G.R. No.

204369

September 17, 2014

ENRIQUETA
M.
LOCSIN, Petitioner,
vs.
BERNARDO HIZON, CARLOS HIZON, SPS. JOSE MANUEL &
LOURDES GUEVARA, Respondents.
DECISION
VELASCO, JR., J.:
Nature of the Case
Before Us is a Petition for Review on Certiorari under Rule 45
assailing the Decision1 and Resolution of the Court of Appeals (CA),
dated June 6, 2012 and October 30, 2012, respectively, in CA-G.R.
CV No. 96659 entitled Enriqueta M Locsin v. Marylou Bolos, et al. In
reversing the ruling of the trial court, the CA held that respondents
are innocent purchasers in good faith and for value of the subject
property.
The Facts
Petitioner Enriqueta M. Locsin (Locsin) was the registered owner of a
760-sq.m. lot covered by Transfer Certificate of Title (TCT) No.
235094, located at 49 Don Vicente St., Don Antonio Heights
Subdivision, Brgy. Holy Spirit, Capitol, Quezon City. In 1992, she filed
an ejectment case, Civil Case No. 38-6633,2 against one Billy Aceron
(Aceron) before the Metropolitan Trial Court, Branch 3 8 in Quezon
City (MTC) to recover possession over the land in issue. Eventually,
the two entered into a compromise agreement, which the MTC
approved on August 6, 1993.3
Locsin later went to the United States without knowing whether
Aceron has complied with his part of the bargain under the

compromise agreement. In spite of her absence, however, she

continued to pay the real property taxes on the subject lot.
In 1994, after discovering thather copy of TCT No. 235094 was
missing, Locsin filed a petition for administrative reconstruction in
order to secure a new one, TCT No. RT-97467. Sometime in early
2002, she then requested her counsel to check the status of the
subject lot. It was then that they discovered the following:
1. One Marylou Bolos (Bolos) had TCT No. RT-97467
cancelled on February 11, 1999, and then secured a new
one, TCT No. N-200074, in her favor by registering a Deed
of Absolute Sale dated November 3, 1979 allegedly
executed by Locsin with the Registry of Deeds;
2. Bolos later sold the subject lot to Bernardo Hizon
(Bernardo) for PhP 1.5 million, but it was titled under Carlos
Hizons (Carlos) name on August 12, 1999. Carlos is
Bernardos son;
3. On October 1, 1999, Bernardo, claiming to be the owner
of the property, filed a Motion for Issuance of Writ of
Execution for the enforcement of the court-approved
compromise agreement in Civil Case No. 38-6633;
4. The property was already occupied and was, in fact, up for
sale.
On May 9, 2002, Locsin, through counsel, sent Carlos a letter
requesting the return of the property since her signature in the
purported deed of sale in favor of Bolos was a forgery. In a letterreply dated May 20, 2002, Carlos denied Locsins request, claiming
that he was unaware of any defect or flaw in Bolos title and he is,
thus, an innocent purchaser for value and good faith. On June 13,
2002,4 Bernardo met with Locsins counsel and discussed the
possibility of a compromise. He ended the meeting with a promise to

come up with a win-win situation for his son and Locsin, a promise
which turned out to be deceitful, for, on July 15, 2002, Locsin learned
that Carlos had already sold the property for PhP 1.5 million to his
sister and her husband, herein respondents Lourdes and Jose
Manuel Guevara (spouses Guevara), respectively, who, as early as
May 24, 2002, had a new certificate of title, TCT No. N-237083,
issued in their names. The spouses Guevara then immediately
mortgaged the said property to secure a PhP 2.5 million loan/credit
facility with Damar Credit Corporation (DCC).
It was against the foregoing backdrop of events that Locsin filed an
action for reconveyance, annulment ofTCT No. N-237083, the
cancellation of the mortgage lien annotated thereon, and damages,
against Bolos, Bernardo, Carlos, the Sps. Guevara, DCC, and the
Register of Deeds, Quezon City, docketed as Civil Case No. Q-0247925, which was tried by the Regional Trial Court, Branch 77 in
Quezon City (RTC). The charges against DCC, however,
weredropped on joint motion ofthe parties. This is in view of the
cancellation of the mortgage for failure of the spouses Guevara to
avail of the loan/credit facility DCC extended in their favor.5
Ruling of the Trial Court
On November 19, 2010, the RTC rendered a Decision 6 dismissing
the complaint and finding for respondents,as defendants thereat,
holding that: (a) there is insufficient evidence to showthat Locsins
signature in the Deed of Absolute Sale between her and Bolos is a
forgery; (b) the questioned deed is a public document, having been
notarized; thus, it has, in its favor, the presumption of regularity; (c)
Locsin cannot simply rely on the apparent difference of the
signatures in the deed and in the documents presented by her to
prove her allegation of forgery; (d) the transfers of title from Bolos to
Carlos and from Carlos to the spouses Guevara are valid and
regular; (e) Bernardo, Carlos, and the spouses Guevara are all
buyers in good faith. Aggrieved, petitioner appealed the case to the
CA.

Ruling of the Court of Appeals

The CA, in its assailed Decision, ruled that it was erroneous for the
RTC to hold that Locsin failed to prove that her signature was forged.
In its appreciation of the evidence, the CA found that, indeed,
Locsins signature in the Deed of Absolute Sale in favor of Bolos
differs from her signatures in the other documents offered as
evidence.
The CA, however, affirmed the RTCs finding that herein respondents
are innocent purchasers for value. Citing Casimiro Development
Corp. v. Renato L. Mateo, 7 the appellate court held that respondents,
having dealt with property registered under the Torrens System, need
not go beyond the certificate of title, but only has to rely on the said
certificate. Moreover, as the CA added, any notice of defect or flaw in
the title of the vendor should encompass facts and circumstances
that would impel a reasonably prudent man to inquire into the status
of the title of the property in order to amount to bad faith.
Accordingly, the CA ruled that Locsin can no longer recover the
subject lot.8 Hence, the insant petition.
Arguments
Petitioner Locsin insists that Bernardo was well aware, at the time he
purchased the subject property, of a possible defect in Bolos title
since he knew that another person, Aceron, was then occupying the
lot in issue.9 As a matter of fact, Bernardo even moved for the
execution of the compromise agreement between Locsin and Aceron
inCivil Case No. 38-6633 in order to enforce to oust Aceron of his
possession over the property.10
Thus, petitioner maintains that Bernardo, knowing as he did the
incidents involving the subject property,should have acted as a
reasonably diligent buyer in verifying the authenticity of Bolostitle
instead of closing his eyes to the possibility of a defecttherein.

Essentially, petitioner argues that Bernardos stubborn refusal to

make an inquiry beyond the face of Bolos title is indicative of his lack
of prudence in protecting himself from possible defects or flaws
therein, and consequently bars him from interposing the protection
accorded toan innocent purchaser for value.

during the trial of the case. 14 This rule, however, admits of

exceptions.For one, the findings of fact of the CA will not bind the
parties in cases where the inference made on the evidence is
mistaken, as here.15
That being said, we now proceed to the core of the controversy.

As regards Carlos and the Sps. Guevaras admissions and

testimonies, petitioner points out that when these are placed side-byside with the concurrent circumstances in the case, it is readily
revealed that the transfer from the former to the latter was only
simulated and intended to keep the property out of petitioners reach.
For their part, respondents maintain that they had the right to rely
solely upon the face of Bolos clean title, considering that it was free
from any lien or encumbrance. They are not even required, so they
claim, to check on the validity of the sale from which they derived
their title.11 Too, respondents claim that their knowledge of Acerons
possession cannot be the basis for an allegation of bad faith, for the
property was purchased on an "asis where-is" basis. The Issue
Considering that the finding of the CAthat Locsins signature in the
Deed of Absolute Sale in favor of Bolos was indeed bogus
commands itself for concurrence, the resolution of the present
petition lies on this singular issuewhether or not respondents are
innocent purchasers for value.12
The Courts Ruling
The petition is meritorious.
Procedural issue
As a general rule, only questions of law may be raised in a petition
for review on certiorari.13 This Court is not a trier offacts; and in the
exercise of the power of review, we do not normally undertake the reexamination of the evidence presented by the contending parties

Precautionary measures for buyers of real property

An innocent purchaser for value is one who buys the property of
another without notice that some other person has a right to or
interest in it, and who pays a full and fair price atthe time of the
purchase or before receiving any notice of another persons
claim.16 As such, a defective title or one the procurement of which
is tainted with fraud and misrepresentationmay be the source of a
completely legal and valid title, provided that the buyer is an innocent
third person who, in good faith, relied on the correctness of the
certificate of title, or an innocent purchaser for value. 17
Complementing this is the mirror doctrine which echoes the doctrinal
rule that every person dealing with registered land may safely rely on
the correctness of the certificate of title issued therefor and is in no
way obliged to go beyond the certificate to determine the condition of
the property.18 The recognized exceptions to this rule are stated as
follows:
[A] person dealing with registeredland has a right to rely on the
Torrens certificate of title and to dispense with the need of inquiring
further except when the party has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make
such inquiry or when the purchaser has knowledge of a defect or the
lack of title in his vendor or of sufficient facts to induce a reasonably
prudent man to inquire into the status of the title of the property in
litigation. The presence of anything which excites or arouses
suspicion should then prompt the vendee to look beyond the
certificate and investigate the title of the vendor appearing on the

face of said certificate. One who falls within the exception can neither
be denominated an innocent purchaser for value nor a purchaser in
good faith and, hence, does not merit the protection of the
law.19 (emphasis added)
Thus, in Domingo Realty, Inc. v. CA, 20 we emphasized the need for
prospective parties to a contract involving titled lands to exercise the
diligence of a reasonably prudent person in ensuring the legality of
the title, and the accuracy of the metes and bounds of the lot
embraced therein, by undertaking precautionary measures, such as:
1. Verifying the origin, history, authenticity, and validity of the
title with the Office of the Register of Deeds and the Land
Registration Authority;

In the case at bar, Bolos certificate of title was concededly free from
liens and encumbrances on its face. However, the failure of Carlos
and the spouses Guevara to exercise the necessary level ofcaution
in light of the factual milieu surrounding the sequence of transfers
from Bolos to respondents bars the application of the mirror doctrine
and inspires the Courts concurrence withpetitioners proposition.
Carlos is not an innocent purchaser for value
Foremost, the Court is of the view that Bernardo negotiated with
Bolos for the property as Carlos agent. This is bolstered by the fact
that he was the one who arranged for the saleand eventual
registration of the property in Carlos favor. Carlos testified during the
May 27, 2009 hearing:21

2. Engaging 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;

Q: Are you privy with the negotiations between your father, Mr.
Bernardo Hizon, and your co-defendant, Marylou Bolos, the alleged
seller?

3. Conducting an actual ocular inspection of the lot;

Q: Do you remember having signed a Deed of Absolute Sale, dated

August 12, 1999?

4. Inquiring from the owners and possessors of adjoining lots

with respect to the true and legal ownership of the lot in
question;
5. Putting up of signs that said lot is being purchased,
leased, or encumbered; and
6. Undertaking such other measures to make the general
public aware that said lot will be subject to alienation, lease,
or encumbrance by the parties.

A: No, Maam.

A: Yes, Maam.
Q: And, at that time that you have signed the Deed, was Marylou
Bolos present?
A: No, Maam.
Q: Who negotiated and arranged for the sale of the property between
Marylou Bolos and you? A: It was my father. (emphasis ours)

Consistent with the rule that the principal is chargeable and bound by
the knowledge of, or notice to, his agent received in that
capacity,22 any information available and known to Bernardo is
deemed similarly available and known to Carlos, including the
following:
1. Bernardo knew that Bolos, from whom he purchased the
subject property, never acquired possession over the lot. As
a matter of fact, in his March 11, 2009 direct
testimony,23 Bernardo admitted having knowledge of
Acerons lot possession as well as the compromise
agreement between petitioner and Aceron.
2. Bolos purported Deed of Sale was executed on
November 3, 1979 but the ejectment case commenced by
Locsin against Aceron was in 1992, or thirteen (13)years
after the property was supposedly transferred to Bolos.
3. The August 6, 1993 Judgment,24 issued by the MTC on the
compromise agreement between Locsin and Aceron, clearly
stated therein that "[o]n August 2, 1993,the parties [Aceron
and Locsin] submitted to [the MTC] for approval a
Compromise Agreement dated July 28, 1993." It further
indicated that "[Aceron] acknowledges [Locsins] right of
possessionto [the subject property], being the registered
owner thereof."
Having knowledge of the foregoing facts, Bernardo and Carlos, to
our mind, should have been impelled to investigate the reason
behind the arrangement. They should have been pressed to inquire
into the status of the title of the property in litigation in order to
protect Carlos interest. It should have struck them as odd that it was
Locsin, not Bolos, who sought the recovery of possession by
commencing an ejectment case against Aceron, and even entered
into a compromiseagreement with the latter years afterthe purported
sale in Bolos favor. Instead, Bernardo and Carlos took inconsistent

positions when they argued for the validity of the transfer of the
property in favor of Bolos, but in the same breath prayed for the
enforcement of the compromise agreement entered into by Locsin.
At this point it is well to emphasize that entering into a compromise
agreement is an act of strict dominion.25 If Bolos already acquired
ownership of the property as early as 1979, it should have been her
who entered into a compromise agreement with Aceron in 1993, not
her predecessor-in-interest, Locsin, who, theoretically, had already
divested herself of ownership thereof.
The spouses Guevara are not innocent purchasers for value
As regards the transfer of the property from Carlos to the spouses
Guevara, We find the existence of the sale highly suspicious. For
one, there is a dearth of evidence to support the respondent
spouses position that the sale was a bona fide transaction. Evenif
we repeatedly sift through the evidence on record, still we cannot
findany document, contract, or deed evidencing the sale in favor of
the spouses Guevara. The same goes for the purported payment of
the purchase price of the property in the amount of PhP 1.5 million in
favor of Carlos. As a matter of fact, the only documentary evidence
that they presented were as follows:
1. Deed of Sale between Locsin and Bolos;
2. TCT No. 200074 issued in Bolos name;
3. TCT No. N-205332 in Carlos name;
4. TCT No. N-237083 in the nameof the Sps. Guevara.
To bridge the gap in their documentary evidence, respondents proffer
their own testimonies explaining the circumstances surrounding the
alleged sale.26 However, basic is the rule that bare and self-serving

allegations, unsubstantiated by evidence, are not equivalent to proof

under the Rules.27 As such, we cannot give credence to their
representations that the sale between them actually transpired.
Furthermore, and noticeably enough,the transfer from Carlos to the
spouses Guevara was effected only fifteen(15) days after Locsin
demanded the surrender of the property fromCarlos. Reviewing the
timeline:
May 9, 2002: Locsins counsel sent a letter to Carlos, requesting that
he return the property to Locsin since the latters signature in the
purported deed of sale between her and Bolos was a forgery.
May 20, 2002:Carlos counsel replied to Locsins May 9, 2002 letter,
claiming that Carlos was unaware of any defect or flaw in Bolos title,
making him an innocent purchaserof the subject property.
May 24, 2002: The Sps. Guevara allegedly purchased the property
from Carlos.
When Bernardo met with Locsinscounsel on June 13, 2002, and
personally made a commitment to comeup with a win-win situation
for his son and Locsin, he knew fully well, too,that the property had
already been purportedly transferred to his daughter and son-in-law,
the spouses Guevara, for he, no less, facilitated the same. This, to
us, isglaring evidence of bad faith and an apparent intention to
mislead Locsin into believing that she could no longer recover the
subject property.
Also, the fact that Lourdes Guevara and Carlos are siblings, and that
Carlos agent in his dealings concerning the property is his own
father, renders incredible the argument thatLourdes had no
knowledge whatsoever of Locsins claim of ownership atthe time of
the purported sale.

Indeed, the fact that the spouses Guevara never intended to be the
owner in good faith and for value of the lot is further made manifest
by their lack of interest in protecting themselvesin the case. It does
not even appear in their testimonies that they, at the very least,
intended to vigilantly protect their claim over the property and prevent
Locsin take it away from them. What they did was to simply appoint
Bernardo as their attorney-in-fact to handle the situation and never
bothered acquainting themselves with the developments in the
case.28 To be sure, respondent Jose Manuel Guevara was not even
presented asa witness in the case.
There is also strong reason to believethat even the mortgage in favor
of DCC was a mere ploy tomake it appear that the Sps. Guevara
exercised acts of dominion over the subject property. This is so
considering the proximity between the propertys registration in their
names and its being subjected to the mortgage. Most telling is that
the credit line secured by the mortgage was never used by the
spouses, resulting in the mortgages cancellation and the exclusion
of DCC as a party in Civil Case No. Q-02-47925.1wphi1
These circumstances, taken altogether, strongly indicate that Carlos
and the spouses Guevara failed to exercise the necessary level of
caution expected of a bona fide buyer and even performed acts that
are highly suspect. Consequently, this Court could not give
respondents the protection accorded to innocent purchasers in good
faith and for value.
Locsin is entitled to nominal damages
We now delve into petitioners prayer for exemplary damages,
attorneys fees, and costs of suit. Here, the Court notes that
petitioner failed to specifically pray that moral damages be awarded.
Additionally, she never invoked any of the grounds that would have
warranted the award of moral damages. As can be gleaned from the
records, lacking from her testimony is any claim that she suffered
any form of physical suffering, mental anguish, fright, serious anxiety,

besmirched reputation, wounded feelings, moral shock, social

humiliation, or any other similar circumstance.29 Thus, we are
constrained to refrain from awarding moral damages in favor of
petitioner.
In the same vein, exemplary damages cannot be awarded in favor of
petitioner. Well-settled that this species of damages is allowed only in
addition to moral damages such that no exemplary damages can be
awarded unless the claimant first establishes his clear right to moral
damages.30 Consequently, despite our finding that respondents acted
in a fraudulent manner, petitioners claim for exemplary damages is
unavailing at this point.
Nevertheless, we find an award for nominal damages to be in order.
Under prevailing jurisprudence, nominal damages are "recoverable
where a legal right is technically violated and must be vindicated
against an invasion that has produced no actual present loss of any
kind or where there has been a breach of contract and no substantial
injury or actual damages whatsoever have been or can be
shown."31 As expounded in Almeda v. Cario,32 a violation of the
plaintiffs right, even if only technical, is sufficient to support an award
of nominal damages. So long as there is a showing of a violation of
the right of the plaintiff, as herein petitioner, an award of nominal
damages is proper.33
In the case at bar, this Court recognizes that petitioner was unduly
deprived of her ownership rights overthe property, and was
compelled to litigate for its recovery, for almost ten (10) years.
Clearly, this could have entitled her to actual or compensatory
damages had she quantified and proved, during trial, the amounts
which could have accrued in her favor, including commercial fruits
such as reasonable rent covering the pendency of the case.
Nonetheless, petitioners failure to prove actual or compensatory
damages does not erase the fact that her property rights were
unlawfully invaded by respondents, entitling her to nominal damages.

As to the amount to be awarded, it bears stressing that the same is

addressed to the sound discretion ofthe court, taking into account the
relevant circumstances.34 Considering the length of time petitioner
was deprived of her property and the bad faith attending
respondents actuations in the extant case, we find the amount of
seventy-five thousand pesos (PhP 75,000) as sufficient nominal
damages. Moreover, respondents should be held jointly and
severally liable for the said amount, attorneys fees in the amount of
an additional seventy-fivethousand pesos (PhP 75,000), and the
costs of the suit.
WHEREFORE, in light of the foregoing, the Petition is hereby
GRANTED. The assailed Decision of the Court of Appeals dated
June 6, 2012 in CA-G.R. CV No. 96659 affirming the Decision of the
Regional Trial Court, Branch 77, Quezon City, in Civil Case No. Q02-47925; as well as its Resolution dated October 30, 2012, denying
reconsideration thereof, are hereby REVERSED and SET ASIDE.
TCT No. N-200074 in the name of Marylou Bolos, and the titles
descending therefrom, namely, TCT Nos. N-205332 and N-237083 in
the name of Carlos Hizon, and the Spouses Jose Manuel & Lourdes
Guevara, respectively, are hereby declared NULL and VOID.
Respondents and all other persons acting under their authority are
hereby DIRECTED to surrender possession of the subject property in
favor of petitioner. Respondents Bernardo Hizon, Carlos Hizon, and
the spouses Jose Manuel and Lourdes Guevara shall jointly and
severally pay petitioner PhP 75,000 as nominal damages, PhP
75,000 as attorney's fees, and costs of suit.
The Register of Deeds of Quezon City is hereby ORDERED to (1)
cancel TCT No. N-237083; (2) reinstate TCT No. RT-97467; and (3)
reissue TCT No. RT-97467 in favor of petitioner, without requiring
from petitioner payment for any and all expenses in performing the
three acts.
SO ORDERED.

G.R. No. 199852, November 12, 2014

SPS.
FELIPE
SOLITARIOS
TORDA, Petitioners, v. SPS. GASTON
JAQUE, Respondents.

AND
JAQUE AND

JULIA
LILIA

DECISION
VELASCO JR., J.:
Nature of the Case
In this Petition for Review on Certiorari under Rule 45 of the Rules of
Court, petitioners spouses Felipe Solitarios and Julia Torda (spouses
Solitarios) seek the reversal of the August 31,2010 Decision and
November 24, 2011 Resolution of the Court of Appeals (CA) in CAG.R. CEB-CV No. 00112, which in turn set aside the Decision of the
Regional Trial Court of Calbayog City, Branch 31 (RTC), in Civil Case
No. 772.ChanRoblesVirtualawlibrary
The Facts
The property subject of this suit is a parcel of agricultural land
designated as Lot 4089, consisting of 40,608 square meters (sq. m.),
and located in Calbayog, Samar. It was originally registered in the
name of petitioner Felipe Solitarios under Original Certificate of Title
(OCT) No. 1249, and, thereafter, in the name of the respondents,
spouses Gaston and Lilia Jaque (the Jaques), under Transfer
Certificate
of
Title
(TCT)
No.
745.
In a Complaint for Ownership and Recovery of Possession with the
RTC of Calbayog City, the respondents spouses Jaque alleged that
they purchased Lot 4089 from the petitioners, spouses Solitarios in
stages. According to respondents, they initially bought one-half of Lot
No. 4089 for P7,000.00. This sale is allegedly evidenced by a
notarized Deed of Sale dated May 8, 1981. Two months later, the

spouses Solitarios supposedly mortgaged the remaining half of Lot

4089 to the Jaques via a Real Estate Mortgage (REM) dated July 15,
1981,
to
secure
a
loan
amounting
to
P3,000.00.
After almost two (2) years, the spouses Solitarios finally agreed to
sell the mortgaged half. However, instead of executing a separate
deed of sale for the second half, they executed a Deed of Sale dated
April 26, 1983 for the whole lot to save on taxes, by making it appear
that the consideration for the sale of the entire lot was only
P12,000.00 when the Jaques actually paid PI9,000.00 in cash and
condoned
the
spouses
Solitarios'
P3,000.00
loan.
On the basis of this second notarized deed, the Jaques had OCT No.
1249 cancelled and registered Lot 4089 in their name under Transfer
Certificate
of
Title
(TCT)
No.
745.
In spite of the sale, the Jaques, supposedly out of pity for the
spouses Solitarios, allowed the latter to retain possession of Lot
4089, subject only to the condition that the spouses Solitarios will
regularly deliver a portion of the property's produce. In an alleged
breach of their agreement, however, the spouses Solitarios stopped
delivering any produce sometime in 2000. Worse, the spouses
Solitarios even claimed ownership over Lot 4089. Thus, the Jaques
filed
the
adverted
complaint
with
the
RTC.
For their part, the spouses Solitarios denied selling Lot 4089 and
explained that they merely mortgaged the same to the Jaques after
the latter helped them redeem the land from the Philippine National
Bank
(PNB).
The spouses Solitarios narrated that, way back in 1975, they
obtained a loan from PNB secured by a mortgage over Lot 4089.
They were able to pay this loan and redeem their property with their
own funds. Shortly thereafter, in 1976, they again mortgaged their
property to PNB to secure a P5,000.00 loan. This time, the Jaques
volunteered to pay the mortgage indebtedness, including interests
and charges and so gave the spouses Solitarios P7,000.00 for this

purpose.
However, this accommodation was made, so the spouses Solitarios
add, with the understanding that they would pay back the Jaques by
delivering to them a portion of the produce of Lot 4089, in particular,
one-half of the produce of the rice land and one-fourth of the produce
of the coconut land. The spouses Solitarios contended that this
agreement was observed by the parties until May 2000, when
Gaston Jaque informed them that he was taking possession of Lot
4089 as owner. And to their surprise, Gaston Jaque showed them the
Deeds of Sale dated May 8, 1981 and April 26, 1983, the REM
contract dated July 15, 1981, and TCT No. 745 to prove his claim.
The spouses Solitarios contended that these deeds of sale were
fictitious and their signatures therein forged. Further, the spouses
Solitarios challenge the validity of TCT No. 745, alleging that the
Jaques acquired it through fraud and machinations and by taking
advantage of their ignorance and educational deficiency. Thus, they
prayed that the RTC: (1) cancel TCT No. 745; (2) declare the
adverted deeds of sales dated May 8, 1981 and April 26, 1983 as
null and void; (3) declare them the true and lawful owners of Lot
4089; and (4) award them moral and actual damages.
During the course of the trial, and in compliance with the February 7,
2001 Order of the RTC, the spouses Solitarios deposited with the
court a quo the Jaques' purported share in the produce of Lot 4089
for the years 2001-2003, which amounted to P16,635.60. 1
On April 15, 2004, the RTC rendered a Decision 2 upholding the
validity of the deeds of sale in question and TCT No. 745, rejecting
the allegations of forgery and fraud. However, in the same breath,
the RTC declared that what the parties entered into was actually an
equitable mortgage as defined under Article 1602 in relation to Article
1604 of the New Civil Code, and not a sale. Consequently, the RTC
ordered, among others, the reformation of the Deeds of Sale dated
May 9, 1981 and April 26, 1983, and the cancellation of TCT No. 745
in the name of the Jaques. The dispositive portion of the RTC
Decision reads:

WHEREFORE, this Court dismisses the instant case and

pronounces Judgment against plaintiffs and hereby orders the
following:
1. Reformation of the Deed of Sale dated May 9, 1981 (Exhibit
"E") and the Deed of Sale dated April 26, 1983 (Exhibit "G")
into contracts of mortgage;
2. Cancellation of TCT No. 745 in the name of spouses Gaston
Jaque and Lilia Laure Jaque;
3. Considering the total mortgage debt of Php 12,000.00 as
totally paid pursuant to Article 1602 of the New Civil Code;
4. Release of the amounts deposited to the Court by
defendants to them minus lawful charges for their
safekeeping, if any; and
5. Payment of costs of the proceedings by the plaintiffs.
SO ORDERED.3
The RTC anchored its holding on the nature of the pertinent
contracts in question on its findings that: (1) after the alleged sale,
the spouses Solitarios remained in possession of the land; (2) the
Jaques did not physically occupy Lot 4089; (3) the consideration for
the sale of the whole land as stated in the Deed of Sale dated April
26, 1983, was only P12,000.00, an amount grossly inadequate for a
titled coconut and rice lands consisting of 40,608 sq. m.; (3) the
Jaques did not disturb the possession of Lot 4089 by Leonora
Solitarios, Felipe's sister-in-law, who resided therein; and (4) the
Jaques never had a tenant in the subject property.
On appeal, the CA4 reversed and set aside the RTC Decision,
rejecting the trial court's holding that the contract between the parties
constituted
an
equitable
mortgage.

The CA noted that the allegation that the transaction is an equitable

mortgage and not one of sale was not presented before the trial court
and was raised belatedly on appeal. Even then, the CA held that the
spouses Solitarios failed to convincingly prove that the deeds of sale
were sham, noting that their bare denial as to their authenticity was
insufficient to overcome the positive value of the notarized deeds of
sale. The CA further found that the spouses Solitarios' claim of
inadequacy of the purchase price is unsupported by any evidence on
record and that the spouses Solitarios' possession of Lot 4089 after
the sale was not in the concept of an owner. In addition, the appellate
court gave weight to the fact that the Jaques paid the taxes on Lot
4089 since 1984. The CA, thus, concluded that based on the parties'
actuations before, during, and after the transactions, it was
unmistakable that they had no other intention but to enter into a
contract
of
sale
of
Lot
4089.
Their Motion for Reconsideration having thereafter been denied by
the CA in its Resolution dated November 24, 2011, the spouses
Solitarios5 have filed the instant petition.ChanRoblesVirtualawlibrary
Issue
From the foregoing narration of facts, it is abundantly clear that the
only material point of inquiry is whether the parties effectively entered
into a contract of absolute sale or an equitable mortgage of Lot
4089.ChanRoblesVirtualawlibrary
The Court's Ruling
The

petition

is

impressed

with

merit.

At the outset, We note that, contrary to the finding of the CA,

petitioner spouses Solitarios actually presented before the RTC their
position that the real agreement between the parties was a
mortgage, and not a sale. Being unlettered, petitioners may have
averred that the deeds of sale and TCT presented by respondents

were forgeries, obtained as they were through fraud and

machination. However, their saying that the sale instruments were
"fictitious" and their signatures thereon were "forged" amounts to
alleging that they never agreed to the sale of their lot, and they never
intended to sign such conveyances. This reality is supported by the
testimony of petitioner Felipe Solitarios that was offered to prove the
true intention of the parties that Lot 4089 was only mortgaged, not
sold, to the Jaques. Before Felipe's direct examination, his counsel
stated thus"ATTY.

MARTIRES

With the permission of the Court. This witness is one of the

defendants; he will testify that the land was just mortgaged to
the plaintiff contrary to the claim of the plaintiff that the
defendants sold the same to the plaintiffs; he will also testify
that the defendants never executed deed of sale in favor of the
plaintiffs; he will also testify that V2 of the produce of the cocoland
subject of this case was delivered by the defendants to the plaintiffs
and with regards to the riceland, 'A of the produce was also delivered
to the plaintiffs; and he will also testify other matters related to this
case."6
The Court is, therefore, not precluded from looking into the real
intentions of the parties in order to resolve the present controversy.
For that reason, the Court takes guidance from Article 1370 of the
Civil Code, which instructs that "if the words [of a contract] appear to
be contrary to the evident intention of the parties, the latter shall
prevail over the former." Indeed, it is firmly settled that clarity of
contract terms and the name given to it does not bar courts from
determining the true intent of the parties. InZamora vs. Court of
Appeals,7 the Court elucidated that
In determining the nature of a contract, courts are not bound by the
title or name given by the parties. The decisive factor in evaluating
such agreement is the intention of the parties, as shown not
necessarily by the terminology used in the contract but by their

conduct, words, actions and deeds prior to, during and

immediately after executing the agreement. As such therefore,
documentary and parol evidence may be submitted and admitted to
prove such intention.8

(3) When upon or after the expiration of the right to repurchase

another instrument extending the period of redemption or granting a
new
period
is
executed;cralawlawlibrary

Further, in resolving this kind of controversy, the doctrinal teaching

of Reyes vs. Court of Appeals 9impels us to give utmost consideration
to the intention of the parties in light of the relative situation of each,
and the circumstances surrounding the execution of the contract,
thus:

(4) When the purchaser retains for himself a part of the purchase
price;cralawlawlibrary

In determining whether a deed absolute inform is a mortgage, the

court is not limited to the written memorials of the transaction. The
decisive factor in evaluating such agreement is the intention of the
parties, as shown not necessarily by the terminology used in the
contract but by all the surrounding circumstances, such as the
relative situation of the parties at that time, the attitude, acts,
conduct, declarations of the parties, the negotiations between them
leading to the deed, and generally, all pertinent facts having a
tendency to fix and determine the real nature of their design and
understanding, x x x

(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.

There is no single conclusive test to determine whether a deed of

sale, absolute on its face, is really a simple loan accommodation
secured by a mortgage.10 However, Article 1602 in relation to Article
1604 of the Civil Code enumerates several instances when a
contract, purporting to be, and in fact styled as, an absolute sale, is
presumed to be an equitable mortgage, thus:

As evident from Article 1602 itself, the presence of any of the

circumstances set forth therein suffices for a contract to be deemed
an equitable mortgage. No concurrence or an overwhelming number
is
needed.12

Art. 1602. The contract shall be presumed to be an equitable

mortgage,
in any of
the
following
cases:
(1) When the price of a sale with right to repurchase is unusually
inadequate;cralawlawlibrary
(2) When the vendor remains in possession as lessee or
otherwise;

(5) When the vendor binds himself to pay the taxes on the thing
sold;cralawlawlibrary

In any of the foregoing cases, any money, fruits, or other benefit to

be received by the vendee as rent or otherwise shall be considered
as interest which shall be subject to the usury laws."
Art. 1604. The provisions of Article 1602 shall also apply to a
contract purporting to be an absolute sale.

With the foregoing in mind, We thus declare that the transaction

between the parties of the present case is actually one of equitable
mortgage pursuant to the foregoing provisions of the Civil Code. It
has never denied by respondents that the petitioners, the spouses
Solitarios, have remained in possession of the subject property and
exercised acts of ownership over the said lot even after the purported
absolute sale of Lot 4089. This fact is immediately apparent from the
testimonies of the parties and the evidence extant on record,
showing that the real intention of the parties was for the transaction
to secure the payment of
a debt. Nothing more.

Petitioner's
Possession
Subject
Property
after
the

of
Purported

the
Sale

During pre-trial, the Jaques admitted that the spouses Solitarios were
in possession of the subject property.13 Gaston Jaque likewise
confirmed that petitioners were allowed to produce copra and till the
rice field, which comprise one-half of the lot that was previously
covered by the real estate mortgage, after said portion was allegedly
sold
to
them.14
This Court had held that a purported contract of sale where the
vendor remains in physical possession of the land, as lessee or
otherwise, is an indicium of an equitable mortgage.15 In Rockville v.
Sps. Culla,16We explained that the reason for this rule lies in the legal
reality that in a contract of sale, the legal title to the property is
immediately transferred to the vendee. Thus, retention by the vendor
of the possession of the property is inconsistent with the vendee's
acquisition of ownership under a true sale. It discloses, in the alleged
vendee, a lack of interest in the property that belies the truthfulness
of
the
sale.
During the period material to the present controversy, the petitioners,
spouses Solitarios, retained actual possession of the property. This
was never disputed. If the transaction had really been one of sale, as
the Jaques claim, they should have asserted their rights for the
immediate delivery and possession of the lot instead of allowing the
spouses Solitarios to freely stay in the premises for almost
seventeen (17) years from the time of the purported sale until their
filing of the complaint. Human conduct and experience reveal that an
actual owner of a productive land will not allow the passage of a long
period of time, as in this case, without asserting his rights of
ownership.
Further, Gaston Jaque first claimed possession of the subject
property through his mother-in-law, and then through hired workers
when the latter passed away;17 not personally. It is also undisputed

that the Jaques never installed a tenant on Lot 4089 and did not
disturb the Solitarios' possession of the same.18On this note, We
agree with the finding of the RTC that the Jaques' alleged
possession of the subject property is suspect and unsubstantial, and
they never possessed the same in the concept of owners,viz:
Even as to the first half portion of the land allegedly sold by the
defendants to the plaintiffs, the evidence too tends to show that the
plaintiffs did not really possess it as owners. Plaintiffs' evidence with
regards to their possession over this portion is very doubtful.
According to plaintiff Gaston Jaque when he testified in Court, they
possessed this portion through his mother-in-law till she died in 1992
or 1992: that when she died, they possessed it already through hired
workers. However, in the statement of facts of the resolution of the
public prosecutor in the case of Qualified Theft which plaintiffs filed
against the defendants, it is clearly shown that the plaintiffs stated
that the defendants took possession of the entire property since 1983
yet.
On the other hand, in this case, they are now claiming that it was
actually in the year 2000 that the defendants bid claim on this land.
x

Third, the fact that defendants' witness Leonora Solitarios [Felipe's

sister] resides and has a house in the land in question without having
been disturbed by the plaintiffs and the fact that the plaintiffs never
have a tenant in the land even if they reside in Cebu City also show
in some manner that they are not really the owners of the land, but
the defendants.19chanrobleslaw
Not only is there a presumption that the deeds of sale are an
equitable mortgage, it has been amply demonstrated by petitioners
that the deed of sale is intended to be one of mortgage based on the
proof presented by petitioners and propped up even by the
admissions of respondents.

The intention of the parties was for

the transaction to secure the
payment of a debt
To stress, Article 1602(6) of the Civil Code provides that a transaction
is presumed to be an equitable mortgage:
(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.
This provision may very well be applied in this case. There is
sufficient basis to indulge in the presumption that the transaction
between the parties was that of an equitable mortgage and that the
spouses Solitarios never wanted to sell the same to the Jaques.
The foregoing presumption finds support in the following: First, the
very testimony of Gaston Jaque and the documents he presented
establish the existence of two loans, which the Jaques extended to
the spouses Solitarios, that were secured by the subject property;
and, second, the testimonies of the parties reveal that they came to
an agreement as to how these loans would be paid.
The first loan was contracted when Gaston Jaque gave the spouses
Solitarios P7,000.00 to help them redeem the subject property from
PNB.20 In effect, by extending the P7,000.00 financial assistance to
the spouses Solitarios, Gaston Jaque took over the loan, became the
lender and assumed the role of mortgagee in place of PNB.
Thereafter, the spouses Solitarios obtained a second loan from the
Jaques amounting to P3,000.00. This is evidenced by an REM dated
July 15, 1981 by virtue of which the spouses Solitarios mortgaged
one-half of the subject property to the Jaques to secure the payment
of
said
loan.
The parties testified that they entered into a verbal agreement on the
sharing of the produce of the subject property. For his part, it seemed

that Gaston Jaque wanted to impress upon the lower court that this
sharing agreement was fixed as a condition for his allowing the
Solitarios' continued possession and cultivation of the subject
property. However, there is a strong reason to believe that this
arrangement was, in fact, a payment scheme for the debts that the
spouses
Solitarios
incurred.
During his testimony, Felipe Solitarios explained that after the Jaques
gave him funds to redeem the property from PNB, they entered into
an agreement on the sharing of the produce and that this
arrangement would last until they shall have redeemed the land from
the Jaques. We note that this assertion by Felipe Solitarios was
never refuted on cross or re-cross examination. Felipe Solitarios
explained
DIRECT EXAMINATION BY
ATTY. MELINDA MARTIRES
Q
A
Q
A
Q
A
Q
A
Q
A
Q

When did Lilia Jaque give you the money to redeem the
mortgage indebtedness from the Philippine National Bank?
In 1976
How much did she give you?
P5,000.00
After giving you the amount of P5,000.00 to be used to
redeem the mortgage indebtedness, was there any
agreement between you and Lilia Jaque?
Our agreement was, on the produce of the riceland, she will
be given 1/4 and on the coconut land 1/2..21
xxx xxx xxx
Where were the spouses when the land was already
redeemed from the PNB?
They were in Cebu.
So, to whom did you deliver their share of the produce of the
land?
To Yaning, the mother of Ma Lilia.
When did you start delivering the share of the plaintiff of the
land in question?

A
Q
A
Q

From the time I mortgaged this land to them.

You mean to say from 1976?
Yes.
How many times did you deliver to the parents of the plaintiffs
the share of the plaintiffs of the produce of the land?
A
Every harvest, we deliver their share and everytime we make
copra, we also deliver their share to Ma Yaning.
xxx xxx xxx
ATTY. MARTIRES
Q
Per condition with the plaintiffs which you have told us a while
ago, for how long will you deliver their share?
A
Every harvest we have to give their share because we have
not yet redeemed the land.
Q
So there was no duration of your giving their share of the
land?
A
If I desire to redeem the land from them.22
Furthermore, Gaston Jaque himself testified receiving a portion of
the produce of the subject property precisely because of the loan
covered by the July 15, 1981 REM.23
It is, thus, clear from the foregoing that the Jaques extended two
loans to the spouses Solitarios, who in exchange, offered to the
former the subject property, not to transfer ownership thereto, but to
merely secure the payment of their debts. This may be deduced from
the testimonies of both Felipe Solitarios and Gaston Jaque, revealing
the fact that they agreed upon terms for the payment of the loans, in
particular, the sharing in the produce of the lot.

The contracts of sale and mortgage

are of doubtful veracity
Furthermore, an examination of the transaction documents casts
doubts on their validity. As alleged by petitioners, their signatures
therein appear to be forged. We distinctly observe that each of the
three (3) documents bears different versions of petitioner Julia
Solitarios' signatures. First, on the first page of the 1981 Deed of
Sale, particularly on the space provided for Julia Solitarios to express
her marital consent to the sale, the signature "Julia Torda Solitarios"
appears.24 What is strange is that in the acknowledgement page of
the very same document, Julia Solitarios purportedly signed as "Julia
T. Solitarios,"25cralawred which is obviously different from the
signature appearing on the first page. Further, while the 1981 REM
document contains the signature "Julia Turda,"26 the 1983 Deed of
Sale bears the signature "Julia Torda." These discrepancies suggest
that the documents were signed by different persons.
Nevertheless, assuming arguendo that these documents were really
signed by petitioners, there is reason to believe that they did so
without understanding their real nature and that the Jaques never
explained to them the effects and consequences of signing the
same.
In negotiating the transactions,
the parties did not deal with
each other on equal terms

Verily, the fact that the parties agreed on payment terms is

inconsistent with the claim of the Jaques that when the spouses
Solitaries executed the questioned deeds of sale they had no other
intention but to transfer ownership over the subject property.

The Civil Code provisions that consider certain types of sales as

equitable mortgages are intended for the protection of the unlettered
such as the spouses Solitarios, who are penurious vis-a-vis their
creditors.27 In Cruz v. Court of Appeals.28 the Court held -

Thus, there is ground to presume that the transaction between the

parties was an equitable mortgage and not a sale. There is nothing in
the records sufficient enough to overturn this presumption.

Vendors covered by Art. 1602 usually find themselves in an unequal

position when bargaining with the vendees, and will readily sign
onerous contracts to get the money they need. Necessitous men are

not really free men in the sense that to answer a pressing

emergency they will submit to any terms that the crafty may impose
on them. This is precisely the evil that Art. 1602 seeks to guard
against. The evident intent of the provision is to give the supposed
vendor maximum safeguards for the protection of his legal rights
under the true agreement of the parties.
Without doubt, the spouses Solitarios need the protection afforded by
the Civil Code provisions on equitable mortgage. Certainly, the
parties were negotiating on unequal footing. As opposed to the
uneducated and impoverished farmer, Felipe Solitarios, 30 Gaston
Jaque, was a 2nd Lieutenant of the Armed Forces of the Philippines
when he retired.31 Further, Felipe Solitarios was constantly in
financial distress. He was constantly in debt and in dire financial
need. That he borrowed money from the PNB twice, first in 1975
then in 1976, and mortgaged the subject property to the Jaques
suggest
as
much.
While Felipe Solitarios was able to settle his 1975 loan and redeem
the mortgage with his own money,32he no longer had enough funds
to redeem the subject property after obtaining a loan in 1976. Thus,
he was impelled to borrow money from the Jaques to get his property
back in 1981. Shortly after, on July 15, 1981, Felipe Solitarios, again
in desperate need, borrowed money from Gaston Jaque and
mortgaged to the latter a portion of the subject property.
It is, therefore, not difficult to imagine that Felipe Solitarios quickly
consented to arrangements proposed to him by a seemingly
trustworthy Gaston Jaque, and mindlessly signed instrumental
documents that were never explained to him and he never fully
understood but nonetheless assured him of fast cash and easy
payment terms. What the court a quo wrote in this regard merits
concurrence:
Still another fact which militates against plaintiffs' cause is their
failure to prove during trial that they really endeavored to explain to
the defendants the real nature of the contract they were entering

into, it appearing that the defendants are of low education compared

to them especially plaintiff Gaston Jaque who is a retired military
officer. The law requires that in case one of the parties to a contract
is unable to read (or maybe of low education), and fraud is alleged,
the person enforcing the contract must show that the term thereof
have been fully explained to the former (Spouses NenaArriola and
Francisco Adolfo, et.al. vs. Demetrio Lolita, Pedro, Nena, Brauliq and
Dominga, all surnamed Mahilum, et. al. G.R. No. 123490, August 9,
2000).33
The
law
transmission

favors
of

the

least
rights

It is further established that when doubt exists as to the true nature of

the parties' transaction, courts must construe such transaction
purporting to be a sale as an equitable mortgage, as the latter
involves a lesser transmission of rights and interests over the
property in controversy.34 Thus, in several cases, the Court has not
hesitated to declare a purported contract of sale to be an equitable
mortgage based solely on one of the enumerated circumstances
under Article 1602. So it should be in the present case.
In Sps. Raymundo v. Sps. Bandong,35 the Court observed that it is
contrary to human experience that a person would easily part with
his property after incurring a debt. Rather, he would first look for
means to settle his obligation, and the selling of a property on which
the house that shelters him and his family stands, would be his last
resort.
Here, the Court finds the spouses Solitarios' alleged sale of the
subject property in favor of the Jaques simply contrary to normal
human behavior. Be it remembered that the spouses Solitarios
depended much on this property as source of income and livelihood.
Further, they made use of it to obtain and secure badly needed
loans. This property was so important to them that they had to
borrow money from the Jaques to raise funds to ensure its
redemption. Furthermore, even after the supposed sale, the spouses

Solitarios remained tied to this land as they never left it to live in

another place and continued tilling and cultivating the same. Thus,
considering how valuable this land was to the spouses Solitarios,
being their main, if not, only source of income, it is hard to believe
that they would easily part with it and sell the same to another.
Furthermore, it is also difficult to understand why, after going through
all the complications in redeeming the property from PNB, the
spouses Solitarios would simply transfer this to the Jaques. It is
inconceivable that the spouses Solitarios would sell their property
just to pay the PNB loan. It is more believable that, if at all, they
conveyed their land on a temporary basis only, without any intention
to transfer ownership thereto and with the assurance that upon the
payment of their debts, the same would be returned to them.
The only reasonable conclusion that may be derived from the
execution of the Deeds of Sale in favor of the Jaques is to ensure
that
the
Solitarios
will
pay
their
obligation.
The
is

transfer
a

of

the
pactum

subject

property
commissorium

Further, We cannot allow the transfer of ownership of Lot 4098 to the

Jaques as it would amount to condoning the prohibited practice
of pactum comissorium. Article 2088 of the Civil Code clearly
provides that a creditor cannot appropriate or consolidate ownership
over a mortgaged property merely upon failure of the mortgagor to
pay a debt obligation,[36 viz.:
Art. 2088. The creditor cannot appropriate the things given by way of
pledge or mortgage, or dispose of them. Any stipulation to the
contrary is null and void.
The essence of pactum commissorium is that ownership of the
security will pass to the creditor by the mere default of the debtor.
This Court has repeatedly declared such arrangements as contrary
to
morals
and
public
policy.37

As We have repeatedly held, the only right of a mortgagee in case of

non-payment of debt secured by mortgage would be to foreclose the
mortgage and have the encumbered property sold to satisfy the
outstanding indebtedness. The mortgagor's default does not operate
to automatically vest on the mortgagee the ownership of the
encumbered property, for any such effect is against public policy, as
earlier
indicated.38
Applying the principle of pactum commissorium to equitable
mortgages, the Court, in Montevirgen vs. CA,39 enunciated that the
consolidation of ownership in the person of the mortgagee in equity,
merely upon failure of the mortgagor in equity to pay the obligation,
would amount to a pactum commissorium.The Court further
articulated that if a mortgagee in equity desires to obtain title to a
mortgaged property, the mortgagee's proper remedy is to cause the
foreclosure of the mortgage in equity and buy it at a foreclosure sale.
In Sps. Cruz vs. CA,40 the Court again reiterated that, in an equitable
mortgage, perfect title over the mortgaged property may not be
secured in a pactum commissorium fashion, but only by causing the
foreclosure of the mortgage and buying the same in an auction sale.
The Court held Indeed, all the circumstances, taken together, are familiar badges of
an equitable mortgage. Private respondents could not in a pactum
commissorium fashion appropriate the disputed property for
themselves as they appeared to have done; otherwise, their act will
not be countenanced by this Court being contrary to good morals
and public policy hence void. If they wish to secure a perfect title
over the mortgaged property, they should do so in accordance with
law, i.e., by foreclosing the mortgage and buying the property in the
auction sale.
It does not appear, under the premises, that the Jaques availed
themselves of the remedy of foreclosure, or that they bought the
subject property in an auction sale after the spouses Solitarios failed

to pay their debt obligation. What seems clear is that the Jaques took
advantage of the spouses Solitarios' intellectual and educational
deficiency and urgent need of money and made it appear that the
latter executed in their favor the questioned Deeds of Sale, thereby
automatically appropriating unto themselves the subject property
upon
their
debtors'
default.
The amount reflected in the 1981 Deed of Sale is telling. The sum of
P7,000.00 representing the alleged purchase price of one-half of the
subject property in the 1981 Deed of Sale is actually the amount
advanced to the spouses Solitarios by way of loan. Other than the
testimony of Gaston Jaque, there is no evidence showing that this
purchase price was actually paid or that the subject property was
bought
in
a
foreclosure
sale.
Further, it can be gleaned from the testimony of Gaston Jaque that
when the spouses Solitarios failed to pay their loan of P3,000.00,
reflected in the July 15, 1981 REM covering the remaining half of the
subject property,41 the Jaques did not foreclose the mortgage and
purchase the said lot in an auction sale. Rather, they supposedly
bought the lot directly from the spouses Solitarios and offset the loan
amount against a portion of the supposed purchase price they
agreed
upon.42
Indubitably, the subject property was transferred to the Jaques in a
prohibited pactum commisoriummanner and, therefore, void. Thus,
the foregoing transaction and the registration of the deeds of sale, by
virtue of which the Jaques were able to obtain the impugned TCT
No.
745
must
be
declared
void.43
Furthermore, given that the transaction between the parties is an
equitable mortgage, this means that the title to the subject property
actually remained with Felipe Solitarios, as owner-mortgagor,
conformably with the well-established doctrine that the mortgagee
does not become the owner of the mortgaged property because the
ownership remains with the mortgagor.44 Thus, Felipe Solitarios'
ownership over the subject property is not affected by the fact that

the same was already registered in the name of the Jaques. The
pronouncement in Montevirgen v. Court of Appeals is instructive:
x x x Equity looks through the form and considers the substance,
and no kind of engagement can be allowed which will enable the
parties to escape from the equitable doctrine adverted to. In other
words, a conveyance of land, accompanied by registration in the
name of the transferee and the issuance of a new certificate, is no
more secured from the operation of this equitable doctrine than the
most
informal
conveyance
that
could
be
devised.
Finally, the circumstance that the original transaction was
subsequently declared to be an equitable mortgage must mean that
the title to the subject land which had been transferred to private
respondents actually remained or is transferred back to petitioners
herein as owners-mortgagors, conformably to the well-established
doctrine that the mortgagee does not become the owner of the
mortgaged property because the ownership remains with the
mortgagor (Art. 2088, New Civil Code).45
Finally, We agree with the RTC that the mortgage debt of the
spouses Solitarios had been fully paid. This holds true whether the
amount of the debt is P12,000.00, as found by the RTC or
P22,000.00, the amount which the Jaques claim they paid for the
subject property. The RTC elucidated as follows 2. The total mortgage debt of Php 12,000.00 which was the
consideration
in
Exh.
"G"
is
deemed
totally
paid.
This finding is based on the last paragraph of Article 1602 of the New
Civil Code of the Philippines which provides that "In any of the
foregoing cases, any money, fruits, or other benefit to be received by
the vendee as rent or otherwise shall be considered as interest
which shall be subject to the usury laws. " (underscoring ours)
If this Court will take at its face value plaintiffs' claim in their
complaint that they get Php 10,000.00 every quarter or

Php40,000.00 a year from the coconut portion and Php5,000.00

every planting season or Php 10,000.00 a year from the rice land
portion of the subject land, then plaintiffs could have earned
Php50,000.00 a year or more or less one million pesos already when
they
filed
this
case
in
the
year
2000.
But this Court has given more credence to defendants' assertion that
from 1976 to 2000, he was giving the one-half share of the plaintiffs
from the proceeds of the copras and rice land to plaintiffs' alleged
caretaker, Yaning. So, if the produce of the land in question as
claimed by the plaintiffs is about Php50,000.00 a year, one-half (1/2)
of it would be Php25,000.00 which is 25 times higher than the Ph.pl,
000.00 interest at 12% per year for the alleged purchase price of
Php 12,000.00 of the land in question. The Php24,000.00 excess
interest would have already been sufficient to pay even the principal
of Php 12,000.00. Thus, clearly, the Php 12,000.00 purchase price of
the land should now be considered fully paid.
WHEREFORE, premises considered, the petition is GRANTED. The
assailed August 31, 2010 Decision and November 24, 2011
Resolution of the Court of Appeals in CA-G.R. CEB-CV No. 00112
are, thus, SET ASIDE. The Decision of the Regional Trial Court,
Calbayog City Branch 21 in Civil Case No. 772 isREINSTATED, with
modification that the reformation of the Deeds of Absolute Sale dated
May 9, 1981 and April 26, 1983 is deleted as it is unnecessary, and
that the transfer of the title to the name of petitioners shall be exempt
from registration fees and taxes and other charges. As Modified, the
Decision of the trial court shall read:
WHEREFORE, this Court dismisses the instant case and
pronounces Judgment against plaintiffs and hereby orders the
following:
1. TCT No. 745 in the name of spouses Gaston Jaque and Lilia
Laure Jaque is declared void and cancelled. Furthermore,
the Register of Deeds of the City of Calbayog is ordered to
issue a new title in the name of petitioners Felipe Solitarios

and Julia Torda without need of payment of registration fees,

taxes, and other charges;
2. The total mortgage debt is considered and deemed totally
paid pursuant to Article 1602 of the New Civil Code;
3. The amounts deposited to the Court by defendants Solitarios
are ordered released to plaintiffs Spouses Gaston and Lilia
Jaque minus lawful charges for their safekeeping, if any; and
4. The costs of the proceedings shall be paid by the plaintiffs.

SO ORDERED.

a notarized Deed of Voluntary Recognition of Paternity of the

children.5

G.R. No. 206248

February 18, 2014

GRACE
M.
vs.
PATRICIO T. ANTONIO, Respondent.

GRANDE, Petitioner,

DECISION
VELASCO, JR., J.:
Before this Court is a Petition for Review on Certiorari under Rule 45,
assailing the July 24, 2012 Decision1 and March 5, 2013
Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 96406.
As culled from the records, the facts of this case are:
Petitioner Grace Grande (Grande) and respondent Patricio Antonio
(Antonio) for a period of time lived together as husband and wife,
although Antonio was at that time already married to someone
else.3 Out of this illicit relationship, two sons were born: Andre Lewis
(on February 8, 1998) and Jerard Patrick (on October 13,
1999).4 The children were not expressly recognized by respondent
as his own in the Record of Births of the children in the Civil Registry.
The parties relationship, however, eventually turned sour, and
Grande left for the United States with her two children in May 2007.
This prompted respondent Antonio to file a Petition for Judicial
Approval of Recognition with Prayer to take Parental Authority,
Parental Physical Custody, Correction/Change of Surname of Minors
and for the Issuance of Writ of Preliminary Injunction before the
Regional Trial Court, Branch 8 of Aparri, Cagayan (RTC), appending

On September 28, 2010, the RTC rendered a Decision in favor of

herein respondent Antonio, ruling that "[t]he evidence at hand is
overwhelming that the best interest of the children can be promoted if
they are under the sole parental authority and physical custody of
[respondent Antonio]."6 Thus, the court a quo decreed the following:
WHEREFORE, foregoing premises considered, the Court hereby
grants [Antonios] prayer for recognition and the same is hereby
judicially approved. x x x Consequently, the Court forthwith issues
the following Order granting the other reliefs sought in the Petition, to
wit:
a. Ordering the Office of the City Registrar of the City of
Makati to cause the entry of the name of [Antonio] as the
father of the aforementioned minors in their respective
Certificate of Live Birth and causing the correction/change
and/or annotation of the surnames of said minors in their
Certificate of Live Birth from Grande to Antonio;
b. Granting [Antonio] the right to jointly exercise Parental
Authority with [Grande] over the persons of their minor
children, Andre Lewis Grande and Jerard Patrick Grande;
c. Granting [Antonio] primary right and immediate custody
over the parties minor children Andre Lewis Grandre and
Jerard Patrick Grande who shall stay with [Antonios]
residence in the Philippines from Monday until Friday
evening and to [Grandes] custody from Saturday to Sunday
evening;
d. Ordering [Grande] to immediately surrender the persons
and custody of minors Andre Lewis Grande and Jerard

Patrick Grande unto [Antonio] for the days covered by the

Order;

appellant, Grace Grande who by virtue hereof is hereby

awarded the full or sole custody of these minor children;

e. Ordering parties to cease and desist from bringing the

aforenamed minors outside of the country, without the written
consent of the other and permission from the court.

c. [Antonio] shall have visitorial rights at least twice a week,

and may only take the children out upon the written consent
of [Grande]; and

f. Ordering parties to give and share the support of the minor

children Andre Lewis Grande and Jerard Patrick Grande in
the amount of P30,000 per month at the rate of 70% for
[Antonio] and 30% for [Grande].7(Emphasis supplied.)

d. The parties are DIRECTED to give and share in support of

the minor children Jerard Patrick and Andre Lewis in the
amount of P30,000.00 per month at the rate of 70% for
[Antonio] and 30% for [Grande]. (Emphasis supplied.)

Aggrieved, petitioner Grande moved for reconsideration. However,

her motion was denied by the trial court in its Resolution dated
November 22, 20108 for being pro forma and for lack of merit.

In ruling thus, the appellate court ratiocinated that notwithstanding

the fathers recognition of his children, the mother cannot be
deprived of her sole parental custody over them absent the most
compelling of reasons.10 Since respondent Antonio failed to prove
that petitioner Grande committed any act that adversely affected the
welfare of the children or rendered her unsuitable to raise the minors,
she cannot be deprived of her sole parental custody over their
children.

Petitioner Grande then filed an appeal with the CA attributing grave

error on the part of the RTC for allegedly ruling contrary to the law
and jurisprudence respecting the grant of sole custody to the mother
over her illegitimate children.9 In resolving the appeal, the appellate
court modified in part the Decision of the RTC. The dispositive
portion of the CA Decision reads:
WHEREFORE, the appeal is partly GRANTED. Accordingly, the
appealed Decision of the Regional Trial Court Branch 8, Aparri
Cagayan in SP Proc. Case No. 11-4492 is MODIFIED in part and
shall hereinafter read as follows:
a. The Offices of the Civil Registrar General and the City
Civil Registrar of Makati City are DIRECTED to enter the
surname Antonio as the surname of Jerard Patrick and
Andre Lewis, in their respective certificates of live birth, and
record the same in the Register of Births;
b. [Antonio] is ORDERED to deliver the minor children Jerard
Patrick and Andre Lewis to the custody of their mother herein

The appellate court, however, maintained that the legal consequence

of the recognition made by respondent Antonio that he is the father of
the minors, taken in conjunction with the universally protected "bestinterest-of-the-child" clause, compels the use by the children of the
surname "ANTONIO."11
As to the issue of support, the CA held that the grant is legally in
order considering that not only did Antonio express his willingness to
give support, it is also a consequence of his acknowledging the
paternity of the minor children.12Lastly, the CA ruled that there is no
reason to deprive respondent Antonio of his visitorial right especially
in view of the constitutionally inherent and natural right of parents
over their children.13

Not satisfied with the CAs Decision, petitioner Grande interposed a

partial motion for reconsideration, particularly assailing the order of
the CA insofar as it decreed the change of the minors surname to
"Antonio." When her motion was denied, petitioner came to this
Court via the present petition. In it, she posits that Article 176 of the
Family Codeas amended by Republic Act No. (RA) 9255, couched
as it is in permissive languagemay not be invoked by a father to
compel the use by his illegitimate children of his surname without the
consent of their mother.
We find the present petition impressed with merit.
The sole issue at hand is the right of a father to compel the use of his
surname by his illegitimate children upon his recognition of their
filiation. Central to the core issue is the application of Art. 176 of the
Family Code, originally phrased as follows:
Illegitimate children shall use the surname and shall be under the
parental authority of their mother, and shall be entitled to support in
conformity with this Code. The legitime of each illegitimate child shall
consist of one-half of the legitime of a legitimate child. Except for this
modification, all other provisions in the Civil Code governing
successional rights shall remain in force.
This provision was later amended on March 19, 2004 by RA
925514 which now reads:
Art. 176. Illegitimate children shall use the surname and shall be
under the parental authority of their mother, and shall be entitled to
support in conformity with this Code. However, illegitimate children
may use the surname of their father if their filiation has been
expressly recognized by their father through the record of birth
appearing in the civil register, or when an admission in a public
document or private handwritten instrument is made by the father.
Provided, the father has the right to institute an action before the
regular courts to prove non-filiation during his lifetime. The legitime of

each illegitimate child shall consist of one-half of the legitime of a

legitimate child. (Emphasis supplied.)
From the foregoing provisions, it is clear that the general rule is that
an illegitimate child shall use the surname of his or her mother. The
exception provided by RA 9255 is, in case his or her filiation is
expressly recognized by the father through the record of birth
appearing in the civil register or when an admission in a public
document or private handwritten instrument is made by the father. In
such a situation, the illegitimate child may use the surname of the
father.
In the case at bar, respondent filed a petition for judicial approval of
recognition of the filiation of the two children with the prayer for the
correction or change of the surname of the minors from Grande to
Antonio when a public document acknowledged before a notary
public under Sec. 19, Rule 132 of the Rules of Court 15 is enough to
establish the paternity of his children. But he wanted more: a judicial
conferment of parental authority, parental custody, and an official
declaration of his childrens surname as Antonio.
Parental authority over minor children is lodged by Art. 176 on the
mother; hence, respondents prayer has no legal mooring. Since
parental authority is given to the mother, then custody over the minor
children also goes to the mother, unless she is shown to be unfit.
Now comes the matter of the change of surname of the illegitimate
children. Is there a legal basis for the court a quo to order the change
of the surname to that of respondent?
Clearly, there is none. Otherwise, the order or ruling will contravene
the explicit and unequivocal provision of Art. 176 of the Family Code,
as amended by RA 9255.
Art. 176 gives illegitimate children the right to decide if they want to
use the surname of their father or not. It is not the father (herein

respondent) or the mother (herein petitioner) who is granted by law

the right to dictate the surname of their illegitimate children.
Nothing is more settled than that when the law is clear and free from
ambiguity, it must be taken to mean what it says and it must be given
its literal meaning free from any interpretation. 16 Respondents
position that the court can order the minors to use his surname,
therefore, has no legal basis.
On its face, Art. 176, as amended, is free from ambiguity. And where
there is no ambiguity, one must abide by its words. The use of the
word "may" in the provision readily shows that an acknowledged
illegitimate child is under no compulsion to use the surname of his
illegitimate father. The word "may" is permissive and operates to
confer discretion17 upon the illegitimate children.
It is best to emphasize once again that the yardstick by which
policies affecting children are to be measured is their best interest.
On the matter of childrens surnames, this Court has, time and again,
rebuffed the idea that the use of the fathers surname serves the best
interest of the minor child. In Alfon v. Republic, 18 for instance, this
Court allowed even a legitimate child to continue using the surname
of her mother rather than that of her legitimate father as it serves her
best interest and there is no legal obstacle to prevent her from using
the surname of her mother to which she is entitled. In fact, in
Calderon v. Republic,19 this Court, upholding the best interest of the
child concerned, even allowed the use of a surname different from
the surnames of the childs father or mother. Indeed, the rule
regarding the use of a childs surname is second only to the rule
requiring that the child be placed in the best possible situation
considering his circumstances.
In Republic of the Philippines v. Capote,20 We gave due deference to
the choice of an illegitimate minor to use the surname of his mother
as it would best serve his interest, thus:

The foregoing discussion establishes the significant connection of a

persons name to his identity, his status in relation to his parents and
his successional rights as a legitimate or illegitimate child. For sure,
these matters should not be taken lightly as to deprive those who
may, in any way, be affected by the right to present evidence in favor
of or against such change.
The law and facts obtaining here favor Giovannis petition. Giovanni
availed of the proper remedy, a petition for change of name under
Rule 103 of the Rules of Court, and complied with all the procedural
requirements. After hearing, the trial court found (and the appellate
court affirmed) that the evidence presented during the hearing of
Giovannis petition sufficiently established that, under Art. 176 of the
Civil Code, Giovanni is entitled to change his name as he was never
recognized by his father while his mother has always recognized him
as her child. A change of name will erase the impression that he was
ever recognized by his father. It is also to his best interest as it will
facilitate his mothers intended petition to have him join her in the
United States. This Court will not stand in the way of the reunification
of mother and son. (Emphasis supplied.)
An argument, however, may be advanced advocating the mandatory
use of the fathers surname upon his recognition of his illegitimate
children, citing the Implementing Rules and Regulations (IRR) of RA
9255,21 which states:
Rule 7. Requirements for the Child to Use the Surname of the Father
7.1 For Births Not Yet Registered
7.1.1 The illegitimate child shall use the surname of the father if a
public document is executed by the father, either at the back of the
Certificate of Live Birth or in a separate document.

7.1.2 If admission of paternity is made through a private instrument,

the child shall use the surname of the father, provided the registration
is supported by the following documents:
xxxx
7.2. For Births Previously Registered under the Surname of the
Mother
7.2.1 If filiation has been expressly recognized by the father, the child
shall use the surname of the father upon the submission of the
accomplished AUSF [Affidavit of Use of the Surname of the Father].
7.2.2 If filiation has not been expressly recognized by the father, the
child shall use the surname of the father upon submission of a public
document or a private handwritten instrument supported by the
documents listed in Rule 7.1.2.
7.3 Except in Item 7.2.1, the consent of the illegitimate child is
required if he/she has reached the age of majority. The consent may
be contained in a separate instrument duly notarized.
xxxx
Rule 8. Effects of Recognition
8.1 For Births Not Yet Registered
8.1.1 The surname of the father shall be entered as the last name of
the child in the Certificate of Live Birth. The Certificate of Live Birth
shall be recorded in the Register of Births.
xxxx

8.2 For Births Previously Registered under the Surname of the

Mother
8.2.1 If admission of paternity was made either at the back of the
Certificate of Live Birth or in a separate public document or in a
private handwritten document, the public document or AUSF shall be
recorded in the Register of Live Birth and the Register of Births as
follows:
"The surname of the child is hereby changed from (original surname)
to (new surname) pursuant to RA 9255."
The original surname of the child appearing in the Certificate of Live
Birth and Register of Births shall not be changed or deleted.
8.2.2 If filiation was not expressly recognized at the time of
registration, the public document or AUSF shall be recorded in the
Register of Legal Instruments. Proper annotation shall be made in
the Certificate of Live Birth and the Register of Births as follows:
"Acknowledged by (name of father) on (date). The surname of the
child is hereby changed from (original surname) on (date) pursuant
to RA 9255." (Emphasis supplied.)
Nonetheless, the hornbook rule is that an administrative issuance
cannot amend a legislative act. In MCC Industrial Sales Corp. v.
Ssangyong Corporation,22 We held:
After all, the power of administrative officials to promulgate rules in
the implementation of a statute is necessarily limited to what is found
in the legislative enactment itself. The implementing rules and
regulations of a law cannot extend the law or expand its coverage, as
the power to amend or repeal a statute is vested in the Legislature.
Thus, if a discrepancy occurs between the basic law and an
implementing rule or regulation, it is the former that prevails, because

the law cannot be broadened by a mere administrative issuance

an administrative agency certainly cannot amend an act of Congress.
Thus, We can disregard contemporaneous construction where there
is no ambiguity in law and/or the construction is clearly
erroneous.23 What is more, this Court has the constitutional
prerogative and authority to strike down and declare as void the rules
of procedure of special courts and quasi- judicial bodies 24 when
found contrary to statutes and/or the Constitution. 25 Section 5(5), Art.
VIII of the Constitution provides:
Sec. 5. The Supreme Court shall have the following powers:
xxxx
(5) Promulgate rules concerning the protection and enforcement of
constitutional rights, pleading, practice and procedure in all courts,
the admission to the practice of law, the Integrated Bar, and legal
assistance to the underprivileged. Such rules shall provide a
simplified and inexpensive procedure for the speedy disposition of
cases, shall be uniform for all courts of the same grade, and shall not
diminish, increase, or modify substantive rights. Rules of procedure
of special courts and quasi-judicial bodies shall remain effective
unless disapproved by the Supreme Court. (Emphasis supplied.)
Thus, We exercise this power in voiding the above-quoted provisions
of the IRR of RA 9255 insofar as it provides the mandatory use by
illegitimate children of their fathers surname upon the latters
recognition of his paternity.
To conclude, the use of the word "shall" in the IRR of RA 9255 is of
no moment. The clear, unambiguous, and unequivocal use of "may"
in Art. 176 rendering the use of an illegitimate fathers surname
discretionary controls, and illegitimate children are given the choice
on the surnames by which they will be known.

At this juncture, We take note of the letters submitted by the children,

now aged thirteen (13) and fifteen (15) years old, to this Court
declaring their opposition to have their names changed to
"Antonio."26 However, since these letters were not offered before and
evaluated by the trial court, they do not provide any evidentiary
weight to sway this Court to rule for or against petitioner. 27 A proper
inquiry into, and evaluation of the evidence of, the children's choice
of surname by the trial court is necessary.
WHEREFORE, the instant petition is PARTIALLY GRANTED. The
July 24, 2012 Decision of the Court of Appeals in CA-G.R. CV No.
96406 is MODIFIED, the dispositive portion of which shall read:
WHEREFORE, the appeal is partly GRANTED. Accordingly. the
appealed Decision of the Regional Trial Court Branch 8, Aparri
Cagayan in SP Proc. Case No. 11-4492 is MODIFIED in part and
shall hereinafter read as follows:
a. [Antonio] is ORDERED to deliver the minor children Jerard
Patrick and Andre Lewis to the custody of their mother herein
appellant, Grace Grande who by virtue hereof is hereby
awarded the full or sole custody of these minor children;
b. [Antonio] shall have visitation rights 28 at least twice a
week, and may only take the children out upon the written
consent of [Grande]:
c. The parties are DIRECTED to give and share in support of
the minor children Jerard Patrick and Andre Lewis in the
amount of P30,000.00 per month at the rate of 70% for
[Antonio] and 30% for [Grande]; and
d. The case is REMANDED to the Regional Trial Court,
Branch 8 of Aparri, Cagayan for the sole purpose of
determining the surname to be chosen by the children Jerard
Patrick and Andre Lewis.

Rule 7 and Rule 8 of the Office of the Civil Registrar General

Administrative Order No. 1, Series of 2004 are DISAPPROVED and
hereby declared NULL and VOID.
SO ORDERED.
G.R. No. 210252, June 25, 2014
VILMA QUINTOS, REPRESENTED BY HER ATTORNEY-IN-FACT
FIDEL I. QUINTOS, JR.; FLORENCIA I. DANCEL, REPRESENTED
BY HER ATTORNEY-IN-FACT FLOVY I. DANCEL; AND CATALINO
L. IBARRA, Petitioners, v. PELAGIA I. NICOLAS, NOLI L. IBARRA,
SANTIAGO L. IBARRA, PEDRO L. IBARRA, DAVID L. IBARRA,
GILBERTO L. IBARRA, HEIRS OF AUGUSTO L. IBARRA,
NAMELY CONCHITA R., IBARRA, APOLONIO IBARRA, AND
NARCISO IBARRA, AND THE SPOUSES RECTO CANDELARIO
AND ROSEMARIE CANDELARIO, Respondents.
DECISION
VELASCO JR., J.:
The Case
Before the Court is a Petition for Review on Certiorari filed under
Rule 45 challenging the Decision1 and Resolution2 of the Court of
Appeals (CA) in CA-G.R. CV No. 98919 dated July 8, 2013 and
November 22, 2013, respectively. The challenged rulings affirmed
the May 7, 2012 Decision3 of the Regional Trial Court (RTC), Branch
68 in Camiling, Tarlac that petitioners and respondents are coowners of the subject property, which should be partitioned as per
the subdivision plan submitted by respondent spouses Recto and
Rosemarie Candelario.
The Facts

As culled from the records, the facts of the case are as follows:
Petitioners Vilma Quintos, Florencia Dancel, and Catalino Ibarra, and
respondents Pelagia Nicolas, Noli Ibarra, Santiago Ibarra, Pedro
Ibarra, David Ibarra, Gilberto Ibarra, and the late Augusto Ibarra are
siblings. Their parents, Bienvenido and Escolastica Ibarra, were the
owners of the subject property, a 281 sqm. parcel of land situated
along Quezon Ave., Poblacion C, Camiling, Tarlac, covered by
Transfer
Certificate
Title
(TCT)
No.
318717.
By 1999, both Bienvenido and Escolastica had already passed away,
leaving to their ten (10) children ownership over the subject property.
Subsequently, sometime in 2002, respondent siblings brought an
action for partition against petitioners. The case was docketed as
Civil Case No. 02-52 and was raffled to the RTC, Branch 68,
Camiling, Tarlac. However, in an Order4 dated March 22, 2004, the
trial court dismissed the case disposing as follows:
For failure of the parties, as well as their counsels, to appear despite
due
notice,
this
case
is
hereby
DISMISSED.
SO ORDERED.
As neither set of parties appealed, the ruling of the trial court became
final, as evidenced by a Certificate of Finality 5 it eventually issued on
August
22,
2008.
Having failed to secure a favorable decision for partition, respondent
siblings instead resorted to executing a Deed of Adjudication 6 on
September 21, 2004 to transfer the property in favor of the ten (10)
siblings. As a result, TCT No. 318717 was canceled and in lieu
thereof, TCT No. 390484 was issued in its place by the Registry of
Deeds of Tarlac in the names of the ten (10) heirs of the Ibarra
spouses.
Subsequently, respondent siblings sold their 7/10 undivided share

over the property in favor of their co-respondents, the spouses Recto

and Rosemarie Candelario. By virtue of a Deed of Absolute
Sale7 dated April 17, 2007 executed in favor of the spouses
Candelario and an Agreement of Subdivision 8purportedly executed
by them and petitioners, TCT No. 390484 was partially canceled and
TCT No. 434304 was issued in the name of the Candelarios,
covering
the
7/10
portion.
On June 1, 2009, petitioners filed a complaint for Quieting of Title
and Damages against respondents wherein they alleged that during
their parents lifetime, the couple distributed their real and personal
properties in favor of their ten (10) children. Upon distribution,
petitioners alleged that they received the subject property and the
house constructed thereon as their share. They likewise averred that
they have been in adverse, open, continuous, and uninterrupted
possession of the property for over four (4) decades and are, thus,
entitled to equitable title thereto. They also deny any participation in
the execution of the aforementioned Deed of Adjudication dated
September 21, 2004 and the Agreement of Subdivision.
Respondents countered that petitioners cause of action was already
barred by estoppel when sometime in 2006, one of petitioners
offered to buy the 7/10 undivided share of the respondent siblings.
They point out that this is an admission on the part of petitioners that
the property is not entirely theirs. In addition, they claimed that
Bienvenido and Escolastica Ibarra mortgaged the property but
because of financial constraints, respondent spouses Candelario had
to redeem the property in their behalf. Not having been repaid by
Bienvenido and Escolastica, the Candelarios accepted from their corespondents their share in the subject property as payment. Lastly,
respondents sought, by way of counterclaim, the partition of the
property.
Docketed as Civil Case No. 09-15 of the RTC of Camiling, Tarlac, the
quieting of title case was eventually raffled to Branch 68 of the court,
the same trial court that dismissed Civil Case No. 02-52. During pretrial, respondents, or defendants a quo, admitted having filed an

action for partition, that petitioners did not participate in the Deed of
Adjudication that served as the basis for the issuance of TCT No.
390484, and that the Agreement of Subdivision that led to the
issuance of TCT No. 434304 in favor of respondent spouses
Candelario
was
falsified.9cralawred
Despite the admissions of respondents, however, the RTC, through
its May 27, 2012 Decision, dismissed petitioners complaint. The
court did not find merit in petitioners asseverations that they have
acquired title over the property through acquisitive prescription and
noted that there was no document evidencing that their parents
bequeathed to them the subject property. Finding that respondent
siblings were entitled to their respective shares in the property as
descendants of Bienvenido and Escolastica Ibarra and as co-heirs of
petitioners, the subsequent transfer of their interest in favor of
respondent spouses Candelario was then upheld by the trial court.
The dispositive portion of the Decision reads:
WHEREFORE, premises considered, the above-entitled case is
hereby
Dismissed.
Also, defendants-spouses Rosemarie Candelario and Recto
Candelario are hereby declared as the absolute owners of the 7/10
portion
of
the
subject
lot.
Likewise, the court hereby orders the partition of the subject lots
between the herein plaintiffs and the defendants-spouses
Candelarios.
SO ORDERED.
Aggrieved, petitioners appealed the trial courts Decision to the CA,
pleading the same allegations they averred in their underlying
complaint for quieting of title. However, they added that the partition
should no longer be allowed since it is already barred by res judicata,
respondent siblings having already filed a case for partition that was
dismissed with finality, as admitted by respondents themselves

during

pre-trial.

On July 8, 2013, the CA issued the assailed Decision denying the

appeal. The fallo reads:
WHEREFORE, premises considered, the Decision dated May 7,
2012 of the Regional Trial Court of Camiling, Tarlac, Branch 68, in
Civil
Case
No.
09-15,
is
hereby AFFIRMED.
SO ORDERED.
Similar to the trial court, the court a quo found no evidence on record
to support petitioners claim that the subject property was specifically
bequeathed by Bienvenido and Escolastica Ibarra in their favor as
their share in their parents estate. It also did not consider petitioners
possession of the property as one that is in the concept of an owner.
Ultimately, the appellate court upheld the finding that petitioners and
respondent spouses Candelario co-own the property, 30-70 in favor
of
the
respondent
spouses.
As regards the issue of partition, the CA added:
x x x Since it was conceded that the subject lot is now co-owned by
the plaintiffs-appellants, (with 3/10 undivided interest) and
defendants-appellees Spouses Candelarios (with 7/10 undivided
interest) and considering that plaintiffs-appellants had already
constructed a 3-storey building at the back portion of the property,
then partition, in accordance with the subdivision plan (records, p.
378) undertaken by defendants-appellants [sic] spouses, is in order.10
On November 22, 2013, petitioners Motion for Reconsideration was
denied. Hence, the instant petition.
Issues
In the present petition, the following errors were raised:

I. THE COURT OF APPEALS MANIFESTLY OVERLOOKED

RELEVANT AND UNDISPUTED FACTS WHICH, IF PROPERLY
CONSIDERED, WOULD JUSTIFY PETITIONERS CLAIM OF
EQUITABLE
TITLE.
II. THE COURT OF APPEALS ERRED WHEN IT AFFIRMED THE
ORDER OF PARTITION DESPITE THE FACT THAT THE
COUNTERCLAIM FOR PARTITION, BASED ON THE DEED OF
ABSOLUTE SALE EXECUTED IN 2007, IS BARRED BY LACHES.
III. THE COURT OF APPEALS RENDERED A SUBSTANTIALLY
FLAWED JUDGMENT WHEN IT NEGLECTED TO RULE ON
PETITIONERS CONTENTION THAT THE COUNTERCLAIM FOR
PARTITION IS ALSO BARRED BY PRIOR JUDGMENT, DESPITE
ITS HAVING BEEN SPECIFICALLY ASSIGNED AS ERROR AND
PROPERLY ARGUED IN THEIR BRIEF, AND WHICH, IF
PROPERLY CONSIDERED, WOULD JUSTIFY THE DISMISSAL OF
THE
COUNTERCLAIM.
IV. THE COURT OF APPEALS ERRED WHEN IT ORDERED
PARTITION IN ACCORDANCE WITH THE SUBDIVISION PLAN
MENTIONED IN ITS DECISION, IN CONTRAVENTION OF THE
PROCEDURE ESTABLISHED IN RULE 69 OF THE RULES OF
CIVIL PROCEDURE.11
To simplify, the pertinent issues in this case are as follows:
1. Whether or not the petitioners were able to prove ownership over
the
property;
2. Whether or not the respondents counterclaim for partition is
already
barred
by
laches
or res
judicata;and
3. Whether or not the CA was correct in approving the subdivision
agreement as basis for the partition of the property.
The Courts Ruling
The

petition

is

meritorious

in

part.

Petitioners
title
or

were
not
able
to
ownership
over

prove
the

equitable
property

Quieting of title is a common law remedy for the removal of any

cloud, doubt, or uncertainty affecting title to real property.12 For an
action to quiet title to prosper, two indispensable requisites must
concur, namely: (1) the plaintiff or complainant has a legal or
equitable title to or interest in the real property subject of the action;
and (2) the deed, claim, encumbrance, or proceeding claimed to be
casting cloud on the title must be shown to be in fact invalid or
inoperative despite its prima facie appearance of validity or
efficacy.13 In the case at bar, the CA correctly observed that
petitioners cause of action must necessarily fail mainly in view of the
absence
of
the
first
requisite.
At the outset, it must be emphasized that the determination of
whether or not petitioners sufficiently proved their claim of ownership
or equitable title is substantially a factual issue that is generally
improper for Us to delve into. Section 1, Rule 45 of the Rules of
Court explicitly states that the petition for review on certiorari shall
raise only questions of law, which must be distinctly set forth. In
appeals by certiorari, therefore, only questions of law may be raised,
because this Court is not a trier of facts and does not normally
undertake the re-examination of the evidence presented by the
contending parties during the trial.14 Although there are
exceptions15 to this general rule as eloquently enunciated in
jurisprudence, none of the circumstances calling for their application
obtains in the case at bar. Thus, We are constrained to respect and
uphold the findings of fact arrived at by both the RTC and the CA.
In any event, a perusal of the records would readily show that
petitioners, as aptly observed by the courts below, indeed, failed to
substantiate their claim. Their alleged open, continuous, exclusive,
and uninterrupted possession of the subject property is belied by the
fact that respondent siblings, in 2005, entered into a Contract of
Lease with the Avico Lending Investor Co. over the subject lot

without any objection from the petitioners. 16 Petitioners inability to

offer evidence tending to prove that Bienvenido and Escolastica
Ibarra transferred the ownership over the property in favor of
petitioners is likewise fatal to the latters claim. On the contrary, on
May 28, 1998, Escolastica Ibarra executed a Deed of Sale covering
half of the subject property in favor of all her 10 children, not in favor
of
petitioners
alone.17cralawred
The cardinal rule is that bare allegation of title does not suffice. The
burden of proof is on the plaintiff to establish his or her case by
preponderance of evidence.18 Regrettably, petitioners, as such
plaintiff, in this case failed to discharge the said burden imposed
upon them in proving legal or equitable title over the parcel of land in
issue. As such, there is no reason to disturb the finding of the RTC
that all 10 siblings inherited the subject property from Bienvenido and
Escolastica Ibarra, and after the respondent siblings sold their aliquot
share to the spouses Candelario, petitioners and respondent
spouses
became
co-owners
of
the
same.
The counterclaim for partition is not barred by prior judgment
This brings us to the issue of partition as raised by respondents in
their counterclaim. In their answer to the counterclaim, petitioners
countered that the action for partition has already been barred by res
judicata.
The doctrine of res judicata provides that the judgment in a first case
is final as to the claim or demand in controversy, between the parties
and those privy with them, not only as to every matter which was
offered and received to sustain or defeat the claim or demand, but as
to any other admissible matter which must have been offered for that
purpose and all matters that could have been adjudged in that
case.19 It precludes parties from relitigating issues actually litigated
and determined by a prior and final judgment. 20 As held in Yusingco
v. Ong Hing Lian:21cralawred

It is a rule pervading every well-regulated system of jurisprudence,

and is put upon two grounds embodied in various maxims of the
common law; the one, public policy and necessity, which makes it to
the interest of the state that there should be an end to litigation
republicae ut sit finis litium; the other, the hardship on the
individual that he should be vexed twice for the same cause nemo
debet bis vexari et eadem causa. A contrary doctrine would subject
the public peace and quiet to the will and neglect of individuals and
prefer the gratitude identification of a litigious disposition on the part
of suitors to the preservation of the public tranquility and
happiness.22cralawlawlibrary
The rationale for this principle is that a party should not be vexed
twice concerning the same cause. Indeed, res judicata is a
fundamental concept in the organization of every jural society, for not
only does it ward off endless litigation, it ensures the stability of
judgment and guards against inconsistent decisions on the same set
of
facts.23cralawred
There is res judicata when the following requisites are present: (1)
the formal judgment or order must be final; (2) it must be a judgment
or order on the merits, that is, it was rendered after a consideration of
the evidence or stipulations submitted by the parties at the trial of the
case; (3) it must have been rendered by a court having jurisdiction
over the subject matter and the parties; and (4) there must be,
between the first and second actions, identity of parties, of subject
matter
and
of
cause
of
action. 24cralawred
In the case at bar, respondent siblings admit that they filed an action
for partition docketed as Civil Case No. 02-52, which the RTC
dismissed through an Order dated March 22, 2004 for the failure of
the parties to attend the scheduled hearings. Respondents likewise
admitted that since they no longer appealed the dismissal, the ruling
attained finality. Moreover, it cannot be disputed that the subject
property in Civil Case No. 02-52 and in the present controversy are
one and the same, and that in both cases, respondents raise the
same action for partition. And lastly, although respondent spouses

Candelario were not party-litigants in the earlier case for partition,

there is identity of parties not only when the parties in the case are
the same, but also between those in privity with them, such as
between
their
successors-in-interest. 25cralawred
With all the other elements present, what is left to be determined now
is whether or not the dismissal of Civil case No. 02-52 operated as a
dismissal on the merits that would complete the requirements of res
judicata.
In advancing their claim, petitioners cite Rule 17, Sec. 3 of the Rules
of Court, to wit:
Section 3. Dismissal due to fault of plaintiff. If, for no justifiable
cause, the plaintiff fails to appear on the date of the presentation of
his evidence in chief on the complaint, or to prosecute his action for
an unreasonable length of time, or to comply with these Rules or any
order of the court, the complaint may be dismissed upon motion of
the defendant or upon the courts own motion, without prejudice to
the right of the defendant to prosecute his counterclaim in the same
or in a separate action. This dismissal shall have the effect of an
adjudication upon the merits, unless otherwise declared by the
court.
The afore-quoted provision enumerates the instances when a
complaint may be dismissed due to the plaintiff's fault: (1) if he fails
to appear on the date for the presentation of his evidence in chief on
the complaint; (2) if he fails to prosecute his action for an
unreasonable length of time; or (3) if he fails to comply with the Rules
or any order of the court. The dismissal of a case for failure to
prosecute has the effect of adjudication on the merits, and is
necessarily understood to be with prejudice to the filing of another
action, unless otherwise provided in the order of dismissal. Stated
differently, the general rule is that dismissal of a case for failure to
prosecute is to be regarded as an adjudication on the merits and with
prejudice to the filing of another action, and the only exception is
when the order of dismissal expressly contains a qualification that

the dismissal is without prejudice.26 In the case at bar, petitioners

claim that the Order does not in any language say that the dismissal
is without prejudice and, thus, the requirement that the dismissal be
on
the
merits
is
present.
Truly, We have had the occasion to rule that dismissal with prejudice
under the above-cited rule amply satisfies one of the elements of res
judicata.27 It is, thus, understandable why petitioners would allegeres
judicata to bolster their claim. However, dismissal with prejudice
under Rule 17, Sec. 3 of the Rules of Court cannot defeat the right of
a co-owner to ask for partition at any time, provided that there is no
actual
adjudication
of
ownership
of
shares
yet.
Pertinent hereto is Article 494 of the Civil Code, which reads:
Article 494. No co-owner shall be obliged to remain in the coownership. Each co-owner may demand at any time the partition
of the thing owned in common, insofar as his share is
concerned.
Nevertheless, an agreement to keep the thing undivided for a certain
period of time, not exceeding ten years, shall be valid. This term may
be
extended
by
a
new
agreement.
A donor or testator may prohibit partition for a period which shall not
exceed
twenty
years.
Neither shall there be any partition when it is prohibited by law.
No prescription shall run in favor of a co-owner or co-heir against his
co-owners or co-heirs so long as he expressly or impliedly
recognizes the co-ownership. (emphasis supplied)
From the above-quoted provision, it can be gleaned that the law
generally does not favor the retention of co-ownership as a property
relation, and is interested instead in ascertaining the co-owners
specific shares so as to prevent the allocation of portions to remain

perpetually in limbo. Thus, the law provides that each co-owner may
demand at any time the partition of the thing owned in common.
Between dismissal with prejudice under Rule 17, Sec. 3 and the right
granted to co-owners under Art. 494 of the Civil Code, the latter must
prevail. To construe otherwise would diminish the substantive right of
a co-owner through the promulgation of procedural rules. Such a
construction is not sanctioned by the principle, which is too well
settled to require citation, that a substantive law cannot be amended
by a procedural rule.28 This further finds support in Art. 496 of the
New Civil Code, viz:
Article 496. Partition may be made by agreement between the
parties or by judicial proceedings. Partition shall be governed by the
Rules of Court insofar as they are consistent with this Code.
Thus, for the Rules to be consistent with statutory provisions, We
hold that Art. 494, as cited, is an exception to Rule 17, Sec. 3 of the
Rules of Court to the effect that even if the order of dismissal for
failure to prosecute is silent on whether or not it is with prejudice, it
shall
be
deemed
to
be
without
prejudice.
This is not to say, however, that the action for partition will never be
barred by res judicata. There can still be res judicata in partition
cases concerning the same parties and the same subject matter
once the respective shares of the co-owners have been determined
with finality by a competent court with jurisdiction or if the court
determines that partition is improper for co-ownership does not or no
longer
exists.
So it was that in Rizal v. Naredo,29 We ruled in the following wise:
Article 484 of the New Civil Code provides that there is co-ownership
whenever the ownership of an undivided thing or right belongs to
different persons. Thus, on the one hand, a co-owner of an undivided
parcel of land is an owner of the whole, and over the whole he
exercises the right of dominion, but he is at the same time the owner

of a portion which is truly abstract. On the other hand, there is no

co-ownership when the different portions owned by different
people are already concretely determined and separately
identifiable,
even
if not
yet
technically described.
Pursuant to Article 494 of the Civil Code, no co-owner is obliged to
remain in the co-ownership, and his proper remedy is an action for
partition under Rule 69 of the Rules of Court, which he may bring at
anytime in so far as his share is concerned. Article 1079 of the Civil
Code defines partition as the separation, division and assignment of
a thing held in common among those to whom it may belong. It has
been held that the fact that the agreement of partition lacks the
technical description of the parties respective portions or that the
subject property was then still embraced by the same certificate of
title could not legally prevent a partition, where the different portions
allotted to each were determined and became separately identifiable.
The partition of Lot No. 252 was the result of the approved
Compromise Agreement in Civil Case No. 36-C, which was
immediately final and executory. Absent any showing that said
Compromise Agreement was vitiated by fraud, mistake or duress, the
court cannot set aside a judgment based on compromise. It is
axiomatic that a compromise agreement once approved by the court
settles the rights of the parties and has the force of res judicata. It
cannot be disturbed except on the ground of vice of consent or
forgery.

exist when the different portions owned by different people are

already concretely determined and separately identifiable, even
if not yet technically described. (emphasis supplied)
In the quoted case, We have held that res judicata applied because
after the parties executed a compromise agreement that was duly
approved by the court, the different portions of the owners have
already been ascertained. Thus, there was no longer a co-ownership
and there was nothing left to partition. This is in contrast with the
case at bar wherein the co-ownership, as determined by the trial
court, is still subsisting 30-70 in favor of respondent spouses
Candelario. Consequently, there is no legal bar preventing herein
respondents from praying for the partition of the property through
counterclaim.
The counterclaim for partition is not barred by laches
We now proceed to petitioners second line of attack. According to
petitioners, the claim for partition is already barred by laches since by
1999, both Bienvenido and Escolastica Ibarra had already died and
yet the respondent siblings only belatedly filed the action for partition,
Civil Case No. 02-52, in 2002. And since laches has allegedly
already set in against respondent siblings, so too should respondent
spouses Candelario be barred from claiming the same for they could
not have acquired a better right than their predecessors-in-interest.
The

Of equal significance is the fact that the compromise judgment in

Civil Case No. 36-C settled as well the question of which specific
portions of Lot No. 252 accrued to the parties separately as their
proportionate shares therein. Through their subdivision survey plan,
marked as Annex A of the Compromise Agreement and made an
integral part thereof, the parties segregated and separately assigned
to themselves distinct portions of Lot No. 252. The partition was
immediately executory, having been accomplished and completed on
December 1, 1971 when judgment was rendered approving the
same. The CA was correct when it stated that no co-ownership

argument

fails

to

persuade.

Laches is the failure or neglect, for an unreasonable and unexplained

length of time, to do that whichby the exercise of due diligence
could or should have been done earlier. It is the negligence or
omission to assert a right within a reasonable period, warranting the
presumption that the party entitled to assert it has either abandoned
or declined to assert it.30 The principle is a creation of equity which,
as such, is applied not really to penalize neglect or sleeping upon
ones right, but rather to avoid recognizing a right when to do so
would result in a clearly inequitable situation. As an equitable

defense, laches does not concern itself with the character of the
petitioners title, but only with whether or not by reason of the
respondents long inaction or inexcusable neglect, they should be
barred from asserting this claim at all, because to allow them to do
so would be inequitable and unjust to petitioners. 31cralawred
As correctly appreciated by the lower courts, respondents cannot be
said to have neglected to assert their right over the subject property.
They cannot be considered to have abandoned their right given that
they filed an action for partition sometime in 2002, even though it
was later dismissed. Furthermore, the fact that respondent siblings
entered into a Contract of Lease with Avico Lending Investor Co.
over the subject property is evidence that they are exercising rights
of
ownership
over
the
same.
The CA erred in approving the Agreement for Subdivision
There is merit, however, in petitioners contention that the CA erred in
approving the proposal for partition submitted by respondent
spouses. Art. 496, as earlier cited, provides that partition shall either
be by agreement of the parties or in accordance with the Rules of
Court. In this case, the Agreement of Subdivision allegedly executed
by respondent spouses Candelario and petitioners cannot serve as
basis for partition, for, as stated in the pre-trial order, herein
respondents admitted that the agreement was a falsity and that
petitioners never took part in preparing the same. The agreement
was crafted without any consultation whatsoever or any attempt to
arrive at mutually acceptable terms with petitioners. It, therefore,
lacked the essential requisite of consent. Thus, to approve the
agreement in spite of this fact would be tantamount to allowing
respondent spouses to divide unilaterally the property among the coowners based on their own whims and caprices. Such a result could
not
be
countenanced.
To rectify this with dispatch, the case must be remanded to the court
of origin, which shall proceed to partition the property in accordance
with the procedure outlined in Rule 69 of the Rules of Court.

WHEREFORE, premises considered, the petition is hereby PARTLY

GRANTED. The assailed Decision and Resolution of the Court of
Appeals in CA-G.R. CV No. 98919 dated July 8, 2013 and November
22,
2013,
respectively,
are
hereby AFFIRMED with MODIFICATION. The
case
is
hereby REMANDED to the RTC, Branch 68 in Camiling, Tarlac for
purposes of partitioning the subject property in accordance with Rule
69
of
the
Rules
of
Court.
SO ORDERED.

CARMELITA FUDOT, G.R. No. 171008

Petitioner,
Present:
QUISUMBING, J.,
- versus - Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
CATTLEYA LAND, INC., VELASCO, JR., JJ.
Respondent.
Promulgated:
September 13, 2007
x-----------------------------------------------------------------------------------x
DECISION
TINGA, J.:
For resolution is a petition that seeks to nullify the Decision [1] and
Resolution[2] of the Court of Appeals dated 28 April 2005 and 11
January 2006, respectively, in C.A.G.R. CV No. 73025 which
declared respondent as having a better right over a parcel of land
located in Doljo, Panglao, Bohol.
The facts, as culled from the records, follow.

Sometime in July 1992, Cattleya Land, Inc. (hereinafter referred to as

respondent) asked someone to check, on its behalf, the titles of nine
(9) lots, the subject land included, which it intended to buy from the
spouses Troadio and Asuncion Tecson. Finding no defect on the
titles, respondent purchased the nine lots through a Deed of
Conditional Sale on 6 November 1992. Subsequently, on 30 August
1993, respondent and the Tecsons executed a Deed of Absolute
Sale over the same properties. The Deed of Conditional Sale and the
Deed of Absolute Sale were registered with the Register of Deeds
on 06 November 1992 and 04 October 1993, respectively.[3] The
Register of Deeds, Atty. Narciso dela Serna, refused to actually
annotate the deed of sale on the titles because of the existing notice
of attachment in connection with Civil Case No. 3399 pending before
the Regional Trial Court of Bohol.[4] The attachment was eventually
cancelled by virtue of a compromise agreement between the
Tecsons and their attaching creditor which was brokered by
respondent. Titles to six (6) of the nine (9) lots were issued, but the
Register of Deeds refused to issue titles to the remaining three (3)
lots , because the titles covering the same were still unaccounted for.
On 23 January 1995, petitioner presented for registration before the
Register of Deeds the owners copy of the title of the subject property,
together with the deed of sale purportedly executed by the Tecsons
in favor of petitioner on 19 December 1986. On the following day,
respondent sent a letter of protest/opposition to petitioners
application. Much to its surprise, respondent learned that
the Register of Deeds had already registered the deed of sale in
favor of petitioner and issued a new title in her name. [5]
On 5 May 1995, respondent filed its Complaint [6] for Quieting Of Title
&/Or Recovery Of Ownership, Cancellation Of Title With Damages
before
the Regional Trial Court ofTagbilaran City.[7] On 26
June
1995, Asuncion filed a complaint-in-intervention, claiming that she
never signed any deed of sale covering any part of their conjugal
property in favor of petitioner. She averred that her signature in
petitioners deed of sale was forged thus, said deed should be
declared null and void.[8] She also claimed that she has discovered

only recently that there was an amorous relationship between her

husband and petitioner.[9]

were free from encumbrance except the attachment on the property

due to Civil Case No. 3399.[15]

Petitioner, for her part, alleged in her answer [10] that the
spouses Tecson had sold to her the subject property for P20,000.00
and delivered to her the owners copy of the titleon 26 December
1986. She claims that she subsequently presented the said title to
the Register of Deeds but the latter refused to register the same
because the property was still under attachment.

Petitioner sought reconsideration of the decision but the Court of

Appeals denied her motion for reconsideration for lack of merit. [16]
Petitioner thus presents before this Court the following issues for
resolution:
I.

On 31 October 2001, the trial court rendered its decision: [11] (i)
quieting the title or ownership of the subject land in favor of
respondent; (ii) declaring the deed of sale between petitioner and
spouses Tecson invalid; (iii) ordering the registration of the subject
land in favor of respondent; (iv) dismissing respondents claim for
damages against the Register of Deeds for insufficiency of evidence;
(v) dismissing Asuncions claim for damages against petitioner for
lack of factual basis; and (vi) dismissing petitioners counterclaim for
lack of the required preponderance of evidence.[12]
According to the trial court, respondent had recorded in good faith
the deed of sale in its favor ahead of petitioner. Moreover, based
on Asuncions convincing and unrebutted testimony, the trial
court concluded that the purported signature of Asuncion in the deed
of sale in favor of petitioner was forged, thereby rendering the sale
void.[13]
Petitioner sought recourse to the Court of Appeals, arguing in the
main that the rule on double sale was applicable to the case. The
appellate court, however, dismissed her appeal, holding that
there was no double sale because the alleged sale to petitioner was
null and void in view of the forgery of Asuncions purported
signature in the deed. The appellate court noted that petitioner failed
to rebut Asuncions testimony despite opportunities to do so.
[14]
Moreover, even if there was double sale, according to the
appellate court, respondents claim would still prevail since it was
able to register the second sale in its favor in good faith, had made
inquiries before it purchased the lots, and was informed that the titles

BETWEEN 2 BUYERS OF REGISTERED

LAND, WHO HAS THE BETTER RIGHT-IS IT
THE FIRST BUYER WHO WAS GIVEN THE
OWNERS DUPLICATE TCT TOGETHER WITH
A DEED OF SALE IN 1986, OR THE SECOND
BUYER IN 1992 WITH ONLY A DEED OF SALE.
II.
IS A BUYER OF REGISTERED LAND WHO DID
NOT DEMAND OR REQUIRE THE DELIVERY
OF THE OWNERS DUPLICATE TCT A BUYER
IN GOOD FAITH.
III.
II. IN SUBSEQUENT REGISTRATION OF
REGISTERED LANDS, AS BY SALE, WHICH
LAW SHALL GOVERN, ARTICLE 1455 OF
CIVIL
CODE
OR
P.D.
1529
OR TORRENSSYSTEM.[17]
Petitioner avers that she was the first buyer in good faith and
even had in her possession the owners copy of the title so much so
that she was able to register the deed of sale in her favor and caused
the issuance of a new title in her name. She argues that the
presentation and surrender of the deed of sale and the owners copy

carried with it the conclusive authority of Asuncion Tecson which

cannot be overturned by the latters oral deposition. [18]
Petitioner claims that respondent did not demand nor require
delivery of the owners duplicate title from the spouses Tecson,
neither did it investigate the circumstances surrounding the absence
of the title. These indicate respondents knowledge of a defect in the
title of the spouses and, thus, petitioner concludes that respondent
was not a buyer in good faith.[19]
Finally, petitioner insists that the applicable law in this case is
P.D. No. 1529, a special law dealing precisely with the registration of
registered lands or any subsequent sale thereof, and not Article 1544
of the Civil Code which deals with immovable property not covered
by the Torrens System.[20]
Respondent points out, on one hand, that petitioners first two
issues which present an inquiry on who has a better right or which
one is a buyer in good faith, are questions of fact not proper in a
petition for review. The third issue, on the other hand, is ostensibly a
question of law which had been unsuccessfully raised below.[21]
Respondent maintains that there is no room to speak of
petitioner as a buyer in good faith since she was never a buyer in the
first place, as her claim is based on a null and void deed of sale, so
the court a quo found. Respondent also asserts that its status as a
buyer in good faith was established and confirmed in the
proceedings before the two courts below.[22]
Lastly, respondent argues that P.D. No. 1529 finds no
application in the instant case. The production of the owners
duplicate certificate x x x being conclusive authority from the
registered owner is only true as between the registration applicant
and the register of deeds concerned, but never to third parties. Such
conclusive authority, respondent adds, is only for the Register of
Deeds to enter a new certificate or to make a memorandum of
registration in accordance with such instrument. It cannot cure the

fatal defect that the instrument from which such registration was
effected is null and void ab initio, respondent concludes.[23]
The petition is bereft of merit.
Petitioners arguments, which rest on the assumption that there was a
double sale, must fail.
In the first place, there is no double sale to speak of. Art. 1544 of the
Civil Code,[24] which provides the rule on double sale, applies only to
a situation where the same property is validly sold to different
vendees. In this case, there is only one sale to advert to, that
between the spouses Tecson and respondent.
In Remalante v. Tibe,[25] this Court ruled that the Civil Law provision
on double sale is not applicable where there is only one valid sale,
the previous sale having been found to be fraudulent. Likewise,
in Espiritu and Apostol v. Valerio,[26] where the same parcel of land
was purportedly sold to two different parties, the Court held that
despite the fact that one deed of sale was registered ahead of the
other, Art. 1544 of the Civil Code will not apply where said deed is
found to be a forgery, the result of this being that the right of the
other vendee should prevail.
The trial court declared that the sale between the spouses Tecson
and petitioner is invalid, as it bears the forged signature
of Asuncion. Said finding is based on the unrebutted testimony
of Asuncion and the trial courts visual analysis and comparison of the
signatures in her Complaint-in-Intervention and the purported deed of
sale. This finding was upheld by the Court of Appeals, as it ruled that
the purported sale in petitioners favor is null and void, taking into
account Asuncions unrefuted deposition. In particular, the Court of
Appeals noted petitioners failure to attend the taking of the oral
deposition and to give written interrogatories. In short, she did not
take the necessary steps to rebut Asuncions definitive assertion.

The congruence of the wills of the spouses is essential for the valid
disposition of conjugal property.[27] Thus, under Article 166 of the Civil
Code[28] which was still in effect on19 December 1986 when the deed
of sale was purportedly executed, the husband cannot generally
alienate or encumber any real property of the conjugal partnership
without the wifes consent.
In this case, following Article 173[29] of the Civil Code, on 26 June
1995, or eight and a half years (8 ) after the purported sale to
petitioner, Asuncion filed her Complaint-in-Intervention seeking the
nullification thereof, and while her marriage with Troadio was still
subsisting. Both the Court of Appeals and the trial court
found Asuncions signature in the deed of sale to have been forged,
and consequently, the deed of sale void for lack of marital consent.
We find no reason to disturb the findings of the trial court and the
Court of Appeals. Findings of fact of lower courts are deemed
conclusive and binding upon the Supreme Court subject to certain
exceptions,[30] none of which are present in this case. Besides, it has
long been recognized in our jurisprudence that a forged deed is a
nullity and conveys no title.[31]
Petitioner argues she has a better right over the property in question,
as the holder of and the first one to present, the owners copy of the
title for the issuance of a new TCT. The Court is not persuaded.
The act of registration does not validate petitioners otherwise void
contract. Registration is a mere ministerial act by which a deed,
contract, or 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 deed, contract, or
instrument. While it operates as a notice of the deed, contract, or
instrument to others, it does not add to its validity nor converts an
invalid instrument into a valid one as between the parties, [32] nor
amounts to a declaration by the state that the instrument is a valid
and subsisting interest in the land. [33] The registration of
petitioners void deed is not an impediment to a declaration by the
courts of its invalidity.

Even assuming that there was double sale in this case, petitioner
would still not prevail. The pertinent portion of Art. 1544 provides:
Art. 1544. x x x.
Should it be immovable property, the
ownership shall belong to the person acquiring it
who in good faith first recorded it in the Registry of
Property.
x x x x.
In interpreting this provision, the Court declared that the governing
principle is primus tempore, potior jure (first in time, stronger in right).
Knowledge gained by the first buyer of the second sale cannot defeat
the first buyers rights, except where the second buyer registers in
good faith the second sale ahead of the first as provided by the
aforequoted provision of the Civil Code. Such knowledge of the first
buyer does not bar him from availing of his rights under the law,
among them to register first his purchase as against the second
buyer. However, knowledge gained by the second buyer of the first
sale defeats his rights even if he is first to register the second sale,
since such knowledge taints his prior registration with bad faith. [34] It
is thus essential, to merit the protection of Art. 1544, second
paragraph, that the second realty buyer must act in good faith in
registering his deed of sale.[35]
We agree with the trial court and the Court of Appeals that
respondent was a buyer in good faith, having purchased the nine (9)
lots, including the subject lot, without any notice of a previous sale,
but only a notice of attachment relative to a pending civil case. In
fact, in its desire to finally have the title to the properties transferred
in its name, it persuaded the parties in the said case to settle the
same so that the notice of attachment could be cancelled.

Relevant to the discussion are the following provisions of

P.D. No. 1529:
Sec. 51. Conveyance and other dealings by
registered owner. An owner of registered land may
convey, mortgage, lease, charge or otherwise deal
with the same in accordance with existing laws. He
may use such forms of deeds, mortgages, lease or
other voluntary instruments as are sufficient in law.
But no deed, mortgage, lease or other voluntary
instrument, except a will purporting to convey or
affect registered land shall take effect as a
conveyance or bind the land, but shall operate only
as a contract between the parties and as evidence
of authority to the Register of Deeds to make
Registration.
The act of registration shall be the
operative act to convey or affect the land
insofar as third persons are concerned, and in
all cases under this Decree, the registration shall be
made in the office of the Register of Deeds for the
province or city where the land lies. (Emphasis
supplied)

Sec. 52. Constructive notice upon registration.

Every
conveyance,
mortgage,
lease,
lien
attachment, order, judgment, instrument or entry
affecting registered land shall, if registered, filed or
entered in the office of the Register of Deeds for the
province or city where the land to which it relates
lies, be constructive notice to all persons from the
time of such registering, filing or entering.

It has been held that between two transactions concerning the same
parcel of land, the registered transaction prevails over the earlier
unregistered right. The act of registration operates to convey and
affect the registered land so that a bona fide purchaser of such land
acquires good title as against a prior transferee, if such prior transfer
was unrecorded.[36]As found by the courts a quo, respondent was
able to register its purchase ahead of petitioner. It will be recalled
that respondent was able to register its Deed of Conditional Sale with
the Register of Deeds as early as 6 November 1992, and its Deed of
Absolute Sale on 14 October 1993. On the other hand, petitioner was
able to present for registration her deed of sale and owners copy of
the title only on 23 January 1995, or almost nine years after the
purported sale. Why it took petitioner nine (9) years to present the
deed and the owners copy, she had no credible explanation; but it is
clear that when she finally did, she already had constructive notice
of the deed of sale in respondents favor. Without a doubt, respondent
had acquired a better title to the property.
Finally, anent petitioners claim that P.D. No. 1529 applies to
registered lands or any subsequent sale thereof, while Art. 1544 of
the Civil Code applies only to immovable property not covered by the
Torrens System, suffice it to say that this quandary has already been
answered by an eminent former member of this Court, Justice Jose
Vitug, who explained that the registration contemplated under Art.
1544 has been held to refer to registration under P.D. No. 1529, thus:
The registration contemplated under Art.
1544 has been held to refer to registration under
Act 496 Land Registration Act (now PD
1529) which considers the act of registration as the
operative act that binds the land (see Mediante v.
Rosabal, 1 O.G. [12] 900, Garcia v. Rosabal, 73 Phil
694). On lands covered by the Torrens System, the
purchaser acquires such rights and interest as they
appear in the certificate of title, unaffected by any
prior lien or encumbrance not noted therein. The
purchaser is not required to explore farther than what
the Torrens title, upon its face, indicates. The only
exception is where the purchaser has actual

knowledge of a flaw or defect in the title of the seller

or of such liens or encumbrances which, as to him, is
equivalent to registration (see Sec. 39, Act
496; Bernales v. IAC, G.R. 75336, 18 October 1988;
Hernandez vs. Sales, 69 Phil 744; Tajonera s. Court
of Appeals, L-26677, 27 March 1981) (Emphasis
supplied)[37]
EN BANC
TERESITA RETAZO A.M. No. P-04-1807
Complainant, [Formerly OCA-I.P.I. No. 03-1714-P]
Promulgated:
December 23, 2008
x--------------------------------------------------------------------------- x
OFFICE OF THE COURT A.M. No. P-02-1653
ADMINISTRATOR, [Formerly A.M. No. 02-9-237-MCTC]
Complainant,

versus -

LORNA A. VERDON,
Clerk of Court, MCTC,
Don Carlos, Bukidnon,
Respondent.
x---------------------------------------------------------------------------------x
DECISION
PER CURIAM:

This is a consolidation of two administrative matters against

respondent Lorna A. Verdon, Clerk of Court of the Municipal Circuit
Trial Court (MCTC), Don Carlos-Kitaotao-Dangcagan, Bukidnon.
A.M. No. P-02-1653 refers to respondents shortages in the cash
collection of the court, while A.M. No. P-04-1807 concerns the
affidavit-complaint dated 4 June 2003 filed by Teresita Retazo
(complainant) charging respondent with Malversation of Public
Funds.
A.M. No. P-02-1653 started as a report [1] dated 5 September
2002 of then Deputy Court Administrator Christopher O. Lock on the
financial accountabilities of respondent. On 8 September 1998,
Acting Presiding Judge Florentina R. Villanueva had requested an
investigation in view of the missing cashbook and passbook for the
Fiduciary Fund, receipts, and other anomalies unearthed by
Commission on Audit (COA) representatives when they conducted
an audit. On 11 September 1998, the Fiscal Monitoring DivisionCourt Management Office (FMD-CMO) of the Office of the Court
Administrator (OCA) directed respondent to submit the
necessary documents such as official cashbooks, validated

duplicate copies of deposit slips, passbooks, for audit and

reconciliation of her books of accounts. Respondent submitted only
photocopies of the required documents. The FMD required
respondent
to
submit
the
original
copies
of
the
documents. Respondent was not able to submit all the originals of
the required documents and was warned that her non-compliance
could result in the withholding of her salaries. As she still failed to
comply, on 10 April 2001, the salaries and other allowances of
respondent were withheld upon recommendation of the OCA.
On 19 July 2001, the Office of the Auditor of the COAs
Provincial Revenue Audit Group-Bukidnon sent respondent a

letter[2] informing her that examination of her cash accounts revealed

that there was a shortage of P238,220.00, and that there were still
official receipts that were missing and unaccounted for.Respondent
was required to explain the shortages and produce the missing
funds. In her reply[3] dated 20 July 2001, respondent explained that
[she had] been trying [her] very best to replenish the said amount as
soon as possible[4] and requested time to produce the amount.
In the resolution of 18 November 2002,[5] the Court directed
respondent, among other things, to explain why no administrative
sanction shall be imposed on her for her continued failure to comply
with the requirements needed to establish her cash accountabilities,
and to submit all the documents required by the FMD-CMO. In the
same resolution, respondent was suspended from office pending
resolution of the case.
Meanwhile, on 4 June 2003, complainant filed the affidavitcomplaint[6] against respondent charging her with Malversation of
Public Funds. Complainant claimed that she deposited with
respondent the amount of thirty thousand pesos (P30,000.00) to
secure the provisional liberty of accused Juanito Retazo in Criminal
Case No. 10586-2000. The criminal case was decided with the
accused being acquitted and the posted bail ordered to be
returned. However, complainant was not able to collect the amount
because respondent had been under suspension and the amount of
the funds in her custody as deposited in the Landbank account was
onlyP2,052.16.

On 28 February
consolidated.[8]

2005,

the

two

administrative

cases

were

As respondent still failed to submit all the documents required by the

FMD-CMO, on 1 June 2005, the Court required respondent to show
cause why she should not be disciplinarily dealt with or held in
contempt of court for such failure.[9] Respondent again did not
comply. Thus, in the resolution of 19 July 2006,[10] the Court imposed
upon her a fine of P1,000.00 or a penalty of imprisonment of five (5)
days if said fine is not paid. However, no response was ever received
from respondent.
In the Memorandum[11] dated 3 October 2008 submitted by the OCA,
it is noted that the evaluation of these administrative cases was
delayed because of respondents repeated failure to comment and
defend herself and submit the required documents. Respondents
refusal to cooperate in the investigation of these cases should not
impede their resolution. Thus, these matters shall be decided based
on the pleadings already filed.
Based on the examination of the cash account of respondent as
Clerk of Court II, on 19 July 2001, the COA audit team found a
shortage of P238,220.00 in the fiduciary account of MCTC, Don
Carlos, Bukidnon, broken down as follows per the letter dated 19
July 2001:[12]
Collections
Accountability:

On 24 July 2003, respondent was required to comment on the

affidavit-complaint but she failed to comply with the directive. Thus,
in the resolution of 14 May 2004,[7] respondent was deemed to have
waived her right to put up a defense and the case was re-docketed
as a regular administrative matter.

Balance shown by your cashbook on 19

July 2001certified correct by you and
verified by us Fiduciary Fund

P325,604.74

Credits to Accountability:
P87,384.74
Cash in Bank

Cash and valid cash items produced by

you and counted by us
Shortage

-0---------------P238,220.00

In her reply to the COAs letter of 19 July 2001, respondent

indicated that she would replenish the shortage. [13] The OCA believes
that this should be deemed an admission on respondents part that
she misappropriated the amount of P238,220.00 since she would not
have made a promise to replenish the same if she had not spent the
fiduciary account of the court for herself. Thus, the OCA
recommends that the misappropriated amount of P238,220.00
should be deducted from respondents withheld salaries. The amount
of P30,000.00 representing the money claim of complainant in
Criminal Case No. 10586-2000 should also be deducted from the
withheld salaries as said amount forms part of the money
misappropriated by respondent. In a memorandum dated 10
February 2003,[14] the Financial Management Office reported that the
amount of P297,792.34 representing the salaries and allowances of
respondent from 16 June 2001 to 31 January 2003 had been
withheld. Hence, the total amount of P268,220.00 should be
deducted from the withheld amount of P297,792.34.
The OCA also recommends the dismissal of respondent from the
service for dishonesty and grave misconduct.
The OCA observes that the Office of the Clerk of Court
performs a very delicate function, that of being the custodian of the
courts funds and revenues, records, properties and premises. Being
the custodian thereof, the clerk of court is liable for any loss,
shortage, destruction or impairment of said funds and
properties. Section 7, Rule 136 of the Rules of Court requires that
the clerk shall keep all record, papers, files, exhibits and public
property committed to his charge.Respondents misappropriation and
conversion of funds under her custody by virtue of her official
position show her unfitness to continue in office. Under Section 23,

Rule XIV of the Omnibus Rules Implementing Book V of E.O No. 292
and other Pertinent Civil Service Laws, dishonesty and grave
misconduct are considered grave offenses for which the penalty of
dismissal is prescribed even at the first instance. Section 9 of the
said Rule also provides that the penalty of dismissal shall carry with it
cancellation of eligibility, forfeiture of leave credits and retirement
benefits, and disqualification for re-employment in the government
service. This penalty is without prejudice to the criminal liability of
respondent.
The findings and recommendations of the OCA are well-taken.
In Navallo v. Sandiganbayan,[15] we held that an accountable officer
may be convicted of malversation even in the absence of direct proof
of misappropriation as long as there is evidence of shortage in his
accounts which he is unable to explain. We also reiterate that public
service requires the utmost integrity and strictest discipline. Thus, a
public servant must exhibit at all times the highest sense of honesty
and integrity. No less than the Constitution declares that a public
office is a public trust, and enjoins all public officers and employees
to serve with the highest degree of responsibility, integrity, loyalty and
efficiency.[16] Those involved in the administration of justice must live
up to the strictest standard of honesty and integrity in public service
for the image of a court is mirrored in the conduct of the men and
women who comprise it, from the judge to the least and lowest of its
personnel.[17]
Respondent failed to live up to the high ethical standards
imposed by the court on its employees and for this she should be
dismissed. Her actions placed her honesty and integrity in serious
doubt. We cannot countenance any conduct, act or omission,
committed by those involved in administering justice, which violate
the norm of public accountability and which diminishes the faith of
the people in the Judiciary.[18]
WHEREFORE, respondent Lorna A. Verdon is found GUILTY of
DISHONESTY and GRAVE MISCONDUCT and is hereby
DISMISSED from the service with forfeiture of retirement benefits

except accrued leave credits, if any, with prejudice to re-employment

in any branch or instrumentality of the government, including
government-owned and controlled- corporations. This is without
prejudice to any criminal complaint that may be filed against her.
The Financial Management Office of the Office of the Court
Administrator is DIRECTED to deduct the following amounts from
respondents withheld salaries and allowances:
(1)

The amount of P268,220.00 which shall then be deposited

to the fiduciary account of the Municipal Circuit Trial Court,
Don
Carlos-Kitaotao-Dangcagan,
Bukidnon. From
the P268,220.00, the amount of P238,220.00 shall be
allocated to the money misappropriated by respondent and
the P30,000.00 shall be returned to complainant Teresita

(2)

Retazo representing the cancelled bail bond of the accused

in Criminal Case No. 10586-2000 upon showing of the
proper documentation; and
The amount of P1,000.00 which shall be paid to the Court
as fine in the Courts resolution of 19 July 2006.

The remaining amount shall be returned to respondent as

the same still forms part of her salaries and allowances.
Let a copy of this Decision be attached to respondents
personnel records in this Court.
SO ORDERED.