persisted in going
down, telling her that the man had companions waiting downstairs.
After the intruder was gone John W. Legare approached the plaintiff, and
exhibiting to her a paper told her to sign it as with the same he could secure
from the U.S. Veterans Administration the amount which they needed to
deliver to that intruder. The plaintiff, who did not know how to read nor write,
although she could sign her name, asked John W. Legare what that paper was.
The latter answered that it was an application for payment of compensation.
As plaintiff had confidence in John W. Legare and prior to that occasion she
had received from the U.S. Veterans Administration a letter concerning some
compensation she was to receive, she signed that paper. After the paper was
signed by the plaintiff, John W. Legare had Purita Tarrosa sign it as a witness,
without however, allowing the latter to read it.
After that paper was thus signed, John W. Legare told the plaintiff and Purita
Tarrosa to pack up their things as they were leaving the house to hide in a
hotel, adding that the men who came earlier that evening were Huks. Early the
next morning John W. Legare took the plaintiff and Purita Tarrosa to the
Windsor Hotel in the City of Manila, and after conducting them to a room in
the hotel, told them not to leave the room or peep out of the window as they
might be seen by the men who came to their house in the previous evening.
This advise given, John W. Legare left the hotel. The plaintiff and Purita
Tarrosa stayed in that hotel for about a month and a half. John W. Legare
occasionally visited them there. In one of said occasional visits the plaintiff
told John that she wanted to go home. The latter told her that it was not yet
safe for her to go home. On May 7, 1953, however, John W. Legare came to
the hotel, gave the plaintiff a five-peso bill, and told her that she could use the
amount for transportation expenses if she wanted to leave the hotel. On the
following morning the plaintiff and Purita Tarrosa left the hotel and went
direct to her house at Sta. Mesa Boulevard Extension. When they arrived at
the house, however, they found that it was occupied by strangers, and that all
her furniture and personal belongings had disappeared. Inquiring from those
strangers how they happened to occupy the house, the latter told her that John
W. Legare had sold the house to them and that it was no longer hers. The
plaintiff thereupon sought the help of her attorney. It was then discovered that
the paper which John W. Legare had the plaintiff and Purita Tarrosa sign in
the evening of March 29, 1953 was a deed of sale of the lot and house in
question in favor of John W. Legare for the sum of P12,000.00, and that it was
supposed to have been executed on the 7th day of April, 1953, and
acknowledged before a notary public on that date. Exhibit X.
19
It further appears that sometime prior to May 9, 1953, John W. Legare
approached Elias B. Fermin, the real estate broker who intervened in the
securing of the loan contracted by the plaintiff from Tomas Q. Soriano, and
sought said broker's help to sell the lot and house in question. Elias B. Fermin
accepted the commission and offered the property in sale to defendants
spouses Conrado C. Fule and Lourdes F. Aragon. Conrado C. Fule read the
title papers in the hand of John W. Legare and inspected the premises, and
satisfied with the result of his inspection, he agreed to purchase the property
for P12,000.00 on condition that the sum of P7,000, the unpaid balance of
plaintiff's indebtedness to Tomas Q. Soriano secured by a mortgage thereon,
would be deducted from the price, and that he would assume said mortgage.
The terms offered by Conrado C. Fule being acceptable to John W. Legare
and Tomas Soriano, the parties proceeded to formalize the contract.
Accordingly, on May 9, 1953, defendant Tomas Q. Soriano executed a deed
of absolute sale thereof, free of all liens and encumbrances, in favor of
defendant spouses Conrado C. Fule and Lourdes F. Aragon, Exhibit X-2, and
said spouses in turn executed in favor of Tomas Q. Soriano a deed of
mortgage covering the property for the sum of P7,000.00. Exhibit X-3. These
three deeds, together with transfer certificate of Title No. 21253, issued in the
name of the plaintiff, were on that same date presented for registration in the
Office of the Register of Deeds of the province of Rizal. The latter, following
the usual procedure, recorded, first, the deed of sale executed by the plaintiff
in favor of defendant John W. Legare (Exhibit 1) and issued in the name of
the latter transfer certificate of title No. 30126 which cancelled transfer
certificate of title No. 21253 (Exhibit Y), then the deed of sale executed by
John W. Legare in favor of the spouses Conrado C. Fule and Lourdes F.
Aragon (Exhibit X-2) and issued in favor of the latter transfer certificate of
title No. 30127 (Exhibit Y-1), which cancelled transfer certificate of title No.
30126, and then annotated on the memorandum of encumbrances of transfer
certificate of title No. 30127 the deed of mortgage (Exhibit X-1) executed in
favor of Tomas Q. Soriano by said spouses. Once these were accomplished,
Elias B. Fermin and John W. Legare went back to the house of the spouses
Conrado C. Fule and Lourdes P. Aragon and gave the transfer certificate of
title No. 30127. Thereupon said spouses delivered to John W. Legare the
balance of the purchase price of the property after deducting therefrom the
amount of the mortgage constituted thereon in favor of Tomas Q. Soriano, the
brkerage fees and the expenses incident to the execution and registration of
said deeds and issuance of new certificates of title, which amounted to a little
P4,000.00.
Upon the evidence, the trial court rendered judgment, the dispositive part of
which reads as follows:
IN VIEW OF ALL THE FOREGOING, this Court hereby orders:
1) the cancellation of Certificates of Title Nos. 30127 and 10126, thereby
leaving valid TCT No. 21253 in the name of Emilia E. de Legare together
with the encumbrance thereon in favor of Tomas Q. Soriano;
2) the delivery of the possession of the premises to the plaintiff and the
monthly rental of P150.00 a month from May 9, 1953, up to and including the
date on which the delivery is to be made, this obligation being understood to
be joint and several insofar as the defendants Fule and Aragon are concerned;
3) the award of P5,000.00 as moral damages in favor of the
plaintiff and enforceable against John W. Legare for the fraud
perpetrated by the latter on the former;
4) the award of P1,000.00 as attorney's is fees enforceable against
the defendants Fule and Aragon;
And on the cross-claim, the court orders —
1) John W. Legare to refund to the spouses Fule and Aragon the
amount paid by the latter on account of the sale contained in
Exhibit X-2 plus interest thereon at the legal rate from the date of
the cross-claim;
2) the award of P5,000.00 as moral damages in favor of the
spouses Fule and Aragon and enforceable against John W. Legare
for the misrepresentation made by him;.
3) the reimbursement to the spouses Fule and Aragon by John W.
Legare of all amounts which may be paid by the former to the
plaintiff by way of rentals for the premises involved herein, as well
as attorney's fees in the amount of P1,000.00.
SO ORDERED.
The Court of Appeals, in deciding the appeal, entered a judgment the
dispositive portion of which follows:.
WHEREFORE, modified as indicated above, i.e., the transfer
certificate of title No. 21253 issued in the name of Emilia E. de
Legare is revived with the mortgage in favor of appellee Tomas Q.
Soriano annotated on its memorandum of encumbrances but
reduced to the amount of P7,000.00, and that the award of
attorney's fees in the amount of P1,000.00 to be paid by the
spouses Conrado C. Fule and Lourdes F. Aragon, in favor of the
plaintiff, is eliminated therefrom, the judgment appealed from is
hereby affirmed in all other respects, without special
pronouncement as to costs in this instance.
IT IS SO ORDERED.
In elevating the judgment of the Court of Appeals to this Tribunal for review,
herein petitioners discussed 6 assignments of error. However, this Court is of
the view that, in effect and substance, only one issue was raised.We have
always refrained from reviewing factual findings of the Court of Appeals and
the first two errors assigned were but attempts at disputing the same. The
other four were simply detailed aspects of the one, sole issue, to wit:
Were the herein petitioners purchasers in good faith and for value
of the properties here contested?
Guided by the facts found by the Court of Appeals, We hold the herein
petitioners innocent purchasers for value of the house and lot here disputed. In
consequence, they are here adjudged the lawful owners thereof.
A purchaser in good faith is one who buys property of another, without notice
that some other persons has a right to, or interest in, such property and pays a
full and fair price for the same, at the time of such purchase, or before he has
notice of the claim or interest of some other persons in the property. Good
faith consists in an honest intention to abstain from taking any
unconscientious advantage of another (Cui and Joven v. Henson, 51 Phil.
606). We have measured the conduct of the petitioner spouses by this
yardstick.
These facts were uncontroverted. The negotiation and transaction which
eventually caused the certificate of title to be transferred from the herein
respondent to the petitioner spouses were conducted by a real estate broker
licensed since 1938. Nothing in John W. Legare's person or behaviour
suggested anything suspicious. He was the adopted son of the herein
respondent, and, to the time that he was contracting with the petitioner
spouses, he had not been known to commit crime or dishonesty. On the
contrary, John has had previous dealings with the real estate broker during
which he exhibited the expected degree of trustworthiness.
It should be noted that the deed of sale was regular upon its face, and no one
would have questioned its authenticity since it was duly acknowledged before
a notary public. Moreover, even if the petitioners had the opportunity to
compare the signature of the respondent on the deed of conveyance with a
specimen of her genuine signature, the effort, nonetheless, would have been in
vain since the respondent's signature on the document was admittedly hers.
Lastly, it should not be overlooked that the respondent, during the whole
period of the negotiation, was nowhere available to confirm or deny the
execution of the deed. She was then in hiding, or, hidden, at the Windsor
Hotel in Manila.
The diligence and precaution observed by the petitioners themselves could
hardly have been wanting. The records show that they did not rely solely and
fully upon the deed of sale in favor of John W. Legare and the fact that John
had then in his possession the corresponding certificate of title of the
20
registered owner. They demanded more. They insisted that the sale in favor of
John W. Legare be first registered and that the transfer in their favor be
thereafter likewise registered. It was only after all these were complied with
that they paid the purchase price. In other words, the petitioner spouses relied
not really on the documents exhibited to them by John W. Legare, but, on the
registerability of those documents. This in Our view, satisfies the measure of
good faith contemplated by law.
It is true that at the time the herein petitioners purchased the properties from
John W. Legare, he was not yet the registered owner of the same. This fact
alone, however, could not have caused the herein petitioners to lose their
status as innocent purchasers for value. It should be recalled that although the
title was in the name of the respondent Emilia E. de Legare, the certificate of
title was in the possession of her adopted son, John. Under Section 55 of Act
496, as amended, John's possession of the certificate and his subsequent
production of it to the herein petitioners operated as a "conclusive authority
from the registered owner to the register of deeds to enter a new certificate."
SEC. 55. The production of the owner's duplicate certificate whenever
any voluntary instrument is presented for registration shall be conclusive
authority from the registered owner to the register of deeds to enter a new
certificate or to make a memorandum or registration in accordance with such
instrument, and the new certificate or memorandum shall be binding upon the
registered owner and upon all persons claiming under him, in favor of every
purchaser for value and in good faith. ....
While it was true that the transfer in favor of John was still unregistered when
he sought to sell the property to the herein petitioners, it was not true that the
latter observed no precaution whatsoever from the complication of such non-
registration. As already discussed above, the petitioners required that the
registration of the previous sale (from the respondent to John W. Legare) be
first attended to and completed. After that was done and the certificate of title
thereof was issued to John by the Register of Deeds, they still withheld
payment till the second sale (from John to the petitioners) has in turn
registered and the corresponding certificate of title therefor was issued in their
names. It was only after all these were followed that the entire negotiation was
terminated with the payment of the balance of the purchase price. All these,
We hold, were adequate safeguards against the objection interposed. A
contrary conclusion would operate to weaken the reliance of the general
public on the indefeasibility of titles registered under the Torrens System.
We have so far demonstrated the good faith of the petitioner spouses. By the
very facts established by the Court of Appeals, however, there is still another
reason why the property herein in question should be adjudged to the
petitioners.
Although the deed of sale in favor of John W. Legare was fraudulent, the fact
remains that he was able to secure a registered title to the house and lot. It was
this title which he subsequently conveyed to the herein petitioners. We have
indeed ruled that a forged or fraudulent deed is a nullity and conveys no title
(Director of Lands v. Addison, 49 Phil. 19). However, We have also laid
down the doctrine that there are instances when such a fraudulent document
may become the root of valid title. One such instance is where the certificate
of title was already transferred from the name of the true owner to the forger,
and while it remained that way, the land was subsequently sold to an innocent
purchaser. For then, the vendee had the right to rely upon what appeared in the
certificate (Inquimboy vs. Cruz, G.R. No. L-13953, July 28, 1960).
Wherefore, the parties respectfully pray that the foregoing stipulation of facts
be admitted and approved by this Honorable Court, without prejudice to the
parties adducing other evidence to prove their case not covered by this
stipulation of facts. 1äwphï1.ñët
We have been constrained to adopt the conclusion here set forth because
under the Torrens system, "registration is the operative act that gives validity
to the transfer or creates a lien upon the land (Secs. 50 and 51, Land
Registration Act). Consequently, where there was nothing in the certificate of
title to indicate any cloud or vice in the ownership of the property, or any
encumbrance thereon, the purchaser is not required to explore farther than
what the Torrens title upon its face indicates in quest for any hidden defect or
inchoate right that may subsequently defeat his right thereto. If the rule were
otherwise, the efficacy and conclusiveness of the certificate of title which the
Torrens system seeks to insure would entirely be futile and nugatory. (Reynes
vs. Barrera, 68 Phil. 656; De Lara and De Guzman vs. Ayroso, 50 O.G. No.
10, 4838). The public shall then be denied of its foremost motivation for
respecting and observing the Land Registration Act. In the end, the business
community stands to be inconvenienced and prejudiced immeasurably.
Furthermore, when the Register of Deeds issued a certificate of title in the
name of John W. Legare, and thereafter registered the same, John W. Legare,
insofar as third parties were concerned, acquired a valid title to the house and
lot here disputed. When, therefore, he transferred this title to the herein
petitioners, third persons, the entire transaction fell within the purview of
Article 1434 of the Civil Code. The registration in John W. Legare's name
effectively operated to convey the properties to him.
ART. 1434. When a person who is not the owner of a thing sells or
alienates and delivers it, and later the seller or grantor acquires title
thereto, such title passes by operation of law to the buyer or
grantee.
This Court sympathizes with the respondent. It is aware of the treacherous,
painful fraud committed on her by her adopted son. But positive provisions of
law and settled jurisprudence cannot be subordinated to that feeling.
Besides, the records of this case reveal that the herein respondent is herself not
entirely free from blame. We note that when John presented to her the
document which turned out to be a bed of conveyance in his favor, she readily
affixed her signature thereto upon the simple representation of John that it was
a document pertaining to her claim with the U.S. Veterans Administration.
She could have asked her maid to read the contents of the same for her and yet
she did not. These, We believe, amount to a lack of prudence and precaution
on the part of Mrs. Emilia de Legare.
IN VIEW OF THE FOREGOING, the decision of the Court of Appeals is
hereby reversed and set aside. A new one is here entered dismissing the
respondent's complaint and declaring the petitioners herein the lawful owners
of the properties here involved. Without pronouncement as to costs.
G.R. No. L-63046 June 21, 1990
MARIANO TORRES Y CHAVARRIA, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, FRANCISCO E.
FERNANDEZ and FE FERNANDEZ, ROSARIO MOTA CUE,
ERNESTO MEDINA CUE and the NATIONAL TREASURER, as
Custodian of the Assurance Fund, respondents.
This is a petition for review of the decision of the Court of Appeals in CA-
G.R. No. 62248-R entitled "Mariano Torres Y Chavarria v. Francisco E.
Fernandez, et al., etc.," which reversed the decision of the then Court of First
Instance of Manila, Branch 7, by holding that it is the respondent Rosario
Mota who is legally entitled to the disputed realties, being an innocent
mortgagee and later the highest bidder when the properties were supposedly
foreclosed, and not the petitioner Mariano Torres, the defrauded owner
thereof; and of the resolution of that Court denying Torres' motion for
reconsideration.
The parcel of land located at the comer of Quezon Boulevard and Raon Street
(now Gonzalo Street), and the building erected thereon known as "M. Torres
Building" is owned by Mariano Torres, the herein petitioner, as evidenced by
Transfer Certificate of Title No. 53628-Manila issued in his name. As far as
the records show, Torres was and still is in possession of the realties, holding
safely to his owner's duplicate certificate of title, and, at least until 1971,
paying the real estate taxes due thereon, and collecting rentals from his tenants
occupying the building.
Sometime in 1966, Francisco Fernandez, Torres' brother-in-law, filed a
petition with the Court of First Instance of Manila, docketed as LRC GLRO
Cad. Rec. No. 133, where he, misrepresenting to be the attorney-in-fact of
Torres and falsely alleging that the a duplicate copy of TCT No. 53628 was
lost, succeeded in obtaining a court order for the issuance of another copy of
the certificate.
21
Once in possession thereof, Fernandez forged a simulated deed of sale of the
realties in his favor. Whereupon TCT No. 53628 in the name of Torres was
canceled and TCT No. 86018 was issued in Fernandez' name.
On various dates from December, 1966 to November, 1967 Fernandez
mortgaged the realties to Rosario Mota, wife of Ernesto Cue, and also to
Angela Fermin, who later assigned her credit to the spouses Cue. The
mortgages were annotated at the back of TCT No. 86018 and so was the deed
of assignment.
Torres, who up to this time still had possession of his owner's duplicate
certificate of title and who was still collecting rentals from the occupants of
the subject building, upon Teaming of the fraud committed by Fernandez,
caused, on March 18, 1968, the annotation on the latter's TCT a notice of
adverse claim.
On March 30, 1968, Torres filed Civil Case No. 72494 against Fernandez to
annul TCT No. 86018 as well as the proceedings in LRC GLRO Cad. Rec.
No. 133. On April 2, 1968, a notice of lis pendens was annotated at the back
of Fernandez' TCT.
In the meantime, Fernandez failed to pay his various loans which prompted
the Cues to institute an extrajudicial foreclosure of the mortgage.
On February 11, 1969, Fernandez filed Civil Case No. 75643 against the
spouses Cue for the annulment of the mortgage with preliminary injunction.
After the foreclosure was enjoined, the parties entered into an amicable
settlement, approved by the court whereby it was stipulated that Fernandez
acknowledged and promised to pay his debt to the Cues for Five Hundred
Sixty-Two Thousand Nine Hundred Fifty-Five and 28/100 (P562,955.28)
Pesos on or before, March 30, 1970, while the spouses bound themselves to
execute and deliver, within ten (10) days from receipt of the sum mentioned
such documents as are necessary to release the mortgages in favor of
defendants on plaintiffs' property.
Before Fernandez could pay his obligation under the settlement agreement, a
decision was rendered in Civil Case No. 72494 where it was declared that the
proceedings held in LRC GLRO Cad. Rec, No. 133 was void and that TCT
No. 86018, issued in the name of Fernandez, is without force and effect as
TCT No. 53628 in the name of Torres is the true and legal evidence of
ownership of the subject immovables. Fernandez appealed from this decision
to the Court of Appeals where it was docketed as CA-G.R. No. 46386-R. The
Court of Appeals, on April 20, 1979, affirmed the decision of the trial court.
There being nothing on the records that would indicate that the judgment of
the appellate court was elevated here, it would appear that it had become final
and executory.
But meanwhile, prior to the Court of Appeals' decision mentioned above,
Fernandez failed to comply with his obligation under the amicable settlement
and whereupon the Cues applied for and were granted a writ of execution. The
subject realties were then levied upon and sold at public auction where
Rosario Mota was the highest bidder.
On August 31, 1971, the redemption period for the subject immovables having
lapsed without Fernandez nor Torres redeeming the properties, Rosario Mota
was issued the Sheriffs Deed of Sale. Thereafter, TCT No. 86018 was
canceled and TCT No. 105953 was issued in her name.
On December 7, 1971 Mota, through her lawyer, notified the tenants
occupying "M. Torres Building" that she is the new owner thereof and
henceforth, payment of their rentals should be made to her.
On December 17, 1971 Torres filed a complaint, which later gave rise to this
petition, with the Court of First Instance of Manila, docketed as Civil Case
No. 85753, against Fernandez and his spouse and the Cues to restrain the latter
from collecting rentals and for the declaration as void TCT No. 105953. The
Cues in turn filed a cross-claim against Fernandez spouses and a third party
complaint against the National Treasurer as the custodian of the Assurance
Fund.
During the proceeding, Mariano Torres, having died sometime in 1974, was
substituted by his widow. On June 3, 1977, the trial court rendered its decision
declaring TCT No. 105953 in the name of Rosario Mota nun and void as it
upheld the validity of TCT No. 53628 in the name of Torres as the true
evidence of title to the disputed realties, and at the same time dismissing the
Cue's third party complaint and cross claim.
The decision was reviewed by the respondent court at the instance of the Cues
which, as aforementioned, reversed the trial court in its decision dated July 30,
1982 and the Resolution of January 14, 1983. Hence, this petition.
There is nothing on the records which shows that Torres performed any act or
omission which could have jeopardized his peaceful dominion over his
realties. The decision under review, however, in considering Mota an innocent
mortgagee protected under Section 55 of the Land Registration Law, held that
Torres was bound by the mortgage. Inevitably, it pronounced that the
foreclosure sale, where Mota was the highest bidder, also bound Torres and
concluded that the certificate of title issued in the name of Mota prevails over
that of Torres'. As correctly pointed out by Torres, however, his properties
were sold on execution, and not on foreclosure sale, and hence, the purchaser
thereof was bound by his notice of adverse claim and lis pendens annotated at
the back of Fernandez' TCT. Moreover, even if We grant Mota the status of an
innocent mortgagee, the doctrine relied upon by the appellate court that a
forged instrument may become the root of a valid title, cannot be applied
where the owner still holds a valid and existing certificate of title covering the
same interest in a realty. The doctrine would apply rather when, as in the cases
for example of De la Cruz v. Fable, 35 Phil. 144 [1916], Fule v. De Legare,
No. L-17951, February 28, 1963, 7 SCRA 351, and Republic v. Umali, G.R.
No. 80687, April 10, 1989, the forger thru insidious means obtains the owner's
duplicate certificate of title, converts it in his name, and subsequently sells or
otherwise encumbers it to an innocent holder for value, for in such a case the
new certificate is binding upon the owner (Sec. 55, Act 496; Sec. 53, P.D. No.
1529). But if the owner holds a valid and existing certificate of title, his would
be indefeasible as against the whole world, and not that of the innocent
holder's. "Prior tempore potior jure" as We have said in Register of Deeds v.
Philippine National Bank, No. L-17641, January 30, 1965, 13 SCRA 46 ,
citing Bank, No. L Legarda v. Saleeby, 31 Phil. 590, Roman Catholic Bishop
v. Philippine Railway, 49 Phil. 546, Reyes v. Borbon, 50 Phil. 791. in C.N.
Hodges v. Dy Buncio & Co., Inc., No. L-16096, October 30, 1962, 6 SCRA
287, 292, We laid down the doctrine that:
The claim of indefeasibility of the petitioner's title under the Torrens land title
system would be correct if previous valid title to the same parcel of land did
not exist. The respondent had a valid title ... It never parted with it; it never
handed or delivered to anyone its owner's duplicate of the transfer certificate
of title, it could not be charged with negligence in the keeping of its duplicate
certificate of title or with any act which could have brought about the issuance
of another certificate upon which a purchaser in good faith and for value could
rely. If the petitioner's contention as to indefeasibility of his title should be
upheld, then registered owners without the least fault on their part could be
divested of their title and deprived of their property. Such disastrous results
which would shake and destroy the stability of land titles had not been
foreseen by those who had endowed with indefeasibility land titles issued
under the Torrens system. Veronica Bareza perpetrated the fraud by making
false representations in her petition and the title issued to her being the
product of fraud could not vest in her valid and legal title to the parcel of land
in litigation. As she had no title to the parcel of land, in the same way that a
thief does not own or have title to the stolen goods, she could not transmit title
which she did not have nor possess.
We have applied this doctrine in the case of the Register of Deeds v. P.N.B.,
supra, where We noted that said ruling is "a mere affirmation of the
recognized principle that a certificate is not conclusive evidence of title if it is
shown that the same land had already been registered and an earlier certificate
for the same land is in existence." Again in the case of Baltazar v. Court of
Appeals, G.R. No. 78728, December 8, 1988, 168 SCRA 354, We held that as
between two persons both of whom are in good faith and both innocent of any
negligence, the law must protect and prefer the lawful holder of registered title
over the transfer of a vendor bereft of any transmissible rights.
In view of the foregoing, to hold, for the purpose of enforcing the mortgage,
that Mota was an innocent mortgagee would be futile because, as above
shown, no certificate of title covering the subject realties in derogation of
Torres' certificate of title may validly be issued.
22
Then it becomes evident that the remaining possible remedies of the Cues are
to go against Fernandez or the Assurance Fund, as they in fact had done in the
lower court by filing a cross claim and third party complaint. The lower court
dismissed the Cues' cross-claim against Fernandez reasoning out that their
remedy is to cause the final judgment (compromise agreement) in Civil Case
No. 75643 executed. This, of course, is correct since the rights and obligations
of both parties had been determined in that case.
The trial court also dismissed the Cues' third party complaint against the
Treasurer of the Philippines as custodian of the Assurance Fund after finding
them negligent in protecting their interest. The trial court recognized the
principle that a person dealing with registered lands need not go beyond the
certificate of title but nevertheless pointed out that there are circumstances in
this case which should have put the Cues on guard and prompted them to
investigate the property being mortgaged to them, thus:
The property in question is a very valuable property, in fact accepted by
defendants Mota and Medina Cue as collateral for more than half a million
pesos in loans granted by them to Fernandez. Its value lies principally in its
income potential, in the form of substantial monthly rentals. Certainly, the
registered title does not yield any information as to the amount of rentals due
from the building, much less on who is collecting them, or who is recognized
by the tenants as their landlord. Any prospective buyer or mortgagee of such a
property, if prudent and in good faith, is normally expected to inquire into all
these and related facts and circumstances.
Besides, by the course of visible dimensions of the M. Torres Building, it
should be readily obvious to any one that the area of the two lots ... covered by
TCT No. 86018 cannot accommodate the building, as in fact it also rests upon
a lot covered by TCT No. 56387, and partly upon a lot leased by (Torres) from
the City of Manila. Had (the Cues) known of this fact would they have
accepted the mortgage alone over TCT No. 86018? The answer is obvious.
And yet, to all indications, they never bothered to look into this fact about the
M. Torres Building.
Another thing that defendants Mota and Medina Cue must have investigated,
as any prudent buyer or mortgagee should before consummating any
transaction on real property, in the matter of payment of taxes on the property.
After all, the big value of the property in question necessarily means that even
real estate taxes on it alone would involve big amounts of money, and if there
are tax arrearages, any buyer or subsequent owner of the property wig have to
come face to face with the tax hen attaching to the property wherever its
owner may be. ... (P. 257, Record on Appeal)
We likewise take note of the manifestation of the Office of the Solicitor
General that the Cues failed to contest the ruling of the trial court negating the
liability of the Assurance Fund. For these reasons, We hold that the Cues'
remedy merely is to go against Francisco Fernandez or rather his estate since
record shows that he died sometime in 1983.
ACCORDINGLY, the decision and resolution under review are REVERSED
and the decision of the then Court of First Instance, Branch 7, Manila in Civil
Case No. 85753 is REINSTATED.
SO ORDERED.
G.R. No. 183448 June 30, 2014
SPOUSES DOMINADOR PERALTA AND OFELIA
PERALTA, Petitioners,
vs.
HEIRS OF BERNARDINA ABALON, represented by MANSUETO
ABALON, Respondents.
x-----------------------x
G.R. No. 183464
HEIRS OF BERNARDINA ABALON, represented by MANSUETO
ABALON, Petitioners,
vs.
MARISSA ANDAL, LEONIL AND AL, ARNEL AND AL, SPOUSES
DOMINDOR PERALTA AND OFELIA PERALTA, and HEIRS of
RESTITUTO RELLAMA, represented by his children ALEX,
IMMANUEL, JULIUS and SYLVIA, all surnamed RELLAMA.
DECISION
SERENO, CJ:
Before us are the consolidated Petitions for Review on Certiorari under Rule
45 of the Rules of Court assailing the 30 May 2007 Decision 1 of the Court of
Appeals (CA) Seventeenth Division in CA-G.R. CV No. 85542. The CA had
reversed the 14 April 2005 Decision2 of the Regional Trial Court (RTC), Fifth
Judicial Region of Legaspi City, Branch 5, in Civil Case No. 9243.
The civil case before the RTC of Legaspi City involved a parcel of land
registered under the name of Bernardina Abalon and fraudulently transferred
to Restituto Rellama and who, in turn, subdivided the subject property and
sold it separately to the other parties to this case – Spouses Dominador and
Ofelia Peralta; and Marissa, Leonil and Arnel, all surnamed Andal. Thereafter,
Spouses Peralta and the Andals individually registered the respective portions
of the land they had bought under their names. The heirs of Bernardina were
claiming back the land, alleging that since it was sold under fraudulent
circumstances, no valid title passed to the buyers. On the other hand, the
buyers, who were now title holders of the subject parcel of land, averred that
they were buyers in good faith and sought the protection accorded to them
under the law.
THE FACTS
The RTC and the CA have the same findings of fact, but differ in their legal
conclusions. There being no factual issues raised in the Petitions, we adopt the
findings of fact of the CA in CA-G.R. No. 85542, as follows:
The subject parcel of land, described as Lot 1679 of the Cadastral Survey of
Legaspi, consisting of 8,571 square meters, was originally covered by Original
Certificate of Title (OCT) No. (O) 16 and registered in the name of
Bernardina Abalon (Abalon). It appears that a Deed of Absolute Sale was
executed over the subject property in favor of Restituto M. Rellama (Rellama)
on June 10, 1975. By virtue of such conveyance OCT No. (O) 16 was
cancelled and in lieu thereof Transfer Certificate of Title (TCT) No. 42108
was issued in the name of Rellama. The subject property was then subdivided
into three (3) portions: Lot 1679-A, Lot 1679-B, Lot 1679-C. Lot 1679-A was
sold to Spouses Dominador P. Peralta, Jr. and Ofelia M. Peralta (Spouses
Peralta) for which reason TCT No. 42254 was issued in their names. Lot
1679-B, on the other hand, was first sold to Eduardo Lotivio (Lotivio) who
thereafter transferred his ownership thereto to Marissa Andal, Arnel Andal,
and Leonil Andal (the Andals) through a Deed of Absolute Sale dated October
9, 1995. On even date, TCT No. 42482 was issued in the name of the Andals.
The Andals likewise acquired Lot 1679-C as evidenced by the issuance of
TCT No. 42821 in their favor on December 27, 1995.
Claiming that the Deed of Absolute Sale executed by Abalon in favor of
Rellama was a forged document, and claiming further that they acquired the
subject property by succession, they being the nephew and niece of Abalon
who died without issue, plaintiff-appellees Mansueta Abalon and Amelia
Abalon filed the case below against Rellama, Spouses Peralta, and the Andals,
the herein defendants-appellants and the Bank of the Philippines [sic] Islands
which was later dropped as a party defendant.
It was alleged in their Complaint and subsequent Amended Complaint, under
five separate causes of action, that Rellama was able to cause the cancellation
of OCT No. (O) 16, and in lieu thereof the issuance of TCT No. 42108 in his
own name from which the defendants-appellants derived their own titles, upon
presentation of a xerox copy of the alleged forged deed of absolute sale and
the order granting the issuance of a second owner’s duplicate copy of OCT
No. (O) 16 in his favor in Miscellaneous Cadastral Case No. 10648, which he
had filed on the pretext that Lot 1679 covered by OCT No. (O) 16 was sold to
him and that the owner’s duplicate copy of the said title got lost in 1976 after
the same was delivered to him. They averred that the owner’s duplicate copy
of Oct NO. (O) 16 had always been with Abalon and that upon her death, it
was delivered to them. Likewise, they alleged that Abalon had always been in
23
possession of the subject property through her tenant Pedro Bellen who was
thereafter succeeded by his wife, Ruperta Bellen, and then his son, Godofredo
Bellen. On the other hand, they said that Rellama had never set foot on the
land he was claiming. They further alleged that after the ownership over the
subject property was transferred to them upon the death of Abalon, they took
possession thereof and retained Godofredo as their own tenant. However, they
averred that in 1995 the defendants-appellants were able to wrest possession
of the subject property from Godofredo Bellen. They alleged that the
defendants-appellants are not buyers in good faith as they were aware that the
subject land was in the possession of the plaintiffs-appellees at the time they
made the purchase. They thus claim that the titles issued to the defendants-
appellants are null and void.
In his answer, Rellama alleged that the deed of absolute sale executed by
Abalon is genuine and that the duplicate copy of OCT No. (O) 16 had been
delivered to him upon the execution of the said deed of transfer.
As for Spouses Peralta and the Andals, who filed their separate answers to the
complaint, they mainly alleged that they are buyers in good faith and for
value.
During the trial, Rellama passed away. He was substituted by his heirs.
After the plaintiffs-appellees rested their case, instead of presenting their own
evidence, the defendants-appellants and the Heirs of Restituto Rellama, on
different occasions, filed a demurrer to evidence.
On April 14, 2005, the court a quo rendered judgment in favor of the
plaintiffs-appellees and ordered the restoration of OCT No. (O) 16 in the name
of Abalon and the cancellation of the titles issued to the defendants-appellants.
The fact that only a xerox copy of the purported deed of sale between Rellama
and Abalon was presented before the Register of Deeds for registration and
the absence of such xerox copy on the official files of the said Office made the
court a quo conclude that the said document was a mere forgery. On the other
hand, the court a quo noted that the duplicate copy of OCT No. (O) 16 in the
hands of the plaintiffs-appellees bears [sic] the perforated serial number B
221377, which it held is a convincing proof of its authenticity and
genuineness. It thus stated that "Miscellaneous Cadastral Case No. 10648 is a
(mere) strategem [sic] fraudulently concocted ... for the issuance of a
fabricated (second) owner’s duplicate certificate of Oct No. (O) 16" since the
owner’s duplicate copy of OCT No. (O) 16 has not been lost at all. It said that
any subsequent registration procured by the presentation of such forged
instrument is null and void. The dispositive portion of the court a quo’s
decision reads: WHEREFORE, [p]remises [c]onsidered, judgment is rendered
as follows, to wit:
1. Ordering the restoration of Original Certificate of Title No. (O) 16
embracing Lot 1679 in the name of Bernardina Abalon into the official files of
the Registry of Deeds of Legaspi City – a copy of the owner’s duplicate
certificate embodying the technical description of Lot 1679 forming official
part of the record as Exhibit "D" – as well as ordering the cancellation of any
and all transfer certificates of title succeeding Original Certificate of title No.
(O) 16 – including Transfer Certificates (sic) of Title Nos. 42108, 42254,
42255, 42256, 42821 [,] and 42482;
2. Ordering the defendants Marissa Andal, Leonil Andal, Arnel Andal[,] and
the spouses Dominador and Ofelia Peralta to vacate Lot 1679 and to
peacefully surrender such lot to the plaintiffs;
3. Ordering the defendants to pay the plaintiffs the amount of ₱50,000.00 as
litigation expenses; and
4. Ordering the defendants to pay the costs of suit.
The counterclaims by [sic] the defendants are all dismissed.
SO ORDERED.
Spouses Peralta and the Andals filed their separate Notices of Appeal and
thereafter, upon approval, filed their respective Defendants-Appellants’
Briefs. The Heirs of Rellama, on the other hand, opted not to challenge the
ruling of the lower court.3
The Andals and Spouses Peralta – appellants in CA-G.R. CV No. 85542 –
raised several issues, which the CA summarized as follows:
1. Whether the Deed of Absolute Sale executed by Abalon in favor of Rellama
was spurious
2. Whether the Andals and Spouses Peralta were buyers in good faith and for
value
3. Who among the parties were entitled to their claims for damages.4
THE RULING OF THE COURT OF APPEALS
On 30 May 2007, the Seventeenth Division of the Court of Appeals
promulgated its assailed judgment setting aside the RTC Decision. The CA
ruled that the circumstances surrounding the sale of the subject property
showed badges of fraud or forgery against Rellama. It found that Abalon had
not parted with her ownership over the subject property despite the claim of
Rellama that they both executed a Deed of Absolute Sale. As proof, the CA
pointed out the existence of a notarized contract of leasehold executed by
Abalon with Ruperta Bellen on 11 June 1976. The genuineness and due
execution of the said leasehold agreement was uncontroverted by the parties.
On this basis, the appellate court concluded that Abalon could not have leased
the subject parcel of land to Bellen if the former had parted with her
ownership thereof.5
The CA also found no evidence to show that Rellama exercised dominion
over the subject property, because he had not introduced improvements on the
property, despite claiming to have acquired it in 1975.6 Further, the CA noted
that he did not cause the annotation of the Deed of Sale, which he had
executed with Abalon, on OCT No. (O) 16. It observed that when the original
copy of OCT No. (O) 16 was allegedly lost in 1976, while Rellama was on his
way to Legaspi City to register the title to his name, it took him almost 20
years to take steps to judicially reconstitute a copy thereof. To the appellate
court, these circumstances cast doubt on the veracity of Rellama’s claim of
ownership over such a significant property, which was almost a hectare. 7
The CA also ruled that the heirs of Bernardina Abalon had the legal standing
to question the sale transaction between Rellama and their predecessor-in-
interest. It concluded that the heirs of Abalon had acquired the subject
property by ordinary acquisitive prescription and thus had every right to attack
every document that intended to divest them of ownership thereof, 8 which in
this case was the Deed of Sale that Bernardina executed in favor of Rellama.
Lastly, the appellate court considered the Spouses Peralta as buyers in bad
faith for relying on a mere photocopy of TCT No. 42108 when they bought
the property from Rellama.9 On the other hand, it accorded the Andals the
presumption of good faith, finding no evidence that would rebut this
presumption.10
The dispositive portion of the assailed CA Decision in CA-G.R. CV No.
85542 is as follows:
WHEREFORE, the assailed decision is SET ASIDE and a new judgment is
rendered as follows:
1. Transfer Certificate of Title No. 42482 and Transfer Certificate of Title No.
42821, both in the names of Andals, are held legal and valid.
2. Transfer Certificate of Title No. 42254 registered in the names of Spouses
Peralta is cancelled for being null and void. Hence, they are ordered to vacate
the land covered thereby and to surrender possession thereof in favor of the
plaintiffs-appellees.
SO ORDERED.11
The heirs of Abalon filed a Motion for Reconsideration of the 30 May 2007
Decision, insofar as the CA declared the Andals to be buyers in good faith of
24
the subject property and, thus, that the land title issued in their favor was
valid. Spouses Peralta, for their part, filed a Motion for Partial
Reconsideration of the said CA Decision pertaining to the portion that
declared them as buyers in bad faith which accordingly nullified the title
issued to them.
On 10 June 2008, the CA denied the Motions for Partial Reconsideration of
the movants for lack of merit.12
On 11 August 2008, Spouses Peralta filed with this Court a Petition for
Review under Rule 45 of the Rules of Court assailing the 30 May 2007
Decision in CA-G.R. CV No. 85542.13 On the same day, the heirs of
Bernardina Abalon, represented by Mansueto Abalon, filed a similar Petition
questioning the portion of the mentioned CA Decision declaring the validity
of the title issued to the Andals, who were adjudged by the appellate court as
buyers in good faith.14 THE ISSUES
The Petition filed by Spouses Peralta, docketed as G.R. No. 183448, lists the
following issues:
a) The case for annulment should have been dismissed because the
purported Deed of Sale executed by Abalon and Rellama was not
introduced in evidence and thus, forgery was not proven.
b) The heirs of Abalon are notforced heirs of Bernardina Abalon;
hence, they do not have the legal personality to file the action to
annul the subject Deed of Sale.
c) The heirs of Abalon failed to prove that they had inherited the
subject property.
d) Spouses Peralta are buyers in good faith and, thus title to their
portion of the subject property must be upheld15
As for the heirs of Abalon, their Petition, docketed as G.R. No. 183464, raises
the following issues:
a) The Andals cannot be considered as buyers in good faith by
simply applying the ordinary presumption in the absence of
evidence showing the contrary.
b) The CA erred in applying in favor of the Andals, the doctrine
that a forged instrument may become the root of a valid title in the
hands of an innocent purchaser for value, because Abalon never
parted with her possession of the valid and uncancelled title over
the subject property
c) The CA erred in declaring the validity of the title issued in the
names of the Andals, because Rellama was bereft of any
transmissible right over the portion of the property he had sold to
them.16
THE COURT’S RULING
We deny the Petitions and affirm the ruling of the CA.
The main issue to be resolved in this case is whether a forged instrument may
become the root of a valid title in the hands of an innocent purchaser for
value, even if the true owner thereof has been in possession of the genuine
title, which is valid and has not been cancelled.
It is well-settled that "a certificate of title serves as evidence of an indefeasible
and incontrovertible title to the property in favor of the person whose name
appears therein. The real purpose of the Torrens system of land registration is
to quiet title to land and put a stop forever to any question as to the legality of
the title."17
In Tenio-Obsequio v. Court of Appeals,18 we explained the purpose of the
Torrens system and its legal implications to third persons dealing with
registered land, as follows:
The main purpose of the Torrens system is to avoid possible conflicts of title
to real estate and to facilitate transactions relative thereto by giving the public
the right to rely upon the face of a Torrens certificate of title and to dispense
with the need of inquiring further, except when the party concerned has actual
knowledge of facts and circumstances that should impel a reasonably cautious
man to make such further inquiry. Where innocent third persons, relying on
the correctness of the certificate of title thus issued, acquire rights over the
property, the court cannot disregard such rights and order the total
cancellation of the certificate. The effect of such an outright cancellation
would be to impair public confidence in the certificate of title, for everyone
dealing with property registered under the Torrens system would have to
inquire in every instance as to whether the title has been regularly or
irregularly issued by the court. Every person dealing with registered land may
safely rely on the correctness of the certificate of title issued therefor and the
law will in no way oblige him to go beyond the certificate to determine the
condition of the property.
The Torrens system was adopted in this country because it was believed to be
the most effective measure to guarantee the integrity of land titles and to
protect their indefeasibility once the claim of ownership is established and
recognized. If a person purchases a piece of land on the assurance that the
seller's title thereto is valid, he should not run the risk of being told later that
his acquisition was ineffectual after all. This would not only be unfair to him.
What is worse is that if this were permitted, public confidence in the system
would be eroded and land transactions would have to be attended by
complicated and not necessarily conclusive investigations and proof of
ownership. The further consequence would be that land conflicts could be
even more numerous and complex than they are now and possibly also more
abrasive, if not even violent. The Government, recognizing the worthy
purposes of the Torrens system, should be the first to accept the validity of
titles issued thereunder once the conditions laid down by the law are satisfied.
The Torrens system was intended to guarantee the integrity and
conclusiveness of the certificate of registration, but the system cannot be used
for the perpetration of fraud against the real owner of the registered land. The
system merely confirms ownership and does not create it. It cannot be used to
divest lawful owners of their title for the purpose of transferring it to another
one who has not acquired it by any of the modes allowed or recognized by
law. Thus, the Torrens system cannot be used to protect a usurper from the
true owner or to shield the commission of fraud or to enrich oneself at the
expense of another.19
It is well-established in our laws and jurisprudence that a person who is
dealing with a registered parcel of land need not go beyond the face of the
title. A person is only charged with notice of the burdens and claims that are
annotated on the title.20 This rule, however, admits of exceptions, which we
explained in Clemente v. Razo:21
Any buyer or mortgagee of realty covered by a Torrens certificate of title, in
the absence of any suspicion, is not obligated to look beyond the certificate to
investigate the titles of the seller appearing on the face of the certificate. And,
he is charged with notice only of such burdens and claims as are annotated on
the title.
We do acknowledge that the rule thus enunciated is not cast in stone. For,
indeed, there are exceptions thereto. Thus, in Sandoval vs. CA, we made clear
the following:
The aforesaid principle admits of an unchallenged exception: that a person
dealing with registered land has a right to rely on the Torrens certificate of
title and to dispense with the need of inquiring further except when the party
has actual knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry or when the purchaser has
knowledge ofa defect or the lack of title in his vendor or of sufficient facts to
induce a reasonably prudent man to inquire into the status of the title of the
property in litigation. The presence of anything which excites or arouses
suspicion should then prompt the vendee to look beyond the certificate and
investigate the title of the vendor appearing on the face of said certificate. One
who falls within the exception can neither be denominated an innocent
purchaser for value nor a purchaser in good faith; and hence does not merit the
protection of the law.22
Thus, the determination whether one is a buyer in good faith or can be
considered an innocent purchaser for value becomes imperative. Section 55 of
the Land Registration Act provides protection to an innocent purchaser for
value23 by allowing him to retain the parcel of land bought and his title is
25
considered valid. Otherwise, the title would be cancelled and the original
owner of the parcel of land is allowed to repossess it.
Jurisprudence has defined an innocent purchaser for value as one who buys
the property of another without notice that some other person has a right to or
interest therein and who then pays a full and fair price for it at the time of the
purchase or before receiving a notice of the claim or interest of some other
persons in the property. Buyers in good faith buy a property with the belief
that the person from whom they receive the thing is the owner who can
convey title to the property. Such buyers do not close their eyes to facts that
should put a reasonable person on guard and still claim that they are acting in
good faith.24
The assailed Decision of the CA held that the Andals were buyers in good
faith, while Spouses Peralta were not. Despite its determination that fraud
marred the sale between Bernardina Abalon and Rellama, a fraudulent or
forged document of sale may still give rise to a valid title. The appellate court
reasoned that if the certificate of title had already been transferred from the
name of the true owner to that which was indicated by the forger and
remained as such, the land is considered to have been subsequently sold to an
innocent purchaser, whose title is thus considered valid.25 The CA concluded
that this was the case for the Andals.
The appellate court cited Fule v. Legare26 as basis for its ruling. In the said
case, the Court made an exception to the general rule that a forged or
fraudulent deed is a nullity and conveys no title. A fraudulent document may
then become the root of a valid title, as it held in Fule:
Although the deed of sale in favor of John W. Legare was fraudulent, the fact
remains that he was able to secure a registered title to the house and lot. It was
this title which he subsequently conveyed to the herein petitioners. We have
indeed ruled that a forged or fraudulent deed is a nullity and conveys no title
(Director of Lands vs. Addison, 49 Phil., 19). However, we have also laid
down the doctrine that there are instances when such a fraudulent document
may become the root of a valid title. One such instance is where the certificate
of title was already transferred from the name of the true owner to the forger,
and while it remained that way, the land was subsequently sold to an innocent
purchaser. For then, the vendee had the right to rely upon what appeared in the
certificate (Inquimboy vs. Cruz, G.R. No. L-13953, July 28, 1960).
We have been constrained to adopt the conclusion here set forth because
under the Torrens system, "registration is the operative act that gives validity
to the transfer or creates a lien upon the land (Secs. 50 and 51, Land
Registration Act). Consequently, where there was nothing in the certificate of
title to indicate any cloud or vice in the ownership of the property, or any
encumbrance thereon, the purchaser is not required to explore farther than
what the Torrens title upon its face indicates in quest for any hidden defect or
inchoate right that may subsequently defeat his right thereto. If the rule were
otherwise, the efficacy and conclusiveness of the certificate of title which the
Torrens system seeks to insure would entirely be futile and nugatory. (Reynes
vs. Barrera, 68 Phil., 656; De Lara and De Guzman vs. Ayroso, 50 O.G. No
10, 4838). The public shall then be denied of its foremost motivation for
respecting and observing the Land Registration Act. In the end, the business
community stands to be inconvenienced and prejudiced immeasurably.
Furthermore, when the Register of Deeds issued a certificate of title in the
name of John W. Legare, and thereafter registered the same, John W. Legare,
insofar as third parties were concerned, acquired valid title to the house and
lot here disputed. When, therefore, he transferred this title to the herein
petitioners, third persons, the entire transaction fell within the purview of
Article 1434 of the Civil Code. The registration in John W. Legare's name
effectively operated to convey the properties to him.
After executing the Deed of Sale with Bernardina Abalon under fraudulent
circumstances, Rellama succeeded in obtaining a title in his name and selling
a portion of the property to the Andals, who had no knowledge of the
fraudulent circumstances involving the transfer from Abalon to Rellama. In
fact, the Decisions of the RTC and the CA show no factual findings or proof
that would rebut the presumption in favor of the Andals as buyers in good
faith. Thus, the CA correctly considered them as buyers in good faith and
upheld their title.
The Abalons counter this ruling and allege that the CA erred in relying on
Fuleto justify its assailed Decision. They argue that Torres v. Court of
Appeals27 is the applicable ruling, because the facts therein are on all fours
with the instant case.28
In Torres, the subject property was covered by TCT No. 53628 registered in
the name of Mariano Torres. His brother-in-law Francisco Fernandez,
misrepresenting that the copy of the title had been lost, succeeded in obtaining
a court Order for the issuance of another copy of TCT No. 53628. He then
forged a simulated deed of sale purportedly showing that Torres had sold the
property to him and caused the cancellation of TCT No. 53628, as well as the
issuance of TCT No. 86018 in his name. Soon, Fernandez mortgaged the
property to Mota. Upon learning of the fraud committed by Fernandez, Torres
caused the annotation of an adverse claim on the former’s copy and succeeded
in having Fernandez’s title declared null and void. Meanwhile, Mota was able
to foreclose on Fernandez’s real estate mortgage, as well as to cause the
cancellation of TCT No. 86018 and the issuance of a new one– TCT No.
105953 – in her name. The issue to be resolved in Torres was whether Mota
can be considered an innocent mortgagee for value, and whether her title can
be deemed valid. Ruling in the negative, the Court explained:
There is nothing on the records which shows that Torres performed any act or
omission which could have jeopardized his peaceful dominion over his
realties. The decision under review, however, in considering Mota an innocent
mortgagee protected under Section 65 of the Land Registration Law, held that
Torres was bound by the mortgage. Inevitably, it pronounced that the
foreclosure sale, where Mota was the highest bidder, also bound Torres and
concluded that the certificate of title issued in the name of Mota prevails over
that of Torres'. As correctly pointed out by Torres, however, his properties
were sold on execution, and not on foreclosure sale, and hence, the purchaser
thereof was bound by his notice of adverse claim and lis pendens annotated at
the back of Fernandez' TCT. Moreover, even if We grant Mota the status of an
innocent mortgagee, the doctrine relied upon by the appellate court that a
forged instrument may become the root of a valid title, cannot be applied
where the owner still holds a valid and existing certificate of title covering the
same interest in a realty. The doctrine would apply rather when, as in the cases
for example of De la Cruz v. Fabie, 35 Phil. 144 [1916], Fule v. De Legare,
No. L-17951, February 28, 1963, 7 SCRA 351, and Republic v. Umali, G.R.
No. 80687, April 10, 1989, the forger thru insidious means obtains the
owner’s duplicate certificate of title, converts it in his name, and subsequently
sells or otherwise encumbers it to an innocent holder for value, for in such a
case the new certificate is binding upon the owner (Sec.55, Act 496; Sec. 53,
P.D. No. 1529). But if the owner holds a valid and existing certificate of title,
his would be indefeasible as against the whole world, and not that of the
innocent holder's. "Prior tempore potior jure" as We have said in Register of
Deeds v. Philippine National Bank, No. L-17641, January 30, 1965, 13 SCRA
46, citing Legarda v. Saleeby, 31 Phil.590, Roman Catholic Bishop v.
Philippine Railway, 49 Phil. 546, Reyes v. Borbon, 50 Phil. 791. 29(Emphasis
and underscoring supplied)
We do not agree with the contention of the Abalons that the ruling in Torresis
controlling in this case. They quoted a portion in the said case that is clearly
an obiter. In Torres, it was shown that Mariano had annotated an adverse
claim on the title procured by Fernandez prior to the execution sale, in which
Mota was the highest bidder. This Court declared her as a mortgagee in bad
faith because, at the back of Fernandez’s title, Torres made an annotation of
the adverse claim and the notice of lis pendens. The annotation of the adverse
claim was made while the forged document was still in the name of the forger,
who in this case is Fernandez. That situation does not obtain in the instant
case.
The records of the RTC and the CA have a finding that when Rellama sold the
properties to the Andals, it was still in his name; and there was no annotation
that would blight his clean title. To the Andals, there was no doubt that
Rellama was the owner of the property being sold to them, and that he had
transmissible rights of ownership over the said property. Thus, they had every
right to rely on the face of his title alone.
The established rule is that a forged deed is generally null and cannot convey
title, the exception thereto, pursuant to Section 55 of the Land Registration
Act, denotes the registration of titles from the forger to the innocent purchaser
for value. Thus, the qualifying point here is that there must be a complete
chain of registered titles.30 This means that all the transfers starting from the
original rightful owner to the innocent holder for value – and that includes the
transfer to the forger – must be duly registered, and the title must be properly
26
issued to the transferee. Contrary to what the Abalons would like to impress
on us, Fuleand Torresdo not present clashing views. In Fule, the original
owner relinquished physical possession of her title and thus enabled the
perpetrator to commit the fraud, which resulted in the cancellation of her title
and the issuance of a new one. The forged instrument eventually became the
root of a valid title in the hands of an innocent purchaser for value. The new
title under the name of the forger was registered and relied upon by the
innocent purchaser for value. Hence, it was clear that there was a complete
chain of registered titles.
On the other hand in Torres, the original owner retained possession of the title,
but through fraud, his brother-in-law secured a court order for the issuance of
a copy thereof. While the title was in the name of the forger, the original
owner annotated the adverse claim on the forged instrument. Thus, before the
new title in the name of the forger could be transferred to a third person, a lien
had already been annotated on its back. The chain of registered titles was
broken and sullied by the original owner’s annotation of the adverse claim. By
this act, the mortgagee was shown to be in bad faith.
In the instant case, there is no evidence that the chain of registered titles was
broken in the case of the Andals. Neither were they proven to have knowledge
of anything that would make them suspicious of the nature of Rellama’s
ownership over the subject parcel of land. Hence, we sustain the CA’s ruling
that the Andals were buyers in good faith. Consequently, the validity of their
title to the parcel of the land bought from Rellama must be upheld.
As for Spouses Peralta, we sustain the ruling of the CA that they are indeed
buyers in bad faith. The appellate court made a factual finding that in
purchasing the subject property, they merely relied on the photocopy of the
title provided by Rellama. The CA concluded that a mere photocopy of the
title should have made Spouses Peralta suspicious that there was some flaw in
the title of Rellama, because he was not in possession of the original copy.
This factual finding was supported by evidence.
The CA pointed out Spouses Peralta’s Answer to the Complaint of the
Abalons in Case No. 9243 in the RTC of Legaspi City, Branch 5. In their
Answer, they specifically alleged as follows:
2- These defendants [Spouses Peralta] acquired lot No. 1679-A by
purchase in good faith and for value from Restituto Rellama under
Doc. No. 11212, page No. 26, Book No. 60, Series of 1996 of
Notary Public Atty. Otilio Bongon, Legaspi City on March 2, 1995
copy of which is attached as and made part of this answer as
Exhibit "1;"
3- That these defendants were handed over by Rellama xerox [sic]
copy of the Transfer Certificate of Title No. 42103 issued by the
Register of Deed of Legaspi City on the 2nd day of August 1995
copy attached and made integral part as Exhibit "1-A" and also
Original Certificate of Title No. (O) 16 as Exhibit "1-B"31
We have no reason to disturb this factual finding of the CA because it is
supported by the evidence on record. Spouses Peralta filed a Petition for
Review on Certiorari under Rule 45, which allows only questions of law to be
raised. It is a settled rule that questions of fact are not reviewable in this kind
of appeal. Under Rule 45, Section 1, "petitions for review on certiorari shall
raise only questions of law which must be distinctly set forth."32 A question of
fact arises when there is "as to the truth or falsehood of facts or when there is a
need to calibrate the whole evidence considering mainly the credibility of the
witnesses, the existence and relevancy of specific surrounding circumstances,
as well as their relation to each other and to the whole, and the probability of
the situation."33 It is further pointed out that "the determination of whether one
is a buyer in good faith is a factual issue, which generally is outside the
province of this Court to determine in a petition for review."34
Whether or not Spouses Peralta are buyers in good faith, is without a doubt, a
factual issue. Although this rule admits of exceptions,35 none of these applies
to their case. There is no conflict between the factual findings and legal
conclusions of the RTC and those of the CA, both of which found them to be
buyers in bad faith. The fact that they did not participate in the proceedings
before the lower court does not help their case either.
On the issue of the legal standing of the Abalons to file this case, we find that
the CA correctly upheld their standing as heirs of the deceased Bernardina
Abalon. The appellate court ruled that during her lifetime, Bernardina Abalon
had promised her heirs - siblings Mansueto and Amelia - that she would give
them the subject property. A duplicate copy of OCT No. (0) 16 was delivered
to them upon her death. Thus, the CA concluded that the two siblings acquired
the subject property by ordinary prescription. Further, it deduced that the
mode of transmission of the property from Bernardina to her nephew and
niece was a form of donation mortis causa, though without the benefit of a
will.36 Despite this omission, it still held that Mansueto and Amelia acquired
the subject property through ordinary acquisitive prescription because, since
the death of their aunt Bernardina, they had been in possession of the property
for more than 10 years that ripened into full ownership.37
Under Article 97538 of the Civil Code, siblings Mansueto and Amelia Abalon
are the legal heirs of Bernardina, the latter having had no issue during her
marriage. As such, they succeeded to her estate when she passed away. While
we agree with the CA that the donation mortis causa was invalid in the
absence of a will, it erred in concluding that the heirs acquired the subject
property through ordinary acquisitive prescription. The subject parcel of land
is a titled property; thus, acquisitive prescription is not applicable.39 Upon the
death of Bernardina, Mansueto and Amelia, being her legal heirs, acquired the
subject property by virtue of succession, and not by ordinary acquisitive
prescription.
WHEREFORE, the petitions in G.R. Nos. 183448 and 183464 are DENIED
for lack of merit. The Decision in CA-G.R. CV No. 85542 is hereby
AFFIRMED.
SO ORDERED.
SPS. EMMANUEL (deceased) G.R. NO. 150066
and EDNA CHUA and
SPS. MANUEL and Present:
MARIA CHUA,
- versus -
MSGR. VIRGILIO SORIANO.
Substituted by Sister Mary
Virgilia Celestino Soriano, Promulgated:
Respondent. April 13, 2007
Before the Court is a Petition for Review on Certiorari under Rule
45 of the Rules of Court assailing the Decision[1] dated September 21, 2001 of
the Court of Appeals (CA) in CA-G.R. CV No. 56568 which affirmed with
modification the Decision[2] dated July 10, 1997 of the Regional Trial Court,
Branch 81, Quezon City (RTC) in Civil Case No. Q-90-6439.
The factual background of the case is as follows:
Msgr. Virgilio C. Soriano (Soriano) owned a 1,600 square meter
parcel of land located in Barangay Banlat, Quezon City, covered by Transfer
Certificate of Title (TCT) No. 363471 of the Registry of Deeds of Quezon City.
Sometime in the early months of 1988, Sorianos first cousin and
godson, Emmanuel C. Celestino, Sr. (Celestino) asked Soriano to lend him
TCT No. 363471 as a security for a loan to be used in the business operation
of Celestinos company, Digital Philippines, Inc.[3] Acceding
to Celestinos request, Soriano executed on March 29, 1988 a Special Power of
Attorney (SPA) authorizing Celestino to mortgage said property.[4]
Then came the June 11, 1988 fire that gutted a portion of
the Quezon City Hall and destroyed in the process the original copy of TCT No.
363471 on file with the Registry of Deeds of Quezon City.
On August 22, 1988, Soriano executed a SPA
authorizing Celestino and one Carlito Castro to initiate administrative
reconstitution proceedings of TCT No. 363471.[5] On April 17, 1990, the
reconstituted title, TCT No. RT-3611 (363471) PR 1686, was issued.[6]
27
 During the pendency of the administrative reconstitution
proceedings, Soriano asked Celestino whether there was any truth to the
spreading rumor that he had already sold the subject
property.[7] Celestino denied the rumor but informed Soriano that the subject
property was mortgaged with a foreign bank. [8] Dissatisfied
with Celestino'sexplanation, Soriano made inquiries with the Registry of Deeds
of Quezon City[9] and discovered, to his dismay, that TCT No. 363471 had been
canceled by TCT No. 14514[10]in the name of spouses Emmanuel and Edna
Chua and spouses Manuel and Maria Chua (Chuas). By virtue of a
SPA[11] dated March 9, 1989 with Soriano's purported signature, Celestino sold
to the Chuas the property in an Absolute Deed of Sale[12] dated July 4,
1989 for P500,000.00.
Claiming that his signature in the SPA is a forgery, Soriano filed
on August 20, 1990 a complaint against Celestino and the Chuas for annulment
of deed of sale and special power of attorney, cancellation of title
and reconveyance with damages.[13]
The defense of Celestino is that he was duly authorized to sell the
property[14] while the Chuas contend that they are purchasers in good faith since
they bought the property from Celestino by virtue of a SPA which was duly
inscribed and annotated on the owner's duplicate of the TCT and the tax
declaration and that they have duly inspected the property before purchasing
it.[15]
Soriano died during the pendency of the trial.[16] He was substituted
by his sister, Florencia Celestino Soriano, also known as Sister
Mary Virgilia Celestino Soriano (Sis. Soriano).[17]
On July 10, 1997, the RTC rendered its Decision [18] in favor
of Soriano, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered
as follows:
1. Declaring the special power of attorney dated March 19, 1985 and
the Deed of Sale dated July 4, 1989 as without legal force and effect;
2. Declaring Transfer Certificate of Title No. 14514 in the name of
the defendants Chuas as null and void;
3. Directing defendants Chuas to reconvey the subject property to
plaintiff Soriano.
4. Ordering defendant Celestino to pay to the plaintiff the amounts
of P100,000.00 as moral damages, P20,000.00 as attorneys fees and P10,000.00
as litigation expenses;
5. Ordering defendant Celestino to pay to the defendants Chuas the
amount of P500,000.00 plus interest at the legal rate from July 4, 1989 until
fully paid;
6. Ordering defendant Celestino to pay the defendants Chuas the
amounts of P20,000.00 as attorneys fees and P10,000.00 as litigation expenses.
With costs against defendant Celestino.
SO ORDERED.[19]
The RTC held that Soriano's purported signature in the SPA dated
March 9, 1989 is a forgery based on the opinion of expert witness Arcadio A.
Ramos, Chief of the Questioned Documents Division of the National Bureau of
Investigation (NBI), that a comparison of Soriano's sample signature and the
one appearing on the SPA dated March 9, 1989 revealed that they were not
written by one and the same person;[20] that the Chuas are not purchasers in
good faith since they did not personally verify the title of the subject property
but relied only upon its tax declaration; that the Chuas were placed on guard to
ascertain the authenticity of the authority of Celestino since they were not
dealing with Soriano, the registered owner.
Dissatisfied, Celestino and the Chuas filed separate appeals with the
CA, docketed singly as CA-G.R. No. 56568.[21] On September 21, 2001, the CA
rendered its Decision,[22] the dispositive portion of which reads:
WHEREFORE, for the lack of merit, this
Court DISMISSES the appeal and AFFIRMS the
appealed Decision except paragraph number 3 of
the dispositive part which is hereby completely
DELETED and replaced with the following: 3. The
Register of Deeds of Quezon City is ordered to reinstate
and reactivate Transfer Certificate of Title No. RT-3611
(363471) PR-1686 in the name of appellee Soriano.
SO ORDERED.[23]
The CA held that that there was no cogent reason to set aside
the RTCs reliance on the testimony of the expert witness since there is no
contrary evidence to rebut the same. The CA also agreed with
the RTCs findings that the Chuas are not purchasers in good faith since they
failed to determine the veracity of Celestinos alleged authority to sell the
property.
No appeal was filed by Celestino. The Chuas filed the present
petition anchored on the following grounds:
THE HONORABLE COURT OF APPEALS
HAS DECIDED A QUESTION IN A WAY NOT
PROBABLY IN ACCORD WITH THE LAW AND
WITH THE DECISIONS OF THE HONORABLE
SUPREME COURT; AND
THE HONORABLE COURT OF APPEALS
HAS SO FAR DEPARTED FROM THE ACCEPTED
AND USUAL COURSE OF JUDICIAL
PROCEEDINGS.[24]
The Chuas argue that they are purchasers in good faith since they
dealt with Celestino who had in his possession the owner's duplicate title and
the SPA dated March 9, 1989 with Sorianos purported signature; that the SPA
was inscribed and annotated in the owner's duplicate title; that since verification
with the original title in the Registry of Deeds of Quezon City was not possible,
they checked the tax declaration of the property; that the SPA dated March 9,
1989 was duly annotated in the tax declaration; that they inspected the property
and found three squatter occupants; that they paid off the two squatters and
appointed the third squatter occupant as caretaker of the property;
that Sorianowas responsible for his predicament since he entrusted the owners
duplicate title to Celestino; that the fact that Sorianos purported signature in the
SPA dated March 9, 1989 was later declared by the NBI handwriting expert as
a forgery is of no moment since they are not handwriting experts and they had
the right to assume that the SPA was perfectly legal for otherwise, it could not
have been annotated at the back of the title.
Sis. Soriano, on the other hand, avers that the Chuas are not
purchasers in good faith since they failed to check the veracity
of Celestino's alleged authority to sell the property; that had
the Chuas conferred with Soriano about the sale transaction proposed
by Celestino, they would have readily discovered the fraud being then hatched
by Celestino.
Emmanuel Chua died during the pendency of the present
petition.[25] He was substituted by his surviving spouse and co-petitioner, Edna
L. Chua, and his children, Erlyn, Ericson, Emmanuel and Elise, all surnamed
Chua.[26]
The sole issue to be resolved in the present petition is this:
whether or not the Chuas are purchasers in good faith.
The question of whether or not a person is a purchaser in good faith
is a factual matter that will generally be not delved into by this Court, since only
questions of law may be raised in petitions for review.[27]
28

The established rule is that in the exercise of the Supreme Courts
power of review, the Court, not being a trier of facts, does not normally embark
on a re-examination of the evidence presented by the contending parties during
the trial of the case considering that the findings of facts of the CA are
conclusive and binding on the Court.[28] This rule, however, has several well-
recognized exceptions: (1) when the findings are grounded entirely on
speculation, surmises or 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 fact are conflicting; (6) when in making its findings the Court of
Appeals went beyond the issues of the case, or its findings are contrary to the
admissions of both the appellant and the appellee; (7) when the findings are
contrary to the trial court; (8) when the findings 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 respondent; (10) when the findings of fact are premised on the supposed
absence of evidence and contradicted by the evidence on record; and (11) when
the Court of Appeals manifestly overlooked certain relevant facts not disputed
by the parties, which, if properly considered, would justify a different
conclusion.[29] Exception (4) is present in the instant case.
A purchaser in good faith is one who buys property without notice
that some other person has a right to or interest in such property and pays its
fair price before he has notice of the adverse claims and interest of another
person in the same property. The honesty of intention which constitutes good
faith implies a freedom from knowledge of circumstances which ought to put a
person on inquiry.[30] As the Court enunciated in Lim v. Chuatoco:[31]
x x x good faith consists in the possessors belief that the
person from whom he received the thing was the owner
of the same and could convey his title. Good faith, while
it is always to be presumed in the absence of proof to the
contrary, requires a well founded belief that the person
from whom title was received was himself the owner of
the land, with the right to convey it. There is good faith
where there is an honest intention to abstain from taking
any unconscientious advantage from another. Otherwise
stated, good faith is the opposite of fraud and it refers to
the state of mind which is manifested by the acts of the
individual concerned.[32]
Consistently, this Court has ruled that every person dealing with
registered land may safely rely on the correctness of the certificate of title
issued therefor and the law will in no way oblige him to go beyond the
certificate to determine the condition of the property. Where there is nothing in
the certificate of title to indicate any cloud or vice in the ownership of the
property, or any encumbrance thereon, the purchaser is not required to explore
further than what the Torrens Title upon its face indicates in quest for any
hidden defects or inchoate right that may subsequently defeat his right
thereto.[33]
However, when a person who deals with registered land through
someone who is not the registered owner, he is expected to look behind the
certificate of title and examine all the factual circumstances, in order to
determine if the vendor has the capacity to transfer any interest in the
land.[34] He has the duty to ascertain the identity of the person with whom he is
dealing and the latters legal authority to convey.[35]
The law requires a higher degree of prudence from one who buys
from a person who is not the registered owner, although the land object of the
transaction is registered.While one who buys from the registered owner does
not need to look behind the certificate of title, one who buys from one who is
not the registered owner is expected to examine not only the certificate of title
but all factual circumstances necessary for him to determine if there are any
flaws in the title of the transferor, or in his capacity to transfer the land.[36]
The strength of buyers inquiry on the sellers capacity or legal
authority to sell depends on the proof of capacity of the seller. If the proof of
capacity consists of a special power of attorney duly notarized, mere inspection
of the face of such public document already constitutes sufficient inquiry. If no
such special power of attorney is provided or there is one but there appear flaws
in its notarial acknowledgment, mere inspection of the document will not do;
the buyer must show that his investigation went beyond the document and into
the circumstances of its execution.[37]
In the present case, the Chuas were dealing
with Celestino, Sorianos attorney-in-fact, who presented Sorianos duplicate
title, a SPA dated March 9, 1989 with Sorianospurported signature, and tax
declaration.
An examination of the assailed SPA shows that it is valid and regular
on its face. It contains a notarial seal.[38] A notarial seal is a mark, image or
impression on a document which would indicate that the notary public has
officially signed it.[39] The long-standing rule is that documents acknowledged
before a notary public have the evidentiary weight with respect to their due
execution and regularity.[40] The assailed SPA is a notarized document and
therefore, presumed to be valid and duly executed.
Thus, the reliance by the Chuas on the notarial acknowledgment
found in the duly notarized SPA presented by Celestino is sufficient evidence
of good faith. The Chuasneed not prove anything more for it is already the
function of the notarial acknowledgment to establish the appearance of the
parties to the document, its due execution and authenticity.[41]
Moreover, the SPA was accepted by the Register of Deeds. It was
registered with the Registry of Deeds of Quezon City[42] and inscribed and
annotated in the owner's duplicate title,[43] further bolstering the appearance of
due execution and regularity.
The fact that Soriano's purported signature in the SPA dated March
9, 1989 was declared to be a forgery does not alter the Chuas status as
purchasers in good faith. The Court's recent pronouncements in Bautista v.
Silva[44] are enlightening to quote:
When the document under scrutiny is a special power of attorney
that is duly notarized, we know it to be a public document where
the notarial acknowledgment is prima facie evidence of the fact of its due
execution. A purchaser presented with such a document would have no choice
between knowing and finding out whether a forger lurks beneath the signature
on it. The notarial acknowledgment has removed the choice from him and
replaced it with a presumption sanctioned by law that the affiant appeared
before the notary public and acknowledged that he executed the document,
understood its import and signed it. In reality, he is deprived of such choice not
because he is incapable of knowing and finding out but because, under
our notarialsystem, he has been given the luxury of merely relying on the
presumption of regularity of a duly notarized SPA. And he cannot be faulted
for that because it is precisely that fiction of regularity which holds together
commercial transactions across borders and time.[45]
Thus, the fact that Sorianos signature in the SPA dated March 9, 1989 was
subsequently declared by the trial court to have been falsified would not revoke
the title subsequently issued title in favor of the Chuas. With the property in
question having already passed to the hands of purchasers in good faith, it is
now of no moment that some irregularity attended the issuance of the SPA,
consistent with our pronouncement in Heirs of Spouses Benito Gavino and
Juana Euste v. Court of Appeals,[46] to wit:
x x x, the general rule that the direct result
of a previous void contract cannot be valid, is
inapplicable in this case as it will directly contravene
the Torrens system of registration. Where innocent
third persons, relying on the correctness of the certificate
29
 of title thus issued, acquire rights over the property, the
court cannot disregard such rights and order the
cancellation of the certificate. The effect of such
outright cancellation will be to impair public
confidence in the certificate of title. The sanctity of
the Torrens system must be preserved; otherwise,
everyone dealing with the property registered under
the system will have to inquire in every instance as to
whether the title had been regularly or irregularly
issued, contrary to the evident purpose of the law.[47]
Being purchasers in good faith, the Chuas already acquired valid title to the
property. A purchaser in good faith holds an indefeasible title to the property
and he is entitled to the protection of the law. Accordingly, TCT No. 14514
issued in the name of the Chuas is valid. The amount of P500,000.00,
representing the purchase price in the Absolute Deed of Sale[48] dated July 4,
1989, which the RTC directed Celestino to pay to the Chuas should instead be
paid to Soriano as part of the actual damages awarded to him. Such amount
shall earn interest rate of 6% from August 20, 1990, the time of the filing of the
complaint until its full payment before finality of judgment. After the judgment
becomes final and executory until the obligation is satisfied, the amount due
shall earn interest at 12% per year, the interim period being deemed equivalent
to a forbearance of credit.[49]
For the Court to uphold the effects of a SPA that is rooted in falsity may be
disconcerting. Yet whatever sympathies may be judicially appreciated for the
deceived party must be balanced in deference to the protection afforded by law
to the purchaser in good faith. If such innocence or good faith is established by
the evidence, or insufficiently rebutted by the disputant, then the corresponding
duty of the Court is simply to affirm the rights of the purchaser in good faith. It
is mischief at worse, and error at least, for a court to misread or inflate the facts
to justify a ruling for the defrauded party, no matter how wronged he or she may
be.[50]
WHEREFORE, the petition is GRANTED. Petitioners are hereby declared
purchasers in good faith. Accordingly, the Decision of the Court of Appeals
dated September 21, 2001 in CA-G.R. CV No. 56568
is PARTLY REVERSED and SET ASIDE insofar as it affirms the Decision
of the Regional Trial Court, Branch 81, Quezon City dated July 10, 1997 in
Civil Case No. Q-90-6439 finding the Chuas as purchasers in bad faith.
The Decision dated July 10, 1997 of the Regional Trial Court, Branch
81, Quezon City (RTC) in Civil Case No. Q-90-6439 is MODIFIED to read as
follows:
1. Declaring the special power of attorney
dated March 9, 1985 and the Deed of Sale dated July 4,
1989 and the Transfer Certificate of Title No. 14514 in
the name of the defendants Chuas as valid;
2. Ordering Celestino to pay plaintiff the
amount of P500,000.00 as actual damages, with interest
rate of 6% p.a. computed from the time of the filing of
the complaint until its full payment before finality of
judgment; thereafter, if the amount adjudged remains
unpaid, the interest rate shall be 12% p.a. computed from
the time the judgment becomes final and executoryuntil
fully satisfied;
3. Ordering defendant Celestino to pay to the
plaintiff the amounts of P100,000.00 as moral
damages, P20,000.00 as attorneys fees and P10,000.00
as litigation expenses;
With costs against defendant Celestino.
SO ORDERED.
No costs.
SO ORDERED.
[G.R. No. L-20611. May 8, 1969.]
AURELIO BALBIN and FRANCISCO BALBIN, Petitioners, v.
REGISTER OF DEEDS OF ILOCOS SUR, Respondent.
Vicente Llanes, for Petitioners.
The Solicitor General for Respondent.
Manuel A. Argel for respondents third parties affected.
1. LAND REGISTRATION ACT; VOLUNTARY DEALINGS WITH
REGISTERED LAND; PRESENTATION OF OWNER’S DUPLICATE
CERTIFICATE OF TITLE FOR REGISTRATION OF VOLUNTARY
INSTRUMENT; ONLY ONE DUPLICATE COPY OF TITLE IS
SURRENDERED. — Section 55 of Act 496 obviously assumes that there is
only one duplicate copy of the title in question, namely, that of the registered
owner himself, such that its production whenever a voluntary instrument is
presented constitutes sufficient authority from him for the register of deeds to
make the corresponding memorandum of registration.
2. ID.; ID.; ID.; REGISTER OF DEEDS’ REFUSAL TO ANNOTATE
DONATION PROPER WHERE THERE WERE THREE OTHER COPIES
OF TITLE. — Where, when the petitioner presented to the register of deeds a
duplicate copy of the registered owner’s certificate of title and a deed of
donation for annotation, three other copies of the title were in existence, the
register of deeds was correct in denying the requested annotation for being
"legally defective or otherwise not sufficient in law." As correctly observed by
the Land Registration Commissioner, petitioners’ claim that the issuance of
those copies was unauthorized or illegal is beside the point, its legality being
presumed until otherwise declared by a court of competent jurisdiction. There
being several copies of the same title in existence, it is easy to see how their
integrity may be adversely affected if an encumbrance, or an outright
conveyance, is annotated on one copy and not on the others.
3. ID.; ID.; ID.; DEED OF DONATION SIGNED BY HUSBAND
DISPOSING OF CONJUGAL PROPERTY CANNOT BE REGISTERED. —
Where the deed of donation executed by the surviving husband bears on its
face an infirmity, namely, the fact that the two-thirds portion of the conjugal
property which he donated was more than his one-half share, not to say more
than what remained of such share after he had sold portions of the same land
to three other parties, the denial of the registration of the said deed of donation
was justified.
4. ID.; ID.; ID.; REGISTRATION OF VOLUNTARY INSTRUMENT OVER
A REGISTERED LAND MAY BE SUSPENDED. — Where there is a case
pending wherein the civil status of the donor and the character of the land in
question are in issue, as well as the validity of the different conveyances
executed by him, the matter of registration of the deed of donation may well
await the outcome of that case, and in the meantime the rights of the interested
parties could be protected by filing the proper notices of lis pendens.
5. ID.; OWNER’S DUPLICATE CERTIFICATE OF TITLE; IMPORTANCE
THEREOF. — The law itself refers to every copy authorized to be issued as a
duplicate of the original, which means that both must contain identical entries
of the transactions, particularly voluntary ones, affecting the land covered by
the title. If this were not so, if different copies were permitted to carry
different annotations, the whole system of Torrens registration would cease to
be reliable.
Appeal from the resolution of the Commissioner of Land Registration in LRC
Consulta No. 366.
On November 15, 1961 petitioners presented to the register of deeds of Ilocos
Sur a duplicate copy of the registered owner’s certificate of title (OCT No.
548) and an instrument entitled "Deed of Donation inter-vivos," with the
request that the same be annotated on the title. Under the terms of the
instrument sought to be annotated one Cornelio Balbin, registered owner of
the parcel of land described in OCT No. 548, appears to have donated inter-
vivos an undivided two-thirds (2/3) portion thereof in favor of petitioners. The
entire area of the land is 11.2225 hectares.
30
The register of deeds denied the requested annotation for being "legally
defective or otherwise not sufficient in law." It appears that previously
annotated in the memorandum of encumbrances on the certificate are three
separate sales of undivided portions of the land earlier executed by Cornelio
Balbin in favor of three different buyers. The pertinent entries
read:jgc:chanrobles.com.ph
"Entry No. 5658. Sales.
Sale for the sum of P400.00 executed by the registered owner, conveying an
undivided portion of an area of 3.710 square meters only in favor of
Florentino Gabayan, this Original Certificate of Title No. 548 is hereby
cancelled with respect to said area of 3.710 square meters and in lieu thereof,
the name of the vendee . . . is hereby substituted to succeed to all rights,
participation in interest of the vendor . . .
"Date of Instrument: January 25, 1955, . . .
x x x refers to every copy authorized to be issued as a duplicate of the original,
"Entry No. 5659. Sale of portion.
Sale for the sum of P100.00 executed by the registered owner, conveying an
undivided portion of an area of 16.713 square meters in favor of Roberto
Bravo, this Original Certificate of Title No. 548 is hereby cancelled with
respect to said undivided portion . . . and in lieu thereof the name of the
vendee . . . is hereby substituted to succeed to all rights, participation and
interest of the vendor . . . "Date of Instrument: June 9, 1953, . . .
‘Entry No. 5660. Sale of portion.
Sale for the sum of P400.00 executed by the registered owner, conveying an
undivided portion of an area of 15.000 square meters in favor of Juana
Gabayan, this Certificate of Title No. 548 is hereby cancelled with respect to
said undivided portion . . . and in lieu thereof the name of the vendee . . . is
hereby substituted to succeed to all rights, participation and interest of the
vendor . . .
"Date of Instrument: February 12, 1952, . . ."cralaw virtua1aw library
The final part of the annotations referring to the above-mentioned sales
contains an additional memorandum stating that "three co-owner’s duplicate
certificates of title No. 548 have been issued (by the register of deeds of Ilocos
Sur) in the name of Florentino Gabayan, Roberto Bravo and Juana Gabayan
upon verbal request of Mr. Andres Cabeldo, Notary Public of Caoayan, I. Sur,
for and in the name of the vendees, this 5th day of January, 1956 at Vigan, I.
Sur." Mainly because these three other co-owner’s copies of the certificate of
title No. 548 had not been presented by petitioners, the Register of Deeds
refused to make the requested annotation.
Unsatisfied, petitioners referred the matter to the Commissioner of Land
Registration, who subsequently upheld the action of the Register of Deeds in a
resolution dated April 10, 1962. With respect to the principal point in
controversy, the Commissioner observed.
"(1) It appears that the donor is now merely a co-owner of the property
described in the Original Certificate of Title No. 548, having previously sold
undivided portions thereof on three different occasions in favor of three
different buyers. Consequently, aside from the owner’s duplicate issued to
Cornelio Balbin, there are now three co-owner’s duplicates which are
presumably in the possession of the three buyers. Accordingly, in addition to
the owner’s duplicate of Original Certificate of Title No. 548, the three co-
owner’s duplicates must likewise be surrendered. The claim of counsel for the
donees that the issuance of the three co-owner’s duplicates was unauthorized
is beside the point. Unless and until a court of competent jurisdiction rules to
the contrary, these titles are presumed to have been lawfully issued."cralaw
virtua1aw library
Without presenting those three (3) other duplicates of the title, petitioners
would want to compel annotation of the deed of donation upon the copy in
their possession, citing Section 55 of Act 496, which provides that "the
production of the owner’s duplicate certificate of title whenever any voluntary
instrument is presented for registration shall be conclusive authority from the
registered owner to the register of deeds to make a memorandum of
registration in accordance with such instrument." Under this provision,
according to petitioners, the presentation of the other copies of the title is not
required, first, because it speaks of "registered owner" and not one whose
claim to or interest in the property is merely annotated on the title, such as the
three vendees-co-owners in this case; and secondly, because the issuance of
the duplicate copies in their favor was illegal or unauthorized.
We find no merit in petitioners’ contention. Section 55, supra, obviously
assumes that there is only one duplicate copy of the title in question, namely,
that of the registered owner himself, such that its production whenever a
voluntary instrument is presented constitutes sufficient authority from him for
the register of deeds to make the corresponding memorandum of registration.
In the case at bar, the three other copies of the title were in existence,
presumably issued under Section 43 * of Act 496. As correctly observed by
the Land Registration Commissioner, petitioners’ claim that the issuance of
those copies was unauthorized or illegal is beside the point, its legality being
presumed until otherwise declared by a court of competent jurisdiction. There
being several copies of the same title in existence, it is easy to see how their
integrity may be adversely affected if an encumbrance, or an outright
conveyance, is annotated on one copy and not on the others. The law itself
which means that both must contain identical entries of the transactions,
particularly voluntary ones, affecting the land covered by the title. If this were
not so, if different copies were permitted to carry differing annotations, the
whole system of Torrens registration would cease to be reliable.
One other ground relied upon by the Land Registration Commissioner in
upholding the action taken by the Register of Deeds of Ilocos Sur is that since
the property subject of the donation is presumed conjugal, that is, property of
the marriage of the donor, Cornelio Balbin, and his deceased wife, Nemesia
Mina, "there should first be a liquidation of the partnership before the
surviving spouse may make such a conveyance." This legal conclusion may
appear too general and sweeping in its implications, for without a previous
settlement of the partnership a surviving spouse may dispose of his aliquot
share or interest therein—subject of course to the result of future liquidation.
Nevertheless, it is not to be denied that, if the conjugal character of the
property is assumed, the deed of donation executed by the husband, Cornelio
Balbin, bears on its face an infirmity which justified the denial of its
registration, namely, the fact that the two-thirds portion of said property which
he donated was more than his one-half share, not to say more than what
remained of such share after he had sold portions of the same land to three
other parties.
It appears that there is a case pending in the Court of First Instance of Ilocos
Sur (CC No. 2221), wherein the civil status of the donor Cornelio Balbin and
the character of the land in question are in issue, as well as the validity of the
different conveyances executed by him. The matter of registration of the deed
of donation may well await the outcome of that case, and in the meantime the
rights of the interested parties could be protected by filing the proper notices
of lis pendens.
IN VIEW OF THE FOREGOING, the decisions of the Register of Deeds of
Ilocos Sur and that of the Commissioner of Land Registration are affirmed.
No pronouncement as to costs.
DOMINGO REALTY, INC. G.R. No. 126236
and AYALA STEEL
MANUFACTURING CO., INC.,
- versus -
COURT OF APPEALS and Promulgated:
ANTONIO M. ACERO,
Respondents. January 26, 2007
Good judgment comes from experience, and often
experience comes from bad judgment.
Rita Mae Brown
The Case
This Petition for Review on Certiorari, under Rule 45 of the Revised
Rules of Court, seeks the reversal of the October 31, 1995 Decision [1] of the
Court of Appeals (CA) in CA-G.R. SP No. 33407, entitled Antonio M. Acero v.
Hon. Sofronio G. Sayo, et al., which annulled the December 7, 1987 Decision
based on a Compromise Agreement among petitioner Domingo Realty, Inc.
(Domingo Realty), respondent Antonio M. Acero, and defendant Luis Recato
31
Dy in Civil Case No. 9581-P before the Pasay City Regional Trial Court (RTC),
Branch CXI; and the August 28, 1996 Resolution [2] of the CA which denied
petitioners Motion for Reconsideration of its October 31, 1995 Decision.
The Facts
On November 19, 1981, petitioner Domingo Realty filed its
November 15, 1981 Complaint[3] with the Pasay City RTC against Antonio M.
Acero, who conducted business under the firm name A.M. Acero
Trading,[4] David Victorio, John Doe, and Peter Doe, for recovery of possession
of three (3) parcels of land located in Cupang, Muntinlupa, Metro Manila,
covered by (1) Transfer Certificate of Title (TCT) No. (75600) S-107639-Land
Records of Rizal; (2) TCT No. (67006) S-107640-Land Records of Rizal; and
(3) TCT No. (67007) S-107643-Land Records of Rizal (the subject
properties). The said lots have an aggregate area of 26,705 square meters, more
or less, on a portion of which Acero had constructed a factory building for the
manufacture of hollow blocks, as alleged by Domingo Realty.
On January 4, 1982, defendants Acero and Victorio filed their
December 21, 1981 Answer[5] to the Complaint in Civil Case No. 9581-
P. Acero alleged that he merely leased the land from his co-defendant David
Victorio, who, in turn, claimed to own the property on which the hollow blocks
factory of Acero stood. In the Answer, Victorio assailed the validity of the
TCTs of Domingo Realty, alleging that the said TCTs emanated from spurious
deeds of sale, and claimed that he and his predecessors-in-interest had been in
possession of the property for more than 70 years.
On December 3, 1987, Mariano Yu representing Domingo Realty,
Luis Recato Dy[6], and Antonio M. Acero, all assisted by counsels, executed a
Compromise Agreement, which contained the following stipulations, to wit:
1. That defendants admit and recognize the
ownership of the plaintiff over the property
subject of this case, covered by TCT No. S-
107639 (75600), S-107643 (67007), and S-
107640 (67006) with a total area of 26,705
square meters;
2. That defendant Luis Recato Dy admits and
recognizes that his title covered by TCT No.
108027 has been proven not to be genuine and
that the area indicated therein is inside the
property of the plaintiff;
3. That defendant Acero admits that the
property he is presently occupying by way of
lease is encroaching on a portion of the property
of the plaintiff and assume[s] and undertakes to
vacate, remove and clear any and all structures
erected inside the property of the plaintiff by
himself and other third parties, duly authorized
and/or who have an existing agreement with
defendant Acero, and shall deliver said portion
of the property of the plaintiff free and clear of
any unauthorized structures, shanties,
occupants, squatters or lessees within a period
of sixty (60) days from date of signing of this
compromise agreement. Should defendant
Acero fail in his obligation to vacate, remove
and clear the structures erected inside the
property of the plaintiff within the period of 60
days afore-mentioned, plaintiff shall be entitled
to a writ of execution for the immediate
demolition or removal of said structure to fully
implement this agreement; and ejectment of all
squatters and occupants and lessees, including
the dependents to fully implement this
agreement;
4. That plaintiff admits and recognizes that
defendant Luis Recato Dy bought and occupied
the property in good faith and for value whereas
defendant Acero leased the portion of said
property likewise in good faith and for value
hereby waives absolutely and unconditionally
all claims including attorneys fees against both
defendants in all cases pending in any court
whether by virtue of any judgment or under the
present complaint and undertake to withdraw
and/or move to dismiss the same under the spirit
of this agreement;
5. That defendants likewise waive all claims for
damages including attorneys fees against the
plaintiff;
6. That plaintiff acknowledges the benefit done
by defendant Luis Recato Dy on the property by
incurring expenses in protecting and preserving
the property by way of construction of
perimeter fence and maintaining a caretaker
therein and plaintiff has agreed to pay Luis
Recato Dy the amount of P100,000.00 upon
approval of this agreement by this Honorable
Court.[7]
Acting on the Compromise Agreement, the Pasay City RTC
rendered the December 7, 1987 Decision which adopted the aforequoted six (6)
stipulations and approved the Compromise Agreement.
To implement the said Decision, Domingo Realty filed its January
21, 1988 Motion[8] asking the trial court for permission to conduct a re-survey
of the subject properties, which was granted in the January 22, 1988 Order.[9]
On February 2, 1988, respondent Acero filed his January 29, 1988 Motion to
Nullify the Compromise Agreement,[10] claiming that the January 22, 1988
Order authorizing the survey plan of petitioner Domingo Realty as the basis of
a resurvey would violate the Compromise Agreement since the whole area he
occupied would be adjudged as owned by the realty firm.
On March 18, 1988, Acero filed a Motion to Resurvey,[11] whereby it was
alleged that the parties agreed to have the disputed lots re-surveyed by the
Bureau of Lands. Thus, the trial court issued the March 21,
1988 Order[12] directing the Director of Lands to conduct a re-survey of the
subject properties.
In his June 9, 1989 Report, Elpidio T. De Lara, Chief of the Technical Services
Division of the Lands Management Section of the National Capital Region -
Department of Environment and Natural Resources, submitted to the trial court
Verification Survey Plan No. Vs-13-000135. In the said Verification Survey
Plan, petitioners TCTs covered the entire land occupied by the respondents
hollow block factory.[13]
On April 10, 1990, petitioner Ayala Steel Manufacturing Co., Inc. (Ayala Steel)
filed its March 30, 1990 Motion for Substitution alleging that it had purchased
the subject lots, attaching to the motion TCT Nos. 152528, 152529, and 152530
all in its name, as proof of purchase.[14]
The said motion was opposed by Acero claiming that this case has already been
terminated in accordance with the compromise agreement of the parties, hence,
substitution will no longer be necessary and justified under the
circumstances.[15] The motion was not resolved which explains why both
32
transferor Domingo Realty and transferee Ayala Steel are co-petitioners in the
instant petition.
In its December 28, 1990 Order,[16] the trial court directed Acero to conduct his
own re-survey of the lots based on the technical description appearing in the
TCTs of Domingo Realty and to have the re-survey plans approved by the
Bureau of Lands. The Order resulted from Aceros contention that he occupied
only 2,000 square meters of petitioners property.
Acero employed the services of Engr. Eligio L. Cruz who came up with
Verification Survey Plan No. Vs-13-000185. However, when the said
Verification Survey Plan was presented to the Bureau of Lands for approval, it
was rejected because Engr. Cruz failed to comply with the requirements of the
Bureau.[17]
On April 8, 1991, petitioners filed a Manifestation with Motion praying for the
denial of respondents Motion to Nullify the Compromise Agreement and for
the approval of Verification Survey Plan No. Vs-13-000135 prepared by Engr.
Lara of the Bureau of Lands. The Pasay City RTC issued the December 6,
1991 Order[18] denying respondent Aceros Motion to Nullify the Compromise
Agreement. As a consequence, petitioners filed a Motion for Execution
on December 10, 1991.[19]
On January 6, 1992, respondent filed an undated Manifestation [20] claiming,
among others, that it was on record that the Compromise Agreement was only
as to a portion of the land being occupied by respondent, which is about 2,000
square meters, more or less. He reiterated the same contentions in his December
21, 1991 Manifestation.[21]
On January 13, 1992, respondent filed a Motion to Modify Order Dated 6
December 91,[22] claiming that the said Order modified the Compromise
Agreement considering that it allegedly involved only 1,357 square meters and
not the entire lot;[23] and if not amended, the Order would deviate from the
principle that no man shall enrich himself at the expense of the other.
In its January 15, 1992 Order,[24] the trial court approved the issuance of a Writ
of Execution to enforce the December 7, 1987 Decision. On February 3, 1992,
respondent Acero subsequently filed a Motion for Reconsideration[25] of the
January 15, 1992 Order arguing that the Order was premature and that
Verification Survey Plan No. Vs-13-000135 violated the Compromise
Agreement.
On January 18, 1992, the Pasay City Hall was gutted by fire, destroying the
records of the lower court, including those of this case. Thus, after
reconstituting the records, the trial court issued the October 6,
1992 Order,[26] reiterating its January 15, 1992 Order and ordering the issuance
of a Writ of Execution.
On October 23, 1992, respondent filed a Manifestation and
Compliance,[27] alleging that Verification Survey Plan No. Vs-13-000185 had
been approved by the Regional Director of the DENR; thus, he moved for the
annulment of the October 6, 1992 Order granting the Writ of Execution in favor
of petitioners.
Given the conflicting Verification Survey Plans of the parties, the trial court
issued the October 11, 1993 Order[28] requiring the Bureau of Lands Director to
determine which of the two survey plans was correct.
Subsequently, Regional Technical Director Eriberto V. Almazan of the Land
Registration Authority issued the November 24, 1993 Order[29] cancelling
Verification Survey Plan No. Vs-13-000185, submitted by Engineer Eligio
Cruz, who was hired by respondent Acero, and declared Verification Survey
Plan No. Vs-13-000135, submitted by Engineer Lara of the Bureau of Lands,
as the correct Plan.
Thereafter, petitioners filed their January 12, 1994 Ex-parte Manifestation with
Motion,[30] praying for the implementation of the Writ of Execution against the
disputed lands, which was granted in the January 12, 1994 Order.[31]
Respondents Motion for Reconsideration[32] of the January 12, 1994 Order was
denied in the February 1, 1994 Order[33] of the Pasay City RTC.
Aggrieved, respondent Acero filed before the CA his February 23, 1994 Petition
for Certiorari and Mandamus with Urgent Prayer for Issuance of a Temporary
Restraining Order,[34] under Rule 65 of the Rules of Court, against petitioners
and Judge Sofronio G. Sayo as presiding judge of the lower court. In the
petition, respondent sought to nullify and set aside the RTC Orders dated
December 6, 1991, January 15, 1992, October 6, 1992, January 12, 1994, and
February 1, 1994, all of which pertain to the execution of the December 7, 1987
Decision on the Compromise Agreement. Significantly, respondent did not seek
the annulment of said judgment but merely reiterated the issue that under the
Compromise Agreement, he would only be vacating a portion of the property
he was occupying.
The Ruling of the Court of Appeals
On October 31, 1995, the CA promulgated the assailed Decision, the fallo of
which reads:
IN VIEW OF THE FOREGOING, the petition
for certiorari is GRANTED and the Orders of
respondent court dated December 6,
1991, January 15, 1992, October 6, 1992,
and January 12, 1994, and February 1,
1994 are SET ASIDE. In the interest of justice,
and consistent with the views expressed by this
Court, the Compromise Judgment dated
December 7, 1987 of respondent court is
likewise SET ASIDE. Respondent Court is
likewise directed to proceed with the hearing of
Civil Case No. 9581-P on the merits and
determine, once and for all, the respective
proprietary rights of the litigants thereto.
SO ORDERED.[35]
In discarding the December 7, 1987 Decision based on the Compromise
Agreement, the appellate court ratiocinated that David Victorio, the alleged
lessor of Acero, was not a party to the Compromise Agreement; thus, there
would always remain the probability that he might eventually resurface and
assail the Compromise Agreement, giving rise to another suit. Moreover, the
CA found the Compromise Agreement vague, not having stipulated a mutually
agreed upon surveyor, who would survey the properties using as a basis, survey
plans acceptable to both, and to thereafter submit a report to the court. [36]
Likewise, the CA sustained Aceros belief that he would only have to vacate a
portion of the property he was presently occupying, which was tantamount to a
mistake that served as basis for the nullification of the Compromise Agreement
entered into.
On January 17, 1996, petitioners filed a Motion for Reconsideration [37] of the
adverse Decision, which was consequently rejected in the CAs August 28,
1996 Resolution.
Thus, the instant petition is in our hands.
The Issues
The issues as stated in the petition are as follows:
1. THE RESPONDENT COURT OF APPEALS ERRED IN NULLIFYING
AND SETTING ASIDE JUDGMENT ON COMPROMISE AGREEMENT
AND THE COMPROMISE AGREEMENT ITSELF AS WELL AS THE
SUBSEQUENT ORDERS OF THE COURT A QUO THOUGH THERE IS
NO MOTION TO SET ASIDE THE JUDGMENT ON THE COMPROMISE
33
AGREEMENT BEFORE THE COURT A QUO ON THE GROUND OF
FRAUD, MISTAKE OR DURESS;
2. THE RESPONDENT COURT OF APPEALS ERRED IN NULLIFYING
AND SETTING ASIDE THE JUDGMENT ON COMPROMISE
AGREEMENT AND THE COMPROMISE AGREEMENT ITSELF AS
WELL AS THE SUBSEQUENT ORDERS OF THE COURT OF QUO [SIC]
THOUGH IN THE PETITION FOR CERTIORARI AND MANDAMUS
BEFORE RESPONDENT COURT OF APPEALS, PRIVATE
RESPONDENT ARGUED THAT JUDGMENT ON COMPROMISE
AGREEMENT IS FINAL, EXECUTORY, IMMUTABLE AND
UNALTERABLE;
3. THE RESPONDENT COURT OF APPEALS ERRED IN NULLIFYING
AND SETTING ASIDE JUDGMENT ON COMPROMISE AGREEMENT
AND THE COMPROMISE AGREEMENT ITSELF AS WELL AS THE
SUBSEQUENT ORDERS OF THE COURT A QUO BASED ON FRAUD
OR MISTAKE THOUGH SAID ISSUES WERE NOT RAISED BEFORE
THE COURT A QUO, AND NO EVIDENCE WAS INTRODUCED TO
SUBSTANTIATE FRAUD OR MISTAKE BEFORE THE COURT A QUO;
4. THE RESPONDENT COURT OF APPEALS ERRED WHEN IT RULED
THAT THE NON-INCLUSION OF ONE OF THE PARTIES IN THIS
CASE, AND THE VAGUENESS OF THE COMPROMISE AGREEMENT
ARE GROUNDS TO NULLIFY AND SET ASIDE THE COMPROMISE
AGREEMENT; AND
5. THE RESPONDENT COURT OF APPEALS ERRED WHEN IT
ENTERTAINED THE PETITION FOR CERTIORARI AND MANDAMUS
THOUGH IT WAS FILED BEYOND REASONABLE TIME IF NOT
BARRED BY LACHES.[38]
Restated, the issues are:
I.WHETHER THE PETITION BEFORE THE COURT OF
APPEALS WAS FILED OUT OF TIME OR BARRED BY
LACHES;
IIWHETHER THE NON-INCLUSION OF DAVID
VICTORIO WOULD NULLIFY THE COMPROMISE
AGREEMENT
III.WHETHER THE JUDGMENT ON COMPROMISE
AGREEMENT SHOULD BE SET ASIDE ON THE
GROUND OF VAGUENESS; AND
IV.WHETHER THE JUDGMENT ON COMPROMISE
AGREEMENT SHOULD BE SET ASIDE ON THE
GROUND OF MISTAKE.
The Courts Ruling
The petition is meritorious.
The preliminary issue involves the query of what proper remedy is available to
a party who believes that his consent in a compromise agreement was vitiated
by mistake upon which a judgment was rendered by a court of law.
There is no question that a contract where the consent is given
through mistake, violence, intimidation, undue influence, or fraud is voidable
under Article 1330 of the Civil Code. If the contract assumes the form of a
Compromise Agreement between the parties in a civil case, then a judgment
rendered on the basis of such covenant is final, unappealable, and immediately
executory. If one of the parties claims that his consent was obtained through
fraud, mistake, or duress, he must file a motion with the trial court that approved
the compromise agreement to reconsider the judgment and nullify or set aside
said contract on any of the said grounds for annulment of contract within 15
days from notice of judgment. Under Rule 37, said party can either file a motion
for new trial or reconsideration. A party can file a motion for new trial based on
fraud, accident or mistake, excusable negligence, or newly discovered evidence.
On the other hand, a party may decide to seek the recall or modification of the
judgment by means of a motion for reconsideration on the ground that the
decision or final order is contrary to law if the consent was procured through
fraud, mistake, or duress. Thus, the motion for a new trial or motion for
reconsideration is the readily available remedy for a party to challenge a
judgment if the 15-day period from receipt of judgment for taking an appeal has
not yet expired. This motion is the most plain, speedy, and adequate remedy in
law to assail a judgment based on a compromise agreement which, even if it is
immediately executory, can still be annulled for vices of consent or forgery.[39]
Prior to the effectivity of the 1997 Rules of Civil Procedure on July 1, 1997, an
order denying a motion for new trial or reconsideration was not appealable since
the judgment in the case is not yet final. The remedy is to appeal from the
challenged decision and the denial of the motion for reconsideration or new trial
is assigned as an error in the appeal.[40] Under the present [1997] Rules of Civil
Procedure, the same rule was maintained that the order denying said motion is
still unappealable and the rule is still to appeal from the judgment and not from
the order rejecting the motion for reconsideration/new trial.
If the 15-day period for taking an appeal has lapsed, then the aggrieved party
can avail of Rule 38 by filing a petition for relief from judgment which should
be done within 60 days after the petitioner learns of the judgment, but not more
than six (6) months after such judgment or final order was entered. Prior to the
effectivity of the 1997 Rules of Civil Procedure in 1997, if the court denies the
petition under Rule 38, the remedy is to appeal from the order of denial and not
from the judgment since said decision has already become final and already
unappealable.[41] However, in the appeal from said order, the appellant may
likewise assail the judgment. Under the 1997 Rules of Civil Procedure, the
aggrieved party can no longer appeal from the order denying the petition since
this is proscribed under Section 1 of Rule 41. The remedy of the party is to file
a special civil action for certiorari under Rule 65 from the order rejecting the
petition for relief from judgment.
The records of the case reveal the following:
1. December 3, 1987 the parties signed the Compromise Agreement;
2. December 7, 1987 a decision/judgment was rendered based on the December
3, 1987 Compromise Agreement;
3. February 2, 1988 Acero filed a Motion to Nullify the Compromise
Agreement;
4. December 6, 1991 the trial court denied Aceros Motion to Nullify the
Compromise Agreement;
5. December 11, 1991 defendant Acero received the December 6, 1991 Order
which denied said motion;[42]
6. December 26, 1991 the 15-day period to appeal to the CA expired by the
failure of defendant Acero to file an appeal with said appellate court;
7. January 15, 1992 the trial court issued the Order which granted petitioners
motion for the issuance of a Writ of Execution;
8. October 6, 1992 the trial court reiterated its January 15, 1992 Order directing
the issuance of a Writ of Execution after the records of the case were lost in a
fire that gutted the Pasay City Hall;
9. January 12, 1994 the trial court issued the Order which directed the
implementation of the Writ of Execution prayed for by petitioners;
10. February 1, 1994 the trial court issued the Order which denied respondents
Motion for Reconsideration of its January 12, 1994 Order; and
11. April 4, 1994 Acero filed with the CA a petition for certiorari in CA-G.R.
SP No. 33407 entitled Antonio M. Acero v. Domingo Realty, Inc., et al.
In his undated Manifestation, respondent Acero admitted having received a
copy of the December 7, 1987 Decision on December 11, 1987. However, it
was only on February 2, 1988 when he filed a Motion to Nullify the
Compromise Agreement which was discarded for lack of merit by the trial court
34
on December 6, 1991. If the Motion to Nullify the Compromise Agreement is
treated as a motion for reconsideration and/or for new trial, then Acero should
have filed an appeal from the December 7, 1987 Decision and assigned as error
the December 6, 1991 Order denying said motion pursuant to the rules existing
prior to the 1997 Rules of Civil Procedure. He failed to file such appeal but
instead filed a petition for certiorari under Rule 65 with the CA on April 4,
1994. This is prejudicial to respondent Acero as the special civil action of
certiorari is not the proper remedy. If the aggrieved party does not interpose a
timely appeal from the adverse decision, a special civil action for certiorari is
not available as a substitute for a lost appeal.[43]
What respondent Acero should have done was to file a petition for relief from
judgment when he became aware that he lost his right of appeal on December
26, 1991. Even with this approach, defendant Acero was also remiss.
In sum, the petition for certiorari instituted by respondent Acero with the CA is
a wrong remedy; a simple appeal to the CA would have sufficed. Since the
certiorari action is an improper legal action, the petition should have been
rejected outright by the CA.
Assuming arguendo that a petition for certiorari with the CA is the appropriate
remedy, still, said petition was filed out of time.
The petition before the CA was filed prior to the effectivity of the 1997 Rules
of Court when there was still no prescribed period within which to file said
petition, unlike in the present Section 4 of Rule 65 wherein a Petition for
Certiorari and Mandamus must be filed within 60 days from notice of the
judgment, final order, or resolution appealed from, or of the denial of the
petitioners motion for new trial or reconsideration after notice of judgment.
Section 4, Rule 65 previously read:
Section 4. Where petition filed.The petition may be filed in the Supreme Court,
or, if it relates to the acts or omissions of an inferior court, or of a corporation,
board or officer or person, in a Court of First Instance having jurisdiction
thereof. It may also be filed in the Court of Appeals if it is in aid of its appellate
jurisdiction
Petitions for certiorari under Rules 43, 44 and 45 shall be filed with the Supreme
Court
Before the 1997 Rules of Civil Procedure became effective on July 1, 1997, the
yardstick to determine the timeliness of a petition for certiorari under Rule 65
was the reasonableness of the time that had elapsed from receipt of notice of the
assailed order/s of the trial court up to the filing of the appeal with the CA. [44] In
a number of cases, the Court ruled that reasonable time can be pegged at three
(3) months.[45]
In the present case, the Order denying the Motion to Nullify the Compromise
Agreement was issued on December 6, 1991. The petition for certiorari was
filed on April 4, 1994.The period of two (2) years and four (4) months cannot
be considered fair and reasonable. With respect to the January 15, 1992 Order
granting the writ of execution and the October 6, 1992 Order directing the
issuance of the writ, it is evident that the petition before the CA was filed more
than three (3) months after the receipt by respondent Acero of said orders and
the filing of the petition is likewise unreasonably delayed.
On the second issue, petitioners assail the ruling of the appellate court that
David Victorio who is claimed to be the lessor of Acero, and who is impleaded
as a defendant in Civil Case No. 9581-P, was not made a party to the
Compromise Agreement and hence, he may later assail the compromise
agreement as not binding upon him, thereby giving rise to another suit. [46]
We find merit in petitioners position.
The CA was unable to cite a law or jurisprudence that supports the annulment
of a compromise agreement if one of the parties in a case is not included in the
settlement. The only legal effect of the non-inclusion of a party in a compromise
agreement is that said party cannot be bound by the terms of the agreement. The
Compromise Agreement shall however be valid and binding as to the parties
who signed thereto.[47]
The issue of ownership between petitioners and David Victorio can be threshed
out by the trial court in Civil Case No. 9581-P. The proper thing to do is to
remand the case for continuation of the proceedings between petitioners and
defendant David Victorio but not to annul the partial judgment between
petitioners and respondent Acero which has been pending execution for 20
years.
With regard to the third issue, petitioners assail the ruling of the CA that the
Compromise Agreement is vague as there is still a need to determine the exact
metes and bounds of the encroachment on the petitioners lot.
The object of a contract, in order to be considered as certain, need
not specify such object with absolute certainty. It is enough that the object is
determinable in order for it to be considered as certain. Article 1349 of the Civil
Code provides:
Article 1349. The object of every contract must
be determinate as to its kind. The fact that the
quantity is not determinate shall not be an
obstacle to the existence of the contract,
provided it is possible to determine the same,
without the need of a new contract between the
parties.
In the instant case, the title over the subject property contains a technical
description that provides the metes and bounds of the property of
petitioners. Such technical description is the final determinant of the extent of
the property of petitioners. Thus, the area of petitioners property is determinable
based on the technical descriptions contained in the TCTs.
Notably, the determination made by the Bureau of Landsthat
Verification Survey Plan No. Vs-13-000135 is the correct Planis controlling and
shall prevail over Verification Survey Plan No. Vs-13-000185 submitted by
Acero. Findings of fact by administrative agencies, having acquired expertise
in their field of specialization, must be given great weight by this Court. [48] Even
if the exact area of encroachment is not specified in the agreement, it can still
be determined from the technical description of the title of plaintiff which
defendant Acero admitted to be correct. Thus, the object of the Compromise
Agreement is considered determinate and specific.
Moreover, vagueness is defined in Blacks Law Dictionary as: indefinite,
uncertain; not susceptible of being understood.
A perusal of the entire Compromise Agreement will negate any contention that
there is vagueness in its provisions. It must be remembered that in the
interpretation of contracts, an instrument must be construed so as to give effect
to all the provisions of these contracts.[49] Thus, the Compromise Agreement
must be considered as a whole.
The alleged vagueness revolves around the term portion in paragraph three (3)
of the Compromise Agreement,[50] taken together with paragraph one (1) which
we quote:
1. That defendants admit and recognize the ownership of the plaintiff over
the property subject of this case, covered by TCT No. S-107639 (75600), S-
107643 (67007), and S-107640 (67006) with a total area of 26,705 square
meters;
3. That defendant Acero admits that the property he is presently
occupying by way of lease is encroaching on a portion of the property of the
plaintiff and assume and undertakes to vacate, remove and clear any and
all structures erected inside the property of the plaintiff by himself and other
third parties, duly authorized and/or who have an existing agreement with
defendant Acero, and shall deliver said portion of the property of the plaintiff
free and clear of any unauthorized structures, shanties, occupants, squatters or
35
lessees within a period of sixty (60) days from date of signing of this
compromise agreement. Should defendant Acero fail in his obligation to vacate,
remove and clear the structures erected inside the property of the plaintiff within
the period of 60 days afore-mentioned, plaintiff shall be entitled to a writ of
execution for the immediate demolition or removal of said structure to fully
implement this agreement; and ejectment of all squatters and occupants and
lessees, including the dependents to fully implement this agreement. (Emphasis
supplied.)
Respondent harps on their contention that the term portion in paragraph 3 of the
Compromise Agreement refers to the property which they are occupying.
Respondents interpretation of paragraph 3 of the Compromise Agreement is
mistaken as it is anchored on his belief that the encroachment on the property
of petitioners is only a portion and not the entire lot he is occupying. This is
apparent from his Supplement to his Petition for Certiorari and Mandamus
where he explained:
Petitioner [Acero] entered into this agreement because of his well-founded
belief and conviction that a portion of the property he is occupying
encroaches only a portion of the property of private respondent. In fine, only
a portion of the property petitioner is occupying (not all of it) encroaches on a
portion of the property of private respondent.[51]
This contention is incorrect. The agreement is clear that respondent
Acero admitted that the property he is presently occupying by way of lease is
encroaching on a portionof the property of the plaintiff. Thus, whether it is only
a portion or the entire lot Acero is leasing that will be affected by the agreement
is of no importance. What controls is the encroachment on the lot of petitioner
Domingo Realty regardless of whether the entire lot or only a portion occupied
by Acero will be covered by the encroachment.
While it may be the honest belief of respondent Acero that only a portion of the
lot he is occupying encroaches on the 26,705-square meter lot of petitioner
Domingo Realty and later, Ayala Steel, the Court finds that the true and real
agreement between the parties is that any encroachment by respondent Acero
on the lot of petitioners will be surrendered to the latter. This is apparent from
the undertaking in paragraph 3 that defendant Acero undertakes to vacate,
remove and clear any and all structures erected inside the property of the
plaintiff. This prestation results from the admission against the interest of
respondent Acero that he admits and recognizes the ownership of the plaintiff
(Domingo Realty) over the subject lot. The controlling word therefore
is encroachmentwhether it involves a portion of or the entire lot claimed by
defendant David Victorio. To reiterate, the word portion refers to petitioners lot
and not that of Aceros. Contrary to the disposition of the CA, we rule that the
terms of the Compromise Agreement are clear and leave no doubt upon the
intent of the parties that respondent Acero will vacate, remove, and clear any
and all structures erected inside petitioners property, the ownership of which is
not denied by him. The literal meaning of the stipulations in the Compromise
Agreement will control under Article 1370 of the Civil Code. Thus, the alleged
vagueness in the object of the agreement cannot be made an excuse for its
nullification.
Finally, with regard to the fourth issue, petitioners question the finding of the
CA that the compromise judgment can be set aside on the ground of mistake
under Article 2038 of the Civil Code, because respondent Acero gave his
consent to the Compromise Agreement in good faith that he would only vacate
a portion of his lot in favor of petitioner Domingo Realty.
We rule otherwise.
Articles 2038 and 1330 of the Civil Code allow a party to a contract, on the
ground of mistake, to nullify a compromise agreement, viz:
Article 2038. A compromise in which there is
mistake, fraud, violence, intimidation, undue
influence, or falsity of documents, is subject to
the provisions of Article 1330 of this Code.
Article 1330. A contract where the consent is
given through mistake, violence, intimidation,
undue influence, or fraud is voidable (emphasis
supplied).
Mistake has been defined as a misunderstanding of the meaning or implication
of something or a wrong action or statement proceeding from a faulty judgment
x x x.[52]
Article 1333 of the Civil Code of the Philippines however states that there is no
mistake if the party alleging it knew the doubt, contingency or risk affecting the
object of the contract.
Under this provision of law, it is presumed that the parties to a contract know
and understand the import of their agreement. Thus, civil law expert Arturo M.
Tolentino opined that:
To invalidate consent, the error must be excusable. It must be real error, and not
one that could have been avoided by the party alleging it. The error must arise
from facts unknown to him. He cannot allege an error which refers to a fact
known to him, or which he should have known by ordinary diligent examination
of the facts. An error so patent and obvious that nobody could have made
it, or one which could have been avoided by ordinary prudence, cannot be
invoked by the one who made it in order to annul his contract. A mistake
that is caused by manifest negligence cannot invalidate a juridical
act.[53] (Emphasis supplied.)
Prior to the execution of the Compromise Agreement, respondent Acero was
already aware of the technical description of the titled lots of petitioner
Domingo Realty and more so, of the boundaries and area of the lot he leased
from David Victorio. Before consenting to the agreement, he could have simply
hired a geodetic engineer to conduct a verification survey and determine the
actual encroachment of the area he was leasing on the titled lot of petitioner
Domingo Realty. Had he undertaken such a precautionary measure, he would
have known that the entire area he was occupying intruded into the titled lot of
petitioners and possibly, he would not have signed the agreement.
In this factual milieu, respondent Acero could have easily averted the alleged
mistake in the contract; but through palpable neglect, he failed to undertake the
measures expected of a person of ordinary prudence. Without doubt, this kind
of mistake cannot be resorted to by respondent Acero as a ground to nullify an
otherwise clear, legal, and valid agreement, even though the document may
become adverse and even ruinous to his business.
Moreover, respondent failed to state in the Compromise Agreement that he
intended to vacate only a portion of the property he was leasing. Such provision
being beneficial to respondent, he, in the exercise of the proper diligence
required, should have made sure that such matter was specified in the
Compromise Agreement. Respondent Aceros failure to have the said stipulation
incorporated in the Compromise Agreement is negligence on his part and
insufficient to abrogate said agreement.
In Torres v. Court of Appeals,[54] which was also cited in LL and Company
Development and Agro-Industrial Corporation v. Huang Chao Chun,[55] it was
held that:
Under Article 1315 of the Civil Code, contracts bind the parties not only to
what has been expressly stipulated, but also to all necessary consequences
thereof, as follows:
ART. 1315. Contracts are perfected by mere consent, and from that moment
the parties are bound not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which, according to their nature, may
be in keeping with good faith, usage and law.
It is undisputed that petitioners are educated and are thus presumed to have
understood the terms of the contract they voluntarily signed. If it was not in
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consonance with their expectations, they should have objected to it and insisted
on the provisions they wanted.

Courts are not authorized to extricate parties from the necessary consequences
of their acts, and the fact that the contractual stipulations may turn out to be
financially disadvantageous will not relieve parties thereto of their
obligations. They cannot now disavow the relationship formed from such
agreement due to their supposed misunderstanding of its terms.

The mere fact that the Compromise Agreement favors one party does not render
it invalid. We ruled in Amarante v. Court of Appeals that:
Compromises are generally to be favored and
cannot be set aside if the parties acted in good
faith and made reciprocal concessions to each
other in order to terminate a case. This holds
true even if all the gains appear to be on one
side and all the sacrifices on the
other (emphasis supplied).[56]

One final note. While the Court can commiserate with respondent Acero in his
sad plight, nonetheless we have no power to make or alter contracts in order to
save him from the adverse stipulations in the Compromise
Agreement. Hopefully this case will serve as a precaution to prospective parties
to a contract involving titled lands for them to exercise the diligence of a
reasonably prudent person by undertaking measures to ensure the legality of the
title and the accurate metes and bounds of the lot embraced in the title. It is
advisable that such parties (1) verify the origin, history, authenticity, and
validity of the title with the Office of the Register of Deeds and the Land
Registration Authority; (2) engage the services of a competent and reliable
geodetic engineer to verify the boundary, metes, and bounds of the lot subject
of said title based on the technical description in the said title and the approved
survey plan in the Land Management Bureau; (3) conduct an actual ocular
inspection of the lot; (4) inquire from the owners and possessors of adjoining
lots with respect to the true and legal ownership of the lot in question; (5) put
up signs that said lot is being purchased, leased, or encumbered; and (6)
undertake such other measures to make the general public aware that said lot
will be subject to alienation, lease, or encumbrance by the parties. Respondent
Acero, for all his woes, may have a legal recourse against lessor David Victorio
who inveigled him to lease the lot which turned out to be owned by another.

WHEREFORE, the petition is hereby GRANTED and the assailed

Decision and Resolution of the CA are REVERSED. The questioned Orders of
the Pasay City RTC dated December 6, 1991, January 15, 1992, October 6,
1992, January 12, 1994, and February 1, 1994, including the Decision dated
December 7, 1987, are AFFIRMED. The case is remanded to the Pasay RTC,
Branch III for further proceedings with respect to petitioner Domingo Realtys
November 15, 1981 Complaint[57] against one of the defendants, David
Victorio. No costs.

SO ORDERED.

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