NOTICE OF LIS PENDENS

dated January 25, 2000 and Resolution dated June 9, 2000 of the Court of Appeals3 which set aside the order of the trial court cancelling the notice of lis pendens. The antecedent facts of this case as found by the Court of Appeals are: "A complaint for quieting of title, annulment and damages was filed by petitioner4 against private respondents5 before the Regional Trial Court, Branch 84, Malolos, Bulacan, docketed as Civil Case No. 195-M-94, alleging that he has been in possession since 1960 of a 200 square meter portion of Lot 4204 situated in Barrio Tikay, Malolos, Bulacan covered by TCT No. 191498 of the Registry of Deeds of Bulacan in the names of Turandut, Traviata, Marcelita, Pacita, Marlene, Mathews, Victoria and Rosary, all surnamed Aldaba; that on January 11, 1983, Rosary Aldaba sold to him said 200 square meter portion, which is included in the former's one-eight share in Lot 4204, consisting of 1,732 square meters; that a complaint for ejectment was filed against him in 1993 by private respondent Henry Lim, who claims to be the owner of the property occupied by him, being a portion of the parcel of land covered by TCT No. T-16375 registered in his name; that judgment was rendered against him in the ejectment case, which he elevated to the appellate court, and that upon investigation, he discovered that TCT No. T-16375 in the name of private respondents was obtained in bad faith, by fraud and/or clever machination. On the other hand, private respondents maintained that their title is valid and legal.1wphi1.nt Petitioner caused the annotation of a notice of lis pendens at the back of TCT T-16375.

TOPIC: 1. NO MOLESTATION OF PARTY THEREFORE CANCELLATION OF LIS PENDENS WAS IMPROPER 2. NOTICE OF LISPENDENS CANNOT BE CANCELLED BY FILING OF A BOND

THIRD DIVISION G.R. No. 143646 April 4, 2001

SPOUSES HENRY G. LIM and ROSARIO T. LIM, petitioners, vs. PEPITO M. VERA CRUZ, respondent. SANDOVAL-GUTIERREZ, J.: Lis pendens is a Latin term which literally means a pending suit. Notice of lis pendens is filed for the purpose of warning all persons that the title to certain property is in litigation and that if they purchase the same, they are in danger of being bound by an adverse judgment.1 The notice is, therefore, intended to be a warning to the whole world that one who buys the property does so at his own risk. This is necessary in order to save innocent third persons from any involvement in any future litigation concerning the property.2 Petitioners filed the instant petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, assailing the Decision

A motion to cancel notice of lis pendens was filed by private respondents on the grounds that said notice was designed solely to molest them/or it is not necessary to protect petitioner's rights. The same was opposed by petitioner insisting that the notice of lis pendens was recorded in order to protect his right over the property covered by TCT No. T-16375 and to avoid sale of property pending the execution of the judgment in the case. On July 22, 1998, respondent judge issued an order cancelling the notice of lis pendens annotated at the back of TCT No. T-16375 upon the posting by private respondents of an indemnity bond in the amount of P2,000,000.00. Petitioner's motion for reconsideration was denied in an order dated October 7, 1998." The issue before this Court is whether or not the Court of Appeals erred in holding that the trial court committed grave abuse of discretion in cancelling the notice of lis pendens. Petitioners contend that the cancellation of the notice of lis pendens by the trial court is justified because respondent had it registered for the sole purpose of molesting them and that it is not necessary to protect his rights. According to petitioners, the trial court correctly ratiocinated as follows: "A very thin line exists and separates the protection afforded by the notice to the plaintiff and the restriction it imposes on the right of the defendants' dominion over the property. Indubitably, the 200 square meter portion claimed by the plaintiff is grossly disproportional to the entire 5,432 square meter property which the notice virtually hold hostage. More so, the annotation proceeds from a still to be proven claim. Thus, based on the

allegations in the pleadings, as between a bare assertion of ownership over the claimed portion anchored on an unregistered deed of sale as against the indefeasible title possessed by the defendants over the entire subject property, the presumption under our rules favor the latter, unless rebutted by evidence on the contrary. As it stands, plaintiff's unregistered deed of sale, cannot, therefore, be accorded more weight than the certificate of title in defendant's name which is proof of ownership over the entire 5,432 square meter property. While affective consequences will be suffered by plaintiff if the notice is cancelled in case he is adjudged the lawful owner of the claim 200 square meter property, defendants will likewise suffer a grave injustice if denied the remedy of cancelling the notice, resort to which is allowed by law and discretionary on the courts upon proper showing. The injustice will take the form of an unlawful dispossession though what is claimed only is 200 square meters, yet the entire 5,432 square meter property is affected. Instead of serving its real purpose as laid by law pursuant to public policy, the continued retention of the notice fosters inequity as clearly established based on the claimed portion vis a vis the unclaimed of free portion of the 5,432 square meter property. To the mind of the Court, this inequity translates to an unwanted and unjustified burden that utterly molest the tranquil possession and enjoyment by the defendants of the subject part. Nevertheless, in the interest of substantial justice and equity, the Court deems it wise under the prevailing circumstances to direct the defendants to post an indemnity bond in an amount commensurate and reasonable proportionate to the per square value of the 2

claimed area of 200 square meter property. To the mind of the Court, thru the posting of a bond, the claim of the plaintiff (respondent herein) would still remain protected and safeguarded even though the notice is eventually cancelled. Equity and fair play dictate the same be resorted to by the Court relative to the peculiar circumstances of the case." Petitioners' contention lacks merit. Sec. 14, Rule 13 of the 1997 Rules of Civil Procedure, as amended, provides: "SECTION 14. Notice of lis pendens In an action affecting the title or the right of possession of real property, the plaintiff and the defendant, when affirmative relief is claimed in his answer, may record in the office of the registry of deeds of the province in which the property is situated a notice of the pendency of the action. Said notice shall contain the names of the parties and the object of the action or defense, and a description of the property in that province affected thereby. Only from the time of filing of such notice for record shall a purchaser, or encumbrancer of the property affected thereby, be deemed to have constructive notice of the pendency of the action, and only of its pendency against the parties designated by their real names. The notice of lis pendens hereinabove mentioned may be cancelled only upon order of the court, after proper showing that the notice is for the purpose of molesting the adverse party, or that it is not necessary to protect the rights of the party who caused it to be recorded. (Emphasis ours)

Sec. 77 of Presidential Decree No. 1529 states: "SECTION 77. Cancellation of lis pendens Before final judgment, a notice of lis pendens may be cancelled upon order of the court, after proper showing that the notice is for the purpose of molesting the adverse party, or that it is not necessary to protect the rights of the party who caused it to be registered. It may also be cancelled by the Register of Deeds upon verified petition of the party who caused registration thereof." Petitioners claim that the notice of lis pendens practically covers his entire land covered by TCT No. T-16375 and thus molests his right as an owner. Lis pendens has been conceived to protect the real rights of the party causing the registration thereof. With the lis pendens duly recorded, he could rest secure that he would not lose the property or any part of it. For such notice serves as a warning to a prospective purchaser or incumbrancer that the particular property is in litigation; and that he should keep his hands off the same unless of course, he intends to gamble on the results of the litigation.6 Based on this principle as well as the express provisions of Sec. 14, Rule 13 of the 1997 Rules of Civil Procedure, as amended, only the particular property subject of litigation is covered by the notice of lis pendens. In this case, only the 200 square meter portion of the entire area is embraced by the notice of lis pendens. In causing the annotation of such notice, respondent's aim is to protect his right as an owner of this specific area. Thus, the ruling of the trial court that the notice of lis pendens is tantamount to an unlawful dispossession and restriction of petitioners' right of dominion over the entire 5,432 square meter lot covered by TCT 16375 in their names is, therefore, an erroneous conclusion.

Pursuant to Section 14, Rule 13 of the 1997 Rules of Civil Procedure, as amended, earlier quoted, courts can cancel a notice of lis pendens only on two grounds: a) after a proper showing that the notice is for the purpose of molesting the adverse party; or b) it is not necessary to protect the interest of the party who caused it to be recorded. In justifying the cancellation of the notice of lis pendens, the trial court held that respondent's unregistered deed of sale can not be accorded more weight than petitioners' certificate of title. For purposes of annotating a notice of lis pendens, there is nothing in the rules which requires the party seeking annotation to show that the land belongs to him. In fact, there is no requirement that the party applying for the annotation of the notice must prove his right or interest over the property sought to be annotated.7 Hence, even on the basis of an unregistered deed of sale, a notice of lis pendens may be annotated on the title. And such annotation can not be considered as a collateral attack against the certificate of title. This is based on the principle that the registration of a notice of lis pendens does not produce a legal effect similar to a lien. It does not create a right or lien. It only means that a person purchases or contracts on the property in dispute subject to the result of the pending litigation.8 We observe that the trial judge was convinced that the cancellation of the lis pendens is not in order. Otherwise, he should not have required petitioners to post a bond of P2,000,000.00 The doctrine of lis pendens is founded upon reasons of public policy and necessity, the purpose of which is to keep the properties in litigation within the power of the court until the litigation is terminated, and to prevent the defeat of the judgment or decree by subsequent alienation. This purpose would be rendered

meaningless if petitioners are allowed to file a bond, regardless of the amount, if substitution of said notice. In Tan vs. Lantin9 , this Court held that the law does not authorize a Judge to cancel a notice of lis pendens pending litigation upon the mere filing of sufficient bond by the party on whose title said notice is annotated. Petitioners likewise insist that since respondent lost in the ejectment suit they filed against him, it follows that he also lost whatever right he has in the 200 square meter portion and that, therefore, he has no more right to be protected by the notice of lis pendens. It bears emphasis that respondent caused the registration of the notice of lis pendens in Civil Case No. 195-M-94 for quieting of title to his, 200 square meter lot, not in the ejectment case. Consequently, the notice of lis pendens annotated on TCT No. T16375 must stay. Indeed, there is nothing in the records indicating that the notice of lis pendens is for the purpose of molesting herein petitioners or that it is not necessary to protect the rights of respondent.1wphi1.nt WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals is AFFIRMED. Costs against petitioners. SO ORDERED. Melo, Vitug, Panganiban Gonzaga-Reyes, JJ ., concur.

Footnotes
1

Black, Law Dictionary 1081 (1957).

Rehabilitation Finance Corporation vs. Morales, 101 Phil. 171 (1957).

3

Penned by Justice Marina L. Buzon with the concurrence of Justices Godardo A. Jacinto and Edgar P. Cruz, Twelfth Division.
4

Respondent Pepito Vera Cruz.

Referring to Spouses Henry and Rosario Lim, petitioners herein.

6

Baranda vs. Gustilo, 165 SCRA 757, 1988. TOPIC: NOTICE OF LIS PENDENS IS PROPER Villanueva vs. Court of Appeals, 281 SCRA 298 (1997). EN BANC G.R. No. L-10064 April 23, 1957

Somes vs. Government of the Philippine Islands, 62 Phil. 432 (1935-1936).

9

142 SCRA 423 (1986).

In Re: Petition for Cancellation of Notice of Lis pendens Annotated in Transfer Certificate of Title No. 12226, Quezon City. REHABILITATION FINANCE CORPORATION, petitioner-appellant, vs. BUEN MORALES, oppositor-appellee. Jesus A. Avancea, Ricardo V. Garcia and Lydia Florendo Veloso for appellant. Alberto R. de Joya for appellee. BAUTISTA ANGELO, J.: This, is a petition filed by the Rehabilitation Finance Corporation in G. L. R. O. Rec. No. 7671 of the Court of First Instance of Rizal for the cancellation of a notice of lis pendens annotated on the back of 5

Transfer Certificate of Title No. 12226 under section 112 of Act No. 496. Buen Morales opposed the petition on the main ground that, being an innocent third party, he is protected by the notice of lis pendens, and if the same will be cancelled, he will, suffer considerable damages as the result of cancellation. He also claims that the issues raised in his opposition which involved the ownership of the property affected by the notice of lis pendens cannot be resolved in the present incident and as much the court has no jurisdiction to act on the matter. After hearing, the court sustained the opposition holding that while the notice of lis pendens annotated subsequently to the mortgage in favor of petitioner cannot affect its right as mortgagee, yet "said notice certainly affected its right as purchaser because notice of us pendens simply means that a certain property is involved in a litigation and serves as notice to the whole world that one who buys the same does it at his own risks." Petitioner moved to reconsider the order, and when the motion was denied it appealed the order in this Court. The background of the incident is as follows: The property covered by the title on which the notice of lis pendens was annotated was originally bought by Consuelo A. Agoncillo from Gregorio Araneta, Inc. under an installment plan and before fully complying with it, Agoncillo sold the property, together with the improvements thereon, in favor of Buen Morales. The understanding between vendor and vendee was that the account would continue to be carried in the new of Agoncillo until it is fully paid, and when full payment is effected and the corresponding title issued, Agoncillo would execute the necessary transfer of title in favor of Morales. By reason of this agreement, the sale was not made of record in the office of Gregorio Araneta. Inc.

Without the knowledge of Morales, however, Agoncillo made an arrangement with the Rehabilitation Finance Corporation whereby she offered the property as a security for certain loan, said corporation agreeing to guarantee the payment of the balance of the purchase price to Gregorio Araneta, Inc. With this guarantee, Gregorio Araneta, Inc. caused to issue a certificate of title in the name of Agoncillo on the back of which the mortgage in favor of the Rehabilitation Finance Corporation was annotated. This annotation having been made, the Rehabilitation Finance Corporation paid Gregorio Araneta, Inc. the balance of the account in full and turned over to Agoncillo the rest of the loan. It was only after the loan had been obtained that Buen Morales discovered the anomalous transaction, and he immediately filed a complaint for estafa against Agoncillo in the office of the City Fiscal of Manila which culminated, in her criminal prosecution. At the same time, Morales filed a civil action in the court of first instance against Agoncillo and the Rehabilitation Finance Corporation for the recovery of the property and caused to be annotated a notice of lis pendens on the back of the title which was in the name of the Agoncillo. In the meantime, the mortgage in favor of the Rehabilitation Finance Corporation was foreclosed upon failure of Agoncillo to pay her obligation and at the public auction that ensued, said corporation bought the property as the highest bidder. The notice of lis pendens was carried forward and annotated on the new title issued in the name of the corporation. This is the notice which petitioner notice which petitioner now seeks to cancel in the present proceeding. There is no dispute that the notice of lis pendens was annotated on the back of the certificate of title issued in the name of Consuelo A. Agoncillo as necessary incident of the civil action instituted by Buen Morales to recover the ownership of the property affected by it against Agoncillo and the Rehabilitation Finance Corporation. There 6

is likewise no dispute that the mortgage executed by Agoncillo in favor of said corporation was annotated on the same title prior to the annotation of the notice of lis pendens, but that when it bought the property as the highest bidder at the auction sale made as an aftermath of the foreclosure of the mortgage, the title already bore the notice of lis pendens. The question now to be determined is: Can said notice of lis pendens be cancelled at the instance, at the instance of petitioner considering that the property affected by it is involved in a litigation wherein both Agoncillo and petitioner appear as party defendants? Resolving this issue, the lower court made the following comment: While it may be true that the notice of lis pendens was annotated subsequent to the mortgage in favor of the Rehabilitation Finance Corporation and cannot, therefore, affect its right as mortgagee, yet the said notice certainly affected its right as purchaser because notice of lis pendens simply means that a certain property is involved in a litigation and serves as a notice to the whole world that one who buys the same does so at his own risk. On the other hand, Section 24, Rule 7, which authorizes the annotation of a notice of lis pendens, provides: SEC. 24. Notice of lis pendens. In an action affecting the title or the right of possession of real property, the plaintiff, at the time of filing the complaint, and the defendant, at the time of filing his answer, when affirmative relief is claimed in such answer, or at any time afterwards, may record in the office of the registrar of deeds of the province in which the property is situated a notice of the pendency of the action, containing the names of the parties and the object of the action or defense, and a description of the

property in that province affected thereby. From the time only of filing, such notice for record shall a purchaser, or incumbrancer of the property affected thereby be deemed to have constructive notice of the pendency of the option, and only of its pendency against parties designated by their real names. (emphasis supplied). In the light of the above-quoted provision of the rule relating to the annotation of a notice of lis pendens, we find correct the finding of the lower court that the notice of lis pendens as annotated should be maintained. It should be noted that said notice was caused to be annotated as an incident of the action taken by the oppositor against both Consuelo A. Agoncillo and the Rehabilitation Finance Corporation to recover precisely the ownership of the property affected by the mortgage and said action, when the petition for cancellation was filed, was still pending and indisposed of. In that case, not only the propriety of the mortgage was involved, but also the very title acquired by petitioner when it subsequently bought the property as the highest bidder, and in said litigation petitioner was a party defendant. It can therefore be said that petitioner not only has a constructive knowledge of said litigation but is a party to the case. The notice is therefore intended to be a warning to this whole world that one who buys the property does so at his own risk. This is necessary order to save innocent third persons from any involvement in any future litigation concerning the property. It is true that as a matter of general principle the notice of lis pendens cannot affect the right of petitioner as mortgagee because the mortgage was another prior to the annotation of said notice and to the extent its right is protected by law as against subsequent encumbrances, but such cannot preclude the continuance of the notice of lis pendens for the simple reason that the property is actually in litigation. This is more so when the validity of the

mortgage is involved. Until the civil case is finally terminated, it would not be right nor proper to cancel the notice of lis pendens. The order appealed from is affirmed, without pronouncement as to costs. Bengzon, Padilla, Montemayor, Reyes, A., Labrador, Concepcion, Reyes, J.B.L. and Endencia, JJ., concur.

Gregorio S. Araneta also known as Don Gregorio Araneta y Soriano, was a Filipino lawyer, businessman, nationalist and patriot, who served his country and people during the Spanish colonization and American occupation. In 1891, he graduated from the University of Santo Tomas with a degree in law. He experienced firsthand the abuses of the Spanish authorities and later defended prominent Filipinos accused of financially supporting the Katipunan. He became the secretary of the Malolos Congress under Emilio Aguinaldo. He died on May 9, 1930 of myocardial infarction.

TRIVIA: Mr. Gregorio Ma. Araneta, III served as the President of Araneta Properties Inc. since October 2007 and serves as its Chief Executive Officer. Mr. Araneta serves as the President of Araza Resources Corporation, Envirotest Corporation, Enviroclean Corporation and Carmel Farms Inc. He serves as Chairman of the Board of Autobus Transport Systems Inc., Gregorio Araneta Management Corp., Gregorio Araneta Inc., Gamma Holdings Corporation, Carmel Development Corp. and Gamma Properties Inc. Mr. Araneta serves as the Chairman of Araneta Properties Inc. and served as its Vice Chairman. He has been Independent Director of ISM Communications Corp. since July 2003. He serves as a Director of LBC Development Bank and Asia International Travel Corporation. Mr. Araneta studied at the University of San Francisco and Ateneo de Manila where he earned his Bachelor of Arts Degree in Economics.

The antecedent facts are as follows: On December 10, 1964, Felix Lim filed with the then Court of the First Instance of Albay Civil Case No. 2953 against his brother Lim Kok Chiong 4 and Legaspi Avenue Hardware Company (LACHO) to annul two deeds of sale executed by Lim Kok Chiong in favor of LACHO, covering lots 1557 and 1558 located in the commercial district of Legaspi City, on the ground that the said deeds included the three-fourteenth 3/14 pro-indiviso portion of subject lots which he (Felix Lim) inherited by Will from his foster parents.1wphi1.nt During the pendency of Civil Case No. 2953, Felix Lim caused the annotation of notice of lis pendens on the certificates of title of said lots. On May 15, 1969, the trial court dismissed the Complaint, declaring LACHO the absolute owner of lots 1557 and 1558. Consequently, the notice of lis pendens annotated on TCT No. 2580 covering lot No. 1557 was cancelled on May 26, 1969. Aggrieved, Felix Lim appealed the case to the Court of Appeals. Pending the appeal thus interposed by Felix Lim before the Court of Appeals from such decision below, LACHO sold subject lots to the spouses Roy Po Lam and Josefa Ong Po Lam. On April 29, 1980, the Court of Appeals came out with its decision in AC G.R. No. 49770-R affirming the appealed decision a quo Felix Lim presented a motion for reconsideration but to no avail. The motion was denied. Without leave of court, he then resorted to a second motion for reconsideration which was favorably acted upon by the Court of Appeals on March 11, 1981, disposing thus: WHEREFORE, the decision of this Court of April 29, 1980, is hereby RECONSIDERED and SET ASIDE and a new judgment rendered:

TOPIC: NOT PURCHASERS IN GOOD FAITH BECAUSE OF THE NOTICE OF LIS PENDENS THIRD DIVISION

G.R. No. 116220 October 13, 1999 SPOUSES ROY PO LAM and JOSEFA ONG PO LAM, petitioners, vs. COURT OF APPEALS and FELIX LIM now JOSE LEE, respondents. PURISIMA, J.: At bar is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court seeking to set aside the Decision 1 of the Court of Appeals 2 dated June 30, 1993 in CA-G.R. CV NO. 37452 which affirmed the Decision 3 dated January 14, 1992 in Civil Case No. 6767 of Branch 2, Regional Trial Court of Legaspi City.

(1) Setting aside the decision of the lower Court; (2) Declaring plaintiff the Owner of threefourteenth (3/14) pro indiviso . . . portion of Cadastral Lots Nos. 1557 and 1558 of the Albay Cadastre; (3) Declaring plaintiff entitled to exercise the right of redemption of said properties which were sold by Lim Kok Chiong to defendant Legaspi Avenue Hardware by returning to said vendee within thirty (30) days from receipt of notice from the Clerk of Court of First Instance of Albay of the records of this case from this Court pursuant to Section 11 of Rule 52 of the Rules of Court, the sum of P20,000.00 plus expenses of the contract and other legitimate payments made by defendants by reason of the sale and such necessary and useful expenses that may have been made on the properties by defendants; (4) In the event that the parties cannot agree on the amount of expenses of the contract and other legitimate expenses made by reason of the sale and the necessary and useful expenses made by defendant on the properties, the court a quo shall receive the evidence of the parties solely for the purpose of determining said amounts to be paid by plaintiff in addition to the P20,000.00. Pending determination of the said amount and upon payment by plaintiff of the sum of P20,000.00 to defendant within the aforesaid period of thirty (30) days above-mentioned, defendant shall execute an appropriate deed of conveyance in favor of plaintiff of the properties in question without prejudice to

the determination of the additional amounts to be paid by plaintiff to defendant. Should defendant refuse or fail to execute said deed of conveyance within thirty (30) days the Court a quo shall order its clerk of court to execute said deed of conveyance. No pronouncement as to costs. 5 LACHO having failed to appeal therefrom, the aforesaid decision became final and executory. On November 12, 1981, Lim filed in the same Civil Case No. 2953 a motion to annotate the said Resolution of the Court of Appeals of March 11, 1989 in G.R. No. 44770-R on the certificate of title of the spouses Po Lam. He likewise moved for the issuance of a writ of execution to enforce the said Resolution and for the execution in his favor of a deed of conveyance of the lots litigated upon. However, the said motions were all denied by the trial court in its Order dated February 4, 1982, the decretal portion of which Order reads: WHEREFORE, reserving to the party/plaintiff the right to institute an action on whether or not the acquisition of the properties in question by spouses Roy Po Lam and Josefa Ong Po Lam, were made in good faith, or whether in the process the cooperation of the Register of Deeds pave the way for such transfer, the writ of execution issued under and by virtue of the Order dated October 20, 1981 is hereby ordered Quash. Consequently likewise, the motion filed by the party/plaintiff to have the order of the Court of Appeals annotated TCT Nos. 8102 and 13711 of the Register of Deeds of Legaspi registered in the name 10

of Roy Po Lam and Josefa Ong Po Lam are hereby DENIED for being premature sans a finding of bad faith on the part of the latter; and the motion to require the party/defendant to execute the deed of conveyance or in his stead, the Clerk of Court are hereby DENIED on the ground of impossibility of performance. 6 Instead of an appeal from the said Order, on February 9, 1982 Felix Lim filed with the Regional Trial Court of Legaspi City, Branch 2, the instant case, docketed as Civil Case No. 6767 for reconveyance and annulment of sale against the spouses Roy Po Lam and Josefa Ong Po Lam. On September 19, 1985, Lim again filed with the trial court in Civil Case 2953, a motion to include spouses Roy Po Lam and Josefa Ong Po Lam as party defendants in the case, as well as a motion to execute the March 11, 1981 Resolution of the Court of Appeals in AC G.R. No. 44770-R. On October 16, 1985, both motions were denied by the trial court and on appeal, in CA G.R. No. 08533-CV, the Court of Appeals upheld the Order of Denial. On October 29, 1990, Felix Lim assigned all his rights to and interest in subject properties to Jose Lee, (a lessee of a commercial building standing on Lot No. 1557), who since then, has substituted Felix Lim as party plaintiff, now the private respondent. Meanwhile, in June 1970, after the herein petitioners bought subject lots from LACHO, the former leased the commercial building on Lot 1557 to the herein private respondent, Jose Lee. But the petitioners later lodged against the latter a Complaint for unlawful detainer, docketed as Civil case No. 2687, before the Metropolitan Trial Court of Legaspi City.

On December 19, 1993, the Metropolitan Trial Court of Legaspi City handed down its decision in the decision, said unlawful detainer case, declaring the herein petitioners as the lawful owners of Lot 1557, and disposing: WHEREFORE, judgment is hereby rendered: (1) declaring the plaintiffs as lawful owners of, and rightfully entitled to the immediate possession of the leased commercial building and Lot 1557, covered by TCT No. 8102 (formerly TCT 2580) as described in paragraph 2 of the complaint; (2) directing the defendant, his agent, or anyone acting in his behalf, to vacate said leased building and lot, and to restore the actual possession thereof, to the plaintiffs; (3) ordering the defendant to pay directly the plaintiffs the whole rentals which accrued, from October 1981 up to the time he shall have vacated the leased premises, at the rate of P2,500.00 a month, minus the amounts already deposited with the City Treasurer's Office of Legazpi, which amounts are hereby allowed to be withdrawn by the plaintiffs, their counsel or representative; (4) directing the defendant to also pay the plaintiffs the amounts of (a) P2,500.00 and P1,200.00 as exemplary damages and attorney's fees respectively; and (b) the costs of the suit. 7 The aforesaid decision was affirmed by the Regional Trial Court and thereafter, by the Court of Appeals in CA-G.R. No. 12316-SP. On February 18, 1988, in G.R. No. 84145-55 (Lim vs. Court of Appeals 8), this Court ruled on Felix Lim's appeal from CA-G.R. No. 12316-SP (unlawful detainer case) and from CA G.R. No. 08533-CV 11

(which affirmed the October 16, 19685 Order of the trial court in Civil Case no. 2953) as follows: ACCORDINGLY, the decisions appealed from are modified. The portions of the appealed decisions dealing with the March 11, 1981 resolution in AC G.R. No. 44770-R are reversed and set aside and the said resolution is ordered reinstated. The decisions are affirmed in all other respects. Costs against private respondents. SO ORDERED 9 On January 14, 1992, the Regional Trial Court of Legaspi City decided Civil Case No. 6767 to the following effect: WITH THE FOREGOING RATIOCINATION AND DEDUCTION, the court hereby DECLARES the defendants spouses Roy Po Lam and Josefa Ong Po Lam as TRANSFEREES PENDENTE LITE, thus they are not purchasers in good faith. They are therefore bound by the decision rendered in AC-G.R. No. 44770-R promulgated on March 11, 1981. No damages having been proved, no award is made concerning the same. No pronouncement as to costs. SO ORDERED. 10 The herein petitioners appealed the Court of Appeals which affirmed the Decision appealed from on June 30, 1990. 11

Undaunted, petitioners found their way to this court via the present petition, contending that: I CONTRARY TO ITS EARLIER JUDGMENTS IN CA-G.R. NO. 12316SP AND AC-G.R. NO. 08533-CV FEBRUARY 18, 1988. THE HONORABLE COURT, IN ITS SUBJECT DECISION, GRAVELY ERRED IN THE CONCLUSION THEREIN THAT "(T)HE MARCH 11, 1981 DECISION" "WOULD NATURALLY AND LOGICALLY" BE ENFORCEABLE AGAINST DEFENDANT-APPELLANTS. (CA DECISION, JUNE 30, 1993) 12 II THE PRONOUNCEMENT IN LIM VS. COURT OF APPEALS, 188 SCRA 23, 32-34, SUPPORTS THE ADVERTED TWIN JUDGMENTS CAG.R. No. 12316-SP and AC-G.R. No. 08533-CV AND INVOLVES, NOT THE ISSUE OF "VESTED RIGHTS IN TECHNICALITIES, BUT THE MORE VITAL AND DECISIVE QUESTION OF CA JURISDICTION TO ALTER ITS EXECUTIRY JUDGMENT OF APRIL 28, 1980. 13 III THE FATAL ERRORS OF RESPONDENT FELIX LIM, SUBSTITUTED BY JOSE LEE, ARE THAT (1) HIS COMPLAINT, FILED ON 12

DECEMBER 10, 1964 TO DECLARE VOID AND SET ASIDE TWO DEEDS OF SALE COVERING LOTS 1557 AND 1558, EXECUTED BY LIM KOK CHIONG IN FAVOR OF LEGAZPI AVENUE HARDWARE CO. (LACHO), ALLEGEDLY BECAUSE SAID DEEDS INCLUDED HIS 3/14 PRO INDIVISO PORTION THEREOF, WAS DISMISSED BY THE TRIAL COURT UPON FELIX LIM'S MOTION (LIM VS. COURT OF APPEALS, 188 SCRA 25) DESPITE THE MANDATORY RULE ON IMPLEADING AN INDESPENSABLE (sic) PARTY; AND THAT (2) FROM THE CA DECISION THEREON, INSTEAD OF PERFECTING AN APPEAL BY CERTIORARI TO THE SUPREME COURT (SEC. 1, RULE 45). LIM FILED HIS USELESS SECOND MOTION FOE RECONSIDERATION. 14 III THERE WAS A GRAVE ERROR, A GRAVE ABUSE OF DISCRETION AND A SERIOUS ANOMALY IN THE LOWER COURT'S APPEALED DECISION ANENT THE SUPPOSED OBITER DICTUM (DECISION IN CIVIL CASE NO. 6767, JAN. 14, 1992, P. 14; FIRST ASSIGNMENT OF ERROR, APPELLANTS' BRIEF, CA-G.R. CV NO. 37452, PP. 14-17; CA DECISION, JUNE 30, 1993; P. 8) IN G.R. NO. 68789, NOVEMBER 10, 1986, 145

SCRA 408-418, THE LEGAL EFFECT OF WHICH WAS IGNORED IN THE CA DECISION SOUGHT TO BE NULLIFIED AND SET ASIDE. 15 V THERE IS NO EVIDENCE OF PETITIONER'S BEING ALLEGEDLY IN BAD FAITH AND TRASNFEREES PENDENTE LITE; NEITHER IS THERE EVIDENCE OF FRAUD. 16 Petitioners capitalize on what this Court said in Lim vs. Court of Appeals that they could not be affected by the proceedings held in Civil Case No. 2953 and CA G.R. No. 44770-R, as they are partieslitigants therein. Petitioners overlooked the fact that the said pronouncement was made with an explicit recognition by this court of the pendency then of the present case (Civil Case No. 6767) before Branch 2, Regional Trial Court of Legaspi City, where the good faith or bad faith of petitioners in acquiring subject lots is the very issue. As ratiocinated by the Court of Appeals, when the Supreme Court declared that the March 11, 1981 Resolution cannot affect the herein petitioners, it was referring to the said March 11, 1981 Resolution, without prejudice to the outcome of this litigation commenced by the latter, to whom the right to bring the said action was reserved by the trial court in its Order of February 4, 1982. 17 Thus, the March 11, 1981 Resolution, coupled with a finding of bad faith on the part of the petitioners in the case at bar, would necessarily make the said March 11, 1981 Resolution enforceable against the petitioners. The procedural matters questioned by the petitioners in the second and third assigned errors deserve scant consideration, the same having been passed upon by this court in the case of Lim vs. Court of Appeals, on the basis of the following disquisition: 13

. . . But one does not have any vested right in technicalities. In meritorious cases, a liberal not literal interpretation of the rules becomes imperative and technicalities should not be resorted to in derogation of the intent of the rules which is the proper and just determination of litigations. Litigations should, as much as possible be decided on their merits and not on technicality, . . . . As has been the constant ruling of this Court, every partylitigant should be afforded the amplest opportunity for the proper and just disposition of his cause free from the constraints of technicalities (Fonseca v. CA, G.R. No. L-36035, 30 August 1988; Hernandez v. Quirtan, G.R. No. L-48457, 29 November 1988, 168 SCRA 99). Furthermore, private respondents failed to raise the issue of failure to comply with the rules. Their failure has the effect of waiver (Republic v. Judge Villanueva, G.R. No. 83333, February 2, 1989, En Banc, Minute Resolution).1wphi1.nt The reversal made by respondent Court of its April 29, 1980 decision in AC-G.R. No. 44770-R thru its March 11, 1981 resolution was the result of a thorough deliberation and evaluation of the evidence of the parties . . . . . 18 So also, Lim vs. Court of Appeals ruled on the legal effect of the Decision of the City Court of Legaspi City in the unlawful detainer case, which declared that the herein petitioners are the lawful owners of Lot 1557. The ruling in Lim vs. Court of Appeals reinstating the Resolution of the Court of Appeals, dated March 11, 1981, would lead to the inevitable conclusion that this court recognized the finality of the said Resolution declaring Felix Lim as the owner of the 3/14 pro indiviso portion of subject lots and

further declaring him (Lim) to be entitled to the exercise the right of redemption of said properties subject, however, to the finding in this case on the good faith or bad faith of the herein petitioners in purchasing the said lots. What portions then of the March 11, 1981 Resolution were ordered reversed and set aside in the dispositive portion of Lim vs. Court of Appeals? Bearing in mind the pendency of the case before the Regional Trial Court of Legaspi City (which case is intended precisely to determine the validity of petitioners' acquisition of Lots 1557 and 1558), the reversed portions of said Resolution would logically be no other than: 1) the decision of the MTC of Legaspi City declaring the herein petitioners as the lawful owners of the 3/14 undivided portion of Lot 1557; and 2) the declaration of the Court of Appeals in CA 44770 (Civil Case No. 2953) that the herein petitioners are considered buyers in bad faith. We now look into and resolve the validity of petitioners' acquisition of the lots in dispute. As to Lot 1558, there is no question that they (petitioners) cannot be deemed buyers in good faith. The annotation of lis pendens on TCT No. 2581 which covers Lot 1558, served as a notice to them that the said lot is involved in a pending litigation. 19 Settled is the rule that one who deals with property subject of a notice of lis pendens, cannot invoke the right of a purchaser in good faith. Neither can he acquire better rights than those of his predecessors in interest. A transferee pendente lite stands in the shoes of the transferor and is bound by any judgment or decree which may be rendered for or against the transferor. 20 It is thus beyond cavil that the herein petitioners, who purchased Lot 1558 subject of a notice of lis pendens, are not purchasers in good faith and are consequently bound by the Resolution dated March 11, 1981 of the Court of Appeals.

14

Can petitioners then be treated purchasers in good faith of Lot 1557 covered by TCT No. 2580 considering that the notice of lis pendens thereon had been already cancelled at the time of the sale? We rule in the negative. It is a firmly settled jurisprudence that a purchaser cannot close his eyes to facts which should put a reasonable man on guard and claim that he acted in good faith in the belief that there was no defect in the title of the vendor. 21 His mere refusal to believe that such a defect exist, or his willful closing of his eyes to the possibility of the existence of a defect in his vendor's tittle, will not make him innocent purchaser for value, if it develops afterwards that the title was in fact defective, and it appears that he had notice of such defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation. 22 In the case under consideration, there exist circumstances which should have placed the herein petitioners on guard. As aptly stressed upon by the respondent court, while it is true that when the petitioners purchased Lot 1557, the notice of lis pendens affecting said lot had been cancelled, it could not be denied that such inscription appears on the Transfer Certificate of Title of the said lot together with the cancellation of the notice of lis pendens. This fact coupled with the non-cancellation of the notice of lis pendens on Transfer Certificate of Title No. 2581 covering Lot 1558, should have sufficiently alerted the petitioners vis-a-vis a possible defect in the title of LACHO, especially so that Lots 1557 and 1558 were simultaneously sold to the petitioners in a single deed of sale executed on May 28, 1969. Then too, considering that Lots 1557 and 1558 are prime commercial lots at the heart of the commercial district of Legaspi City, it is unbelievable that the petitioners who were assisted in purchasing the lots by Atty. Rodolfo Madrid (who during his time was a well-known lawyer of competence in the Province of Albay)

would have released the purchase price of 700,000.00 without inquiring into the status of the subject lots. Verily spouses Roy Po Lam and Josefa Ong Po Lam willfully closed their eyes to the possibility of a defect in the vendor's (LACHO) title. The petitioners, very much aware of the pending litigation affecting the lots under controversy, gambled on the outcome of the litigation. Consequently, they cannot now be permitted to evade the outcome of the risk they assumed. Premises studiedly considered, the Court is of the ineluctable conclusion, and so holds, that the petitioners, Roy Po Lam and Josefa Ong Po Lam, are transferees pendente lite and therefore, not purchasers in good faith and are thus bound by the Resolution dated March 11, 1981 of the Court of Appeals in AC-G.R. No 44770R.1wphi1.nt WHEREFORE, the Petition is DENIED and the decision of the Court of Appeals in CA-G.R. CV No. 37452 AFFIRMED in toto. No pronouncement as to costs. SO ORDERED. Melo, Vitug, Panganiban and Gonzaga-Reyes, JJ., concur. Footnotes 1 Annex "B", Rollo, pp. 69-89. 2 Thirteenth Division, composed of Associate Justices: Serafin V. C. Guingona (ponente), Antonio M. Martinez (chairman), and Eubulo C. Verzola. 3 Annex "A", Rollo, pp. 49-68.

15

4 On November 3, 1969, the trial court on motion of Felix Lim dropped the case against him. 5 Decision, Rollo, pp. 51-52. 6 Decision, Rollo, p. 53. 7 Decision, Rollo, p. 54. 8 188 SCRA 23. 9 188 SCRA 23, p. 37. 10 Decision, Annex "A", Rollo, p. 68. 11 Decision, Rollo, p. 88. 12 Petition, Rollo, p. 29. 13 Id., p. 34. 14 Id., p. 37. 15 Id., p. 41. 16 Id., p. 44. 17 Decision, Annex "B", Rollo, p. 88. 18 Lim vs. Court of Appeals, 188 SCRA 23, pp. 33-34. 19 Yu vs. Court of Appeals 251 SCRA 509, p. 513.

20 Id. p. 513-514, citing Constantino vs. Espiritu, 45 SCRA 557 [1972], Tuazon vs. Reyes and Siochi, 48 Phil. 844 [1962]; Demontano vs. Court of Appeals, 81 SCRA 287 [1978]; Rivera vs. Moran 48 Phil. 388 [1926]; Director of Lands vs. Martin 48 Phil. 140 [1949]. 21 Leung Yee vs. F.L. Strong Machinery Co. and Williamson 37 Phil. 644, p. 665. 22 Rehabilitation Finance Corporation vs. Lucio Javillonas, et al., 107 Phil. 644, p. 667-668.

16

G.R. No. 135016 September 10, 2001 SOLID HOMES, INC., petitioner, vs. INVESTCO, INC., substituted by ARMED FORCES OF THE PHILIPPINES MUTUAL BENEFIT ASSOCIATION, INC., respondent. RESOLUTION PARDO, J.: What is before the Court is Solid Homes, Inc.s motion for reconsideration of the decision promulgated on March 3, 2000, reversing the decision of the Court of Appeals and ordering the Register of Deeds to cancel the notice of lis pendens on the titles issued to petitioner AFP Mutual Benefit Association, Inc. (AFPMBAI), declaring it as buyer in good faith and for value. We have defined a purchaser in good faith and for value as one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other person in the property.1 Solid Homes, Inc.s motion for reconsideration is based on the following grounds: (1) that the Court erred in ruling that petitioner was a purchaser in good faith and for value; (2) that the Court erred in failing to appreciate Solid Homes, Inc.s cause of action (in Civil Case No. 52999); and (3) that the Court erred in denying Solid Homes, Inc.s petition (in G. R. No. 135016) to set aside the trial courts order denying its motion to execute the decision in Civil Case No. 40615.

TOPIC: 1. PENCIL MARKINGS NOT ALLOWED in annotation 2. NOTICE OF LIS PENDENS DOES NOT APPLY IN MONEY JUDGEMENT

FIRST DIVISION G.R. No. 104769 September 10, 2001

AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner, vs. COURT OF APPEALS, SOLID HOMES, INC., INVESTCO, INC., and REGISTER OF DEEDS OF MARIKINA, respondents. x---------------------------------------------------------x

17

We find the motion without merit. 1. Solid Homes, Inc.s position is anchored on the preposition that a notice of lis pendens was duly annotated on the vendors title that must be deemed carried over to the titles issued to AFPMBAI, subjecting it to the final result of the litigation2 as a transferee pendente lite. However, the law is clear.3 The Revised Rules of Court4 allows the annotation of a notice of lis pendens in actions affecting the title or right of possession of real property,5 or an interest in such real property.6 We further declared that the rule of lis pendens applied to suits brought "to establish an equitable estate, interest, or right in specific real property or to enforce any lien, charge, or encumbrance against it x x x."7 Pencil markings, which even Solid Homes, Inc. admits to be provisional,8 are not an accepted form of annotating a notice of lis pendens. The Court cannot accept the argument that such pencil annotation can be considered as a valid annotation of notice of lis pendens, and thus an effective notice to the whole world as to the status of the title to the land. The law requires proper annotation, not "provisional" annotation of a notice of lis pendens. If we allow provisional annotations as a valid form of annotation of notice of lis pendens, we would be eroding the very value of the indefeasibility of the torrens system. If there were a valid annotation of notice of lis pendens, the same would have been carried over to the titles issued to AFPMBAI. As it is, the transfer certificates of titles of the vendor Investco, Inc. conveyed to AFPMBAI were clean and without any encumbrance. In the present case, there could be no valid annotation on the titles issued to AFPMBAI because the case used as basis of the annotation

pending with the trial court was an action for collection of a sum of money and did not involve the titles to, possession or ownership of the subject property or an interest therein. This Court, in its final decision on the case categorized the action initiated by Investco, Inc. against Solid Homes, Inc. (Civil Case No. 40615 of the Regional Trial Court, Pasig, Metro Manila) as: "An action for collection of sums of money, damages and attorneys fees was filed with the Regional Trial Court (Civil Case No. 40615) of Pasig by private respondents Investco, Angela Perez Staley and Antonio Perez, Jr. against petitioner Solid Homes, Inc."9 Unquestionably, such action did not directly involve titles to, ownership or possession of the subject property, and, therefore, was not a proper subject of a notice of lis pendens. "The Torrens System was adopted in this country because it was believed to be the most effective measure to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized. If a person purchases a piece of land on the assurance that the sellers title thereto is valid, he should not run the risk of being told later that his acquisition was ineffectual after all. This would not only be unfair to him. What is worse is that if this were permitted, public confidence in the system would be eroded and land transactions would be attended by complicated and not necessarily conclusive investigations and proof of ownership. The further consequence would be that land conflicts could be even more numerous and complex than they are now and possibly also more abrasive, if not even violent."10 Prevailing jurisprudence recognizes that "All persons dealing with property covered by the torrens certificate of title are not required 18

to go beyond what appears on the face of the title."11 "The buyer is not even obligated to look beyond the certificate to investigate the titles of the seller appearing on the face of the certificate."12 Hence, we ruled that AFPMBAI is a buyer in good faith and for value. Consequently, we reject movant Solid Homes, Inc.s contention that AFPMBAI is a transferee pendente lite of Investco, Inc. 2. It should be emphasized that the contractual relation between Investco, Inc. and Solid Homes, Inc., is based on an agreement executed in 1976 as a contract to sell and to buy. AFPMBAI never figured in this contract. The relationship between AFPMBAI and Investco, Inc. arose out of a contract of absolute sale after Solid Homes, Inc. reneged or defaulted on its contract to sell, and Investco, Inc. rescinded extra-legally such contact to sell with Solid Homes, Inc. AFPMBAI did not acquire from Solid Homes, Inc. its rights or interest over the property in question; Investco, Inc. sold the property itself which AFPMBAI paid for in full, thus causing the transfer of titles in the name of AFPMBAI. When the contract was entered into between Solid Homes, Inc. and Investco, Inc. in September 1976, the titles to the Quezon City and Marikina property had not been transferred in the name of Investco, Inc. as assignee of the owners. Hence, Investco, Inc. merely agreed to sell, and Solid Homes, Inc. to buy, the formers "rights and interest" in the subject property which at the time was still registered in the names of Angela Perez Staley and Antonio Perez, Investco, Inc.s predecessors-in-interest. Under the contract to sell and buy, the vendors bound themselves to cause the titles to the land to be transferred in the name of Investco, Inc. after which, should Solid Homes, Inc. complete the installment payments, Investco, Inc. would execute a "Deed of Absolute Sale" in favor of Solid Homes, Inc. and the latter would

execute a first preferred mortgage in favor of Investco, Inc. The deed of absolute sale would replace the contract to sell. Only then would Solid Homes, Inc. be entitled to take possession of the Quezon City and Marikina parcels of land and introduce improvements thereon. On or about March 21, 1979, the titles to the Marikina property were issued in the name of Investco, Inc. However, Investco, Inc. did not execute a deed of absolute sale in favor of Solid Homes, Inc. because Solid Homes, Inc. never paid in full its stipulated obligation payable in installments. In fact, Solid Homes, Inc. did not even bother to register its contract to sell with the Register of Deeds pursuant to Presidential Decree 1529, also known as the "Property Registration Decree." 3. We find untenable Solid Homes, Inc.s contention that the transaction between AFPMBAI, Investco, Inc. and Solid Homes, Inc. is in the nature of a double sale. The transaction between Investco, Inc. and Solid Homes, Inc. was a contract to sell and to buy that was not fully paid because Solid Homes, Inc. defaulted on its payments. On the other hand, the contract between Investco, Inc. and AFPMBAI was an absolute sale that culminated in the registration of the deeds and the issuance of certificate of titles in favor of AFPMBAI. In Salazar v. Court of Appeals,13 we explained the distinction between a contract to sell and a contract of sale: "In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot 19

recover it until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor until full payment of the price. In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective."14 Upon Solid Homes, Inc.s failure to comply with its obligation thereunder, there was no need to judicially rescind the contract to sell. Failure by one of the parties to abide by the conditions in a contract to sell resulted in the rescission of the contract.15 Unquestionably, Solid Homes, Inc. reneged on its obligation to pay the installments for the purchase of the Quezon City and Marikina property of Investco, Inc. on the dates specified in the contract to sell. 4. Movant Solid Homes, Inc. finally contends that when the decision in Civil Case No. 40615 became final, there was no one to move for execution of the decision since Investco, Inc. had absconded, and had in fact re-sold the property in question to AFPMBAI. We find the contention without merit. Investco, Inc. was the prevailing party which had the right to demand execution.16 "Once a judgment becomes final and executory, the prevailing party can have it executed as a matter of right, and the issuance of a writ of execution becomes a ministerial duty of the court."17 In fact, the prevailing party is the one really entitled to file a motion for the issuance of a writ of execution. Yet, in this case, it was Solid Homes, Inc. that filed on June 19, 1996, a motion for execution of judgment in the court of origin (RTC Pasig, Branch 157). The trial court denied the motion. Hence, on September 11, 1998, Solid Homes, Inc. filed a petition for certiorari with this Court.18

Assuming that AFPMBAI was bound by the judgment in Civil Case No. 40615, and be substituted for Investco, Inc., it is clear that Investco, Inc. prevailed in the case. It was the winning party.19 It is the prevailing party which is entitled as a matter of right to a writ of execution in its favor.20 It is not an option of the losing party to file a motion for execution of judgment to compel the winning party to take the judgment. As the losing party in Civil Case No. 40615, Solid Homes, Inc. can not now insist on the performance of the very contract on which it defaulted for more than fourteen (14) years. Hence, Solid Homes, Inc. has no personality to move for execution of the final judgment in Civil Case No. 40615. The trial court correctly denied its motion for execution. It would be the height of unfairness if Solid Homes, Inc. which has failed to pay anything since 1981 and defaulted since 1982, would now get the property by performance of the very contract which it violated. With the passage of time, more than fourteen (14) years, and appreciation in the value of real estate, the property is now worth billions of pesos,21 thus enriching Solid Homes, Inc. for its violation of the contract and default on its obligation. IN VIEW WHEREOF, we DENY Solid Homes, Inc.s motion for reconsideration, for lack of merit. The denial is final. SO ORDERED. Davide, Jr., C.J., Puno, Kapunan, and Ynares-Santiago, JJ., concur.

Footnotes
1

Diaz-Duarte v. Ong, 358 Phil. 876, 885 [1998].

20

In Civil Case No. 40615, RTC Pasig. Solid Homes, Inc. v. Court of Appeals, 235 SCRA 299 [1994].
3

Solid Homes, Inc. v. Court of Appeals, 235 SCRA 299, 300 [1994].
10

P. D. No. 1529.

Rule 13, Section 14, Revised Rules of Court; Po Lam v. Court of Appeals, G. R. No. 116220, December 6, 2000.
5

Traders Royal Bank v. Court of Appeals; and Capay v. Santos, 315 SCRA 190, 202 [1999], citing Tenio-Obsequio v. Court of Appeals, 230 SCRA 550 [1994].
11

Vda. de Medina v. Cruz, 161 SCRA 36, 44 [1988].

Gochan v. Young, G. R. No. 131889, March 12, 2001; Villanueva v. Court of Appeals, 346 Phil. 289, 302 [1997].
6

12

Alberto v. Court of Appeals, 334 SCRA 756, 772 [2000]. A notice of lis pendens is proper in the following cases: a) An action to recover possession of real estate;

Tenio-Obsequio v. Court of Appeals, supra, Note 10; Republic v. Intermediate Appellate Court, 209 SCRA 90, 101102 [1992].
13

327 Phil. 944, 955 [1996].

14

b) An action to quiet title thereto; c) An action to remove clouds thereon; d) An action for partition; and e) Any other proceedings of any kind in Court directly affecting the title to the land or the use or occupation thereof or the buildings thereon. (Magdalena Homeowners Association, Inc. v. Court of Appeals, 184 SCRA 325, 329-330 [1990]).
7

Citing Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 150-B Phil. 264 [1972]; Jacinto v. Kaparaz, 209 SCRA 246, 254 [1992]; Visayan Sawmill Co., Inc. v. Court of Appeals, 219 SCRA 378, 389 [1993]; Pingol v. Court of Appeals, 226 SCRA 118, 126 [1993]; Dawson v. Register of Deeds, 356 Phil. 1037, 1045 [1998].
15

Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., supra, Note 14.
16

Rule 39, Section 1, Revised Rules of Court.

17

Viewmaster Construction Corporation v. Maulit, 326 SCRA 821, 829-830 [2000], citing Villanueva v. Court of Appeals, supra, Note 5.
8

Buaya v. Stronghold Insurance Co., Inc., G. R. No. 139020, October 11, 2000, citing Rubio v. MTCC, Br. 3, Cagayan de Oro City, 322 Phil. 171, 193-194 [1996]; Soco v. Court of Appeals, 331 Phil. 753, 760 [1996].
18

Motion for Reconsideration, Rollo, pp. 469-518, at p. 485.

Docketed as G. R. No. 135016.

21

19

See Solid Homes, Inc. v. Court of Appeals, 235 SCRA 299 [1994].
20

Rule 39, Section 1, Revised Rules of Court; Carreon v. Buissan, 162 Phil. 77, 83 [1976].
21

The land involved is a 35.53 hectare lot, located at the outskirts of Marikina City, adjacent to the Loyola Grand Villa Subdivision, Ayala Heights Subdivision and Capitol Golf and Country Club, Quezon City (Solid Homes, Inc. Memorandum, dated December 10, 2000, pp. 724-725) (Rollo, pp. 724809).

ADVERSE CLAIM

22

SECOND DIVISION

The facts are not disputed, and are hereby reproduced as follows: On September 22, 1983, the spouses Ernesto Uychocde and Lucita Jarin agreed to sell a parcel of residential land located in Antipolo, Rizal to the spouses Alfredo Sajonas and Conchita R. Sajonas on installment basis as evidenced by a Contract to Sell dated September 22, 1983. The property was registered in the names of the Uychocde spouses under TCT No. N-79073 of the Register of Deeds of Marikina, Rizal. On August 27, 1984, the Sajonas couple caused the annotation of an adverse claim based on the said Contract to Sell on the title of the subject property, which was inscribed as Entry No. 116017. Upon full payment of the purchase price, the Uychocdes executed a Deed of Sale involving the property in question in favor of the Sajonas couple on September 4, 1984. The deed of absolute sale was registered almost a year after, or on August 28, 1985. Meanwhile, it appears that Domingo Pilares (defendant-appellant) filed Civil Case No. Q-28850 for collection of sum of money against Ernesto Uychocde. On June 25, 1980, a Compromise Agreement was entered into by the parties in the said case under which Ernesto Uychocde acknowledged his monetary obligation to Domingo Pilares amounting to P27,800 and agreed to pay the same in. two years from June 25, 1980. When Uychocde failed to comply with his undertaking in the compromise agreement, defendant-appellant Pilares move d for the issuance of a writ of execution to enforce the decision based on the 23

G.R. No. 102377 July 5, 1996 ALFREDO SAJONAS and CONCHITA SAJONAS, petitioners, vs. THE COURT OF APPEALS, DOMINGO A. PILARES, SHERIFF ROBERTO GARCIA OF QUEZON CITY and REGISTER OF DEEDS OF MARIKINA, respondents.

TORRES, JR., J.:p A word or group of words conveys intentions. When used truncatedly, its meaning disappears and breeds conflict. Thus, it is written -- "By thy words shalt thou be justified, and by thy words shalt thou be condemned." (Matthew, 12:37) Construing the new words of a statute separately is the raison d'etre of this appeal. Essentially, the case before us is for cancellation of the inscription of a Notice of Levy on Execution from a certificate of Title covering a parcel of real property. The inscription was caused to be made by the private respondent on Transfer Certificate of Title No. N-79073 of the Register of Deeds of Marikina, issued in the name of the spouses Ernesto B. Uychocde and Lucita Jarin, and was later carried over to and annotated on Transfer Certificate of Title No. N-109417 of the same registry, issued in the name of the spouses Alfredo Sajonas and Conchita H. Sajonas, who purchased the parcel of land from the Uychocdes, and are now the petitioners in this case.

compromise agreement, which the court granted in its order dated August 3, 1982. Accordingly, a writ of execution was issued on August 12, 1982 by the CFI of Quezon City where the civil case was pending. Pursuant to the order of execution dated August 3, 1982, a notice of levy on execution was issued on February 12, 1985, On February 12, 1985, defendant sheriff Roberto Garcia of Quezon City presented said notice of levy on execution before the Register of Deeds of Marikina and the same was annotated at the back of TCT No. 79073 as Entry No. 123283. When the deed of absolute sale dated September 4, 1984 was registered on August 28, 1985, TCT No. N79073 was cancelled and in lieu thereof, TCT No. N109417 was issued in the name of the Sajonas couple. The notice of levy on execution annotated by defendant sheriff was carried over to the new title. On October 21, 1985, the Sajonas couple filed a Third Party Claim with the sheriff of Quezon city, hence the auction sale of the subject property did not push through as scheduled. On January 10, 1986, the Sajonas spouses demanded the cancellation of the notice of levy on execution upon defendant-appellant Pilares, through a letter to their lawyer, Atty. Melchor Flores. Despite said demand, defendant-appellant Pilares refused to cause the cancellation of said annotation. In view thereof, plaintiffs-appellees filed this complaint dated January 11, 1986 on February 5, 1986. 1

The Sajonases filed their complaint 2 in the Regional Trial Court of Rizal, Branch 71, against Domingo Pilares, the judgment creditor of the Uychocdes. The relevant portion of the complaint alleges: 7. That at the time the notice of levy was annotated by the defendant, the Uychocde spouses, debtors of the defendant, have already transferred, conveyed and assigned all their title, rights and interests to the plaintiffs and there was no more title, rights or interests therein which the defendant could levy upon; 8. That the annotation of the levy on execution which was carried over to the title of said plaintiffs is illegal and invalid and was made in utter bad faith, in view of the existence of the Adverse Claim annotated by the plaintiffs on the corresponding title of the Uychocde spouses; 9. That a demand was made by the plaintiffs upon the defendant Domingo A. Pilares, to cause the cancellation of the said notice of levy but the latter, without justifiable reason and with the sole purpose of harassing and embarrassing the plaintiffs ignored and refused plaintiffs' demand; 10. That in view of the neglect, failure and refusal of the defendant to cause the cancellation of the notice of levy on execution, the plaintiffs were compelled to litigate and engage the services of the undersigned counsel, to protect their rights and interests, for which they agreed to pay attorney's fees in the amount of P10,000 and appearance fees of P500 per day in court. 3 24

Pilares filed his answer with compulsory counterclaim 4 on March 8, 1986, raising special and affirmative defenses, the relevant portions of which are as follows: 10. Plaintiff has no cause of action against herein defendants; 11. Assuming without however admitting that they filed an adverse claim against the property covered by TCT No. 79073 registered under the name of spouses Ernesto Uychocde on August 27, 1984, the same ceases to have any legal force and effect (30) days thereafter pursuant to Section 70 of P.D. 1529; 12 The Notice of Levy annotated at the back of TCT No. 79073 being effected pursuant to the Writ of Execution dated August 31, 1982, duly issued by the CFI (now RTC) of Quezon proceeding from a decision rendered in Civil Case No. 28859 in favor of herein defendant against Ernesto Uychocde, is undoubtedly proper and appropriate because the property is registered in the name of the judgment debtor and is not among those exempted from execution; 13. Assuming without admitting that the property subject matter of this case was in fact sold by the registered owner in favor of the herein plaintiffs, the sale is the null and void (sic) and without any legal force and effect because it was done in fraud of a judgment creditor, the defendant Pilares. 5 Pilares likewise sought moral and exemplary damages in a counterclaim against the Sajonas spouses. The parties appeared at

pre-trial proceedings on January 21, 1987, 6 after which, trial on the merits ensued. The trial court rendered its decision on February 15, 1989. 7 It found in favor of the Sajonas couple, and ordered the cancellation of the Notice of Levy from Transfer Certificate of Title No. N-109417. The court a quo stated, thus: After going over the evidence presented by the parties, the court finds that although the title of the subject matter of the Notice of Levy on Execution was still in the name of the Spouses Uychocde when the same was annotated on the said title, an earlier Affidavit of Adverse of claim was annotated on the same title by the plaintiffs who earlier bought said property from the Uychocdes. It is a well settled rule in this jurisdiction (Guidote vs. Maravilla, 48 Phil. 442) that actual notice of an adverse claim is equivalent to registration and the subsequent registration of the Notice of Levy could not have any legal effect in any respect on account of prior inscription of the adverse claim annotated on the title of the Uychocdes. xxx xxx xxx On the issue of whether or not plaintiffs are buyers in good faith of the property of the spouses Uychocde even notwithstanding the claim of the defendant that said sale executed by the spouses was made in fraud of creditors, the Court finds that the evidence in this instance is bare of any 25

indication that said plaintiffs as purchasers had notice beforehand of the claim of the defendant over said property or that the same is involved in a litigation between said spouses and the defendant. Good faith is the opposite of fraud and bad faith, and the existence of any bad faith must be established by competent proof. 8 (Cai vs. Henson, 51 Phil 606) xxx xxx xxx In view of the foregoing, the Court renders judgment in favor of the plaintiffs and against the defendant Pilares, as follows: 1. Ordering the cancellation of the Notice of Levy on Execution annotated on Transfer Certificate of Title No. N-109417. 2. Ordering said defendant to pay the amount of P5,000 as attorney's fees. 3. Dismissing the Counterclaim interposed by said defendant. Said defendant is likewise ordered to pay the costs. Dissatisfied, Pilares appealed to the Court of Appeals", assigning errors on the part of the lower court. The appellate court reversed the lower court's decision, and upheld the annotation of the levy on execution on the certificate of title, thus:

WHEREFORE, the decision of the lower court dated February 15, 1989 is reversed and set aside and this complaint is dismissed. Costs against the plaintiffs-appellees. 10 The Sajonas couple are now before us, on a Petition for Review on Certiorari, 11 praying inter alia to set aside the Court of Appeals' decision, and to reinstate that of the Regional Trial Court Private respondent filed his Comment 12 on March 5, 1992, after which, the parties were ordered to file their respective Memoranda. Private respondent complied thereto on April 27, 1994 13, while petitioners were able to submit their Memorandum on September 29, 1992. 14 Petitioner assigns the following as errors of the appellate court, to wit: I THE LOWER COURT ERRED IN HOLDING THAT THE RULE ON THE 30-DAY PERIOD FOR ADVERSE CLAIM UNDER SECTION 70 OF P.D. NO. 1529 IS ABSOLUTE INASMUCH AS IT FAILED TO READ OR CONSTRUE THE PROVISION IN ITS ENTIRETY AND TO RECONCILE THE APPARENT INCONSISTENCY WITHIN THE PROVISION IN ORDER TO GIVE EFFECT TO IT AS A WHOLE. II THE LOWER COURT ERRED IN INTERPRETING SECTION 70 OF P.D. NO. 1529 IN SUCH WISE ON 26

THE GROUND THAT IT VIOLATES PETITIONERS' SUBSTANTIAL RIGHT TO DUE PROCESS. Primarily, we are being asked to ascertain who among the parties in suit has a better right over the property in question. The petitioners derive their claim from the right of ownership arising from a perfected contract of absolute sale between them and the registered owners of the property, such right being attested to by the notice of adverse claim 15 annotated on TCT No. N-79073 as early as August 27, 1984. Private respondent on the other hand, claims the right to levy on the property, and have it sold on execution to satisfy his judgment credit, arising from Civil Case No. Q-28850 16 against the Uychocdes, from whose title, petitioners derived their own. Concededly, annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property where the registration of such interest or right not otherwise provided for by the Land Registration Act or Act 496 (now P.D. 1529 or the Property Registration Decree), and serves a warning to third parties dealing with said property that someone is claiming an interest on the same or a better right than that of the registered owner thereof. Such notice is registered by filing a sworn statement with the Register of Deeds of the province where the property is located, setting forth the basis of the claimed right together with other dates pertinent thereto. 17 The registration of an adverse claim is expressly recognized under Section 70 of P.D. No. 1529. * Noting the changes made in the terminology of the provisions of the law, private respondent interpreted this to mean that a Notice of Adverse Claim remains effective only for a period of 30 days from its annotation, and does not automatically lose its force afterwards.

Private respondent further maintains that the notice of adverse claim was annotated on August 27, 1984, hence, it will be effective only up to September 26, 1984, after which it will no longer have any binding force and effect pursuant to Section 70 of P.D. No. 1529. Thus, the sale in favor of the petitioners by the Uychocdes was made in order to defraud their creditor (Pilares), as the same was executed subsequent to their having defaulted in the payment of their obligation based on a compromise agreement. 18 The respondent appellate court upheld private respondents' theory when it ruled: The above staled conclusion of the lower court is based on the premise that the adverse claim filed by plaintiffs-appellees is still effective despite the lapse of 30 days from the date of registration. However, under the provisions of Section 70 of P.D. 1529, an adverse claim shall be effective only for a period of 30 days from the date of its registration. The provision of this Decree is clear and specific. xxx xxx xxx It should be noted that the adverse claim provision in Section 110 of the Land Registration Act (Act 496) does not provide for a period of effectivity of the annotation of an adverse claim. P.D. No. 1529, however, now specifically provides for only 30 days. If the intention of the law was for the adverse claim to remain effective until cancelled by petition of the interested party, then the aforecited provision in P.D. No. 1529 stating the period of effectivity would not have been inserted in the law. 27

Since the adverse claim was annotated On August 27, 1984, it was effective only until September 26, 1984. Hence, when the defendant sheriff annotated the notice of levy on execution on February 12, 1985, said adverse claim was already ineffective. It cannot be said that actual or prior knowledge of the existence of the adverse claim on the Uychocdes' title is equivalent to registration inasmuch as the adverse claim was already ineffective when the notice of levy on execution was annotated. Thus, the act of defendant sheriff in annotating the notice of levy on execution was proper and justified. The appellate court relied on the rule of statutory construction that Section 70 is specific and unambiguous and hence, needs no interpretation nor construction. 19 Perforce, the appellate court stated, the provision was clear enough to warrant immediate enforcement, and no interpretation was needed to give it force and effect. A fortiori, an adverse claim shall be effective only for a period of thirty (30) days from the date of its registration, after which it shall be without force and effect. Continuing, the court further stated; . . . clearly, the issue now has been reduced to one of preference -- which should be preferred between the notice of levy on execution and the deed of absolute sate. The Deed of Absolute Sale was executed on September 4, 1984, but was registered only on August 28, 1985, while the notice of levy on execution was annotated six (6) months prior to the registration of the sale on February 12, 1985. In the case of Landig vs. U.S. Commercial Co., 89 Phil. 638 Commere it was held that where a sale is

recorded later than an attachment, although the former is of an earlier date, the sale must give way to the attachment on the ground that the act of registration is the operative act to affect the land. A similar ruling was restated in Campillo vs. Court of Appeals (129 SCRA 513). xxx xxx xxx The reason for these rulings may be found in Section 51 of P.D. 1529, otherwise known as the Property Registration Decree, which provides as follows: Sec. 1. Conveyance and other dealings by the registered owner. -An owner of registered land may convey, mortgage, lease, charge, otherwise deal with the same in accordance with existing laws. He may use such forms of deeds, mortgages, leases 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 Deeds to make of registration.

28

The act of registration shall be the operative act to convey or affect the land in so far as third persons are concerned and in all cases under the 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 by the lower court.) Under the Torrens system, registration is the operative act which gives validity to the transfer or creates a lien upon the land. A person dealing with registered land is not required to go behind the register to determine the condition of the property. He is only charged with notice of the burdens on the property which are noted on the face of the register or certificate of title. 20 Although we have relied on the foregoing rule, in many cases coming before us, the same, however, does not fit in the case at bar. While it is the act of registration which is the operative act which conveys or affects the land insofar as third persons are concerned, it is likewise true, that the subsequent sale of property covered by a Certificate of Title cannot prevail over an adverse claim, duly sworn to and annotated on the certificate of title previous to the sale. 21 While it is true that under the provisions of the Property Registration Decree, deeds of conveyance of property registered under the system, or any interest therein only take effect as a conveyance to bind the land upon its registration, and that a purchaser is not required to explore further than what the Torrens title, upon its face, indicates in quest for any hidden defect or inchoate right that may subsequently defeat his right thereto, nonetheless, this rule is not absolute. Thus, one who buys from the registered owner need not have to look behind the certificate of title, he is, nevertheless, bound by the liens and encumbrances annotated thereon. One who buys without checking the vendor's title takes all the risks and losses consequent to such failure. 22

In PNB vs. Court of Appeals, we held that "the subsequent sale of the property to the De Castro spouses cannot prevail over the adverse claim of Perez, which was inscribed on the bank' s certificate of title on October 6, 1958. That should have put said spouses on notice, and they can claim no better legal right over and above that of Perez. The TCT issued in the spouses' names on July, 1959 also carried the said annotation of adverse claim. Consequently, they are not entitled to any interest on the price they paid for the property. 23 Then again, in Gardner vs. Court of Appeals, we said that "the statement of respondent court in its resolution of reversal that 'until the validity of an adverse claim is determined judicially, it cannot be considered a flaw in the vendor's title' contradicts the very object of adverse claims. As stated earlier, the annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property, and serves as a notice and warning to third parties dealing with said property that someone is claiming an interest on the same or has a better right than the registered owner thereof. A subsequent sale cannot prevail over the adverse claim which was previously annotated in the certificate of title over the property. 24 The question may be posed, was the adverse claim inscribed in the Transfer Certificate of Title No. N-109417 still in force when private respondent caused the notice of levy on execution to be registered and annotated in the said title, considering that more than thirty days had already lapsed since it was annotated? This is a decisive factor in the resolution of this instant case. If the adverse claim was still in effect, then respondents are charged with knowledge of pre-existing interest over the subject property,

29

and thus, petitioners are entitled to the cancellation of the notice of levy attached to the certificate of title. For a definitive answer to this query, we refer to the law itself. Section 110 of Act 496 or the Land Registration Act reads: Sec. 110. Whoever claims any part or interest in registered lands adverse to the registered owner, arising subsequent to the date of the original registration, may, if no other provision is made in this Act for registering the same, make a statement in writing setting forth fully his alleged right or interest, and how or under whom acquired, and a reference to the volume and page of the certificate of title of the registered owner, and a description of the land in which the right or interest is claimed. The statement shall be signed and sworn to, and shall state the adverse claimant's residence, and designate a place at which all notices may be served upon him. The statement shall be entitled to registration as an adverse claim, and the court, upon a petition of any party in interest, shall grant a speedy hearing upon the question of the validity of such adverse claim and shall enter such decree therein as justice and equity may require. If the claim is adjudged to be invalid, the registration shall be cancelled. If in any case, the court after notice and hearing shall find that a claim thus registered was frivolous or vexatious, it may tax the adverse claimant double or treble the costs in its discretion."

The validity of the above-mentioned rules on adverse claims has to be reexamined in the light of the changes introduced by P.D. 1529, which provides: Sec . 70 Adverse Claim -- Whoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to the date of the original registration, may, if no other provision is made in this decree for registering the same, make a statement in writing setting forth fully his alleged right or interest, and how or under whom acquired, a reference to the number of certificate of title of the registered owner, the name of the registered owner, and a description of the land in which the right or interest is claimed. The statement shall be signed and sworn to, and shall state the adverse claimant's residence, and a place at which all notices may be served upon him. This statement shall be entitled to registration as an adverse claim on the certificate of title. The adverse claim shall be effective for a period of thirty days from the date of registration. After the lapse of said period, the annotation of adverse claim may be cancelled upon filing of a verified petition therefor by the party in-interest: Provided, however, that after cancellation, no second adverse claim based on the same ground shall be registered by the same claimant. Before the lapse of thirty days aforesaid, any party in interest may file a petition in the Court of First Instance where the land is situated for the cancellation the adverse claim, and the court shall 30

grant a speedy hearing upon the question of the validity of such adverse claim, and shall render judgment as may be just and equitable. If the adverse claim is adjudged to be invalid, the registration thereof shall be ordered cancelled. If, in any case, the court, after notice and hearing shall find that the adverse claim thus registered was frivolous, it may fine the claimant in an amount not less than one thousand pesos, nor more than five thousand pesos, in its discretion. Before the lapse of thirty days, the claimant may withdraw his adverse claim by filing with the Register of Deeds a sworn petition to that effect. (Emphasis ours). In construing the law aforesaid, care should be taken that every part thereof be given effect and a construction that could render a provision inoperative should be avoided, and inconsistent provisions should be reconciled whenever possible as parts of a harmonious whole. 25 For taken in solitude, a word or phrase might easily convey a meaning quite different from the one actually intended and evident when a word or phrase is considered with those with which it is associated." 26 In ascertaining the period of effectivity of an inscription of adverse claim, we must read the law in its entirety. Sentence three, paragraph two of Section 70 of P.D. 1529 provides: The adverse claim shall be effective for a period of thirty days from the date of registration." At first blush, the provision in question would seem to restrict the effectivity of the adverse claim to thirty days. But the above provision cannot and should not be treated separately, but should be read in relation to the sentence following, which reads:

After the lapse of said period, the annotation of adverse claim may be cancelled upon filing of a verified petition therefor by the party in interest. If the rationale of the law was for the adverse claim to ipso facto lose force and effect after the lapse of thirty days, then it would not have been necessary to include the foregoing caveat to clarify and complete the rule. For then, no adverse claim need be cancelled. If it has been automatically terminated by mere lapse of time, the law would not have required the party in interest to do a useless act. A statute's clauses and phrases must not be taken separately, but in its relation to the statute's totality. Each statute must, in fact, be construed as to harmonize it with the pre-existing body of laws. Unless clearly repugnant, provisions of statutes must be reconciled. The printed pages of the published Act, its history, origin, and its purposes may be examined by the courts in their construction. 27 An eminent authority on the subject matter states the rule candidly: A statute is passed as a whole and not in parts sections, and is animated by one general purpose and intent. Consequently, each part or section should be construed in connection with every other part section so as to produce a harmonious whole. It is not proper to confine its intention to the one section construed. It is always an unsafe way of construing a statute or contract to divide it by a process of etymological dissection, into separate words, and then apply to each, thus separated from the context, some particular meaning to be attached to any word or phrase usually to be ascertained from the as context. 28

31

Construing the provision as a whole would reconcile the apparent inconsistency between the portions of the law such that the provision on cancellation of adverse claim by verified petition would serve to qualify the provision on the effectivity period. The law, taken together, simply means that the cancellation of the adverse claim is still necessary to render it ineffective, otherwise, the inscription will remain annotated and shall continue as a lien upon the property. For if the adverse claim has already ceased to be effective upon the lapse of said period, its cancellation is no longer necessary and the process of cancellation would be a useless ceremony. 29 It should be noted that the law employs the phrase "may be cancelled", which obviously indicates, as inherent in its decision making power, that the court may or not order the cancellation of an adverse claim, nothwitstanding such provision limiting the effectivity of an adverse claim for thirty days from the date of registration. The court cannot be bound by such period as it would be inconsistent with the very authority vested in it. A fortiori, the limitation on the period of effectivity is immaterial in determining the validity or invalidity of an adverse claim which is the principal issue to be decided in the court hearing. It will therefore depend upon the evidence at a proper hearing for the court to determine whether it will order the cancellation of the adverse claim or not. 30 To interpret the effectivity period of the adverse claim as absolute and without qualification limited to thirty days defeats the very purpose for which the statute provides for the remedy of an inscription of adverse claim, as the annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property where the registration of such interest or right is not otherwise provided for by the Land Registration Act or Act 496 (now P.D. 1529 or the Property Registration Decree), and serves as a warning to third parties dealing with said property that someone is

claiming an interest or the same or a better right than the registered owner thereof. 31 The reason why the law provides for a hearing where the validity of the adverse claim is to be threshed out is to afford the adverse claimant an opportunity to be heard, providing a venue where the propriety of his claimed interest can be established or revoked, all for the purpose of determining at last the existence of any encumbrance on the title arising from such adverse claim. This is in line with the provision immediately following: Provided, however, that after cancellation, no second adverse claim shall be registered by the same claimant. Should the adverse claimant fail to sustain his interest in the property, the adverse claimant will be precluded from registering a second adverse claim based on the same ground. It was held that "validity or efficaciousness of the claim may only be determined by the Court upon petition by an interested party, in which event, the Court shall. order the immediate hearing thereof and make the proper adjudication a justice and equity may warrant. And it is only when such claim is found unmeritorious that the registration of the adverse claim may be cancelled, thereby protecting the interest of the adverse claimant and giving notice and warning to third parties". 32 In sum, the disputed inscription of an adverse claim on the Transfer Certificate of Title No. N-79073 was still in effect on February 12, 1985 when Quezon City Sheriff Roberto Garcia annotated the notice of levy on execution thereto. Consequently, he is charged with knowledge that the property sought to be levied upon the execution was encumbered by an interest the same as or better 32

than that of the registered owner thereof. Such notice of levy cannot prevail over the existing adverse claim inscribed on the certificate of title in favor of the petitioners. This can be deduced from the pertinent provision of the Rules of Court, to wit: Sec. 16. Effect of levy on execution as to third persons -- The levy on execution shall create a lien in favor of the judgment creditor over the right, title and interest of the judgment debtor in such property at the time of the levy, subject to liens or encumbrances then existing. (Emphasis supplied) To hold otherwise would be to deprive petitioners of their property, who waited a long time to complete payments on their property, convinced that their interest was amply protected by the inscribed adverse claim. As lucidly observed by the trial court in the challenged decision: True, the foregoing section provides that an adverse claim shall be effective for a period of thirty days from the date of registration. Does this mean however, that the plaintiffs thereby lost their right over the property in question? Stated in another, did the lapse of the thirty day period automatically nullify the contract to sell between the plaintiffs and the Uychocdes thereby depriving the former of their vested right over the property? It is respectfully submitted that it did not. 33 As to whether or not the petitioners are buyers in good faith of the subject property, the same should be made to rest on the findings of the trial court. As pointedly observed by the appellate court,

"there is no question that plaintiffs-appellees were not aware of the pending case filed by Pilares against Uychocde at the time of the sale of the property by the latter in their favor. This was clearly elicited from the testimony of Conchita Sajonas, wife of plaintiff, during cross-examination on April 21, 1988". 34 ATTY. REYES. Q Madam Witness, when Engr. Uychocde and his wife offered to you and your husband the property subject matter of this case, they showed you the owner's transfer certificate, is it not? A Yes, sir. Q That was shown to you the very first time that this lot was offered to you for sale? A Yes. Q After you were shown a copy of the title and after you were informed that they are desirous in selling the same, did you and your husband decide to buy the same? A No, we did not decide right after seeing the title. Of course, we visited. . .

33

Q No, you just answer my question. You did not immediately decide? A Yes. Q When did you finally decide to buy the same? A After seeing the site and after verifying from the Register of Deeds in Marikina that it is free from encumbrances, that was the time we decided. Q How soon after you were offered this lot did you verify the exact location and the genuineness of the title, as soon after this was offered to you? A I think it' s one week after they were offered. 35 A purchaser in good faith and for value is one who buys property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claims or interest of some other person in the property. 36 Good faith consists in an honest intention to abstain from taking an unconscientious advantage of another, 37 Thus, the claim of the private respondent that the sale executed by the spouses was made in fraud of creditors has no basis in fact, there being no evidence that the petitioners had any knowledge or notice of the debt of the Uychocdes in favor of the private respondent, nor of any claim by

the latter over the Uychocdes' properties or that the same was involved in any litigation between said spouses and the private respondent. While it may be stated that good faith is presumed, conversely, bad faith must be established by competent proof by the party alleging the same. Sans such proof, the petitioners are deemed to be purchasers in good faith, and their interest in the subject property must not be disturbed. At any rate, the Land Registration Act (Property Registration Decree) guarantees to every purchaser of registered land in good faith that they can take and hold the same free from any and all prior claims, liens an encumbrances except those set forth on the Certificate of Title and those expressly mentioned in the ACT as having been reserved against it. Otherwise, the efficacy of the conclusiveness of the Certificate of Title which the Torrens system seeks to insure would be futile and nugatory. 38 ACCORDINGLY, the assailed decision of the respondent Court of Appeals dated October 17, 1991 is hereby REVERSED and SET ASIDE. The decision of the Regional Trial Court dated February 15, 1989 finding for the cancellation of the notice of levy on execution from Transfer Certificate of Title No. N-109417 is hereby REINSTATED. The inscription of the notice of levy On execution on TCT No. N109417 is hereby CANCELLED. Costs against private respondent. SO ORDERED. Regalado, Romero, Puno and Medoza, JJ., concur. Footnotes

34

1 Decision, pp. 38-50, Records (CA-G.R. CV No. 24015). 2 Volume 1, pp. 1-3, Record.

17 Paz Ty Sin Tei vs. Lee Dy Piao, 103 Phil. 858; Sanchez vs. CA, G.R. No. 40177, February 12, 1986, 69 SCRA 327. * Idem.

3 Ibid, p. 3. 18 Comment, supra., pp. 57-61. 4 Ibid., p. 19. 19 Decision, p. 22, supra. 5 Ibid, pp. 22-23. 20 Reynes vs. Barrera 66 Phil. 656. 6 Ibid, p. 58. 7 Ibid, p 162. 8 Ibid., p. 167. 9 Appeal was assigned to the Special Tenth Division, Associate Justice Salome A. Montoya, Ponente and concurred by Justices Eduardo Bengzon and Fortunato A. Valloces. 10 Decision, supra. 11 Rollo, pp. 6-16. 12 Ibid., p. 57. 13 Ibid., p. 63. 14 Ibid., p. 74. 15 Vol. I, p. 6, Ibid. 16 Vol. II, p. 5, Ibid. 35 27 Commissioner of Customs vs. ESSO Standards Eastern Inc., G.R. No. L-28329, August 7, 1975, 66 SCRA 113. 28 Sutherland, Statutory Construction, 2d. Ed., 386, citing International Trust Co. vs. Am. L & L. Co., Minn. 501. 25 JMM Promotions and Management, Inc. vs. NLRC, G.R No. 109835, November 22, 1993, 228 SCRA 129. 26 Aboitiz Shipping Corp. vs. City of Cebu, G.R. No. L-14526, March 31, 195 SCRA 121 Phil. 425. 22 Noblejas and Noblejas, Registration of Land Titles and Deeds, 1986 ed., p. 180. 23 Supra. 24 Supra. 21 Gardner vs. CA G.R. No. L-59952, August 31, 1994, 131 SCRA 585; PNB vs CA G.R. No. L-30831 and L-31176, November 21, 1979, 94 SCRA 357.

29 IBP Journal, Vol. XI, No. 3, p. 103, by Raymundo Blanco. 30 Ibid. 31 Ty Sin Tel vs. Lee Dy Piao, Sanchez vs. CA, supra. 32 Ibid. 33 Decision of the Regional Trial Court, pp. 162-172, Volume I Original Record. 34 Decision, supra. 35 TSN, Cross Examination of Conchita Sajonas, April 21, 1988, p. 21. 36 DE Santos vs. IAC, G.R. No. L-69591, January 25, 1988, 157 SCRA 295. 37 Fule vs. Legare, G.R. No. L-17951, February 28, 1963, 7 SCRA 351. 38 De Jesus vs. City of Manila, 29 Phil. 73; Fule, et al. vs. De Legare, supra. ADVERSE CLAIM THIRD DIVISION

36

FLOR MARTINEZ, represented by MACARIO MARTINEZ, authorized representative and Attorney-inFact, Petitioner,

G.R. No. 166536 PERALTA, J.: Present:

DECISION

Before us is a special civil action for certiorari under Rule 65 of the Rules of Court to annul and set aside the Decision1*1+ dated CARPIO,* J., CORONA, J., Chairperson, VELASCO, JR., August 12, 2004 and the Resolution2*2+ dated November 18, 2004 of the Court of Appeals (CA) in CA-G.R. CV No. 61591, which reversed and set aside the Decision3*3+ dated April 15, 1998 and

- versus NACHURA, and PERALTA, JJ.

Order4*4+ dated August 11, 1998 of the Regional Trial Court (RTC) of Pasig, Branch 267, in Special Civil Action No. 574.

The factual antecedents are as follows: Promulgated: ERNESTO G. GARCIA EDILBERTO M. BRUA, and

Respondents.

February 4, 2010
1*1+

Penned by Associate Justice Vicente S.E. Veloso, with Justices Roberto A. Barrios and Amelita G. Tolentino, concurring; rollo, pp. 22-35.
2*2+

Id. at 37-38. Id. at 39-46; per Judge Florito S. Macalino. Id. at 47-48.

x-------------------------------------------------------------------------------------3*3+

Designated to sit as an additional member in lieu of Associate Justice Jose C. Mendoza per Special Order No. 818 dated January 18, 2010.

4*4+

37

Respondent Edilberto Brua was the registered owner of a parcel of land located in Mandaluyong, Rizal, covered by Transfer Certificate of Title (TCT) No. 346026 of the Registry of Deeds of Rizal, which is the subject matter of this case. The property was first mortgaged to the Government Service Insurance System (GSIS), and such mortgage was annotated at the back of TCT No. 346026 as Entry No. 91370, inscribed on June 5, 1974.5*5+ On February 5, 1980, respondent Brua obtained a loan from his brother-in-law, respondent Ernesto Garcia, in the amount of One Hundred Fifty Thousand Pesos (P150,000.00) and, to secure the payment of said loan, respondent Brua mortgaged the subject property to

Entry No. 49853/T-346026,8*8+ which remained uncanceled up to this time.

Sometime in October 1991, respondent Brua requested respondent Garcia to pay the former's loan with the GSIS, so that the title to the subject property would be released to the latter. Respondent Garcia then paid GSIS the amount of P400,000.00 and, thus, the title to the subject property was released to him.

respondent Garcia, as evidenced by a Deed of Real Estate Mortgage6*6+ executed in respondent Garcia's favor. Since the title to the subject property was in the possession of the GSIS and respondent Garcia could not register the Deed of Real Estate Mortgage, he then executed an Affidavit of Adverse Claim7*7+ and registered it with the Registry of Deeds of Rizal on June 23, 1980 as On October 22, 1991, a Deed of Absolute Sale9*9+ was executed between respondents Garcia and Brua over the subject property, where respondent Brua sold the property in the amount of P705,000.00. In the same deed, it was stated that the subject property was only a partial payment of respondent Brua's mortgage indebtedness to respondent Garcia, which he could no longer redeem from the latter. Respondent Garcia then registered
5*5+

the Deed of Sale with the Registry of Deeds of Rizal on October 24

Exhibit B-1, records, Garcia, p. 213. Exhibit C, id. at 215. Exhibit D, id. at 217.
8*8+

6*6+

Exhibit B-2, id. at 213. Exhibit F, id. at 219-220.

7*7+

9*9+

38

1991, and a new TCT No. 520410*10+ was issued in the names of respondent Garcia and his wife. However, the annotations at the back of the previous title were carried over to the new title, to wit: Entry No. 56837, a Notice of Levy on Attachment and/or Levy inscribed on January 8, 1981;11*11+ Entry No. 2881 showing a Notice of Levy on Execution in favor of petitioner Flor Martinez, which was inscribed on July 11, 1988;12*12+ Entry No. 3706, which was a Certificate of Sale in favor of petitioner inscribed on September 2, 1988;13*13+ Entry No. 72854, which was a Notice of Levy on Execution in favor of Pilipinas Bank inscribed on December 8, 1981;14*14+ and Entry No. 16611 inscribed on October 24, 1991, which was the cancellation of respondent Brua's mortgage with GSIS.15*15+

It appeared that the annotations found at the back of the title of the subject property in favor of petitioner, i.e., Notice of Levy on Attachment and/or Levy, Notice of Levy on Execution, and Certificate of Sale, were all made in connection with petitioner's action for Collection of Sum of Money, which she filed against respondent Brua at the RTC of Makati City, Branch 60, docketed as Civil Case No. 39633. In that case, a decision was rendered in favor of petitioner, where the RTC ordered respondent Brua to pay the former the amount of P244,594.10, representing the value of the dishonored checks plus 12% interest per annum as damages and the premium paid by petitioner for the attachment bond. The decision became final and executory as respondent Brua failed to appeal the same, and a notice of levy on execution was issued. A public auction was subsequently conducted, where the subject property was awarded to petitioner as the sole bidder in the amount of

10*10+

Exhibit B, id. at 213. Exhibit B-3, id. at 213. Exhibit B-4, id. at 214. Exhibit B-6, id. Exhibit B-4, id. Id. at 214.

P10,000.00, and a Certificate of Sale was issued in her favor.

11*11+

12*12+

The annotation of

Pilipinas Bank's

Notice of Levy on

13*13+

Execution annotated as Entry No. 72854 on the title of the subject property was by virtue of a civil case filed by Filipinas Manufacturers Bank, now known as Pilipinas Bank, against respondent Brua.

14*14+

15*15+

39

On February 9, 1994, respondents Garcia and Brua filed with the RTC of Pasig, Branch 267, an Action to Quiet Title, initially against petitioner due to the encumbrances/liens annotated on respondent Garcia's new title. They contended that these

merit and judgment is hereby rendered in favor of defendants Flor Martinez and Pilipinas Bank as against plaintiffs Ernesto Garcia and Edilberto Brua who are further directed to pay both defendants attorney's fees in the amount of P50,000.00 each.

encumbrances/liens were registered subsequent to the annotation of respondent Garcia's adverse claim made in 1980, and prayed that these be canceled. Subsequently, the complaint was amended to include Pilipinas Bank as an additional defendant. Petitioner and Pilipinas Bank filed their respective Answers thereto.

Accordingly, the judicial inscriptions particularly, Entry No. 3706/T-346026, annotation of certificate of sale and Entry No. 72854/T-346026 are held to be valid, subsisting liens which do not constitute a cloud on Transfer Certificate of Title No. 5204.16*16+

In so ruling, the RTC found that the adverse claim which Trial thereafter ensued. respondent Garcia caused to be annotated on the previous title of the subject property, i.e, TCT No. 346026, on June 23, 1980 was predicated on his interest as a mortgagee of a loan of P150,000.00, which he extended to respondent Brua; that respondent Garcia's On April 15, 1998, the RTC rendered its decision dismissing respondent Garcia's action for quieting of title, the dispositive portion of which reads: adverse interest was merely that of a second mortgagee, as he was not yet the purchaser of the subject property as of said date; that when the judicial liens, i.e., Notice of Levy on Attachment and/or Levy and Notice of Levy on Execution, were caused to be registered WHEREFORE, PREMISES CONSIDERED, the instant complaint is hereby dismissed for lack of

16*16+

Rollo, p. 46.

40

by petitioner on respondent Brua's title on January 8, 1981 and July 8, 1998, respectively, by virtue of petitioner being adjudged

Pilipinas Bank v. Edilberto Brua, was a valid levy on the subject property in favor of Pilipinas Bank. The levy could not be canceled, as this would impair the interest of the bank which had been decided upon by a co-equal court. The RTC found that the sale between respondents appeared to be tainted with bad faith, which constrained petitioner and Pilipinas Bank from engaging the

judgment creditor by Branch 60 of RTC Makati, respondent Garcia's claim became inferior to that of petitioner. The RTC said that respondent Garcia's inaction to preserve his adverse claim as a second mortgagee, which was inscribed on June 23, 1980, and his sudden decision to redeem and purchase the subject property from the GSIS in October 1991 -- when petitioner's Notice of Levy on Attachment and/or Levy, Notice of Levy on Execution and Certificate of Sale were already inscribed at the back of respondent Brua's title -- showed bad faith on the part of respondent Garcia; that respondent Brua did not even testify or participate in the case, except when he was impleaded as a plaintiff in the case. The RTC did not give credit to respondent Garcia's claim that he and respondent Brua had no prior knowledge of the occurrence of a public auction and the consequent annotation of the certificate of sale, and found respondent Garcia to be a buyer in bad faith of the subject property.

services of lawyers; thus, the award of attorney's fees in the latter's favor.

Respondents' motion for reconsideration was denied by the RTC on August 11, 1998.

Respondents filed their appeal with the CA. However, respondent Brua failed to file his appellant's brief; thus, his appeal was considered abandoned and dismissed. Petitioner and Pilipinas Bank filed their respective appellees' briefs.

The RTC also ruled that the Notice of Levy on Execution, which was annotated on December 8, 1981 as Entry No. 72854 on respondent Brua's title arising from Civil Case No. 7262 entitled On August 12, 2004, the CA reversed and set aside the RTC decision, the dispositive portion of which reads: 41

was registered prior to the inscription of the Certificate of Sale in WHEREFORE, the appealed Decision dated April 15, 1998 is REVERSED and SET ASIDE. Granting the instant appeal, Entry No. 72854 (Notice of Levy on Execution in favor of Pilipinas Bank), Entry No. 2881 (Notice of Levy on Execution in favor of Flor Martinez) and Entry No. 3706 (Certificate of Sale in favor of Flor Martinez) inscribed in TCT No. 346026 and carried over to TCT No. 5204, are hereby CANCELLED.17*17+ favor of petitioner under Entry No. 3706 and Pilipinas Bank's Notice of Levy on Execution under Entry No. 72854; that the prior registration of respondent Garcia's adverse claim effectively gave petitioner and Pilipinas Bank notice of the former's right to the subject property and, thus, petitioner was deemed to have

knowledge of respondent Garcia's claim and could not be considered as a buyer in good faith at the time she purchased the subject property in the public auction; that petitioner could not

The CA said that a subsequent sale of property covered by a certificate of title cannot prevail over an adverse claim, duly sworn to and annotated on the certificate of title previous to the sale; that while one who buys a property from the registered owner need not have to look behind the title, he is nevertheless bound by the liens and encumbrances annotated thereon; and, thus, one who buys without checking the vendor's title takes all the risks and losses consequent to such failure. The CA found that in order to protect his interest, respondent Garcia executed an Affidavit of Adverse Claim on June 23, 1980, annotated it on the title of the subject property under Entry No. 49853 and it has remained uncanceled up to this time; that such adverse claim
17*17+

claim that she was a purchaser in good faith, since respondent Garcia's adverse claim was entered on June 23, 1980, eight years ahead of petitioner's Certificate of Sale on September 2, 1988; that when the Notice of Levy on Execution in favor of Pilipinas Bank was annotated on respondent Brua's title, the sheriff who caused the annotation was charged with knowledge that the property sought to be levied upon on execution was encumbered by an interest, which was the same if not better than that of the registered owner thereof; and that such notice of levy could not prevail over the existing adverse claim of respondent Garcia inscribed on the title as can be deduced from Section 12, Rule 39 of the Rules of Court.

Id. at 34-35.

42

The CA found that the RTC erred in concluding that respondent Garcia was a purchaser in bad faith, since his adverse claim was entered in respondent Brua's title in 1980, and respondent Garcia could not have foretold at the time he caused such annotation of adverse claim that petitioner would purchase the same property eight years thereafter; and that while good faith is presumed, bad faith must be established by competent proof by the party alleging the same; and, thus, in the absence of respondent Garcia's bad faith, he is deemed to be a purchaser in good faith, and his interest in the property must not be disturbed.

Petitioners motion for reconsideration was denied by the CA in a Resolution dated November 18, 2004.

Petitioner is now before us via a petition for certiorari under Rule 65, alleging grave abuse of discretion amounting to lack or excess of jurisdiction committed by the CA in issuing its assailed decision and resolution.

Petitioner contends that respondent Garcia's adverse claim is nothing but a notice that he has an interest adverse to that of The CA also found that a Notice of Adverse Claim remains valid even after the lapse of 30 days, as provided for in Sec. 70 of Presidential Decree No. (PD) 1529 pursuant to our ruling in Sajonas v. CA; that since no petition was filed by petitioner for the cancellation of respondent Garcia's Notice of Adverse Claim, the adverse claim subsisted and his rights over the subject property must consequently be upheld. respondent Brua to the extent of P150,000.00, which was the amount of the loan secured by a Deed of Real Estate Mortgage executed by respondent Brua in favor of respondent Garcia; that the adverse claim cannot be said to be superior to a final sale conducted by the sheriff by authority of the court pursuant to a judgment that has attained finality; that Sajonas v. CA, on which the CA anchored its decision, differs from this case, since the adverse claim made in the title by therein petitioner Sajonas was by virtue of a contract to sell; that unlike in this case, respondent Garcia caused the annotation of his adverse claim as a mortgagee of 43

respondent Brua in the amount of

P150,000.00 in 1980; and

petitioner should have been a petition for review under Rule 45 which had already lapsed; that when the CA reversed the RTC decision, such action did not constitute grave abuse of discretion since it had legal basis; that any lien or adverse claim earlier inscribed prevails over those liens or adverse claims inscribed subsequent thereto.

respondent Garcia's payment of the GSIS loan in 1991, upon the request of respondent Brua, was presumably for the reason that respondent Brua could no longer discharge the GSIS obligation; and to avoid the foreclosure of the property by the GSIS, respondent Brua asked Garcia to redeem it; that respondent Garcia's adverse claim in 1980 was not as a vendee of the property like in Sajonas, but merely as a mortgagee.

Respondent Brua did not file his comment.

Thus, we

dispensed with the filing of the same in a Resolution dated June 19, Petitioner admits that respondent Garcia, as a mortgagee on the basis of which an adverse claim was inscribed on the title of the subject property, is protected by Sec. 12, Rule 39 of the Rules of Court; and, thus, petitioner knows that she is obliged as a vendee in the public sale to pay liens and encumbrances then existing at the time of the sale on September 2, 1988, which necessarily included the adverse claim of respondent Garcia in the amount of P150,000.00. The parties submitted their respective memoranda as required in Our Resolution dated August 30, 2006. In his Comment, respondent Garcia claims that the petition faces outright dismissal, since the appropriate remedy of the 44 Petitioner filed her Reply, arguing that a petition for certiorari may be availed of where appeal is inadequate and ineffectual. 2006.

We dismiss the petition.

and, thus, under Rule 45, she has 15 days from receipt of such resolution, or until December 9, 2004, to file a petition for review. However, petitioner did not file a petition for review; instead, she

Petitioner should have filed a petition for review under Rule 45 of the Rules of Court instead of a petition for certiorari under Rule 65, since she is assailing the CA decision and resolution which are final judgments. Rule 45 clearly provides that decisions, final orders or resolutions of the CA in any case, i.e., regardless of the nature of the action or proceedings involved, may be appealed to us by filing a petition for review, which is just a continuation of the appellate process over the original case.18*18+ And the petition for review must be filed within fifteen (15) days from notice of the judgment or final order or resolution appealed from, or of the denial of petitioner's motion for a new trial or reconsideration filed in due time after notice of the judgment.19*19+

filed a petition for certiorari under Rule 65 on January 24, 2005.20*20+ Hence, the CA decision and resolution have already attained finality, and petitioner has lost her right to appeal.

A petition for certiorari under Rule 65 is proper if a tribunal, a board or an officer exercising judicial or quasi-judicial functions has acted without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction and there is no appeal, or any plain, speedy and adequate remedy in the ordinary course of law.21*21+ In this case, petitioner had the remedy of appeal, and it was the speedy and adequate remedy in the ordinary course of law. Thus, a special civil action for certiorari cannot be used as a substitute for an appeal that the petitioner has already

In this case, petitioner received a copy of the CA Resolution denying her motion for reconsideration on November 24, 2004;
18[18]

lost.

Certiorari cannot be allowed when a party to a case fails to

appeal a judgment to the proper forum despite the availability of

Land Bank of the Philippines v. Court of Appeals, 456 Phil. 755, 785 (2003), citing Heirs of Marcelino Pagobo v. Court of Appeals, G..R. No. 121687, October 16, 1997, 280 SCRA 870, 883.
19[19]

20*20+

The 60 day fell on January 23, 2005, which was a Sunday. RULES OF CIVIL PROCEDURE, Sec. 1, Rule 65, 1997.

th

RULES OF COURT, Rule 45, Sec. 2.

21*21+

45

that remedy, certiorari not being a substitute for a lost appeal.22*22+ Certiorari will not be a cure for failure to timely file a petition for review on certiorari under Rule 45.23*23+ While there are instances where the extraordinary remedy of certiorari may be resorted to despite the availability of an appeal, the long line of decisions denying the special civil action for certiorari, either before appeal was availed of or in instances where the appeal period had lapsed, far outnumber the instances where certiorari was given due course.24*24+ The few significant exceptions are: (1) when public welfare and the advancement of public policy dictate; (2) when the broader interests of justice so require; (3) when the writs issued are null; (4) when the questioned order amounts to an oppressive exercise of judicial authority,25*25+

which we find to be not present in this case. Notably, petitioner did not even fail to advance an explanation why appeal was not availed of, nor was there any showing that the issue raised in the petition for certiorari could not be raised on appeal. Concomitant to a liberal application of the rules of procedure should be an effort on the part of the party invoking liberality to adequately explain his failure to abide by the rules.26*26+

In fact, the argument raised by petitioner, i.e., that the Court of Appeals had no legal authority to vary the findings of the trial court and substitute its own conclusion, which were patently contrary to the trial court's findings, and conclusion, relates to the wisdom and soundness of the assailed CA decision and resolution. Where the issue or question involved affects the wisdom or legal

22*22+

International Exchange Bank v. Court of Appeals, G.R. No. 165403, February 27, 2006, 483 SCRA 373, 381.
23*23+

soundness of the decision not the jurisdiction of the court to render said decision the same is beyond the province of a special civil action for certiorari.27*27+ Erroneous findings and conclusions do not render the appellate court vulnerable to the corrective writ

Abedes v. Court of Appeals, G.R. No. 174373, October 15, 2007, 536 SCRA 268, 282.
24*24+

Heirs of Lourdes Potenciano Padilla v. Court of Appeals , G.R. No. 147205, March 10, 2004, 425 SCRA 236, 242; Jan Dec Construction v. Court of Appeals, G.R. No. 146818, February 6, 2006, 481 SCRA 556, 564.
25*25+

26[26]

Duremdes v. Duremdes, G.R. No. 138256, November 12, 2003, 415 SCRA 684.
27[27]

Id. International Exchange Bank v. Court of Appeals, supra.

46

of certiorari, for where the court has jurisdiction over the case, even if its findings are not correct, these would, at the most, constitute errors of law and not abuse of discretion correctible by certiorari.28*28+ For if every error committed by the trial court or quasi-judicial agency were to be the proper subject of review by certiorari, then trial would never end, and the dockets of appellate courts would be clogged beyond measure.29*29+

lack of jurisdiction, and mere abuse of discretion is not enough -- it must be grave.31*31+

Petitioner contends that the adverse claim of respondent Garcia inscribed on the title of the subject property is but a notice that the latter has an interest adverse to respondent Brua's title, to the extent of P150,000.00 secured by a real estate mortgage, and such adverse claim cannot be considered superior to that of a final

Even if we consider this petition for certiorari under Rule 65, it must be shown that the CA committed grave abuse of discretion equivalent to lack or excess of jurisdiction, and not mere errors of judgment, for the petition to be granted.30*30+ As we said, certiorari is not a remedy for errors of judgment, which are correctible by appeal. By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to

sale conducted by the sheriff by virtue of a court judgment that has attained finality.

Sec. 12, Rule 39 of the Rules of Court provides:

SEC. 12. Effect of levy on execution as to third persons. The levy on execution shall create a lien in favor of the judgment obligee over the right, title and interest of the judgment obligor in such property at the time of the levy, subject to liens and encumbrances then existing.

28*28+

Id. Jan Dec Construction v. Court of Appeals, supra . Buntag v. Paa, G.R. No. 145564, March 24, 2006, 485 SCRA 302,

29*29+

30*30+

306.

31*31+

Id.

47

Clearly, the levy does not make the judgment creditor the owner of the property levied upon. He merely obtains a lien.32*32+ Such levy on execution is subject and subordinate to all valid claims and liens existing against the property at the time the execution lien attached, such as real estate mortgages.33*33+

an interest the same as or better than that of the registered owner thereof.34*34+ Thus, no grave abuse of discretion was committed by the CA when it held that the notice of levy and subsequent sale of the subject property could not prevail over respondent Garcia's existing adverse claim inscribed on respondent Brua's certificate of title.

Respondent Garcia's adverse claim, which refers to the deed of mortgage executed by respondent Brua in his favor, was annotated on respondent Brua's title registered with the Registry of Deeds of Rizal on June 23, 1980 as Entry No. 49853. The adverse claim was already existing when the Notice of Levy on Execution, as well as the Certificate of Sale in favor of petitioner, was inscribed on July 11, 1988 and September 2, 1988, respectively; and, hence, the adverse claim is sufficient to constitute constructive notice to petitioner regarding the subject property. When petitioner The annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property, where the registration of such interest or right is not otherwise provided for by the Land Registration Act or Act No. 496 (now P.D. No.1529 or the Property Registration Decree), and serves a warning to third parties dealing with said property that someone is claiming an interest on the same or a better right than that of the registered owner thereof.35*35+

registered her Notice of Levy on Execution on the title of the subject property, she was charged with the knowledge that the subject property sought to be levied upon on execution was encumbered by
34*34+ 32*32+

Paras, RULES OF COURT, Third Edition, Vol. 1, 804 (1990).

Sajonas v. Court of Appeals, G.R. No. 102377, July 5, 1996, 258 SCRA 79, 98; Diaz-Duarte v. Ong, G.R. No. 130352, November 3, 1998, 298 SCRA 389.
35*35+

33*33+

Francisco, REVISED RULES OF COURT IN THE PHILIPPINES, Vol. II, 711 (1966).

Sajonas v. Court of Appeals, id. at 89.

48

Petitioner cannot be considered as a buyer in good faith. A purchaser in good faith and for value is one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase, or before he has notice of the claims or interest of some other person in the property.36*36+ Here, petitioner admitted on cross-examination that when she registered her notice of attachment in 1981 and the levy on execution on July 11, 1988, she already saw respondent Garcia's adverse claim inscribed on respondent Brua's title on June 23, 1980.37*37+

August 28, 1985; that when the respondent therein registered his notice levy on execution on February 12, 1985, such notice of levy could not have precedence over the adverse claim, because there was no more property to levy upon. In this case, however,

respondent Garcia caused the annotation of his adverse claim only as a mortgagee of respondent Brua in the amount of P150,000.00 in 1980. The subsequent deed of sale was executed in 1991

between respondents Garcia and Brua after the former paid the latter's loan from with the GSIS. When a new title was issued in respondent Garcia's name, the notice of levy on execution and the certificate of sale were already annotated on the title of the subject property; and, thus, the sale in favor of respondent Garcia could not

Petitioner claims that Sajonas v. CA38*38+ is not applicable, since the adverse claim registered on the title of the subject property made by the Sajonases in 1984 was by virtue of a contract to sell, so that when the full purchase price was eventually paid on September 4, 1984, a deed of sale of the property was subsequently executed and registered in the Registry of Deeds of Marikina on
36*36+

prevail over the previous auction sale in petitioner's favor.

We are not impressed. The issue posed in Sajonas was whether the adverse claim inscribed on TCT No. N-190417 was still in force when private

Diaz-Duarte v. Ong, supra at 397. TSN, October 15, 1996, p. 8. Supra note 34.

respondent therein caused the annotation of the notice of levy on execution on the title; if the adverse claim was still in effect, then respondent therein was charged with the knowledge of pre-existing interest over the subject property and, thus, the Sajonases were 49

37*37+

38*38+

entitled to the cancellation of the notice of levy inscribed on the title. We ruled in Sajonas that the inscription of the adverse claim on the title of the subject property was still in effect on February 12, 1985, when the sheriff annotated the notice of levy on execution in favor of respondent therein; that respondent therein was charged with knowledge that the subject property sought to be levied upon on execution was encumbered by an interest the same as or better than that of the registered owner thereof. We then said that such notice of levy could not prevail over the existing adverse claim inscribed on the certificate of title in favor of the Sajonases.

could no longer redeem from the latter. Thus, the sale of the subject property by respondent Brua to respondent Garcia was by reason of respondent Brua's prior loan from respondent Garcia, which was secured by a mortgage on the subject property; and this mortgage was registered and already existing on the title of the subject property when the Notice of Levy on Execution and Certificate of Sale in favor of petitioner were inscribed thereon. Thus, petitioner's claim over the subject property must yield to the earlier encumbrance registered by respondent Garcia. WHEREFORE, the petition is DISMISSED. The Decision

dated August 12, 2004 and Resolution dated November 18, 2004 of the Court of Appeals in CA-G.R. CV No. 61591 are AFFIRMED. ADVERSE CLAIM

As in that case, the adverse claim of respondent Garcia based on the Deed of Mortgage executed by respondent Brua over the subject land in the formers favor was existing when the Notice of Levy on Execution was inscribed in favor of petitioner. Although the deed of sale between respondents Brua and Garcia was done after the notice of levy on execution and certificate of sale were inscribed on the title, it was clearly stated in the deed that the subject property was only a partial payment for respondent Brua's mortgage indebtedness to respondent Garcia, which the former LUCIO C. SANCHEZ, JR., petitioner, vs. HON. COURT OF APPEALS and RURAL BANK OF ORMOC CITY, INC., respondents. Froilan V. Quijano for petitioner. 50 FIRST DIVISION G.R. No. L-40177 February 12, 1976

Bruno Villamor for private respondent.

surrender the certificates of title to petitioner without such annotation first having been made so that it "will not be at the losing end and to protect the rights of the bank." 2 Upon the refusal of the Tacloban Register of Deeds to register the bank's adverse claim, respondent bank filed with the court of first instance of Leyte as a land registration court three petitions 3 for an order to direct the Tacloban and Ormoc Registers of Deeds to annotate its adverse claim on the said titles, while petitioner in turn opposed the petitions and filed his counter-petition for an order directing respondent bank to return the said titles without such annotations. In its Order of July 10, 1974, the court of first instance resolved the petitions and counter-petition by ordering the Registers of Deeds to annotate respondent' bank's adverse claims and "thereafter ... to release the aforesaid titles to the corresponding registered owners." The Order was immediately implemented even before it became final and executory and the bank's affidavits of adverse claim were annotated by the Registers of Deeds on the back of the certificates of title. Petitioner thereafter filed a petition for certiorari with respondent Court of Appeals for the setting aside of the Order and the cancellation of the annotations of adverse claims, pleading the inadequacy of resorting to an ordinary appeal with its concomitant delay. Giving due course to the petition, respondent court thus stated the legal issues submitted to it: "(T)he answer of respondent bank did not raise any question of fact. The only issues raised in this petition for certiorari are (1) 'whether a mere money claim may be properly registered as an adverse claim on a Torrens Certificate of Title within the purview of the Land Registration Act,' and (2) 'whether a 51

TEEHANKEE, J.: The Court reverses respondent appellate court's dismissal of the case on a procedural question and instead applies the settled doctrine that when the right to appeal is not an adequate remedy, certiorari will issue to promptly relieve an aggrieved party from the injurious effects of an order issued with grave abuse of discretion. On the merits, the Court holds that a mere money claim such as a personal loan granted by a bank on promissory notes executed by the borrower and his co-maker is riot registrable as an adverse claim to be annotated on their registered real properties. Respondent Rural Bank of Ormoc City, Inc. had executed certain affidavits of adverse claim to certain registered sugar lands in Tacloban and Ormoc Cities alleged by petitioner to belong to him either as co-owner and/or as redemptioner. The said lands were the subject of mortgage loans obtained from respondent bank which had been fully paid and discharged either by payment or redemption after extra-judicial foreclosure. Claiming that it still had certain unsecured money claims against the registered owners (i.e. loans extended by it to seven other borrowers covered by promissory notes wherein petitioner had signed as co-maker as well as other unsecured loans wherein the other registered owners [Magno Amora and Ponciano Mangco, represented by petitioner as attorney-in-fact] had likewise signed as co-makers of the promissory notes), respondent bank sought to have its adverse claim annotated on the certificates of title as "a claim or right of (the) bank to the properties of the persons ... having a contractual obligation with the bank" 1 and refused to

Judge of the Court of First Instance who orders the annotation of such money claim as an adverse claim on the certificate of title commits grave abuse of discretion amounting to lack or excess of jurisdiction."' By-passing the first and principal issue, respondent court in its decision of January 9, 1975 dismissed the petition on the ground that appeal from the lower court's order for the annotation of the bank's money claims, and not certiorari, was "the only remedy" and that "even if, as contended by herein petitioner, respondent Judge erred in ordering the annotation of the adverse claim on the certificates of title, that error, alone and in itself, is not a ground for certiorari, for not every erroneous conclusion of law or fact is abuse of discretion (Villa-Rey Transit vs. Bello, G.R. No. L-18957, April 23, 1963)." Hence, the present petition, after the failure of petitioner's motion for reconsideration with respondent court. Upon receipt of respondent bank's comment on the petition as required, the Court resolved, by way of expediting the disposition of the simple issues of the case, to treat the petition as a special civil action and declared the case submitted for decision without briefs. Respondent court clearly erred in dismissing the petition on the ground that appeal from the questioned Order was petitioner's "only remedy". It is settled doctrine that the prerogative writ of certiorari may be applied for by proper petition notwithstanding the existence of the regular remedy of an appeal in due course when, among other reasons, the broader interests of justice so require or an ordinary appeal is not an adequate remedy. 4

Here, petitioner had correctly pleaded that an appeal would be ineffectual to redress the lower court's error since lien-free titles to the sugar lands in question were required by the banks as collaterals before they would grant him badly needed crop loans to finance their operation and the delay in securing a reversal by ordinary appeal would work injustice to him while certiorari could promptly relieve him from the injurious and prejudicial effects of the questioned order. Now, to resolve the issues of the case on the merits. A mere money claim may not be registered as an adverse claim on a torrens certificate of title and a judge who orders the annotation on the certificate of title of such money claim as an adverse claim acts without any authority in law and commits a grave discretion amounting in law and commits a grave abuse of discretion amounting to lack of jurisdiction that calls for the issuance of the corrective writ of certiorari. Section 110 of the Land Registration Act (Act 496) manifestly provides that a person or entity who wishes to register an adverse claim in registered land must-claim a "part or interest in (the) registered land adverse to the registered owner. 5 Thus, purely money claims such as those of respondent bank by virtue of unsecured personal loans granted by it on promissory notes executed in its favor signed by the borrowers and co-signed by petitioner as co-maker are not registrable as adverse claims against the petitioner's registered lands. 6 The claim asserted must affect the title or be adverse to the title of the registered owner in order to be duly annotated as an adverse claim to the land against the registered owner. As pointed out by the Court, the annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property where the registration of such 52

interest or right is not otherwise provided for by the Land Registration Act, and serves as a notice and warning to third parties dealing with said property that someone is claiming an interest on the same or a better right than the registered owner thereof. 7 If respondent bank wanted the additional security of petitioner's real properties besides his personal signature assuming liability for the payment of the personal loans, then it should not have extended the loans without requiring furthermore the execution of a covering real 'estate mortgage. If the loans were due and it feared that there would be a fraudulent removal-or disposition of the debtors' properties, then its proper course was to file the proper collection suit and seek a court order for attachment under bond but certainly not to execute and submit for registration a mere baseless adverse claim, simply because it happened to be in possession of petitioner's certificates of title as a mortgagee whose mortgage lien had been fully discharged. The writ of certiorari sought in vain by petitioner from respondent court should therefore be issued. ACCORDINGLY, respondent court's decision of January 9, 1975 is set aside and in lieu thereof judgment is hereby rendered declaring null and void the lower court's Order of July 10, 1974 for annotation of respondent bank's affidavits of adverse claims on the certificates of title in question. Private respondent is ordered to deliver forthwith to the Tacloban and Ormoc Cities Registers of Deeds the owner's copies of said certificates of title and pay the required fees for the cancellation of said annotations and for the return of said certificates thereafter to petitioner and the corresponding registered owners. With costs in all instances against private respondent. SO ORDERED.

Makasiar, Esguerra, Muoz Palma and Martin, JJ, concur. Footnotes 1 Rollo, page 29. 2 Rollo, page 26. 3 In Cadastral Case No. 35, GLRO Record No. 1795. 4 Cf. 3 Moran's Rules of Court 1970 Ed., pp. 162-165 and cases cited. 5 The text of the cited section reads: "(W)hoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to the date of the original registration, may, if no other provision is made in this Act for registering the same, make a statement in writing setting forth fully his alleged right or interest, and how or under whom acquired, and a reference to the volume and page of the certificate of title of the registered owner, and a description of the land in which the right or interest is claimed. ... (first paragraph). 6 Narciso Pena in Registration of Land Titles and Deeds, 1966 Rev. Ed., p. 407, stresses that "purely personal claims such as commission from the sale of land, fees for legal services rendered expenses advanced, or money loaned, cannot be annotated on a certificate of title as adverse claims. But where the court shall have ordered the cancellation of the registration of such claims, it has no power to order

53

their payment by the party in whose name the certificate of title was issued." 7 Ty Sin Tei vs. Lee Dy Piao, 103 Phil. 858 (1958).

On January 4, 1960, petitioner herein Elisa D. Gabriel, filed with the Register of Deeds of Manila, an Adverse claim, against the properties registered in the name of oppositor-appellant, Juanita R. Domingo, her sister. As grounds for the adverse claim, petitioner allege Notwithstanding the registration of the foregoing properties in the name of Juanita R. Domingo, the same properties have been included in the amended inventory of the estate of the late Antonia Reyes Vda. de Domingo, filed by Elisa Domingo de Gabriel1 as they are in fact properties acquired by the deceased during her lifetime. The registration of the titles of these properties,; should have been made in the name of said Antonia Reyes Vda. de Dominga, but due to commission of fraud and deceit, by said Juanita R. Domingo, who was then living in the same house with the deceased, all the titles of the above stated properties were registered instead in her name, thus depriving herein adverse claimant who is likewise an heir of Antonia Reyes Vda. de Domingo of her lawful rights, interests and participations over said properties.

ADVERSE CLAIM EN BANC G.R. No. L-17956 September 30, 1963

ELISA D. GABRIEL, petitioner-appellee, vs. REGISTER OF DEEDS OF RIZAL, respondent, JUANITA R. DOMINGO, oppositor-appellant. Romualdo D. Celestra for petitioner-appellee. Balcos, Salazar & Associates for oppositor-appellant. PAREDES, J.:

On the same date, a similar notice of adverse claim was presented by petitioner with the Register of Deeds of Rizal, on the properties registered in the name of Juanita R. Domingo, located in Rizal Province, the ground for which was stated as follows The foregoing properties an included in the amended inventory of the estate of their late mother Antonia Reyes Vda, de Domingo, who is the true owner of said properties, and considering that the registrations in the name of Juanita R. Domingo were only made fraudulently, thus depriving herein adverse claimant of her lawful rights, interest and participations over said properties. 54

For the adverse claim on the Manila properties, Domingo presented an opposition, claiming that the Adverse claim was instituted for (1) Harassment;(2) Had no legal basis; and (3) Had done and will do irreparable loss her. The Register of Deeds of Manila, elevated the matter to the Land Registration Commission en Consulta, where in he stated Because the undersigned is in doubt as to whether the registration of the claim is proper determination by this Commission. Oppositor Domingo also asked that the adverse claim of Gabriel on her Rizal properties be denied, contending that same was presented only to embarrass her that said properties were acquired by her pursuant to an extrajudicial partition in which the petitioner Gabriel and their mother (Antonia), were signatories. On January 13, 1960, the Register of Deeds of Rizal denied registration of the Notice of Adverse Claim, stating P.E. No. 90080 NOTICE OF ADVERSE CLAIM has have been found to be legally defective or otherwise not sufficient in law and is/are therefore, hereby denied on the following ground: Where there are other provisions of remedies under this Act, the affidavit of adverse claim is not applicable. Under date of January 21, 1960, Elisa D. Gabriel appealed the above denial to the Land Registration Commission.1awphl.nt On February 17, 1960, the Register of Deeds of Rizal in his letter transmitting the case to the LRC, tried justify his denial to

annotate the affidavit of Adverse claim, by pointing out that such procedure was not proper contending that petitioner's case does not come under the provisions of Section 110 of Act 496. if at all, he claims petitioner should have availed Section 98 thereof. On March 7, 1960, the LRC heard the two cases, and before any of the parties could file his memorandum, the Register of Deeds of Rizal, presented a Supplemental Memorandum, reiterating his stand. In his reply, Gabriel clarified the issue, stating that the question at bar concerns the fraudulent registration by oppositor, of the properties subject of the Adverse claims, and not their fraudulent acquisition. The Land Registration Commission, on April 29, 1960, issued a resolution, the pertinent portions of which are reproduced hereinbelow The only question to be resolved by this Commission in these related consultas the registration of the two notices of adverse claim filed with the Registries of Manila and Rizal. Whether or not these adverse claims are valid, whether or not they are frivolous and merely intended to harass, and such other litigious matters raised by the protagonists, are for a Court of competent jurisdiction, and not for this Commission to decide. Sec. 110 of Act No. 496 provides that Whoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to the date of the original registration, may, if no other provision is made in this Act for registering the same, make statement in writing setting forth fully his alleged right or 55

interest, and how or under whom acquired, and a reference to the volume and page of the certificate of title of the registered owner, and a description of the land in which the right or interest is claimed. The statement shall be signed and sworn to, and shall state the adverse claimant's residence, and designate a place at which all notices may be served upon him. This statement shall be entitled to registration as an adverse claim and the court, upon petition of any party in interest, shall grant a specific hearing upon the question of the validity of such adverse claim and shall enter such decree therein as justice and equity may require. If the claim is adjudged to be invalid, the registration shall be cancelled. If in any case the court after notice and hearing shall find that a claim thus registered was frivolous or vexatious, it may tax the adverse claimant. double or treble the costs in its discretion. It is believed that the two notices of adverse claim filed both registries substantially comply with the above legal requirements. And under paragraph 5 of the LRC Circular No. 2, dated July 10. 1954, where the document sought to be registered is sufficient in law and drawn up in accordance with existing requirements, it, becomes incumbent upon the Register of Deeds to perform his ministerial duty without unnecessary delay. The registration of an invalid adverse claim will not do as much harm as the non-registration of a valid one. The notation of an adverse claim, like that of lis pendens, does not create non-existent right or lien and only means that a

person who chases or contracts on the property in dispute does so subject to the result or outcome of the dispute.... xxx xxx xxx

In view of the foregoing facts and considerations, this Commission is of the opinion, and so holds, that the notices of verse claim filed by Elisa D. Gabriel with the Registries of Manila and Rizal are registrable. Registration should not however be confused with validity. The registration of the adverse claim will not by itself alone make them valid. Their validity will ultimately decided in Special Proceeding No. 2658 or, in alternative, in the more expeditious remedy provided for in 110 of Act No. 496, i.e., a speedy hearing upon the question the validity of the adverse claim. Oppositor Domingo moved for a reconsideration of above order, contending, in the main, that a Register Deeds exercises some degree of judicial power to determine upon his own responsibility, the legality of instruments brought before him for registration. In other words, oppositor submits that the duties of the Register of Deeds are not wholly ministerial, for they can refuse, and/or suspend the registration of documents when they think they are not valid or not registrable. In denying the motion for reconsideration, the Land Registration Commissioner said, in part The only question resolved by this Commission was the registrability of the two notices of adverse claims. The allegations and counter-allegations of the contending parties on the validity or invalidity of the adverse claims were not considered. They should be addressed to and decided by a competent court.

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With the denial of the motion for reconsideration, oppositor brought the matter to this Court on appeal, claiming that the Land Registration Commissionerred (1) holding the adverse claims registrable; and (2) in holding that it is the mandatory duty of the Register of Deeds register the instant notices of adverse claims "whether not they are valid, "whether or not they are frivolous merely intended to harass." In addition to the well-taken disquisitions of the L.R.C., it should be observed that section 110 of Act No. 496, which is the legal provision applicable to the case, is divided into two parts: the first refers to the duty of the party who claims any part or interest in registered land adverse to the registered owner, subsequent to the date of the original registration; and the requirements to be complied with in order that such statement shall been titled to registration as an adverse claim, thus showing the ministerial function of the Register of Deeds, when no defect is found on the face of such instrument; and the second applies only when, after registration of the adverse claim, a party files an appropriate petition with a competent court which shall grant a speedy hearing upon the question of the validity of such adverse claim, and to enter a decree, as justice and equity require; and in this hearing, the competent court shall resolve whether the adverse claim is frivolous or vexatious, which shall serve as the basis in taxing the costs. In the instant case, the first part was already acted upon by the L.P.C. which resolved in favor of the registrability of the two adverse claims and this part should have been considered as closed. What is left, is the determination of the validity of the adverse claims by competent court, after the filing of the corresponding petition for hearing, which the appellant had not done. Anent the second assignment of error, the Land Registration Commission did not state that it was mandatory for a Register of Deeds to register invalid or frivolous documents, or those intended

to harass; it merely said that whether the document is invalid, frivolous or intended to harass, is not the duty of a Register of Deeds to decide, but a court of competent jurisdiction, and that it is his concern to see whether the documents sought to be registered conform with the formal and legal requirements for such documents. WHEREFORE, the Resolution of the Land Registration Commission, holding the registrability of the Adverse Claims under consideration, should be, as it is hereby affirmed, with costs against oppositor-appellant Juanita R. Domingo. Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Dizon, Regala and Makalintal, concur. Reyes, J.B.L., J., took no part. Footnotes 1Special Proceeding No. 2658, CFI of Rizal, still pending. ADVERSE CLAIM EN BANC G.R. No. L-16448 April 29, 1961

REGISTER OF DEEDS OF QUEZON CITY, petitioner; PEOPLE'S HOMESITE AND HOUSING CORPORATION, vendor; and DEVELOPMENT BANK OF THE PHILIPPINES, vendee-appellant, vs. HONESTO G. NICANDRO and ELISA F. NICANDRO, vendeesappellees. Jesus A. Avancea for petitioner. Jose C. Colayco for vendees-appellees.

57

BARRERA, J.: From the resolution of the Land Registration Commissioner on the question submitted to him en consulta by the Register of Deeds of Quezon City(LRC Consulta No. 250), the Development Bank of the Philippines (formerly Rehabilitation Finance Corporation) has appealed to this Court pursuant to Section 4 of Republic Act No. 1151. There is no controversy as to the following facts: On October 20, 1955, the People's Homesite and Housing Corporation (PHHC) sold to the Rehabilitation Finance Corporation, now the Development Bank of the Philippines (DBP), 159 lots comprised in Blocks 21 to 31 of West Triangle in Diliman, Quezon City; that at that time, all the 159 lots were included in a larger parcel of land covered by TCT No. 1356; that subsequently, without the knowledge of the DBP, the 159 lots were segregated and a new transfer certificate of title No. 36533 covering the same was issued; that the subdivision plan segregating them was not annotated on the bigger title No. 1356, nor the fact that the latter was pro tanto cancelled by the new title No. 36533; that because of these circumstances the sale agreement between appellant DBP and the PHHC, when presented for registration on January 15, 1959, was entered in the day book under date of January 15 and inscribed on TCT No. 1356 as a "sale of unsegregated portions" with the note "new titles to be issued upon presentation of the corresponding subdivision plan and technical descriptions duly approved by the authorities". A month later, or on February 16, 1959, Honesto C. Nicandro and Elisa F. Nicandro presented to the Register of Deeds for registration two deeds of sale executed by the PHHC in their favor, involving Lots Nos. 2 and 4, Block 21, which was later covered, among other lots, by TCT No. 36533. These lots were among the 159 lots already sold to the appellant Development Bank of the Philippines. These

deeds of sale of the Nicandros were denied registration for the reason that only photostatic copies of the deeds were presented, the lots were mortgaged to the GSIS whose consent did not appear on the deeds, and they lacked the necessary documentary stamps. On the following day, February 17, the Nicandros filed affidavit of adverse claim over the two lots, which were annotated on TCT No. 36533, and simultaneously filed a petition in the Court of First Instance of Rizal to require the GSIS to surrender the owner's duplicate of said TCT No. 36533 to the Register of Deeds for the annotation of the sale in their favor. Discovering that the lots it had purchased are already covered by TCT No. 36533, the vendee DBP, on March 6, 1959, caused the annotation thereon of its deed of sale of October 20, 1955. It was then found out that the required subdivision plan covering the lots involved in the sale, was already submitted and duly recorded in TCT No. 36533. As a consequence, upon petition of DBP, the Register of Deeds transferred the annotation of the deed of sale of the DBP appearing on TCT No. 1356 to the new TCT No. 36533. As the DBP's demand for the issuance of a new certificate of title in its name was opposed the Nicandros, the Register of Deeds referred the matte en consults to the Land Registration Commissioner. In the meantime, upon order of the Court of First Instance and as prayed for by the Nicandros, the GSIS surrendered the owner's duplicate of TCT No. 36533, and both the a verse claims of the Nicandros and the deed of sale in favor of the Bank were annotated on the back thereof. In his Resolution of July 25, 1959, the Land Registration Commissioner ruled that the annotation on TCT N 1356 of the sale agreement between the PHHC and the vendee DBP, did not constitute registration sufficient to bind innocent third parties (referring to the Nicandros), for the reasons that (1) the deed of 58

October 20, 1955 did not specify that it was a sale of an unsegregated portion of land and the deed, consequently, was defective; (2 when the sale agreement was annotated on TCT No. 3156, the owner's duplicate certificate was not surrendered, an even if it did so, it would have no effect at all as TCT No. 3156 was already cancelled and superseded by TCT No. 36533; and (3) TCT No. 1356, on which said sale was first annotated, no longer covers the 159 lots subject o the sale. It was, therefore, held that the Nicandros are entitled to the issuance of the corresponding certificate of title, subject to the mortgage in favor of the GSIS. Hence, this appeal by DBP. A careful consideration of the facts and the law involved in this appeal induces us to conclude and hold the Land Registration Commissioner erred in declaring the Nicandros entitled to registration of Lots Nos. 2 an 4 in their names, and in directing the issuance to the of the corresponding certificates. The Commissioner's finding that the sale-contract in favor of the appellant DBP is defective, for failure to specify that it was for an unsegregated portion, is without factual basis. The pertinent provisions of the sale agreement textually read: That for and in consideration of the sum of EIGHT HUNDRED TWO THOUSAND ONE HUNDRED FIFTY-FIVE PESOS AND FIFTY-SIX CENTAVOS (P802,155.56), Philippine Currency, of which the receipt of the amount of FOUR HUNDRED THOUSAND PESOS (P400,000.00) is hereby acknowledged as advance payment to defray the expenses which the PHHC will incur in carrying out the obligations imposed upon it under Conditions Nos. 7 & 8 of this Agreement and the balance to be payable upon compliance by the PHHC of Condition No. 7, the PHHC, by these presents, hereby conveys, sells and transfers unto the RFC the lots in Blocks

21 to 31, West Triangle, totalling 91,188.30 square meters, as listed in the schedule attached hereto as Annex A, described in Annex B, and shown in the plan Annex C. of which lots the PHHC is the absolute owner as evidenced by TCT No. 1356 of the land records of Quezon City, subject to the following terms, and conditions and undertakings: xxx xxx xxx

8. The PHHC shall complete the subdivision of this area in accordance with the plan approved by the RFC, secure the approval of the subdivision plan by the Bureau of Lands, the Land Registration Commission and the appropriate court of first instance, and to register said plan with the Register of Deeds of Quezon City, in order that titles to the lots conveyed herein may be issued in favor of the RFC. (Emphasis supplied.) It may be gathered from the foregoing that the subject of the sale were certain "lots in Blocks 21 to 31, West Triangle, totalling 91,188.30 square meters, . . . of which the PHHC is the absolute owner as evidenced by TCT No. 1356"; that while there was a subdivision plan prepared by the PHHC, to which the vendee DBP is agreeable, the same was not yet approved by the proper authorities, nor duly recorded in the Register of Deeds' office at the time of the execution of the contract. Thus, under said agreement, the vendor was still obliged to complete the subdivision of the area, secure its approval by the Bureau of Lands, Land Registration Commission, and the court of first' instance, and cause the registration thereof in the office of the Register of Deeds. Clearly, from the language of the document, the area comprising the 159 lots subject of the sale, although perhaps already surveyed for purposes of segregation, had not yet been officially segregated from the bigger tract of land in the records of the Register of Deeds. In 59

the circumstances, the contract, evidently, is for the sale of an unsegregated portion of West Triangle area owned by the PHHC. And the denomination of the deed simply as a "Deed of Sale" did not transform said contract into one for the sale of a segregated parcel land. The nature of a contract is not determined by title given to it but by the intention of the parties an the legal effect of the instrument.1 The deed of sale favor of the DBP is, clearly, a registerable document. Too, there was a finding that when the deed of sale was presented for registration, the registrant (DBP) failed to surrender the owner's duplicate certificate; thus, the Commissioner ruled that the annotation thereof on TCT No. 1356 on January 15, 1959, was made in disregard on Section 55 of Act 496, and, consequently, invalid. It appears on record, however, that by virtue of a arrangement between the PHHC and the Register of Deed of Quezon City, the last sheets of the certificates of title covering all the properties of the PHHC were kept in possession of the Register of Deeds, to facilitate the annotation on the certificates of title of the transactions entered into by the housing corporation. (pp. 77-78, Record on Appeal.) To effect registration of lands purchase from the PHHC, therefore, the vendee would only have to present the deed of sale to the Register of Deeds, and the latter, who has with him the corresponding sheets of the owner's duplicate certificates, could already register or annotate the said deed on the corresponding title. We find nothing wrong in this procedure. As so declared by the Land Registration ACT2 the production of the owner's duplicate certificate, whenever any voluntary instrument is presented for registration, is conclusive authority from the registered owner to the register of deeds to enter a new certificate or make the corresponding memorandum of such document. In the instant case,

the owner (PHHC) by its delivery of the pertinent sheets of it certificates of title to the Register of Deeds of Quezon City already authorized said official to make the corresponding entries of all transactions entered into by the housing corporation. Neither can it be claimed that the annotation of the deed of sale in favor of the DBP on TCT No. 1356, under date of January 15, 1959, does not constitute sufficient registration to bind third parties. True it may be that when the instrument was presented to the Register of Deeds for registration, and in fact it was so inscribed in the day book, the 159 lots subject of the sale were already covered by a separate certificate of title, TCT No. 36533. It must be remembered, however, that on said date, January 15, 1959, TCT No. 1356 which originally covered the whole tract of land, including the 159 lots, was yet uncancelled nor any inscription appeared thereon to the effect that a new certificate was already issued in respect to the said 159 lots. Evidently, when the DBP presented the deed of sale for registration, there were two subsisting titles covering the y159 lots subject of the sale. As TCT No. 1356, being uncancelled, did, for all intents and purposes, still cover the 159 lots, the annotation thereon of the sale to DBP is valid and effective. For this reason, the Register of Deeds acted correctly in transferring the inscription from TCT No. 1356 to TCT No. 36533 upon discovery that the subdivision plan had already been approved, submitted and annotated, and a new certificate of title issued. Even on this score alone, considering that the adverse claim of the Nicandros was annotates on TCT No. 35633 only on February 17, 1959, whereas the sale to the DBP was registered as of January 15, 1959, the certificate of title on the two lots in controversy should be issued in favor of the first registrant, the DBP. There is, however, another reason why the Commissioner's ruling must be set aside.

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Although admittedly we have here a case of double sale, actually this is not an instance of double registration. As above stated, only the deed of sale in favor of appellant was inscribed on the certificate of title covering the lots in question. The Nicandros were not able to register their deeds of sale; instead, informed of the prior registration by the DBP, they sought to protect their right by filing adverse claims based on the said deeds of sale under Section 110 of Act 496, which provides: SEC. 110. Whoever claims any right or interest in registered land adverse to the registered owner, arising subsequent to the date of the original registration, may, if no other provision is made in this Act for registering the same, make a statement in writing setting forth fully his alleged right or interest, and how or under whom acquired, and a reference to the volume and page of the certificate of title of the registered owner, and a description of the land in which the right or interest is claimed. . . . (Emphasis supplied.) It is clear from the above quotation that for this special remedy (adverse claim) to be availed of, it must be shown that there is no other provision in the law for registration of the claimant's alleged right or interest in the property. The herein claim of the Nicandros is based on a perfected contract of sale executed in their favor by the lawful owner of the land. Considering that the Land Registration Act specifically prescribes the procedure for registration of a vendee's right on a registered property,3 the remedy provided in Section 110, which was resorted to and invoked by appellees, would be ineffective for the purpose of protecting their said right or interest on the two lots. WHEREFORE, the Resolution appealed from is hereby set aside, and the Register of Deeds of Quezon City ordered to issue the

corresponding certificate of title in favor of appellant DBP. Without costs. So ordered. Bengzon, C.J., Labrador, Concepcion, Reyes, J.B.L., Paredes and Dizon, JJ., concur. Padilla, J., took no part.

Footnotes
1

Morrison v. St. Paul & N.P.R. Co., 63 Minn. 78, 65 N.W. 141, 30 L.R.A. 546; Intermountain Bldg. & Loan Assn. v. Gallegos, C.C.A. W. Va., 59 F. Sd 711, 87 A.L.R., 555.
2

Section 55, Act 496. Section 57, Act 496.

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OLIVIA and CALIXTA, all surnamed TOSINO, APOLONIA TOSINO VDA. DE RAMIREZ and JULITA TOSINO DEAN; PEDRO TORBELA, represented by his heirs, namely: JOSE and DIONISIO, both surnamed TORBELA; EUFROSINA TORBELA ROSARIO, represented by her heirs, namely: ESTEBAN T. ROSARIO, MANUEL T. ROSARIO, ROMULO T. ROSARIO and ANDREA ROSARIO-HADUCA; LEONILA TORBELA TAMIN; FERNANDO TORBELA, represented by his heirs, namely: SERGIO T. TORBELA, EUTROPIA T. VELASCO, PILAR T. ZULUETA, CANDIDO T. TORBELA, FLORENTINA T. TORBELA and PANTALEON T. TORBELA; DOLORES TORBELA TABLADA; LEONORA TORBELA AGUSTIN, represented by her heirs, namely: PATRICIO, SEGUNDO, CONSUELO and FELIX, all surnamed AGUSTIN; and SEVERINA TORBELA ILDEFONSO, Petitioners, vs. SPOUSES ANDRES T. ROSARIO and LENA DUQUE-ROSARIO and BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 140553 LENA DUQUE-ROSARIO, Petitioner, vs. BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Respondent. DECISION ADVERSE CLAIM FIRST DIVISION G.R. No. 140528 December 7, 2011 LEONARDO-DE CASTRO, J.: Presently before the Court are two consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of Court, both assailing the Decision1 dated June 29, 1999 and Resolution2 dated October 22, 1999 of the Court of Appeals in CA-G.R. CV No. 39770.

MARIA TORBELA, represented by her heirs, namely: EULOGIO TOSINO, husband and children: CLARO, MAXIMINO, CORNELIO,

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The petitioners in G.R. No. 140528 are siblings Maria Torbela,3 Pedro Torbela,4 Eufrosina Torbela Rosario,5 Leonila Torbela Tamin, Fernando Torbela,6 Dolores Torbela Tablada, Leonora Torbela Agustin,7 and Severina Torbela Ildefonso (Torbela siblings). The petitioner in G.R. No. 140553 is Lena Duque-Rosario (DuqueRosario), who was married to, but now legally separated from, Dr. Andres T. Rosario (Dr. Rosario). Dr. Rosario is the son of Eufrosina Torbela Rosario and the nephew of the other Torbela siblings. The controversy began with a parcel of land, with an area of 374 square meters, located in Urdaneta City, Pangasinan (Lot No. 356A). It was originally part of a larger parcel of land, known as Lot No. 356 of the Cadastral Survey of Urdaneta, measuring 749 square meters, and covered by Original Certificate of Title (OCT) No. 16676,8 in the name of Valeriano Semilla (Valeriano), married to Potenciana Acosta. Under unexplained circumstances, Valeriano gave Lot No. 356-A to his sister Marta Semilla, married to Eugenio Torbela (spouses Torbela). Upon the deaths of the spouses Torbela, Lot No. 356-A was adjudicated in equal shares among their children, the Torbela siblings, by virtue of a Deed of Extrajudicial Partition9 dated December 3, 1962. On December 12, 1964, the Torbela siblings executed a Deed of Absolute Quitclaim10 over Lot No. 356-A in favor of Dr. Rosario. According to the said Deed, the Torbela siblings "for and in consideration of the sum of NINE PESOS (P9.00) x x x transfer[red] and convey[ed] x x x unto the said Andres T. Rosario, that undivided portion of THREE HUNDRED SEVENTY-FOUR square meters of that parcel of land embraced in Original Certificate of Title No. 16676 of the land records of Pangasinan x x x."11 Four days later, on December 16, 1964, OCT No. 16676 in Valerianos name was partially cancelled as to Lot No. 356-A and TCT No. 5275112 was issued in Dr. Rosarios name covering the said property.

Another Deed of Absolute Quitclaim13 was subsequently executed on December 28, 1964, this time by Dr. Rosario, acknowledging that he only borrowed Lot No. 356-A from the Torbela siblings and was already returning the same to the latter for P1.00. The Deed stated: That for and in consideration of the sum of one peso (P1.00), Philippine Currency and the fact that I only borrowed the above described parcel of land from MARIA TORBELA, married to Eulogio Tosino, EUFROSINA TORBELA, married to Pedro Rosario, PEDRO TORBELA, married to Petra Pagador, LEONILA TORBELA, married to Fortunato Tamen, FERNANDO TORBELA, married to Victoriana Tablada, DOLORES TORBELA, widow, LEONORA TORBELA, married to Matias Agustin and SEVERINA TORBELA, married to Jorge Ildefonso, x x x by these presents do hereby cede, transfer and convey by way of this ABSOLUTE QUITCLAIM unto the said Maria, Eufrosina, Pedro, Leonila, Fernando, Dolores, Leonora and Severina, all surnamed Torbela the parcel of land described above.14 (Emphasis ours.) The aforequoted Deed was notarized, but was not immediately annotated on TCT No. 52751. Following the issuance of TCT No. 52751, Dr. Rosario obtained a loan from the Development Bank of the Philippines (DBP) on February 21, 1965 in the sum of P70,200.00, secured by a mortgage constituted on Lot No. 356-A. The mortgage was annotated on TCT No. 52751 on September 21, 1965 as Entry No. 243537.15 Dr. Rosario used the proceeds of the loan for the construction of improvements on Lot No. 356-A. On May 16, 1967, Cornelio T. Tosino (Cornelio) executed an Affidavit of Adverse Claim,16 on behalf of the Torbela siblings. Cornelio deposed in said Affidavit:

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3. That ANDRES T. ROSARIO later quitclaimed his rights in favor of the former owners by virtue of a Deed of Absolute Quitclaim which he executed before Notary Public Banaga, and entered in his Notarial Registry as Dec. No. 43; Page No. 9; Book No. I; Series of 1964; 4. That it is the desire of the parties, my aforestated kins, to register ownership over the above-described property or to perfect their title over the same but their Deed could not be registered because the registered owner now, ANDRES T. ROSARIO mortgaged the property with the DEVELOPMENT BANK OF THE PHILIPPINES, on September 21, 1965, and for which reason, the Title is still impounded and held by the said bank; 5. That pending payment of the obligation with the DEVELOPMENT BANK OF THE PHILIPPINES or redemption of the Title from said bank, I, CORNELIO T. TOSINO, in behalf of my mother MARIA TORBELA-TOSINO, and my Aunts EUFROSINA TORBELA, LEONILA TORBELA-TAMEN, DOLORES TORBELA, LEONORA TORBELA-AGUSTIN, SEVERINA TORBELA-ILDEFONSO, and my Uncles PEDRO TORBELA and FERNANDO, also surnamed TORBELA, I request the Register of Deeds of Pangasinan to annotate their adverse claim at the back of Transfer Certificate of Title No. 52751, based on the annexed document, Deed of Absolute Quitclaim by ANDRES T. ROSARIO, dated December 28, 1964, marked as Annex "A" and made a part of this Affidavit, and it is also requested that the DEVELOPMENT BANK OF THE PHILIPPINES be informed accordingly.17 The very next day, on May 17, 1967, the Torbela siblings had Cornelios Affidavit of Adverse Claim dated May 16, 1967 and Dr. Rosarios Deed of Absolute Quitclaim dated December 28, 1964

annotated on TCT No. 52751 as Entry Nos. 27447118 and 274472,19 respectively. The construction of a four-storey building on Lot No. 356-A was eventually completed. The building was initially used as a hospital, but was later converted to a commercial building. Part of the building was leased to PT&T; and the rest to Mrs. Andrea RosarioHaduca, Dr. Rosarios sister, who operated the Rose Inn Hotel and Restaurant. Dr. Rosario was able to fully pay his loan from DBP. Under Entry No. 520197 on TCT No. 5275120 dated March 6, 1981, the mortgage appearing under Entry No. 243537 was cancelled per the Cancellation and Discharge of Mortgage executed by DBP in favor of Dr. Rosario and ratified before a notary public on July 11, 1980. In the meantime, Dr. Rosario acquired another loan from the Philippine National Bank (PNB) sometime in 1979-1981. Records do not reveal though the original amount of the loan from PNB, but the loan agreement was amended on March 5, 1981 and the loan amount was increased to P450,000.00. The loan was secured by mortgages constituted on the following properties: (1) Lot No. 356A, covered by TCT No. 52751 in Dr. Rosarios name; (2) Lot No. 4489, with an area of 1,862 square meters, located in Dagupan City, Pangasinan, covered by TCT No. 24832; and (3) Lot No. 5-F-8-C-2-B2-A, with an area of 1,001 square meters, located in Nancayasan, Urdaneta, Pangasinan, covered by TCT No. 104189.21 The amended loan agreement and mortgage on Lot No. 356-A was annotated on TCT No. 52751 on March 6, 1981 as Entry No. 520099.22 Five days later, on March 11, 1981, another annotation, Entry No. 520469,23 was made on TCT No. 52751, canceling the adverse claim on Lot No. 356-A under Entry Nos. 274471-274472, on the basis of the Cancellation and Discharge of Mortgage executed by Dr. Rosario 64

on March 5, 1981. Entry No. 520469 consisted of both stamped and handwritten portions, and exactly reads: Entry No. 520469. Cancellation of Adverse Claim executed by Andres Rosario in favor of same. The incumbrance/mortgage appearing under Entry No. 274471-72 is now cancelled as per Cancellation and Discharge of Mortgage Ratified before Notary Public Mauro G. Meris on March 5, 1981: Doc. No. 215; Page No. 44; Book No. 1; Series Of 1981. Lingayen, Pangasinan, 3-11, 19981 [Signed: Pedro dela Cruz] Register of Deeds 24 On December 8, 1981, Dr. Rosario and his wife, Duque-Rosario (spouses Rosario), acquired a third loan in the amount of P1,200,000.00 from Banco Filipino Savings and Mortgage Bank (Banco Filipino). To secure said loan, the spouses Rosario again constituted mortgages on Lot No. 356-A, Lot No. 4489, and Lot No. 5-F-8-C-2-B-2-A. The mortgage on Lot No. 356-A was annotated on TCT No. 52751 as Entry No. 53328325 on December 18, 1981. Since the construction of a two-storey commercial building on Lot No. 5F-8-C-2-B-2-A was still incomplete, the loan value thereof as collateral was deducted from the approved loan amount. Thus, the spouses Rosario could only avail of the maximum loan amount of P830,064.00 from Banco Filipino. Because Banco Filipino paid the balance of Dr. Rosarios loan from PNB, the mortgage on Lot No. 356-A in favor of PNB was cancelled per Entry No. 53347826 on TCT No. 52751 dated December 23, 1981. On February 13, 1986, the Torbela siblings filed before the Regional Trial Court (RTC) of Urdaneta, Pangasinan, a Complaint for recovery

of ownership and possession of Lot No. 356-A, plus damages, against the spouses Rosario, which was docketed as Civil Case No. U-4359. On the same day, Entry Nos. 593493 and 593494 were made on TCT No. 52751 that read as follows: Entry No. 593494 Complaint Civil Case No. U-4359 (For: Recovery of Ownership and Possession and Damages. (Sup. Paper). Entry No. 593493 Notice of Lis Pendens The parcel of land described in this title is subject to Lis Pendens executed by Liliosa B. Rosario, CLAO, Trial Attorney dated February 13, 1986. Filed to TCT No. 52751 February 13, 1986-1986 February 13 3:30 p.m. (SGD.) PACIFICO M. BRAGANZA Register of Deeds27 The spouses Rosario afterwards failed to pay their loan from Banco Filipino. As of April 2, 1987, the spouses Rosarios outstanding principal obligation and penalty charges amounted to P743,296.82 and P151,524.00, respectively.28 Banco Filipino extrajudicially foreclosed the mortgages on Lot No. 356-A, Lot No. 4489, and Lot No. 5-F-8-C-2-B-2-A. During the public auction on April 2, 1987, Banco Filipino was the lone bidder for the three foreclosed properties for the price of P1,372,387.04. The Certificate of Sale29 dated April 2, 1987, in favor of Banco Filipino, was annotated on TCT No. 52751 on April 14, 1987 as Entry No. 610623.30 On December 9, 1987, the Torbela siblings filed before the RTC their Amended Complaint,31 impleading Banco Filipino as additional

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defendant in Civil Case No. U-4359 and praying that the spouses Rosario be ordered to redeem Lot No. 356-A from Banco Filipino. The spouses Rosario instituted before the RTC on March 4, 1988 a case for annulment of extrajudicial foreclosure and damages, with prayer for a writ of preliminary injunction and temporary restraining order, against Banco Filipino, the Provincial Ex Officio Sheriff and his Deputy, and the Register of Deeds of Pangasinan. The case was docketed as Civil Case No. U-4667. Another notice of lis pendens was annotated on TCT No. 52751 on March 10, 1988 as Entry No. 627059, viz: Entry No. 627059 Lis Pendens Dr. Andres T. Rosario and Lena Duque Rosario, Plaintiff versus Banco Filipino, et. al. Civil Case No. U-4667 or Annulment of ExtraJudicial Foreclosure of Real Estate Mortgage The parcel of land described in this title is subject to Notice of Lis Pendens subscribed and sworn to before Notary Public Mauro G. Meris, as Doc. No. 21; Page No. 5; Book 111; S-1988. March 7, 1988-1988 March 10, 1:00 p.m. (SGD.) RUFINO M. MORENO, SR. Register of Deeds32 The Torbela siblings intervened in Civil Case No. U-4667. Eventually, on October 17, 1990, the RTC issued an Order33 dismissing without prejudice Civil Case No. U-4667 due to the spouses Rosarios failure to prosecute. Meanwhile, the Torbela siblings tried to redeem Lot No. 356-A from Banco Filipino, but their efforts were unsuccessful. Upon the expiration of the one-year redemption period in April 1988, the Certificate of Final Sale34 and Affidavit of Consolidation35 covering all three foreclosed properties were executed on May 24, 1988 and May 25, 1988, respectively.

On June 7, 1988, new certificates of title were issued in the name of Banco Filipino, particularly, TCT No. 165812 for Lot No. 5-F-8-C-2-B2-A and TCT No. 165813 for Lot No. 356-A .36 The Torbela siblings thereafter filed before the RTC on August 29, 1988 a Complaint37 for annulment of the Certificate of Final Sale dated May 24, 1988, judicial cancelation of TCT No. 165813, and damages, against Banco Filipino, the Ex Officio Provincial Sheriff, and the Register of Deeds of Pangasinan, which was docketed as Civil Case No. U-4733. On June 19, 1991, Banco Filipino filed before the RTC of Urdaneta City a Petition for the issuance of a writ of possession. In said Petition, docketed as Pet. Case No. U-822, Banco Filipino prayed that a writ of possession be issued in its favor over Lot No. 5-F-8-C2-B-2-A and Lot No. 356-A, plus the improvements thereon, and the spouses Rosario and other persons presently in possession of said properties be directed to abide by said writ. The RTC jointly heard Civil Case Nos. U-4359 and U-4733 and Pet. Case No. U-822. The Decision38 on these three cases was promulgated on January 15, 1992, the dispositive portion of which reads: WHEREFORE, judgment is rendered: 1. Declaring the real estate mortgage over Lot 356-A covered by TCT 52751 executed by Spouses Andres Rosario in favor of Banco Filipino, legal and valid; 2. Declaring the sheriffs sale dated April 2, 1987 over Lot 356-A covered by TCT 52751 and subsequent final Deed of Sale dated May 14, 1988 over Lot 356-A covered by TCT No. 52751 legal and valid; 66

3. Declaring Banco Filipino the owner of Lot 356-A covered by TCT No. 52751 (now TCT 165813); 4. Banco Filipino is entitled to a Writ of Possession over Lot 356-A together with the improvements thereon (Rose Inn Building). The Branch Clerk of Court is hereby ordered to issue a writ of possession in favor of Banco Filipino; 5. [The Torbela siblings] are hereby ordered to render accounting to Banco Filipino the rental they received from tenants of Rose Inn Building from May 14, 1988; 6. [The Torbela siblings] are hereby ordered to pay Banco Filipino the sum of P20,000.00 as attorneys fees; 7. Banco Filipino is hereby ordered to give [the Torbela siblings] the right of first refusal over Lot 356-A. The Register of Deeds is hereby ordered to annotate the right of [the Torbela siblings] at the back of TCT No. 165813 after payment of the required fees; 8. Dr. Rosario and Lena Rosario are hereby ordered to reimburse [the Torbela siblings] the market value of Lot 356-A as of December, 1964 minus payments made by the former; 9. Dismissing the complaint of [the Torbela siblings] against Banco Filipino, Pedro Habon and Rufino Moreno in Civil Case No. U-4733; and against Banco Filipino in Civil Case No. U-4359.39 The RTC released an Amended Decision40 dated January 29, 1992, adding the following paragraph to the dispositive:

Banco Filipino is entitled to a Writ of Possession over Lot-5-F-8-C-2[B]-2-A of the subdivision plan (LRC) Psd-122471, covered by Transfer Certificate of Title 104189 of the Registry of Deeds of Pangasinan[.]41 The Torbela siblings and Dr. Rosario appealed the foregoing RTC judgment before the Court of Appeals. Their appeal was docketed as CA-G.R. CV No. 39770. In its Decision42 dated June 29, 1999, the Court of Appeals decreed: WHEREFORE, foregoing considered, the appealed decision is hereby AFFIRMED with modification. Items No. 6 and 7 of the appealed decision are DELETED. Item No. 8 is modified requiring [Dr. Rosario] to pay [the Torbela siblings] actual damages, in the amount of P1,200,000.00 with 6% per annum interest from finality of this decision until fully paid. [Dr. Rosario] is further ORDERED to pay [the Torbela siblings] the amount of P300,000.00 as moral damages; P200,000.00 as exemplary damages and P100,000.00 as attorneys fees. Costs against [Dr. Rosario].43 The Court of Appeals, in a Resolution44 dated October 22, 1999, denied the separate Motions for Reconsideration of the Torbela siblings and Dr. Rosario. The Torbela siblings come before this Court via the Petition for Review in G.R. No. 140528, with the following assignment of errors: First Issue and Assignment of Error: THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT THE REGISTRATION OF THE DEED OF 67

ABSOLUTE QUITCLAIM EXECUTED BY [DR. ANDRES T. ROSARIO] IN FAVOR OF THE [TORBELA SIBLINGS] DATED DECEMBER 28, 1964 AND THE REGISTRATION OF THE NOTICE OF ADVERSE CLAIM EXECUTED BY THE [TORBELA SIBLINGS], SERVE AS THE OPERATIVE ACT TO CONVEY OR AFFECT THE LAND AND IMPROVEMENTS THEREOF IN SO FAR AS THIRD PERSONS ARE CONCERNED. Second Issue and Assignment of Error: THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE SUBJECT PROPERTY COVERED BY T.C.T. NO. 52751 IS CLEAN AND FREE, DESPITE OF THE ANNOTATION OF ENCUMBRANCES OF THE NOTICE OF ADVERSE CLAIM AND THE DEED OF ABSOLUTE QUITCLAIM APPEARING AT THE BACK THEREOF AS ENTRY NOS. 274471 AND 274472, RESPECTIVELY. Third Issue and Assignment of Error: THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE NOTICE OF ADVERSE CLAIM OF THE [TORBELA SIBLINGS] UNDER ENTRY NO. 274471 WAS VALIDLY CANCELLED BY THE REGISTER OF DEEDS, IN THE ABSENCE OF A PETITION DULY FILED IN COURT FOR ITS CANCELLATION. Fourth Issue and Assignment of Error: THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENT BANCO FILIPINO SAVINGS AND MORTGAGE BANK IS A MORTGAGEE IN GOOD FAITH. Fifth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT THE FILING OF A CIVIL CASE NO. U-4359 ON DECEMBER 9, 1987, IMPLEADING RESPONDENT BANCO FILIPINO AS ADDITIONAL PARTY DEFENDANT, TOLL OR SUSPEND THE RUNNING OF THE ONE YEAR PERIOD OF REDEMPTION. Sixth Issue and Assignment of Error: THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT THE OWNERSHIP OVER THE SUBJECT PROPERTY WAS PREMATURELY CONSOLIDATED IN FAVOR OF RESPONDENT BANCO FILIPINO SAVINGS AND MORTGAGE BANK. Seventh Issue and Assignment of Error: THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE SUBJECT PROPERTY IS AT LEAST WORTH P1,200,000.00.45 The Torbela siblings ask of this Court: WHEREFORE, in the light of the foregoing considerations, the [Torbela siblings] most respectfully pray that the questioned DECISION promulgated on June 29, 1999 (Annex "A", Petition) and the RESOLUTION dated October 22, 1999 (Annex "B", Petition) be REVERSED and SET ASIDE, and/or further MODIFIED in favor of the [Torbela siblings], and another DECISION issue ordering, among other reliefs, the respondent Banco Filipino to reconvey back Lot No. 356-A, covered by T.C.T. No. 52751, in favor of the [Torbela siblings] who are the actual owners of the same.

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The [Torbela siblings] likewise pray for such other reliefs and further remedies as may be deemed just and equitable under the premises.46 Duque-Rosario, now legally separated from Dr. Rosario, avers in her Petition for Review in G.R. No. 140553 that Lot No. 4489 and Lot No. 5-F-8-C-2-B-2-A were registered in her name, and she was unlawfully deprived of ownership of said properties because of the following errors of the Court of Appeals: A THE HON. COURT OF APPEALS PATENTLY ERRED IN NOT FINDING THAT THE PERIOD TO REDEEM THE PROPERTY HAS NOT COMMENCED, HENCE, THE CERTIFICATE OF SALE, THE CONSOLIDATION OF OWNERSHIP BY [BANCO FILIPINO], ARE NULL AND VOID. B THE COURT OF APPEALS PATENTLY ERRED IN REFUSING TO RULE THAT THE FILING OF THE COMPLAINT BEFORE THE COURT A QUO BY THE [TORBELA SIBLINGS] HAD ALREADY BEEN PRESCRIBED.47 Duque-Rosario prays that the appealed decision of the Court of Appeals be reversed and set aside, and that Lot No. 4489 and Lot No. 5-F-8-C-2-B-2-A be freed from all obligations and encumbrances and returned to her. Review of findings of fact by the RTC and the Court of Appeals warranted.

A disquisition of the issues raised and/or errors assigned in the Petitions at bar unavoidably requires a re-evaluation of the facts and evidence presented by the parties in the court a quo. In Republic v. Heirs of Julia Ramos,48 the Court summed up the rules governing the power of review of the Court: Ordinarily, this Court will not review, much less reverse, the factual findings of the Court of Appeals, especially where such findings coincide with those of the trial court.http://sc.judiciary.gov.ph/jurisprudence/2010/february2010/ 169481.htm - _ftn The findings of facts of the Court of Appeals are, as a general rule, conclusive and binding upon this Court, since this Court is not a trier of facts and does not routinely undertake the reexamination of the evidence presented by the contending parties during the trial of the case. The above rule, however, is subject to a number of exceptions, such as (1) when the inference made is manifestly mistaken, absurd or impossible; (2) when there is grave abuse of discretion; (3) when the finding is grounded entirely on speculations, surmises, or conjectures; (4) when the judgment of the Court of Appeals is based on misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both parties; (7) when the findings of the Court of Appeals are contrary to those of the trial court; (8) when the findings of fact are conclusions without citation of specific evidence on which they are based; (9) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion; and (10) when the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on record.49 69

As the succeeding discussion will bear out, the first, fourth, and ninth exceptions are extant in these case. Barangay conciliation was not a pre-requisite to the institution of Civil Case No. U-4359. Dr. Rosario contends that Civil Case No. U-4359, the Complaint of the Torbela siblings for recovery of ownership and possession of Lot No. 356-A, plus damages, should have been dismissed by the RTC because of the failure of the Torbela siblings to comply with the prior requirement of submitting the dispute to barangay conciliation. The Torbela siblings instituted Civil Case No. U-4359 on February 13, 1986, when Presidential Decree No. 1508, Establishing a System of Amicably Settling Disputes at the Barangay Level, was still in effect.50 Pertinent provisions of said issuance read: Section 2. Subject matters for amicable settlement. The Lupon of each barangay shall have authority to bring together the parties actually residing in the same city or municipality for amicable settlement of all disputes except: 1. Where one party is the government, or any subdivision or instrumentality thereof; 2. Where one party is a public officer or employee, and the dispute relates to the performance of his official functions; 3. Offenses punishable by imprisonment exceeding 30 days, or a fine exceeding P200.00; 4. Offenses where there is no private offended party; xxxx

5. Such other classes of disputes which the Prime Minister may in the interest of justice determine upon recommendation of the Minister of Justice and the Minister of Local Government. Section 3. Venue. Disputes between or among persons actually residing in the same barangay shall be brought for amicable settlement before the Lupon of said barangay. Those involving actual residents of different barangays within the same city or municipality shall be brought in the barangay where the respondent or any of the respondents actually resides, at the election of the complainant. However, all disputes which involved real property or any interest therein shall be brought in the barangay where the real property or any part thereof is situated. The Lupon shall have no authority over disputes: 1. involving parties who actually reside in barangays of different cities or municipalities, except where such barangays adjoin each other; and 2. involving real property located in different municipalities.

Section 6. Conciliation, pre-condition to filing of complaint. No complaint, petition, action or proceeding involving any matter within the authority of the Lupon as provided in Section 2 hereof shall be filed or instituted in court or any other government office for adjudication unless there has been a confrontation of the parties before the Lupon Chairman or the Pangkat and no conciliation or settlement has been reached as certified by the Lupon Secretary or the Pangkat Secretary, attested by the Lupon or Pangkat Chairman,

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or unless the settlement has been repudiated. x x x. (Emphases supplied.) The Court gave the following elucidation on the jurisdiction of the Lupong Tagapayapa in Tavora v. Hon. Veloso51 : The foregoing provisions are quite clear. Section 2 specifies the conditions under which the Lupon of a barangay "shall have authority" to bring together the disputants for amicable settlement of their dispute: The parties must be "actually residing in the same city or municipality." At the same time, Section 3 while reiterating that the disputants must be "actually residing in the same barangay" or in "different barangays" within the same city or municipality unequivocably declares that the Lupon shall have "no authority" over disputes "involving parties who actually reside in barangays of different cities or municipalities," except where such barangays adjoin each other. Thus, by express statutory inclusion and exclusion, the Lupon shall have no jurisdiction over disputes where the parties are not actual residents of the same city or municipality, except where the barangays in which they actually reside adjoin each other. It is true that immediately after specifying the barangay whose Lupon shall take cognizance of a given dispute, Sec. 3 of PD 1508 adds: "However, all disputes which involve real property or any interest therein shall be brought in the barangay where the real property or any part thereof is situated." Actually, however, this added sentence is just an ordinary proviso and should operate as such.

The operation of a proviso, as a rule, should be limited to its normal function, which is to restrict or vary the operation of the principal clause, rather than expand its scope, in the absence of a clear indication to the contrary. "The natural and appropriate office of a proviso is . . . to except something from the enacting clause; to limit, restrict, or qualify the statute in whole or in part; or to exclude from the scope of the statute that which otherwise would be within its terms." (73 Am Jur 2d 467.) Therefore, the quoted proviso should simply be deemed to restrict or vary the rule on venue prescribed in the principal clauses of the first paragraph of Section 3, thus: Although venue is generally determined by the residence of the parties, disputes involving real property shall be brought in the barangay where the real property or any part thereof is situated, notwithstanding that the parties reside elsewhere within the same city/municipality.52 (Emphases supplied.) The original parties in Civil Case No. U-4359 (the Torbela siblings and the spouses Rosario) do not reside in the same barangay, or in different barangays within the same city or municipality, or in different barangays of different cities or municipalities but are adjoining each other. Some of them reside outside Pangasinan and even outside of the country altogether. The Torbela siblings reside separately in Barangay Macalong, Urdaneta, Pangasinan; Barangay Consolacion, Urdaneta, Pangasinan; Pangil, Laguna; Chicago, United States of America; and Canada. The spouses Rosario are residents of Calle Garcia, Poblacion, Urdaneta, Pangasinan. Resultantly, the Lupon had no jurisdiction over the dispute and barangay conciliation was not a pre-condition for the filing of Civil Case No. U4359.

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The Court now looks into the merits of Civil Case No. U-4359. There was an express trust between the Torbela siblings and Dr. Rosario. There is no dispute that the Torbela sibling inherited the title to Lot No. 356-A from their parents, the Torbela spouses, who, in turn, acquired the same from the first registered owner of Lot No. 356-A, Valeriano. Indeed, the Torbela siblings executed a Deed of Absolute Quitclaim on December 12, 1964 in which they transferred and conveyed Lot No. 356-A to Dr. Rosario for the consideration of P9.00. However, the Torbela siblings explained that they only executed the Deed as an accommodation so that Dr. Rosario could have Lot No. 356-A registered in his name and use said property to secure a loan from DBP, the proceeds of which would be used for building a hospital on Lot No. 356-A a claim supported by testimonial and documentary evidence, and borne out by the sequence of events immediately following the execution by the Torbela siblings of said Deed. On December 16, 1964, TCT No. 52751, covering Lot No. 356-A, was already issued in Dr. Rosarios name. On December 28, 1964, Dr. Rosario executed his own Deed of Absolute Quitclaim, in which he expressly acknowledged that he "only borrowed" Lot No. 356-A and was transferring and conveying the same back to the Torbela siblings for the consideration of P1.00. On February 21, 1965, Dr. Rosarios loan in the amount of P70,200.00, secured by a mortgage on Lot No. 356-A, was approved by DBP. Soon thereafter, construction of a hospital building started on Lot No. 356-A. Among the notable evidence presented by the Torbela siblings is the testimony of Atty. Lorenza Alcantara (Atty. Alcantara), who had no apparent personal interest in the present case. Atty. Alcantara, when she was still a boarder at the house of Eufrosina Torbela

Rosario (Dr. Rosarios mother), was consulted by the Torbela siblings as regards the extrajudicial partition of Lot No. 356-A. She also witnessed the execution of the two Deeds of Absolute Quitclaim by the Torbela siblings and Dr. Rosario. In contrast, Dr. Rosario presented TCT No. 52751, issued in his name, to prove his purported title to Lot No. 356-A. In Lee Tek Sheng v. Court of Appeals,53 the Court made a clear distinction between title and the certificate of title: The certificate referred to is that document issued by the Register of Deeds known as the Transfer Certificate of Title (TCT). By title, the law refers to ownership which is represented by that document. Petitioner apparently confuses certificate with title. Placing a parcel of land under the mantle of the Torrens system does not mean that ownership thereof can no longer be disputed. Ownership is different from a certificate of title. The TCT is only the best proof of ownership of a piece of land. Besides, the certificate cannot always be considered as conclusive evidence of ownership. Mere issuance of the certificate of title in the name of any person does not foreclose the possibility that the real property may be under coownership with persons not named in the certificate or that the registrant may only be a trustee or that other parties may have acquired interest subsequent to the issuance of the certificate of title. To repeat, registration is not the equivalent of title, but is only the best evidence thereof. Title as a concept of ownership should not be confused with the certificate of title as evidence of such ownership although both are interchangeably used. x x x.54 (Emphases supplied.) Registration does not vest title; it is merely the evidence of such title. Land registration laws do not give the holder any better title than what he actually has.55 Consequently, Dr. Rosario must still

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prove herein his acquisition of title to Lot No. 356-A, apart from his submission of TCT No. 52751 in his name. Dr. Rosario testified that he obtained Lot No. 356-A after paying the Torbela siblings P25,000.00, pursuant to a verbal agreement with the latter. The Court though observes that Dr. Rosarios testimony on the execution and existence of the verbal agreement with the Torbela siblings lacks significant details (such as the names of the parties present, dates, places, etc.) and is not corroborated by independent evidence. In addition, Dr. Rosario acknowledged the execution of the two Deeds of Absolute Quitclaim dated December 12, 1964 and December 28, 1964, even affirming his own signature on the latter Deed. The Parol Evidence Rule provides that when the terms of the agreement have been reduced into writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement.56 Dr. Rosario may not modify, explain, or add to the terms in the two written Deeds of Absolute Quitclaim since he did not put in issue in his pleadings (1) an intrinsic ambiguity, mistake, or imperfection in the Deeds; (2) failure of the Deeds to express the true intent and the agreement of the parties thereto; (3) the validity of the Deeds; or (4) the existence of other terms agreed to by the Torbela siblings and Dr. Rosario after the execution of the Deeds.57 Even if the Court considers Dr. Rosarios testimony on his alleged verbal agreement with the Torbela siblings, the Court finds the same unsatisfactory. Dr. Rosario averred that the two Deeds were executed only because he was "planning to secure loan from the Development Bank of the Philippines and Philippine National Bank and the bank needed absolute quitclaim[.]"58 While Dr. Rosarios explanation makes sense for the first Deed of Absolute Quitclaim

dated December 12, 1964 executed by the Torbela siblings (which transferred Lot No. 356-A to Dr. Rosario for P9.00.00), the same could not be said for the second Deed of Absolute Quitclaim dated December 28, 1964 executed by Dr. Rosario. In fact, Dr. Rosarios Deed of Absolute Quitclaim (in which he admitted that he only borrowed Lot No. 356-A and was transferring the same to the Torbela siblings for P1.00.00) would actually work against the approval of Dr. Rosarios loan by the banks. Since Dr. Rosarios Deed of Absolute Quitclaim dated December 28, 1964 is a declaration against his self-interest, it must be taken as favoring the truthfulness of the contents of said Deed.59 It can also be said that Dr. Rosario is estopped from claiming or asserting ownership over Lot No. 356-A based on his Deed of Absolute Quitclaim dated December 28, 1964. Dr. Rosario's admission in the said Deed that he merely borrowed Lot No. 356-A is deemed conclusive upon him. Under Article 1431 of the Civil Code, "[t]hrough estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon."60 That admission cannot now be denied by Dr. Rosario as against the Torbela siblings, the latter having relied upon his representation. Considering the foregoing, the Court agrees with the RTC and the Court of Appeals that Dr. Rosario only holds Lot No. 356-A in trust for the Torbela siblings. Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It is a fiduciary relationship that obliges the trustee to deal with the property for the benefit of the beneficiary. Trust relations between parties may either be express or implied. An express trust is created by the intention of the trustor or of the parties, while an implied trust comes into being by operation of law.61 73

Express trusts are created by direct and positive acts of the parties, by some writing or deed, or will, or by words either expressly or impliedly evincing an intention to create a trust. Under Article 1444 of the Civil Code, "[n]o particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended."62 It is possible to create a trust without using the word "trust" or "trustee." Conversely, the mere fact that these words are used does not necessarily indicate an intention to create a trust. The question in each case is whether the trustor manifested an intention to create the kind of relationship which to lawyers is known as trust. It is immaterial whether or not he knows that the relationship which he intends to create is called a trust, and whether or not he knows the precise characteristics of the relationship which is called a trust.63 In Tamayo v. Callejo,64 the Court recognized that a trust may have a constructive or implied nature in the beginning, but the registered owners subsequent express acknowledgement in a public document of a previous sale of the property to another party, had the effect of imparting to the aforementioned trust the nature of an express trust. The same situation exists in this case. When Dr. Rosario was able to register Lot No. 356-A in his name under TCT No. 52751 on December 16, 1964, an implied trust was initially established between him and the Torbela siblings under Article 1451 of the Civil Code, which provides: ART. 1451. When land passes by succession to any person and he causes the legal title to be put in the name of another, a trust is established by implication of law for the benefit of the true owner. Dr. Rosarios execution of the Deed of Absolute Quitclaim on December 28, 1964, containing his express admission that he only borrowed Lot No. 356-A from the Torbela siblings, eventually transformed the nature of the trust to an express one. The express

trust continued despite Dr. Rosario stating in his Deed of Absolute Quitclaim that he was already returning Lot No. 356-A to the Torbela siblings as Lot No. 356-A remained registered in Dr. Rosarios name under TCT No. 52751 and Dr. Rosario kept possession of said property, together with the improvements thereon. The right of the Torbela siblings to recover Lot No. 356-A has not yet prescribed. The Court extensively discussed the prescriptive period for express trusts in the Heirs of Maximo Labanon v. Heirs of Constancio Labanon,65 to wit: On the issue of prescription, we had the opportunity to rule in Bueno v. Reyes that unrepudiated written express trusts are imprescriptible: "While there are some decisions which hold that an action upon a trust is imprescriptible, without distinguishing between express and implied trusts, the better rule, as laid down by this Court in other decisions, is that prescription does supervene where the trust is merely an implied one. The reason has been expressed by Justice J.B.L. Reyes in J.M. Tuason and Co., Inc. vs. Magdangal, 4 SCRA 84, 88, as follows: Under Section 40 of the old Code of Civil Procedure, all actions for recovery of real property prescribed in 10 years, excepting only actions based on continuing or subsisting trusts that were considered by section 38 as imprescriptible. As held in the case of Diaz v. Gorricho, L-11229, March 29, 1958, however, the continuing or subsisting trusts contemplated in section 38 of the Code of Civil Procedure referred only to express unrepudiated trusts, and did not include constructive trusts (that are imposed by law) where no 74

fiduciary relation exists and the trustee does not recognize the trust at all." This principle was amplified in Escay v. Court of Appeals this way: "Express trusts prescribe 10 years from the repudiation of the trust (Manuel Diaz, et al. vs. Carmen Gorricho et al., 54 O.G. p. 8429, Sec. 40, Code of Civil Procedure)." In the more recent case of Secuya v. De Selma, we again ruled that the prescriptive period for the enforcement of an express trust of ten (10) years starts upon the repudiation of the trust by the trustee.66 To apply the 10-year prescriptive period, which would bar a beneficiarys action to recover in an express trust, the repudiation of the trust must be proven by clear and convincing evidence and made known to the beneficiary.67 The express trust disables the trustee from acquiring for his own benefit the property committed to his management or custody, at least while he does not openly repudiate the trust, and makes such repudiation known to the beneficiary or cestui que trust. For this reason, the old Code of Civil Procedure (Act 190) declared that the rules on adverse possession do not apply to "continuing and subsisting" (i.e., unrepudiated) trusts. In an express trust, the delay of the beneficiary is directly attributable to the trustee who undertakes to hold the property for the former, or who is linked to the beneficiary by confidential or fiduciary relations. The trustee's possession is, therefore, not adverse to the beneficiary, until and unless the latter is made aware that the trust has been repudiated.68 Dr. Rosario argues that he is deemed to have repudiated the trust on December 16, 1964, when he registered Lot No. 356-A in his name under TCT No. 52751, so when on February 13, 1986, the Torbela siblings instituted before the RTC Civil Case No. U-4359, for

the recovery of ownership and possession of Lot No. 356-A from the spouses Rosario, over 21 years had passed. Civil Case No. U-4359 was already barred by prescription, as well as laches. The Court already rejected a similar argument in Ringor v. Ringor69 for the following reasons: A trustee who obtains a Torrens title over a property held in trust for him by another cannot repudiate the trust by relying on the registration. A Torrens Certificate of Title in Joses name did not vest ownership of the land upon him. The Torrens system does not create or vest title. It only confirms and records title already existing and vested. It does not protect a usurper from the true owner. The Torrens system was not intended to foment betrayal in the performance of a trust. It does not permit one to enrich himself at the expense of another. Where one does not have a rightful claim to the property, the Torrens system of registration can confirm or record nothing. Petitioners cannot rely on the registration of the lands in Joses name nor in the name of the Heirs of Jose M. Ringor, Inc., for the wrong result they seek. For Jose could not repudiate a trust by relying on a Torrens title he held in trust for his co-heirs. The beneficiaries are entitled to enforce the trust, notwithstanding the irrevocability of the Torrens title. The intended trust must be sustained.70 (Emphasis supplied.) In the more recent case of Heirs of Tranquilino Labiste v. Heirs of Jose Labiste,71 the Court refused to apply prescription and laches and reiterated that: [P]rescription and laches will run only from the time the express trust is repudiated. The Court has held that for acquisitive prescription to bar the action of the beneficiary against the trustee in an express trust for the recovery of the property held in trust it must be shown that: (a) the trustee has performed unequivocal acts 75

of repudiation amounting to an ouster of the cestui que trust; (b) such positive acts of repudiation have been made known to the cestui que trust, and (c) the evidence thereon is clear and conclusive. Respondents cannot rely on the fact that the Torrens title was issued in the name of Epifanio and the other heirs of Jose. It has been held that a trustee who obtains a Torrens title over property held in trust by him for another cannot repudiate the trust by relying on the registration. The rule requires a clear repudiation of the trust duly communicated to the beneficiary. The only act that can be construed as repudiation was when respondents filed the petition for reconstitution in October 1993. And since petitioners filed their complaint in January 1995, their cause of action has not yet prescribed, laches cannot be attributed to them.72 (Emphasis supplied.) It is clear that under the foregoing jurisprudence, the registration of Lot No. 356-A by Dr. Rosario in his name under TCT No. 52751 on December 16, 1964 is not the repudiation that would have caused the 10-year prescriptive period for the enforcement of an express trust to run. The Court of Appeals held that Dr. Rosario repudiated the express trust when he acquired another loan from PNB and constituted a second mortgage on Lot No. 356-A sometime in 1979, which, unlike the first mortgage to DBP in 1965, was without the knowledge and/or consent of the Torbela siblings. The Court only concurs in part with the Court of Appeals on this matter. For repudiation of an express trust to be effective, the unequivocal act of repudiation had to be made known to the Torbela siblings as the cestuis que trust and must be proven by clear and conclusive

evidence. A scrutiny of TCT No. 52751 reveals the following inscription: Entry No. 520099 Amendment of the mortgage in favor of PNB inscribed under Entry No. 490658 in the sense that the consideration thereof has been increased to PHILIPPINE PESOS Four Hundred Fifty Thousand Pesos only (P450,000.00) and to secure any and all negotiations with PNB, whether contracted before, during or after the date of this instrument, acknowledged before Notary Public of Pangasinan Alejo M. Dato as Doc. No. 198, Page No. 41, Book No. 11, Series of 1985. Date of Instrument March 5, 1981 Date of Inscription March 6, 198173 Although according to Entry No. 520099, the original loan and mortgage agreement of Lot No. 356-A between Dr. Rosario and PNB was previously inscribed as Entry No. 490658, Entry No. 490658 does not actually appear on TCT No. 52751 and, thus, it cannot be used as the reckoning date for the start of the prescriptive period. The Torbela siblings can only be charged with knowledge of the mortgage of Lot No. 356-A to PNB on March 6, 1981 when the amended loan and mortgage agreement was registered on TCT No. 52751 as Entry No. 520099. Entry No. 520099 is constructive notice to the whole world74 that Lot No. 356-A was mortgaged by Dr. Rosario to PNB as security for a loan, the amount of which was increased to P450,000.00. Hence, Dr. Rosario is deemed to have effectively repudiated the express trust between him and the Torbela siblings on March 6, 1981, on which day, the prescriptive period for the enforcement of the express trust by the Torbela siblings began to run. 76

From March 6, 1981, when the amended loan and mortgage agreement was registered on TCT No. 52751, to February 13, 1986, when the Torbela siblings instituted before the RTC Civil Case No. U4359 against the spouses Rosario, only about five years had passed. The Torbela siblings were able to institute Civil Case No. U-4359 well before the lapse of the 10-year prescriptive period for the enforcement of their express trust with Dr. Rosario. Civil Case No. U-4359 is likewise not barred by laches. Laches means the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier. It is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. As the Court explained in the preceding paragraphs, the Torbela siblings instituted Civil Case No. U-4359 five years after Dr. Rosarios repudiation of the express trust, still within the 10-year prescriptive period for enforcement of such trusts. This does not constitute an unreasonable delay in asserting one's right. A delay within the prescriptive period is sanctioned by law and is not considered to be a delay that would bar relief. Laches apply only in the absence of a statutory prescriptive period.75 Banco Filipino is not a mortgagee and buyer in good faith. Having determined that the Torbela siblings are the true owners and Dr. Rosario merely the trustee of Lot No. 356-A, the Court is next faced with the issue of whether or not the Torbela siblings may still recover Lot No. 356-A considering that Dr. Rosario had already mortgaged Lot No. 356-A to Banco Filipino, and upon Dr. Rosarios default on his loan obligations, Banco Filipino foreclosed the mortgage, acquired Lot No. 356-A as the highest bidder at the foreclosure sale, and consolidated title in its name under TCT No. 165813. The resolution of this issue depends on the answer to the

question of whether or not Banco Filipino was a mortgagee in good faith. Under Article 2085 of the Civil Code, one of the essential requisites of the contract of mortgage is that the mortgagor should be the absolute owner of the property to be mortgaged; otherwise, the mortgage is considered null and void. However, an exception to this rule is the doctrine of "mortgagee in good faith." Under this doctrine, even if the mortgagor is not the owner of the mortgaged property, the mortgage contract and any foreclosure sale arising therefrom are given effect by reason of public policy. This principle is based on the rule that all persons dealing with property covered by a Torrens Certificate of Title, as buyers or mortgagees, are not required to go beyond what appears on the face of the title. This is the same rule that underlies the principle of "innocent purchasers for value." The prevailing jurisprudence is that a mortgagee has a right to rely in good faith on the certificate of title of the mortgagor to the property given as security and in the absence of any sign that might arouse suspicion, has no obligation to undertake further investigation. Hence, even if the mortgagor is not the rightful owner of, or does not have a valid title to, the mortgaged property, the mortgagee in good faith is, nonetheless, entitled to protection.76 On one hand, the Torbela siblings aver that Banco Filipino is not a mortgagee in good faith because as early as May 17, 1967, they had already annotated Cornelios Adverse Claim dated May 16, 1967 and Dr. Rosarios Deed of Absolute Quitclaim dated December 28, 1964 on TCT No. 52751 as Entry Nos. 274471-274472, respectively. On the other hand, Banco Filipino asseverates that it is a mortgagee in good faith because per Section 70 of Presidential Decree No. 1529, otherwise known as the Property Registration Decree, the notice of adverse claim, registered on May 17, 1967 by the Torbela siblings under Entry Nos. 274471-274472 on TCT No. 52751, already 77

lapsed after 30 days or on June 16, 1967. Additionally, there was an express cancellation of Entry Nos. 274471-274472 by Entry No. 520469 dated March 11, 1981. So when Banco Filipino approved Dr. Rosarios loan for P1,200,000.00 and constituted a mortgage on Lot No. 356-A (together with two other properties) on December 8, 1981, the only other encumbrance on TCT No. 52751 was Entry No. 520099 dated March 6, 1981, i.e., the amended loan and mortgage agreement between Dr. Rosario and PNB (which was eventually cancelled after it was paid off with part of the proceeds from Dr. Rosarios loan from Banco Filipino). Hence, Banco Filipino was not aware that the Torbela siblings adverse claim on Lot No. 356-A still subsisted. The Court finds that Banco Filipino is not a mortgagee in good faith. Entry Nos. 274471-274472 were not validly cancelled, and the improper cancellation should have been apparent to Banco Filipino and aroused suspicion in said bank of some defect in Dr. Rosarios title. The purpose of annotating the adverse claim on the title of the disputed land is to apprise third persons that there is a controversy over the ownership of the land and to preserve and protect the right of the adverse claimant during the pendency of the controversy. It is a notice to third persons that any transaction regarding the disputed land is subject to the outcome of the dispute.77 Adverse claims were previously governed by Section 110 of Act No. 496, otherwise known as the Land Registration Act, quoted in full below: ADVERSE CLAIM

SEC. 110. Whoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to the date of the original registration, may, if no other provision is made in this Act for registering the same, make a statement in writing setting forth fully his alleged right or interest, and how or under whom acquired, and a reference to the volume and page of the certificate of title of the registered owner, and a description of the land in which the right or interest is claimed. The statement shall be signed and sworn to, and shall state the adverse claimants residence, and designate a place at which all notices may be served upon him. This statement shall be entitled to registration as an adverse claim, and the court, upon a petition of any party in interest, shall grant a speedy hearing upon the question of the validity of such adverse claim and shall enter such decree therein as justice and equity may require. If the claim is adjudged to be invalid, the registration shall be cancelled. If in any case the court after notice and hearing shall find that a claim thus registered was frivolous or vexatious, it may tax the adverse claimant double or treble costs in its discretion. Construing the aforequoted provision, the Court stressed in Ty Sin Tei v. Lee Dy Piao78 that "[t]he validity or efficaciousness of the [adverse] claim x x x may only be determined by the Court upon petition by an interested party, in which event, the Court shall order the immediate hearing thereof and make the proper adjudication as justice and equity may warrant. And it is ONLY when such claim is found unmeritorious that the registration thereof may be cancelled." The Court likewise pointed out in the same case that while a notice of lis pendens may be cancelled in a number of ways, "the same is not true in a registered adverse claim, for it may be cancelled only in one instance, i.e., after the claim is adjudged invalid or unmeritorious by the Court x x x;" and "if any of the registrations should be considered unnecessary or superfluous, it 78

would be the notice of lis pendens and not the annotation of the adverse claim which is more permanent and cannot be cancelled without adequate hearing and proper disposition of the claim." With the enactment of the Property Registration Decree on June 11, 1978, Section 70 thereof now applies to adverse claims: SEC. 70. Adverse claim. Whoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to the date of the original registrations, may, if no other provision is made in this Decree for registering the same, make a statement in writing setting forth fully his alleged right, or interest, and how or under whom acquired, a reference to the number of the certificate of title of the registered owner, the name of the registered owner, and a description of the land in which the right or interest is claimed. The statement shall be signed and sworn to, and shall state the adverse claimants residence, and a place at which all notices may be served upon him. This statement shall be entitled to registration as an adverse claim on the certificate of title. The adverse claim shall be effective for a period of thirty days from the date of registration. After the lapse of said period, the annotation of adverse claim may be cancelled upon filing of a verified petition therefor by the party in interest: Provided, however, that after cancellation, no second adverse claim based on the same ground shall be registered by the same claimant. Before the lapse of thirty days aforesaid, any party in interest may file a petition in the Court of First Instance where the land is situated for the cancellation of the adverse claim, and the court shall grant a speedy hearing upon the question of the validity of such adverse claim, and shall render judgment as may be just and equitable. If the adverse claim is adjudged to be invalid, the

registration thereof shall be ordered cancelled. If, in any case, the court, after notice and hearing, shall find that the adverse claim thus registered was frivolous, it may fine the claimant in an amount not less than one thousand pesos nor more than five thousand pesos, in its discretion. Before the lapse of thirty days, the claimant may withdraw his adverse claim by filing with the Register of Deeds a sworn petition to that effect. (Emphases supplied.) In Sajonas v. Court of Appeals,79 the Court squarely interpreted Section 70 of the Property Registration Decree, particularly, the new 30-day period not previously found in Section 110 of the Land Registration Act, thus: In construing the law aforesaid, care should be taken that every part thereof be given effect and a construction that could render a provision inoperative should be avoided, and inconsistent provisions should be reconciled whenever possible as parts of a harmonious whole. For taken in solitude, a word or phrase might easily convey a meaning quite different from the one actually intended and evident when a word or phrase is considered with those with which it is associated. In ascertaining the period of effectivity of an inscription of adverse claim, we must read the law in its entirety. Sentence three, paragraph two of Section 70 of P.D. 1529 provides: "The adverse claim shall be effective for a period of thirty days from the date of registration." At first blush, the provision in question would seem to restrict the effectivity of the adverse claim to thirty days. But the above provision cannot and should not be treated separately, but should be read in relation to the sentence following, which reads:

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"After the lapse of said period, the annotation of adverse claim may be cancelled upon filing of a verified petition therefor by the party in interest." If the rationale of the law was for the adverse claim to ipso facto lose force and effect after the lapse of thirty days, then it would not have been necessary to include the foregoing caveat to clarify and complete the rule. For then, no adverse claim need be cancelled. If it has been automatically terminated by mere lapse of time, the law would not have required the party in interest to do a useless act. A statute's clauses and phrases must not be taken separately, but in its relation to the statute's totality. Each statute must, in fact, be construed as to harmonize it with the pre-existing body of laws. Unless clearly repugnant, provisions of statutes must be reconciled. The printed pages of the published Act, its history, origin, and its purposes may be examined by the courts in their construction. x x x. xxxx Construing the provision as a whole would reconcile the apparent inconsistency between the portions of the law such that the provision on cancellation of adverse claim by verified petition would serve to qualify the provision on the effectivity period. The law, taken together, simply means that the cancellation of the adverse claim is still necessary to render it ineffective, otherwise, the inscription will remain annotated and shall continue as a lien upon the property. For if the adverse claim has already ceased to be effective upon the lapse of said period, its cancellation is no longer necessary and the process of cancellation would be a useless ceremony. It should be noted that the law employs the phrase "may be cancelled," which obviously indicates, as inherent in its decision

making power, that the court may or may not order the cancellation of an adverse claim, notwithstanding such provision limiting the effectivity of an adverse claim for thirty days from the date of registration. The court cannot be bound by such period as it would be inconsistent with the very authority vested in it. A fortiori, the limitation on the period of effectivity is immaterial in determining the validity or invalidity of an adverse claim which is the principal issue to be decided in the court hearing. It will therefore depend upon the evidence at a proper hearing for the court to determine whether it will order the cancellation of the adverse claim or not. To interpret the effectivity period of the adverse claim as absolute and without qualification limited to thirty days defeats the very purpose for which the statute provides for the remedy of an inscription of adverse claim, as the annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property where the registration of such interest or right is not otherwise provided for by the Land Registration Act or Act 496 (now P.D. 1529 or the Property Registration Decree), and serves as a warning to third parties dealing with said property that someone is claiming an interest or the same or a better right than the registered owner thereof. The reason why the law provides for a hearing where the validity of the adverse claim is to be threshed out is to afford the adverse claimant an opportunity to be heard, providing a venue where the propriety of his claimed interest can be established or revoked, all for the purpose of determining at last the existence of any encumbrance on the title arising from such adverse claim. This is in line with the provision immediately following: "Provided, however, that after cancellation, no second adverse claim shall be registered by the same claimant."

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Should the adverse claimant fail to sustain his interest in the property, the adverse claimant will be precluded from registering a second adverse claim based on the same ground. It was held that "validity or efficaciousness of the claim may only be determined by the Court upon petition by an interested party, in which event, the Court shall order the immediate hearing thereof and make the proper adjudication as justice and equity may warrant. And it is only when such claim is found unmeritorious that the registration of the adverse claim may be cancelled, thereby protecting the interest of the adverse claimant and giving notice and warning to third parties."80 (Emphases supplied.) Whether under Section 110 of the Land Registration Act or Section 70 of the Property Registration Decree, notice of adverse claim can only be cancelled after a party in interest files a petition for cancellation before the RTC wherein the property is located, and the RTC conducts a hearing and determines the said claim to be invalid or unmeritorious. No petition for cancellation has been filed and no hearing has been conducted herein to determine the validity or merit of the adverse claim of the Torbela siblings. Entry No. 520469 cancelled the adverse claim of the Torbela siblings, annotated as Entry Nos. 274471-774472, upon the presentation by Dr. Rosario of a mere Cancellation and Discharge of Mortgage. Regardless of whether or not the Register of Deeds should have inscribed Entry No. 520469 on TCT No. 52751, Banco Filipino could not invoke said inscription in support of its claim of good faith. There were several things amiss in Entry No. 520469 which should have already aroused suspicions in Banco Filipino, and compelled the bank to look beyond TCT No. 52751 and inquire into Dr. Rosarios title. First, Entry No. 520469 does not mention any court

order as basis for the cancellation of the adverse claim. Second, the adverse claim was not a mortgage which could be cancelled with Dr. Rosarios Cancellation and Discharge of Mortgage. And third, the adverse claim was against Dr. Rosario, yet it was cancelled based on a document also executed by Dr. Rosario. It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor or mortgagor. His mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in the vendor's or mortgagor's title, will not make him an innocent purchaser or mortgagee for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defects as would have led to its discovery had he acted with the measure of precaution which may be required of a prudent man in a like situation.81 While the defective cancellation of Entry Nos. 274471-274472 by Entry No. 520469 might not be evident to a private individual, the same should have been apparent to Banco Filipino. Banco Filipino is not an ordinary mortgagee, but is a mortgagee-bank, whose business is impressed with public interest. In fact, in one case, 82 the Court explicitly declared that the rule that persons dealing with registered lands can rely solely on the certificate of title does not apply to banks. In another case,83 the Court adjudged that unlike private individuals, a bank is expected to exercise greater care and prudence in its dealings, including those involving registered lands. A banking institution is expected to exercise due diligence before entering into a mortgage contract. The ascertainment of the status or condition of a property offered to it as security for a loan must be a standard and indispensable part of its operations.

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Banco Filipino cannot be deemed a mortgagee in good faith, much less a purchaser in good faith at the foreclosure sale of Lot No. 356A. Hence, the right of the Torbela siblings over Lot No. 356-A is superior over that of Banco Filipino; and as the true owners of Lot No. 356-A, the Torbela siblings are entitled to a reconveyance of said property even from Banco Filipino. Nonetheless, the failure of Banco Filipino to comply with the due diligence requirement was not the result of a dishonest purpose, some moral obliquity, or breach of a known duty for some interest or ill will that partakes of fraud that would justify damages.84 Given the reconveyance of Lot No. 356-A to the Torbela siblings, there is no more need to address issues concerning redemption, annulment of the foreclosure sale and certificate of sale (subject matter of Civil Case No. U-4733), or issuance of a writ of possession in favor of Banco Filipino (subject matter of Pet. Case No. U-822) insofar as Lot No. 356-A is concerned. Such would only be superfluous. Banco Filipino, however, is not left without any recourse should the foreclosure and sale of the two other mortgaged properties be insufficient to cover Dr. Rosarios loan, for the bank may still bring a proper suit against Dr. Rosario to collect the unpaid balance. The rules on accession shall govern the improvements on Lot No. 356-A and the rents thereof. The accessory follows the principal. The right of accession is recognized under Article 440 of the Civil Code which states that "[t]he ownership of property gives the right by accession to everything which is produced thereby, or which is incorporated or attached thereto, either naturally or artificially."

There is no question that Dr. Rosario is the builder of the improvements on Lot No. 356-A. The Torbela siblings themselves alleged that they allowed Dr. Rosario to register Lot No. 356-A in his name so he could obtain a loan from DBP, using said parcel of land as security; and with the proceeds of the loan, Dr. Rosario had a building constructed on Lot No. 356-A, initially used as a hospital, and then later for other commercial purposes. Dr. Rosario supervised the construction of the building, which began in 1965; fully liquidated the loan from DBP; and maintained and administered the building, as well as collected the rental income therefrom, until the Torbela siblings instituted Civil Case No. U-4359 before the RTC on February 13, 1986. When it comes to the improvements on Lot No. 356-A, both the Torbela siblings (as landowners) and Dr. Rosario (as builder) are deemed in bad faith. The Torbela siblings were aware of the construction of a building by Dr. Rosario on Lot No. 356-A, while Dr. Rosario proceeded with the said construction despite his knowledge that Lot No. 356-A belonged to the Torbela siblings. This is the case contemplated under Article 453 of the Civil Code, which reads: ART. 453. If there was bad faith, not only on the part of the person who built, planted or sowed on the land of another, but also on the part of the owner of such land, the rights of one and the other shall be the same as though both had acted in good faith. It is understood that there is bad faith on the part of the landowner whenever the act was done with his knowledge and without opposition on his part. (Emphasis supplied.) When both the landowner and the builder are in good faith, the following rules govern:

82

ART. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof. ART. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor. Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof. ART. 548. Expenses for pure luxury or mere pleasure shall not be refunded to the possessor in good faith; but he may remove the ornaments with which he has embellished the principal thing if it suffers no injury thereby, and if his successor in the possession does not prefer to refund the amount expended. Whatever is built, planted, or sown on the land of another, and the improvements or repairs made thereon, belong to the owner of the land. Where, however, the planter, builder, or sower has acted in good faith, a conflict of rights arises between the owners and it becomes necessary to protect the owner of the improvements

without causing injustice to the owner of the land. In view of the impracticability of creating what Manresa calls a state of "forced coownership," the law has provided a just and equitable solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity or to oblige the builder or planter to pay for the land and the sower to pay the proper rent. It is the owner of the land who is allowed to exercise the option because his right is older and because, by the principle of accession, he is entitled to the ownership of the accessory thing.85 The landowner has to make a choice between appropriating the building by paying the proper indemnity or obliging the builder to pay the price of the land. But even as the option lies with the landowner, the grant to him, nevertheless, is preclusive. He must choose one. He cannot, for instance, compel the owner of the building to remove the building from the land without first exercising either option. It is only if the owner chooses to sell his land, and the builder or planter fails to purchase it where its value is not more than the value of the improvements, that the owner may remove the improvements from the land. The owner is entitled to such remotion only when, after having chosen to sell his land, the other party fails to pay for the same.86 This case then must be remanded to the RTC for the determination of matters necessary for the proper application of Article 448, in relation to Article 546, of the Civil Code. Such matters include the option that the Torbela siblings will choose; the amount of indemnity that they will pay if they decide to appropriate the improvements on Lot No. 356-A; the value of Lot No. 356-A if they prefer to sell it to Dr. Rosario; or the reasonable rent if they opt to sell Lot No. 356-A to Dr. Rosario but the value of the land is considerably more than the improvements. The determination made by the Court of Appeals in its Decision dated June 29, 1999

83

that the current value of Lot No. 356-A is P1,200,000.00 is not supported by any evidence on record. Should the Torbela siblings choose to appropriate the improvements on Lot No. 356-A, the following ruling of the Court in Pecson v. Court of Appeals87 is relevant in the determination of the amount of indemnity under Article 546 of the Civil Code: Article 546 does not specifically state how the value of the useful improvements should be determined. The respondent court and the private respondents espouse the belief that the cost of construction of the apartment building in 1965, and not its current market value, is sufficient reimbursement for necessary and useful improvements made by the petitioner. This position is, however, not in consonance with previous rulings of this Court in similar cases. In Javier vs. Concepcion, Jr., this Court pegged the value of the useful improvements consisting of various fruits, bamboos, a house and camarin made of strong material based on the market value of the said improvements. In Sarmiento vs. Agana, despite the finding that the useful improvement, a residential house, was built in 1967 at a cost of between eight thousand pesos (P8,000.00) to ten thousand pesos (P10,000.00), the landowner was ordered to reimburse the builder in the amount of forty thousand pesos (P40,000.00), the value of the house at the time of the trial. In the same way, the landowner was required to pay the "present value" of the house, a useful improvement, in the case of De Guzman vs. De la Fuente, cited by the petitioner. The objective of Article 546 of the Civil Code is to administer justice between the parties involved. In this regard, this Court had long ago stated in Rivera vs. Roman Catholic Archbishop of Manila that the said provision was formulated in trying to adjust the rights of the owner and possessor in good faith of a piece of land, to administer complete justice to both of them in such a way as neither one nor

the other may enrich himself of that which does not belong to him. Guided by this precept, it is therefore the current market value of the improvements which should be made the basis of reimbursement. A contrary ruling would unjustly enrich the private respondents who would otherwise be allowed to acquire a highly valued income-yielding four-unit apartment building for a measly amount. Consequently, the parties should therefore be allowed to adduce evidence on the present market value of the apartment building upon which the trial court should base its finding as to the amount of reimbursement to be paid by the landowner.88 (Emphases supplied.) Still following the rules of accession, civil fruits, such as rents, belong to the owner of the building.89 Thus, Dr. Rosario has a right to the rents of the improvements on Lot No. 356-A and is under no obligation to render an accounting of the same to anyone. In fact, it is the Torbela siblings who are required to account for the rents they had collected from the lessees of the commercial building and turn over any balance to Dr. Rosario. Dr. Rosarios right to the rents of the improvements on Lot No. 356-A shall continue until the Torbela siblings have chosen their option under Article 448 of the Civil Code. And in case the Torbela siblings decide to appropriate the improvements, Dr. Rosario shall have the right to retain said improvements, as well as the rents thereof, until the indemnity for the same has been paid.90 Dr. Rosario is liable for damages to the Torbela siblings. The Court of Appeals ordered Dr. Rosario to pay the Torbela siblings P300,000.00 as moral damages; P200,000.00 as exemplary damages; and P100,000.00 as attorneys fees. Indeed, Dr. Rosarios deceit and bad faith is evident when, being fully aware that he only held Lot No. 356-A in trust for the Torbela 84

siblings, he mortgaged said property to PNB and Banco Filipino absent the consent of the Torbela siblings, and caused the irregular cancellation of the Torbela siblings adverse claim on TCT No. 52751. Irrefragably, Dr. Rosarios betrayal had caused the Torbela siblings (which included Dr. Rosarios own mother, Eufrosina Torbela Rosario) mental anguish, serious anxiety, and wounded feelings. Resultantly, the award of moral damages is justified, but the amount thereof is reduced to P200,000.00. In addition to the moral damages, exemplary damages may also be imposed given that Dr. Rosarios wrongful acts were accompanied by bad faith. However, judicial discretion granted to the courts in the assessment of damages must always be exercised with balanced restraint and measured objectivity. The circumstances of the case call for a reduction of the award of exemplary damages to P100,000.00. As regards attorney's fees, they may be awarded when the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest. Because of Dr. Rosarios acts, the Torbela siblings were constrained to institute several cases against Dr. Rosario and his spouse, DuqueRosario, as well as Banco Filipino, which had lasted for more than 25 years. Consequently, the Torbela siblings are entitled to an award of attorney's fees and the amount of P100,000.00 may be considered rational, fair, and reasonable. Banco Filipino is entitled to a writ of possession for Lot No. 5-F-8-C2-B-2-A. The Court emphasizes that Pet. Case No. U-822, instituted by Banco Filipino for the issuance of a writ of possession before the RTC of Urdaneta, included only Lot No. 5-F-8-C-2-B-2-A and Lot No. 356-A (Lot No. 4489, the third property mortgaged to secure Dr. Rosarios

loan from Banco Filipino, is located in Dagupan City, Pangasinan, and the petition for issuance of a writ of possession for the same should be separately filed with the RTC of Dagupan City). Since the Court has already granted herein the reconveyance of Lot No. 356-A from Banco Filipino to the Torbela siblings, the writ of possession now pertains only to Lot No. 5-F-8-C-2-B-2-A. To recall, the Court of Appeals affirmed the issuance by the RTC of a writ of possession in favor of Banco Filipino. Dr. Rosario no longer appealed from said judgment of the appellate court. Already legally separated from Dr. Rosario, Duque-Rosario alone challenges the writ of possession before this Court through her Petition in G.R. No. 140553. Duque-Rosario alleges in her Petition that Lot No. 5-F-8-C-2-B-2-A had been registered in her name under TCT No. 104189. Yet, without a copy of TCT No. 104189 on record, the Court cannot give much credence to Duque-Rosarios claim of sole ownership of Lot No. 5-F-8-C-2-B-2-A. Also, the question of whether Lot No. 5-F-8-C2-B-2-A was the paraphernal property of Duque-Rosario or the conjugal property of the spouses Rosario would not alter the outcome of Duque-Rosarios Petition. The following facts are undisputed: Banco Filipino extrajudicially foreclosed the mortgage constituted on Lot No. 5-F-8-C-2-B-2-A and the two other properties after Dr. Rosario defaulted on the payment of his loan; Banco Filipino was the highest bidder for all three properties at the foreclosure sale on April 2, 1987; the Certificate of Sale dated April 2, 1987 was registered in April 1987; and based on the Certificate of Final Sale dated May 24, 1988 and Affidavit of Consolidation dated May 25, 1988, the Register of Deeds cancelled TCT No. 104189 and issued TCT No. 165812 in the name of Banco Filipino for Lot No. 5-F-8-C-2-B-2-A on June 7, 1988.

85

The Court has consistently ruled that the one-year redemption period should be counted not from the date of foreclosure sale, but from the time the certificate of sale is registered with the Registry of Deeds.91 No copy of TCT No. 104189 can be found in the records of this case, but the fact of annotation of the Certificate of Sale thereon was admitted by the parties, only differing on the date it was made: April 14, 1987 according to Banco Filipino and April 15, 1987 as maintained by Duque-Rosario. Even if the Court concedes that the Certificate of Sale was annotated on TCT No. 104189 on the later date, April 15, 1987, the one-year redemption period already expired on April 14, 1988.92 The Certificate of Final Sale and Affidavit of Consolidation were executed more than a month thereafter, on May 24, 1988 and May 25, 1988, respectively, and were clearly not premature. It is true that the rule on redemption is liberally construed in favor of the original owner of the property. The policy of the law is to aid rather than to defeat him in the exercise of his right of redemption.93 However, the liberal interpretation of the rule on redemption is inapplicable herein as neither Duque-Rosario nor Dr. Rosario had made any attempt to redeem Lot No. 5-F-8-C-2-B-2-A. Duque-Rosario could only rely on the efforts of the Torbela siblings at redemption, which were unsuccessful. While the Torbela siblings made several offers to redeem Lot No. 356-A, as well as the two other properties mortgaged by Dr. Rosario, they did not make any valid tender of the redemption price to effect a valid redemption. The general rule in redemption is that it is not sufficient that a person offering to redeem manifests his desire to do so. The statement of intention must be accompanied by an actual and simultaneous tender of payment. The redemption price should either be fully offered in legal tender or else validly consigned in court. Only by such means can the auction winner be assured that the offer to redeem is being made in good faith.94 In case of disagreement over the redemption price, the redemptioner may

preserve his right of redemption through judicial action, which in every case, must be filed within the one-year period of redemption. The filing of the court action to enforce redemption, being equivalent to a formal offer to redeem, would have the effect of preserving his redemptive rights and "freezing" the expiration of the one-year period.95 But no such action was instituted by the Torbela siblings or either of the spouses Rosario. Duque-Rosario also cannot bar the issuance of the writ of possession over Lot No. 5-F-8-C-2-B-2-A in favor of Banco Filipino by invoking the pendency of Civil Case No. U-4359, the Torbela siblings action for recovery of ownership and possession and damages, which supposedly tolled the period for redemption of the foreclosed properties. Without belaboring the issue of Civil Case No. U-4359 suspending the redemption period, the Court simply points out to Duque-Rosario that Civil Case No. U-4359 involved Lot No. 356-A only, and the legal consequences of the institution, pendency, and resolution of Civil Case No. U-4359 apply to Lot No. 356-A alone. Equally unpersuasive is Duque-Rosarios argument that the writ of possession over Lot No. 5-F-8-C-2-B-2-A should not be issued given the defects in the conduct of the foreclosure sale (i.e., lack of personal notice to Duque-Rosario) and consolidation of title (i.e., failure to provide Duque-Rosario with copies of the Certificate of Final Sale). The right of the purchaser to the possession of the foreclosed property becomes absolute upon the expiration of the redemption period. The basis of this right to possession is the purchaser's ownership of the property. After the consolidation of title in the buyer's name for failure of the mortgagor to redeem, the writ of possession becomes a matter of right and its issuance to a

86

purchaser in an extrajudicial foreclosure is merely a ministerial function.961avvphi1 The judge with whom an application for a writ of possession is filed need not look into the validity of the mortgage or the manner of its foreclosure. Any question regarding the validity of the mortgage or its foreclosure cannot be a legal ground for the refusal to issue a writ of possession. Regardless of whether or not there is a pending suit for the annulment of the mortgage or the foreclosure itself, the purchaser is entitled to a writ of possession, without prejudice, of course, to the eventual outcome of the pending annulment case. The issuance of a writ of possession in favor of the purchaser in a foreclosure sale is a ministerial act and does not entail the exercise of discretion.97 WHEREFORE, in view of the foregoing, the Petition of the Torbela siblings in G.R. No. 140528 is GRANTED, while the Petition of Lena Duque-Rosario in G.R. No. 140553 is DENIED for lack of merit. The Decision dated June 29, 1999 of the Court of Appeals in CA-G.R. CV No. 39770, which affirmed with modification the Amended Decision dated January 29, 1992 of the RTC in Civil Case Nos. U-4359 and U4733 and Pet. Case No. U-822, is AFFIRMED WITH MODIFICATIONS, to now read as follows: (1) Banco Filipino is ORDERED to reconvey Lot No. 356-A to the Torbela siblings; (2) The Register of Deeds of Pangasinan is ORDERED to cancel TCT No. 165813 in the name of Banco Filipino and to issue a new certificate of title in the name of the Torbela siblings for Lot No. 356-A; (3) The case is REMANDED to the RTC for further proceedings to determine the facts essential to the proper

application of Articles 448 and 546 of the Civil Code, particularly: (a) the present fair market value of Lot No. 356A; (b) the present fair market value of the improvements thereon; (c) the option of the Torbela siblings to appropriate the improvements on Lot No. 356-A or require Dr. Rosario to purchase Lot No. 356-A; and (d) in the event that the Torbela siblings choose to require Dr. Rosario to purchase Lot No. 356-A but the value thereof is considerably more than the improvements, then the reasonable rent of Lot No. 356-A to be paid by Dr. Rosario to the Torbela siblings; (4) The Torbela siblings are DIRECTED to submit an accounting of the rents of the improvements on Lot No. 356-A which they had received and to turn over any balance thereof to Dr. Rosario; (5) Dr. Rosario is ORDERED to pay the Torbela siblings P200,000.00 as moral damages, P100,000.00 as exemplary damages, and P100,000.00 as attorneys fees; and (6) Banco Filipino is entitled to a writ of possession over Lot5-F-8-C-2-B-2-A, covered by TCT No. 165812. The RTC Branch Clerk of Court is ORDERED to issue a writ of possession for the said property in favor of Banco Filipino. SO ORDERED. TERESITA J. LEONARDO-DE CASTRO Associate Justice

Footnotes 87

Rollo (G.R. No. 140528), pp. 39-57; rollo (G.R. No. 140553), pp. 16-34; penned by Associate Justice Eugenio S. Labitoria with Associate Justices Mariano M. Umali and Edgardo P. Cruz, concurring.
2

13

Id. at 1061. Id. Id. at 1058. Id. at 1062-1063. Id. Id. at 1058, 1059-A. Id. Id. at 1059-A.

14

15

Id. at 58-59; id. at 35-36.

16

Represented by her heirs: Eulogio Tosino, Claro Tosino, Maximino Tosino, Cornelio Tosino, Olivia Tosino, Calixta Tosino, Apolonia Tosino vda. de Ramirez, and Julita Tosino Dean.
4

17

18

Represented by his heirs: Jose Torbela and Dionisio Torbela.

5

19

20

Represented by her heirs: Esteban Rosario, Manuel Rosario, and Andrea Rosario-Haduca.
6

21

No copies of TCT Nos. 24832 and 104189 can be found in the case records.
22

Represented by Sergio Torbela, Eutropia Velasco, Pilar Zulueta, Candido Torbela, Florentina Torbela, and Pantaleon Torbela.
7

Records, Folder of Exhibits, p. 1059-A. Id. at 1060. Id. Id. Id. Id. Records, pp. 489-492. Id. at 476-477. 88

23

Represented by her heirs: Patricio Agustin, Segundo Agustin, Consuelo Agustin, and Felix Agustin.
8

24

Records, Folder of Exhibits, pp. 1047-1050. Id. at 1051-1054. Id. at 1055-1056. Id. at 1055. Id. at 1057-1060.

25

26

10

27

11

28

12

29

30

Records, Folder of Exhibits, p. 1060.

44

Id. at 253-254. Rollo (G.R. No. 140528), pp. 21-22, 31, and 33. Id. at 35. Rollo (G.R. No. 140553), p. 10. G.R. No. 169481, February 22, 2010, 613 SCRA 314. Id. at 324-325.

31

Records, pp. 180-188. The Torbela siblings would eventually file a Second Amended Complaint in Civil Case No. U-4359 on July 29, 1991 (id. at 391-403).
32

45

46

Records, Folder of Exhibits, p. 1060A. CA rollo, p. 169. Records, pp. 478-479. Id. at 480. Records, Folder of Exhibits, p. 1064.

47

33

48

34

49

35

50

36

This was repealed by Republic Act No. 7160, otherwise known as the Local Government Code of 1991, which took effect on January 1, 1992.
51

37

Records, pp. 536-547. The Torbela siblings would subsequently file an Amended Complaint in Civil Case No. U-4733 on July 29, 1991.
38

202 Phil. 943 (1982). Id. at 947-948. 354 Phil. 556 (1998). Id. at 561-562.

52

CA rollo, pp. 138-148; penned by Judge Modesto C. Juanson.

39

53

54

Id. at 148.
55

40

Id. at 149-150. Id. at 149.

Heirs of Rosa Dumaliang v. Serban, G.R. No. 155133, February 21, 2007, 516 SCRA 343, 357-358.
56

41

Rules of Court, Rule 130, Section 9. Id. TSN, September 25, 1991, p. 21. Declaro v. Court of Appeals, 399 Phil. 616, 623 (2000). 89

42

Id. at 195-213; penned by Associate Justice Eugenio S. Labitoria with Associate Justices Mariano M. Umali and Edgardo P. Cruz, concurring.
43

57

58

Id. at 212.

59

60

Spouses Gomez v. Duyan, 493 Phil. 819, 828 (2005).

61

Heirs of Tranquilino Labiste v. Heirs of Jose Labiste, G.R. No. 162033, May 8, 2009, 587 SCRA 417, 425.
62

Id.

63

Heirs of Maximo Labanon v. Heirs of Constancio Labanon, G.R. No. 160711, August 14, 2007, 530 SCRA 97, 107.
64

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.
75

De Castro v. Court of Appeals, 434 Phil. 53, 68 (2002). Llanto v. Alzona, 490 Phil. 696, 703 (2005). Arrazola v. Bernas, 175 Phil. 452, 456-457 (1978). 103 Phil. 858, 867 (1958). 327 Phil. 689 (1996). Id. at 708-712.

150-B Phil. 31, 37-38 (1972). Supra note 63. Id. at 108-109. Secuya v. De Selma, 383 Phil. 126, 137 (2000). Diaz v. Gorricho and Aguado, 103 Phil. 261, 266 (1958). G.R. No. 147863, August 13, 2004, 436 SCRA 484. Id. at 500-501. Supra note 61. Id. at 426. CA rollo, p. 105.

76

65

77

66

78

67

79

68

80

69

81

70

Crisostomo v. Court of Appeals, 274 Phil. 1134, 1142-1143 (1991).

82

71

Philippine Trust Company v. Court of Appeals, G.R. No. 150318, November 22, 2010, 635 SCRA 518, 530.
83

72

73

Cruz v. Bancom Finance Corporation, 429 Phil. 225, 239 (2002).

84

74

Section 52 of Presidential Decree No. 1529, otherwise known as the Property Registration Decree, reads:

Metropolitan Bank and Trust Co. v. Pascual, G.R. No. 163744, February 29, 2008, 547 SCRA 246, 261.
85

Bernardo v. Bataclan, 66 Phil. 598, 602 (1938). 90

86

Briones v. Spouses Macabagdal, G.R. No. 150666, August 3, 2010, 626 SCRA 300, 307-308.
87

314 Phil. 313 (1995). Id. at 323-325.

88

89

Article 441(3) of the Civil Code provides that "To the owner belongs x x x (t)he civil fruits." Article 442 of the same Code describes "civil fruits" as "the rents of buildings, the price of leases of lands and other property and the amount of perpetual or life annuities or other similar income."
90

TAX SALE SECOND DIVISION G.R. No. 152627 September 16, 2005 SPOUSES AMANCIO and LUISA SARMIENTO and PEDRO OGSINER, Petitioners, vs. vs. THE HON. COURT OF APPEALS (Special Former Fifth Division), RODEANNA REALTY CORPORATION, THE HEIRS OF CARLOS MORAN SISON, PROVINCIAL SHERIFF OF PASIG, M.M., MUNICIPAL (CITY) TREASURER OF MARIKINA, JOSE F. PUZON, THE HON. EFICIO ACOSTA, REGIONAL TRIAL COURT OF PASIG CITY, BRANCH 155 and REGISTER OF DEEDS OF MARIKINA (CITY), RIZAL, Respondent. DECISION CHICO-NAZARIO, J.:

Id.

91

Metropolitan Bank and Trust Company v. Tan, G.R. No. 178449, October 17, 2008, 569 SCRA 814, 831.
92

The year 1988 was a leap-year. Ysmael v. Court of Appeals, 376 Phil. 323, 334 (1999).

93

94

BPI Family Savings Bank Inc. v. Sps. Veloso, 479 Phil. 627, 634 (2004).
95

Banco Filipino Savings & Mortgage Bank v. Court of Appeals, 501 Phil. 372, 384 (2005).
96

Sarrosa v. Dizon, G.R. No. 183027, July 26, 2010, 625 SCRA 556, 564-565.
97

Fernandez v. Espinoza, G.R. No. 156421, April 14, 2008, 551 SCRA 136, 150.

In a case for recovery of possession based on ownership (accion reivindicatoria), is the defendants third-party complaint for cancellation of plaintiffs title a collateral attack on such title?

91

This is the primary issue that requires resolution in this petition for review on certiorari of the Decision1 of the Court of Appeals dated 27 November 2001 and its Resolution2 dated 08 March 2002 affirming the Decision of the Regional Trial Court (RTC) of Pasig, Branch 162, in Civil Case No. 54151, finding for then plaintiff (private respondent herein) Rodeanna Realty Corporation (RRC). The relevant antecedents of this case have been summarized by the Court of Appeals as follows: The subject of the present controversy is a parcel of land situated in Marikina covered by Transfer Certificate of Title No. N-119631 and registered in the name of the plaintiff-appellee RODEANNA REALTY CORPORATION. The aforementioned land was previously owned by the Sarmiento spouses by virtue of a deed of absolute sale executed on July 17, 1972 and as evidenced by a Transfer Certificate of Title No. 3700807. Upon acquisition of the land, the Sarmiento spouses appointed PEDRO OGSINER as their overseer. On August 15, 1972, the subject land was mortgaged by the Sarmiento spouses to Carlos Moran Sison (Mr. Sison) as a security for a sixty-five thousand three hundred seventy pesos and 25/100 loan obtained by the Sarmiento spouses from Mr. Sison. Upon failure of the Sarmiento spouses to pay the loan, Mr. Sison initiated the extra-judicial foreclosure sale of the mortgaged property, and on October 20, 1977, the said property was foreclosed through the Office of the Sheriff of Rizal, which accordingly, issued a certificate of sale in favor of Mr. Sison, and which Mr. Sison caused to be annotated on the title of Sarmiento spouses on January 31, 1978.

On August 25, 1982, JOSE PUZON (Mr. Puzon) purchased the same property in an auction sale conducted by the Municipal Treasurer of Marikina for non-payment of taxes. After paying P3,400.00, he was issued a certificate of sale and caused it to be registered in the Registry of Deeds of Marikina. No redemption having been made by the Sarmiento spouses, a final bill of sale was issued in his (Mr. Puzon) favor. Thereafter, Mr. Puzon filed a petition for consolidation of ownership and issuance of new title over the subject property before the Regional Trial Court of Pasig, Branch 155. The said petition, which was docketed as LRC Case No. T3367, was granted by the court in its Order dated August 03, 1984. Thereafter, Transfer Certificate of Title No. 102902 was issued in the name of Jose Puzon. On August 16, 1986, Mr. Puzon sold the property in question to herein plaintiff-appellee. By virtue of such sale, a transfer certificate of title over the subject property was issued in favor of the plaintiff-appellee. Records show that Mr. Puzon assured the plaintiff-appellee that he (Jose Puzon) will take care of the squatters in the subject property by filing an ejectment case against them. However, Mr. Puzon failed to comply with his promise. On December 19, 1986, plaintiff-appellee filed a complaint for recovery of possession with damages against the Sarmiento spouses and Pedro Ogsiner, the Sarmiento spouses caretaker of the subject property who refused to vacate the premises. In its complaint, plaintiff-appellee alleged that the Sarmiento spouses lost all the rights over the property in question when a certificate of sale was executed in favor of Mr. Sison for their failure to pay the mortgage loan. On January 30, 1987, the Sarmiento spouses filed a motion for leave to file a third-party complaint against Mr. Sison, the 92

Provincial Sheriff of Pasig, Mr. Puzon, the Judge of Regional Trial Court of Branch 155 in LRC Case No. R-3367 and the Register of Deeds of Marikina. On the same date the Sarmiento spouses filed their answer to the complaint. Expectedly, plaintiff-appellee opposed the motion. In its order dated June 16, 1987, the trial court denied the motion of the Sarmiento spouses. Records show that the said order of the trial court was set aside in a petition for certiorari filed before this Court. Hence, the third-party complaint was admitted. Consequently, Mr. Sison, the Register of Deeds of Marikina filed their answer, while Mr. Puzon filed a motion to dismiss the thirdparty complaint on the grounds of misjoinder of causes of action and non-jurisdiction of the trial court over said third-party complaint. In a motion to set for hearing its special and affirmative defenses, the Register of Deeds of Marikina moved for the dismissal of the third-party complaint against them. The motion of Mr. Puzon was held in abeyance by the trial court ratiocinating that the issues raised in the motion still do not appear to be indubitable. On October 20, 1988, Mr. Puzon filed his answer. In its order dated February 22, 1989, the trial court dismissed the third-party complaint against the Register of Deeds of Marikina on the ground that the case may proceed even without the Register of Deeds being impleaded. On April 29, 1991, the trial court issued its assailed decision in favor of the plaintiff-appellee. A timely appeal was filed by the Sarmiento spouses. In their manifestation filed on July 17, 1989, the Heirs of Mr. Sison prayed for substitution for their late father. Consequently, the Heirs of Mr. Sison moved for new trial or reconsideration on the ground that they were not properly

represented in the case after the death of Mr. Sison. In its order dated November 28, 1991, the trial court granted the motion. On February 4, 1993, the trial court dismissed the claim of Mr. Sison as represented by his heirs, that he is the beneficial owner of the subject property. In its order dated May 18, 1993, the court a quo denied the motion for reconsideration of the Heirs of Mr. Sison.3 The dispositive portion of the trial court ruling dated 29 April 1991 reads as follows: WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff against all defendants: 1) ordering defendant Pedro Ogsiner and all persons claiming rights under him to vacate the premises and surrender peaceful possession to the plaintiff within fifteen (15) days from receipt of this order; 2) ordering defendant spouses Sarmiento to pay the sum of P20,000.00 as and for attorneys fees; 3) ordering the defendants jointly and severally to pay the sum of P300.00 a month as reasonable compensation for the use of the property in question starting June, 1986 until such time that they actually surrendered the possession of the property to the plaintiff; 4) ordering defendant spouses Sarmiento to pay the cost of this suit. Defendants third-party complaint against all third-party defendants is hereby dismissed for lack of sufficient merit.4 93

On appeal by herein petitioners Amancio and Luisa Sarmiento (Sarmiento spouses) and by the heirs of Carlos Moran Sison, the Court of Appeals rendered the assailed Decision, dated 27 November 2001, the dispositive portion of which reads: WHEREFORE, for lack of merit, the instant appeal is hereby DISMISSED. The assailed April 29, 1991 Decision of the Regional Trial Court of Pasig, Metro Manila is hereby AFFIRMED with the modification that the award of P 20,000.00 as attorneys fees is hereby DELETED. The February 03, 1993 Resolution and the May 18, 1993 Order of the trial court are also hereby AFFIRMED.5 On 08 March 2002, the Court of Appeals rendered the assailed Resolution denying petitioners motion for reconsideration. The Sarmiento spouses anchor their petition on the following legal arguments: 1) The ruling of the Court of Appeals that private respondent RRCs certificate of title cannot be collaterally attacked and that their right to claim ownership over the subject property is beyond the province of the action for recovery of possession is contrary to law and applicable decisions of the Supreme Court; 2) The ruling of the Court of Appeals that private respondent RRC is entitled to ownership of subject property simply by virtue of its title as evidenced by Transfer Certificate of Title (TCT) No. N119631 is contrary to law and jurisprudence and is not supported by evidence; and 3) The affirmation by the Court of Appeals of the award of rentals to private respondent RRC lacks factual and legal basis. First Issue:

The Court of Appeals, in holding that the third-party complaint of the Sarmiento spouses amounted to a collateral attack on TCT No. N-119631, ratiocinated as follows: In resolving the errors/issues assigned by the herein parties, We should be guided by the nature of action filed by the plaintiffappellee before the lower court, and as previously shown it is an action for the recovery of possession of the property in question with damages. Thus, from the said nature of action, this Court believes that the focal point of the case is whether or not the plaintiff-appellee has a better right to possess the contested real property. Corollary, it must also be answered whether or not the Transfer Certificate of Title No. N-119631 can be collaterally attacked in an action for recovery of possession. ... In their assigned errors, the Sarmiento spouses alleged that the plaintiff-appellee is not a purchaser in good faith, as they were chargeable with the knowledge of occupancy by Pedro Ogsiner in behalf of the Sarmiento spouses, and that the auction sale of the property in favor of Mr. Puzon is null and void for its failure to comply with the requirement of notice provided by the law. The same have been argued by the Heirs of Mr. Sison. The above assertions, We rule, amounts to a collateral attack on the certificate of title of the plaintiff-appellee. A collateral attack is made when, in another action to obtain a different relief, an attack on the judgment is made as an incident in said action. This is proper only when the judgment on its face is null and void, as where it is patent that the court, which rendered said judgment has no jurisdiction. On the other hand, a direct attack against a judgment is made through an action or proceeding the main object of which is to annul, set aside, or enjoin the enforcement of such 94

judgment, if not carried into effect, or if the property has been disposed of, the aggrieved party may sue for recovery. In the present case, to rule for the nullity of the auction sale in favor of Mr. Puzon will result in ruling for the nullity of the order of Branch 155 of the Regional Trial Court of Pasig City, granting the petition for consolidation of ownership over the subject property filed by Mr. Puzon. It will also result in the nullity of title issued in the name of Mr. Puzon. Hence, the end objective in raising the aforementioned arguments is to nullify the title in the name of the plaintiff-appellee. In fact, a reading of the answer of the Sarmiento spouses and the Heirs of Mr. Sison reveals that they are asking the court to nullify all documents and proceedings which led to the issuance of title in favor of the plaintiff-appellee. This is obviously a collateral attack which is not allowed under the principle of indefeasibility of torrens title. The issue of validity of plaintiffappellees title can only be raised in an action expressly instituted for that purpose. A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or canceled except in a direct proceeding in accordance with law. Case law on the matter shows that the said doctrine applies not only with respect to the original certificate of title but also to transfer certificate of title. Hence, whether or not the plaintiff-appellee has a right to claim ownership over the subject property is beyond the province of the present action. It does not matter whether the plaintiff-appellees title is questionable because this is only a suit for recovery of possession. It should be raised in a proper action for annulment of questioned documents and proceedings, considering that it will not be procedurally unsound for the affected parties to seek for such remedy. In an action to recover possession of real property, attacking a transfer certificate of title covering the subject property is an improper procedure. The rule is well-settled that a torrens title as a rule, is irrevocable and indefeasible, and the duty of the court is to see to it that this title

is maintained and respected unless challenged in a direct proceeding.6 (Emphasis and underscoring supplied) An action is deemed an attack on a title when the object of the action or proceeding is to nullify the title, and thus challenge the judgment pursuant to which the title was decreed.7 The attack is direct when the object of the action is to annul or set aside such judgment, or enjoin its enforcement.8 On the other hand, the attack is indirect or collateral when, in an action to obtain a different relief, an attack on the judgment is nevertheless made as an incident thereof.9 In its analysis of the controversy, the Court of Appeals, alas, missed one very crucial detail which would have turned the tide in favor of the Sarmiento spouses. What the Court of Appeals failed to consider is that Civil Case No. 54151 does not merely consist of the case for recovery of possession of property (filed by RRC against the Sarmiento spouses) but embraces as well the thirdparty complaint filed by the Sarmiento spouses against Carlos Moran Sison, Jose F. Puzon (Mr. Puzon), the Provincial Sherriff of Pasig, Metro Manila, the Municipal Treasurer of Marikina, Rizal, the Judge of the RTC, Branch 155, in LRC Case No. R-3367 and the Register of Deeds of the then Municipality of Marikina, Province of Rizal. The rule on third-party complaints is found in Section 22, Rule 6 of the 1997 Rules of Court, which reads: Sec. 22. Third, (fourth, etc.)party complaint. A third (fourth, etc.)-party complaint is a claim that a defending party may, with leave of court, file against a person not a party to the action, called the third-party defendant, for contribution, indemnity, subrogation or any other relief, in respect of his opponents claim.

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A third-party complaint is in the nature of an original complaint. This is so because it is "actually independent of and separate and distinct from the plaintiffs complaint."10 In herein case, after leave of court was secured11 to file a third-party complaint, the thirdparty complainants (Sarmiento spouses) had to pay the necessary docket fees.12 Summonses were then issued on the third-party defendants13 who answered in due time.14 In Firestone Tire and Rubber Company of the Philippines v. Tempongko,15 we had occasion to expound on the nature of a third-party complaint, thus: The third-party complaint, is therefore, a procedural device whereby a "third party" who is neither a party nor privy to the act or deed complained of by the plaintiff, may be brought into the case with leave of court, by the defendant, who acts as third-party plaintiff to enforce against such third-party defendant a right for contribution, indemnity, subrogation or any other relief, in respect of the plaintiffs claim. The third-party complaint is actually independent of and separate and distinct from the plaintiffs complaint. Were it not for this provision of the Rules of Court, it would have to be filed independently and separately from the original complaint by the defendant against the third-party. But the Rules permit defendant to bring in a third-party defendant or so to speak, to litigate his separate cause of action in respect of plaintiffs claim against a third party in the original and principal case with the object of avoiding circuity of action and unnecessary proliferation of lawsuits and of disposing expeditiously in one litigation the entire subject matter arising from one particular set of facts. . . When leave to file the third-party complaint is properly granted, the Court renders in effect two judgments in the same case, one on the plaintiffs complaint and the other on the thirdparty complaint. (Emphasis supplied)

Prescinding from the foregoing, the appellate court grievously erred in failing to appreciate the legal ramifications of the thirdparty complaint vis--vis the original complaint for recovery of possession of property. The third-party complaint for cancellation of TCT being in the nature of an original complaint for cancellation of TCT, it therefore constitutes a direct attack of such TCT. The situation at bar can be likened to a case for recovery of possession wherein the defendant files a counterclaim against the plaintiff attacking the validity of the latters title. Like a third-party complaint, a counterclaim is considered an original complaint, as such, the attack on the title in a case originally for recovery of possession cannot be considered as a collateral attack. We thus held in Development Bank of the Philippines (DBP) v. Court of Appeals:16 Nor is there any obstacle to the determination of the validity of TCT No. 10101. It is true that the indefeasibility of torrens titles cannot be collaterally attacked. In the instant case, the original complaint is for recovery of possession filed by petitioner against private respondent, not an original action filed by the latter to question the validity of TCT No. 10101 on which the petitioner bases its right. To rule on the issue of validity in a case for recovery of possession is tantamount to a collateral attack. However, it should not be overlooked that private respondent filed a counterclaim against petitioner, claiming ownership over the land and seeking damages. Hence, we could rule in the question of the validity of TCT No. 10101 for the counterclaim can be considered a direct attack on the same. "A counterclaim is considered a complaint, only this time, it is the original defendant who becomes plaintiff It stands on the same footing and is to be tested by the same rules as if it were an independent action."

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There being a direct attack on the TCT which was unfortunately ignored by the appellate court, it behooves this Court to deal with and to dispose of the said issue more so because all the facts and evidence necessary for a complete determination of the controversy are already before us. Again, DBP instructs: . . . In an analogous case, we ruled on the validity of a certificate of title despite the fact that the original action instituted before the lower court was a case for recovery of possession. The Court reasoned that since all the facts of the case are before it, to direct the party to institute cancellation proceedings would be needlessly circuitous and would unnecessarily delay the termination of the controversy which has already dragged on for 20 years.17 Second Issue: In their third-party complaint, as amended, the Sarmiento spouses asserted six causes of action. The second18 to sixth causes of action referred to the proceedings leading to and resulting from the tax sale held on 28 August 1982, summarized by the trial court as follows: . . . Third Party Plaintiffs alleged that on August 28, 1982, the Municipal Treasurer of Marikina sold at public auction, the same property in favor of Jose F. Puzon for tax deficiency at the price of Three Thousand Three Hundred Eighty Four Pesos and 89/100 (P 3,383.89) which is very low considering that the area of the property is 1,060 square meters; that they were not notified of the public auction sale and further, the requirements, such as posting of notices in public places, among other requirements, were not complied with; that since the property was sold at a very low price, the public auction sale and the Certificate of Sale issued by Municipal Treasurer of Marikina in favor of third party defendant

Jose F. Puzon are null and void; that in August 1984, the third party defendant in order to consolidate his ownership and title to the property filed a Petition with the Land Registration Commission in the Regional Trial Court, Branch 155, Pasig, Metro Manila in LRC Case No. R-3367, for consolidation of his ownership and title; that third party plaintiffs were not notified thereof and did not have their day in Court; hence, the order of the Judge of the Regional trial Court in LRC Case No. R-3367 authorizing the consolidation of the ownership and title of Jose F. Puzon is null and void, that Jose F. Puzon after having been issued a new title in his name sold in June 1986, the property in favor of plaintiff RODEANNA REALTY CORPORATION.19 The Sarmiento spouses thus prayed that: (a) the certificate of sale executed by the Municipal Treasurer of the then Municipality of Marikina, Rizal, in favor of Mr. Puzon be declared null and void and all subsequent transactions therefrom declared null and void as well; (b) the Order of the RTC in LRC Case No. R-3367, authorizing the consolidation of ownership of and issuance of new TCT No. 102909 in favor of Mr. Puzon, be declared null and void; (c) the Register of Deeds be directed to cancel the Certificate of Sale and TCT No. 102909 issued in favor of Mr. Puzon as well as TCT No. N-119631 issued in the name of RRC and that TCT No. 370807 in the name of the Sarmiento spouses be restored; (d) all third-party defendants be made to pay, jointly and severally, moral and exemplary damages such amount as to be fixed by the court as well as attorneys fees in the amount of P10,000.00; and (e) Mr. Puzon be made to pay P500,000.00 the actual value of the property at the time of the tax sale in the remote event that the title of RRC is not invalidated. The trial court held that the Sarmiento spouses were not entitled to the relief sought by them as there was nothing irregular in the way the tax sale was effected, thus: 97

Defendants Sarmiento aver that they were not notified of the auction sale of the property by the Municipal Treasurer of Marikina. However, the Court would like to point out that during the examination of Amancio Sarmiento, he testified that in 1969 or 1970, he started residing at No. 13 19th Avenue, Cubao, Quezon City; that his property was titled in 1972; that he transferred his residence from Cubao to No. 76 Malumanay Street, Quezon City but he did not inform the Municipal Treasurer of the said transfer. Hence, notice was directed to his last known address. ... The law requires posting of notice and publication. Personal notice to the delinquent taxpayer is not required. In the case at bar, notice was sent to defendants (sic) address at No. 12 13th Avenue, Cubao Quezon City. If said notice did not reach the defendant, it is because of defendants fault in not notifying the Municipal Treasurer of Marikina of their change of address.20 The above-quoted ratiocination does not sit well with this Court for two fundamental reasons. First, the trial court erroneously declared that personal notice to the delinquent taxpayer is not required. On the contrary, personal notice to the delinquent taxpayer is required as a prerequisite to a valid tax sale under the Real Property Tax Code,21 the law then prevailing at the time of the tax sale on 28 August 1982.22 Section 73 of the Real Property Tax Code provides: Sec. 73. Advertisement of sale of real property at public auction. After the expiration of the year for which the tax is due, the provincial or city treasurer shall advertise the sale at public auction of the entire delinquent real property, except real property mentioned in subsection (a) of Section forty hereof, to

satisfy all the taxes and penalties due and the costs of sale. Such advertisement shall be made by posting a notice for three consecutive weeks at the main entrance of the provincial building and of all municipal buildings in the province, or at the main entrance of the city or municipal hall in the case of cities, and in a public and conspicuous place in barrio or district wherein the property is situated, in English, Spanish and the local dialect commonly used, and by announcement at least three market days at the market by crier, and, in the discretion of the provincial or city treasurer, by publication once a week for three consecutive weeks in a newspaper of general circulation published in the province or city. The notice, publication, and announcement by crier shall state the amount of the taxes, penalties and costs of sale; the date, hour, and place of sale, the name of the taxpayer against whom the tax was assessed; and the kind or nature of property and, if land, its approximate areas, lot number, and location stating the street and block number, district or barrio, municipality and the province or city where the property to be sold is situated. Copy of the notice shall forthwith be sent either by registered mail or by messenger, or through the barrio captain, to the delinquent taxpayer, at his address as shown in the tax rolls or property tax record cards of the municipality or city where the property is located, or at his residence, if known to said treasurer or barrio captain: Provided, however, That a return of the proof of service under oath shall be filed by the person making the service with the provincial or city treasurer concerned. (Emphasis supplied) We cannot overemphasize that strict adherence to the statutes governing tax sales is imperative not only for the protection of the taxpayers, but also to allay any possible suspicion of collusion between the buyer and the public officials called upon to enforce 98

the laws.23 Notice of sale to the delinquent land owners and to the public in general is an essential and indispensable requirement of law, the non-fulfillment of which vitiates the sale.24 Thus, the holding of a tax sale despite the absence of the requisite notice is tantamount to a violation of delinquent taxpayers substantial right to due process. 25 Administrative proceedings for the sale of private lands for nonpayment of taxes being in personam, it is essential that there be actual notice to the delinquent taxpayer, otherwise the sale is null and void although preceded by proper advertisement or publication.26 The consequential issue in this case, therefore, is whether or not the registered owners the Sarmiento spouses were personally notified that a tax sale was to be conducted on 28 August 1982. The Sarmiento spouses insist that they were not notified of the tax sale. The trial court found otherwise, as it declared that a notice was sent to the spouses last known address. Such conclusion constitutes the second fundamental error in the trial courts disposition of the case as such conclusion is totally bereft of factual basis. When findings of fact are conclusions without citation of specific evidence upon which they are based, this Court is justified in reviewing such finding.27 In herein case, the evidence does not support the conclusion that notice of the tax sale was sent to the Sarmiento spouses last known address. What is clear from the evidence is that the Sarmiento spouses were notified by mail after the subject property was already sold, i.e., the notice that was sent to the last known address was the "Notice of Sold Properties" and not the notice to hold a tax sale.28 This was testified upon by third-party defendant Natividad M. Cabalquinto, the Municipal Treasurer of Marikina, who swore that per her records, neither notice of tax delinquency nor notice of tax sale was sent to the Sarmiento

spouses.29 Counsel for respondent RRC did not cross-examine Ms. Cabalquinto on this on the theory that Ms. Cabalquinto had no personal knowledge of the tax sale and the proceedings leading thereto as she became Municipal Treasurer only in 1989.30 Notwithstanding Ms. Cabalquintos lack of personal knowledge, her testimony -- that per records in her possession no notice was actually sent to the Sarmiento spouses -- is sufficient proof of the lack of such notice in the absence of contrary proof coming from the purchaser in the tax sale, Mr. Puzon, and from his eventual buyer, herein private respondent RRC. Be it noted that under Section 73 of the Real Property Tax Code, it is required that a return of the proof of service to the registered owner be made under oath and filed by the person making the service with the provincial or city treasurer concerned. This implies that as far as tax sales are concerned, there can be no presumption of the regularity of any administrative action; hence the registered owner/delinquent taxpayer does not have the burden of proof to show that, indeed, he was not personally notified of the sale thru registered mail. There can be no presumption of the regularity of any administrative action which results in depriving a taxpayer of his property through a tax sale.31 This is an exception to the rule that administrative proceedings are presumed to be regular.32 This doctrine can be traced to the 1908 case of Valencia v. Jimenez and Fuster33 where this Court held: The American law does not create a presumption of the regularity of any administrative action which results in depriving a citizen or taxpayer of his property, but, on the contrary, the due process of law to be followed in tax proceedings must be established by proof and the general rule is that the purchaser of a tax title is bound to take upon himself the burden of showing the regularity 99

of all proceedings leading up to the sale. The difficulty of supplying such proof has frequently lead to efforts on the part of legislatures to avoid it by providing by statute that a tax deed shall be deemed either conclusive or presumptive proof of such regularity. Those statutes attributing to it a conclusive effect have been held invalid as operating to deprive the owner of his property without due process of law. But those creating a presumption only have been sustained as affecting a rule of evidence, changing nothing but the burden of proof. (Turpin v. Lemon, 187 U.S., 51.) The tax law applicable to Manila does not attempt to give any special probative effect to the deed of the assessor and collector, and therefore leaves the purchaser to establish the regularity of all vital steps in the assessment and sale. In the fairly recent case of Requiron v. Sinaban,34 we had occasion to reiterate the doctrine laid down in Valencia with respect specifically to tax sales conducted under Commonwealth Act No. 470 (Assessment Law). Nevertheless, no substantial variance exists between Commonwealth Act No. 470 and the Real Property Tax Code, which took effect on 01 June 1974, concerning the required procedure in the conduct of public auction sale involving real properties with tax delinquencies.35 In sum, for failure of the purchaser in the tax sale (third-party defendant Mr. Puzon) to prove that notice of the tax sale was sent to the Sarmiento spouses, such sale is null and void. As the tax sale was null and void, the title of the buyer therein (Mr. Puzon) was also null and void, which thus leads us to the question of who between petitioners and private respondent RRC has the right to possess the subject property.

In its complaint for recovery of possession with damages filed before the trial court, RRC averred that it is the present registered owner of the subject land which it bought from Mr. Puzon, who was then the registered owner thereof, free from liens and encumbrances. It also stated that therein defendant Pedro Ogsiner was an illegal occupant as he was the overseer for the Sarmiento spouses who no longer had any title to or rights over the property. It thus prayed that Pedro Ogsiner vacate the property and that he and the Sarmiento spouses be ordered to pay attorneys fees and rent in the amount of P500.00 monthly from 1984 until Pedro Ogsiner finally vacates the land.36 In their Answer,37 the Sarmiento spouses invoked certain affirmative defenses, to wit: (1) The certificate of sale issued by the Municipal Treasurer of Marikina, Rizal, the order authorizing consolidation of ownership and the issuance of a new title all in favor of Mr. Puzon were null and void as the Sarmiento spouses and Pedro Ogsiner were not notified of the tax sale; (2) Mr. Puzon, knowing that the sale of the subject property by the Municipal Treasurer of Marikina was null and void, still sold the same to herein private respondent RRC; and (3) RRC purchased the property in bad faith, thus the sale to it was null and void. A complaint for recovery of possession based on ownership (accion reivindicatoria or accion reivindicacion) is an action whereby the plaintiff alleges ownership over a parcel of land and seeks recovery of its full possession.38 As possession is sought based on ownership, we must inquire into the title of RRC which it

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acquired from Mr. Puzon who, in turn, derived his title from the void tax sale. The void tax sale notwithstanding, RRCs title cannot be assailed if it is a purchaser in good faith and for value.39 In its narration of the facts, the trial court acknowledged that RRC -- through its President, Roberto Siy, and through its representative, Lorenzo Tabilog conducted an ocular inspection of the subject land and found therein that its actual occupant, Pedro Ogsiner, had a house erected thereon and that such occupant was the overseer for the Sarmiento spouses who claimed ownership over the subject land.40 Armed with this knowledge, RRC did only one thing: it offered Pedro Ogsiner P2,000.00 to vacate the subject property.41 Relying on the fact that the TCT in Mr. Puzons name was free of liens and encumbrances and that Mr. Puzon would take care of the "squatters," RRC did not investigate whatever claim Pedro Ogsiner and the Sarmiento spouses had over the subject land. From the foregoing undisputed facts, the trial court held: There is no doubt that when the plaintiff Rodeanna Realty Corporation purchased the property, there was a title in the name of Jose Puzon, thus, making them a purchaser (sic) in good faith and for value. Said buyers relied on the owners (sic) title which is free and clear of all liens and encumbrances. ... After a careful evaluation of the facts of this case, the Court believes that plaintiff is entitled to the relief sought for. As enunciated in the case of Carmelita E. Reyes vs. Intermediate Appellate Court, Gregorio Galang and Soledad Pangilinan (No. L-

60941, February 28, 1985, 135 SCRA 214), a contract of sale between a buyer from public auction of land sold for unpaid realty taxes and subsequent innocent purchaser in good faith and for value is valid whether or not the City Treasurer followed the prescribed procedure. In the case at bar, assuming that the Municipal Treasurer of Marikina failed to comply with certain procedure, it does not follow that the Rodeanna Realty Corporation has no valid title. For as they have asserted, they are purchaser in good faith and for value in the amount of P190, 000.00. There is nothing in the record which would show that they were aware or they were party to the alleged irregularities. Hence, title of Rodeanna Realty Corporation cannot now be assailed (William vs. Barrera, 68 Phil. 656; PMHC vs. Mencias, August 16, 1967, 20 SRCA 1031; Pascua vs. Capuyos, 77 SCRA 78).42 In affirming the trial court, the Court of Appeals ruled: As proven by the plaintiff-appellee, they obtained the property in question from Mr. Puzon, who in turn acquired it in a public auction conducted by the Municipality of Marikina. By virtue of the sale by Mr. Puzon to plaintiff-appellee, TCT No. N-119631 was issued in its name. The best proof of ownership of a piece of land is the certificate of title. The certificate of title is considered the evidence of plaintiff-appellees ownership over the subject real property, and as its registered owner, it is entitled to its possession. Hence, as compared to the Sarmiento spouses whose previous title over the subject property has been cancelled, and to the Heirs of Mr. Sison, who had not shown any better proof of ownership, the plaintiff-appellee, as evidenced by its certificate of title, has superior right to possess the contested property. Xxx43

101

Verily, every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go behind the certificate to determine the condition of the property.44 Thus, the general rule is that a purchaser may be considered a purchaser in good faith when he has examined the latest certificate of title.45 An exception to this rule is when there exist important facts that would create suspicion in an otherwise reasonable man to go beyond the present title and to investigate those that preceded it. Thus, it has been said that a person who deliberately ignores a significant fact which would create suspicion in an otherwise reasonable man is not an innocent purchaser for value.46 A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor.47 As we have held: The failure of appellees to take the ordinary precautions which a prudent man would have taken under the circumstances, specially in buying a piece of land in the actual, visible and public possession of another person, other than the vendor, constitutes gross negligence amounting to bad faith. In this connection, it has been held that where, as in this case, the land sold is in the possession of a person other than the vendor, the purchaser is required to go beyond the certificate of title to ma[k]e inquiries concerning the rights of the actual possessor. Failure to do so would make him a purchaser in bad faith. (Citations omitted). ... One who purchases real property which is in the actual possession of another should, at least make some inquiry concerning the right of those in possession. The actual possession by other than the

vendor should, at least put the purchaser upon inquiry. He can scarely, in the absence of such inquiry, be regarded as a bona fide purchaser as against such possessors.48 (Emphasis supplied) Prescinding from the foregoing, the fact that private respondent RRC did not investigate the Sarmiento spouses claim over the subject land despite its knowledge that Pedro Ogsiner, as their overseer, was in actual possession thereof means that it was not an innocent purchaser for value upon said land. Article 524 of the Civil Code directs that possession may be exercised in ones name or in that of another. In herein case, Pedro Ogsiner had informed RRC that he was occupying the subject land on behalf of the Sarmiento spouses. Being a corporation engaged in the business of buying and selling real estate,49 it was gross negligence on its part to merely rely on Mr. Puzons assurance that the occupants of the property were mere squatters considering the invaluable information it acquired from Pedro Ogsiner and considering further that it had the means and the opportunity to investigate for itself the accuracy of such information. Third Issue: As it is the Sarmieno spouses, as exercised by their overseer Pedro Ogsiner, who have the right of possession over the subject property, they cannot be made to pay rent to private respondent RRC. WHEREFORE, premises considered, the Decision of the Court of Appeals dated 27 November 2001 and its Resolution dated 08 March 2002 are REVERSED and SET ASIDE. The public auction sale conducted on 28 August 1982 is declared VOID for lack of notice to the registered owners Amancio and Luisa Sarmiento. Transfer Certificate of Title No. N-119631 of the Registry of Deeds of what was then the Municipality of Marikina, Province of Rizal, in the 102

name of Rodeanna Realty Corporation is hereby ANNULLED. The Register of Deeds of Marikina City, Metro Manila, is ordered to cancel TCT No. N-119631 and to issue, in lieu thereof, a new title in the name of spouses Amancio and Luisa Sarmiento. Costs against private respondent RRC. SO ORDERED. MINITA V. CHICO-NAZARIO Associate Justice Footnotes
1

Ibid. Ibid.

10

Firestone Tire and Rubber Company of the Philippines v. Tempongko, No. L-24399, 28 March 1969, 27 SCRA 418, 423.
11

Penned by Associate Justice Perlita J. Tria Tirona with Associate Justices Ramon A. Barcelona and Bernardo P. Abesamis concurring, Rollo, pp. 38-48.
2

The Motion to file a third-party complaint was initially denied by the trial court on 16 June 1987 while the motion for reconsideration was denied on 22 July 1987 (Records, pp. 54-55, 65). The Sarmiento spouses then elevated the denial to the Court of Appeals via a Petition for Certiorari. The Fourteenth Division of the appellate court, composed of Associate Justices Fidel P. Purisima, Emeterio C. Cui and Jesus M. Elbinias, set aside the trial courts orders and ordered, instead, the admission of the Sarmiento spouses third-party complaint (Records, pp. 166-170).
12

Penned by Associate Justice Perlita J. Tria Tirona with Associate Justices Conchita Carpio-Morales (now a member of this Court) and Bernardo P. Abesamis concurring, Rollo, pp. 49-50.
3

See Order of the trial court dated 25 January 1988 (Records, p. 121).
13

Ibid.

Rollo, pp. 39-42. Rollo, pp. 68-69. Rollo, p. 48 Rollo, pp. 45-47.

14

Malilin, Jr. v. Castillo, G.R. No. 136803, 16 June 2000, 333 SCRA 628, 640.

Third-Party defendant Carlos Moran Sison answered on 24 March 1988 (Records, pp. 137-146). Third-Party Register of Deeds of Marikina filed its Answer on 06 May 1988 (Records, pp. 157-160). Defendant Puzon filed his "Answer with Counterclaim" on 20 October 1988 (Records, pp. 214218) while he filed his supplemental answer to the amended third-party complaint on 26 July 1989 (Rollo, pp. 146-147). RRC likewise filed its Answer to the third-party complaint (Rollo, pp. 148-149).

103

15

Supra, note 10.

16

G.R. No. 129471, 28 April 2000, 331 SCRA 267, 286-287 (citing A. Francisco Realty and Development Corp. v. Court of Appeals, G.R. No. 125055, 30 October 1998, 298 SCRA 349, 358). See also Heirs of Simplicio Santiago v. Heirs of Mariano Santiago, G.R. No. 151440, 17 June 2003, 404 SCRA 193, 203-204.
17

Id. at 287 (citing Mendoza v. Court of Appeals, No. L62089, 09 March 1988, 158 SCRA 508, 512-514). The instant controversy, on the other hand, is approaching its 19th anniversary, the complaint for recovery of possession having been filed before the RTC on 19 December 1986.
18

Sison who then timely appealed to the Court of Appeals. The Court of Appeals, however, affirmed the ruling of the trial court. It does not appear from the records of the case that the heirs of Sison appealed the Court of Appeals decision to this Court. Before this Court, when required to comment to the instant petition filed by the Sarmiento spouses, the heirs of Sison, namely George (Rollo, p. 218), Luis (Rollo, p. 221) and Margarita (Rollo, pp. 227, 230), manifested that they will not file any comment and that they are willing to comply with the petition. Ricardo Sison, another heir, manifested that he had no objection to the instant petition (Rollo, p. 260).
19

Rollo, pp. 52-53. Rollo, pp. 66-68.

The first cause of action does not have direct bearing on the present petition as the same was made against Mr. Sison, the mortgagee who was able to foreclose the subject property and who had his right annotated on the title which was then still in the name of the Sarmiento spouses. It will be recalled that Mr. Sison failed to consolidate his title to the property despite nonredemption by the Sarmiento spouses. When the title to the property was transferred to Mr. Puzon, the highest bidder in the tax sale, the TCT no longer carried Mr. Sisons annotation. The trial court ruled in favor of RRC, the plaintiff in the case for recovery of possession and against the Sarmiento spouses and Mr. Sison. The heirs of Sison, after having been substituted for their late father, seasonably filed a motion for new trial which motion was granted. After trial, however, the trial court dismissed the claim of Mr. Sison, as represented by his heirs, that he is the beneficial owner of the subject property. The trial court denied the motion for reconsideration of the heirs of

20

21

Puzon v. Abellera, G.R. No. 75082, 31 January 1989, 169 SCRA 789, 795.
22

The Real Property Tax Code was the precursor of the Local Government Code of 1991 (Republic Act No. 7160). At present, the notice requirement in tax sales is set forth in Section 178 of Rep. Act No. 7160: SECTION 178. Advertisement and Sale. Within thirty (30) days after the levy, the local treasurer shall proceed to publicly advertise for sale or auction the property or a usable portion thereof as may be necessary to satisfy the claim and cost of sale; and such advertisement shall cover a period of at least thirty (30) days. It shall be effected by posting a notice at the main entrance of the municipal building or city hall, and in a public and conspicuous place in the barangay where the real property is located, and by 104

publication once a week for three (3) weeks in a newspaper of general circulation in the province, city or municipality where the property is located. The advertisement shall contain the amount of taxes, fees, or charges are levied, and a short description of the property to be sold. At any time before the date fixed for the sale, the taxpayer may stay they proceedings by paying the taxes, fees, charges, penalties and interests. If he fails to do so, the sale shall proceed and shall be held either at the main entrance of the provincial, city or municipal building, or on the property to be sold., or at any other place as determined by the local treasurer conducting the sale and specified in the notice of sale. Within thirty (30) days after the sale, the local treasurer or his deputy shall make a report of the sale to the sanggunian concerned, and which shall form part of his records. After consultation with the sanggunian, the local treasurer shall make and deliver to the purchaser a certificate of sale, showing the proceeding of the sale, describing the property sold, stating the name of the purchaser and setting out the exact amount of all taxes, fees, charges, and related surcharges, interests, or penalties: Provided, however, That any excess in the proceeds of the sale over the claim and cost of sales shall be turned over to the owner of the property. The local treasurer may, by ordinance duly approved, advance an amount sufficient to defray the costs of collection by means of the remedies provided for in this Title, including the preservation or transportation in case of personal property, and the advertisement and subsequent sale, in cases of personal and real property including improvements thereon.

23

Serfino v. Court of Appeals, No. L-40858, No. L-40751, 15 September 1987, 154 SCRA 19, 27.
24

Ibid. See also Cf. Tiongco v. Philippine Veterans Bank, G.R. No. 82782, 05 August 1992, 212 SCRA 176, 192; and Cabrera v. Prov. Treasurer, 75 Phil. 780.
25

Supra, note 21.

26

Ibid.; Lopez v. Director of Lands, 47 Phil. 23; Talusan v. Tayag, G.R. No. 133698, 04 April 2001, 356 SCRA 263, 276.
27

Solid Homes, Inc. v. Court of Appeals, G.R. No. 117501, 08 July 1997, 275 SCRA 267, 279.
28

TSN, 16 March 1992, pp. 9-10. Id., p. 8. Id., p. 10.

29

30

31

Francia v. Intermediate Appellate Court, No. L-67649, 28 June 1988, 162 SCRA 753, 760.
32

Ibid.

33

11 Phil 492, 498-499; and reiterated in Camo v. Buyco, No. 8304, 11 February 1915, 29 Phil. 437, 444-445.
34

G.R. No. 138280, 10 March 2003, 398 SCRA 713, 722. Ibid. Records, pp. 1-3. 105

35

36

37

Records, pp. 263-265.

38

Serdoncillo v. Benolirao, G.R. No. 118328, 08 October 1998, 297 SCRA 448, 460.
39

Cf. Reyes v. Intermediate Appellate Court, No. L-60941, 28 February 1985, 135 SCRA 214, 223-224.
40

Rollo, pp. 56-58. Ibid. Rollo, pp. 67-68. Id., p. 45 (citation omitted).

ADVERSE CLAIM EN BANC G.R. No. L-17956 September 30, 1963 ELISA D. GABRIEL, petitioner-appellee, vs.REGISTER OF DEEDS OF RIZAL, respondent, JUANITA R. DOMINGO, oppositor-appellant. Romualdo D. Celestra for petitioner-appellee. Balcos, Salazar & Associates for oppositor-appellant. PAREDES, J.: On January 4, 1960, petitioner herein Elisa D. Gabriel, filed with the Register of Deeds of Manila, an Adverse claim, against the properties registered in the name of oppositor-appellant, Juanita R. Domingo, her sister. As grounds for the adverse claim, petitioner allege Notwithstanding the registration of the foregoing properties in the name of Juanita R. Domingo, the same properties have been included in the amended inventory of the estate of the late Antonia Reyes Vda. de Domingo, filed by Elisa Domingo de Gabriel1 as they are in fact properties acquired by the deceased during her lifetime. The registration of the titles of these properties,; should have been made in the name of said Antonia Reyes Vda. de 106

41

42

43

44

Heirs of Tajonera v. Court of Appeals, No. L-26677, 27 March 1981, 103 SCRA 467, 474.
45

Ibid.

46

Development Bank of the Philippines v. Court of Appeals, supra, note 16.

47

Ibid.

48

Id., pp. 290-291. See also Lucena v. Court of Appeals, G.R. No. 77468, 25 August 1999, 313 SCRA 47, 59-60; Santiago v. Court of Appeals, G.R. No. 117014, 14 August 1995, 247 SCRA 336, 345; De Guzman, Jr. v. Court of Appeals, G.R. No. L-46935, 21 December 1987, 156 SCRA 701, 710.
49

RTC Decision, Rollo, p. 6.

Dominga, but due to commission of fraud and deceit, by said Juanita R. Domingo, who was then living in the same house with the deceased, all the titles of the above stated properties were registered instead in her name, thus depriving herein adverse claimant who is likewise an heir of Antonia Reyes Vda. de Domingo of her lawful rights, interests and participations over said properties. On the same date, a similar notice of adverse claim was presented by petitioner with the Register of Deeds of Rizal, on the properties registered in the name of Juanita R. Domingo, located in Rizal Province, the ground for which was stated as follows The foregoing properties an included in the amended inventory of the estate of their late mother Antonia Reyes Vda, de Domingo, who is the true owner of said properties, and considering that the registrations in the name of Juanita R. Domingo were only made fraudulently, thus depriving herein adverse claimant of her lawful rights, interest and participations over said properties. For the adverse claim on the Manila properties, Domingo presented an opposition, claiming that the Adverse claim was instituted for (1) Harassment;(2) Had no legal basis; and (3) Had done and will do irreparable loss her. The Register of Deeds of Manila, elevated the matter to the Land Registration Commission en Consulta, where in he stated Because the undersigned is in doubt as to whether the registration of the claim is proper determination by this Commission.

Oppositor Domingo also asked that the adverse claim of Gabriel on her Rizal properties be denied, contending that same was presented only to embarrass her that said properties were acquired by her pursuant to an extrajudicial partition in which the petitioner Gabriel and their mother (Antonia), were signatories. On January 13, 1960, the Register of Deeds of Rizal denied registration of the Notice of Adverse Claim, stating P.E. No. 90080 NOTICE OF ADVERSE CLAIM has have been found to be legally defective or otherwise not sufficient in law and is/are therefore, hereby denied on the following ground: Where there are other provisions of remedies under this Act, the affidavit of adverse claim is not applicable. Under date of January 21, 1960, Elisa D. Gabriel appealed the above denial to the Land Registration Commission.1awphl.nt On February 17, 1960, the Register of Deeds of Rizal in his letter transmitting the case to the LRC, tried justify his denial to annotate the affidavit of Adverse claim, by pointing out that such procedure was not proper contending that petitioner's case does not come under the provisions of Section 110 of Act 496. if at all, he claims petitioner should have availed Section 98 thereof. On March 7, 1960, the LRC heard the two cases, and before any of the parties could file his memorandum, the Register of Deeds of Rizal, presented a Supplemental Memorandum, reiterating his stand. In his reply, Gabriel clarified the issue, stating that the question at bar concerns the fraudulent registration by oppositor, of the properties subject of the Adverse claims, and not their fraudulent acquisition. 107

The Land Registration Commission, on April 29, 1960, issued a resolution, the pertinent portions of which are reproduced hereinbelow The only question to be resolved by this Commission in these related consultas the registration of the two notices of adverse claim filed with the Registries of Manila and Rizal. Whether or not these adverse claims are valid, whether or not they are frivolous and merely intended to harass, and such other litigious matters raised by the protagonists, are for a Court of competent jurisdiction, and not for this Commission to decide. Sec. 110 of Act No. 496 provides that Whoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to the date of the original registration, may, if no other provision is made in this Act for registering the same, make statement in writing setting forth fully his alleged right or interest, and how or under whom acquired, and a reference to the volume and page of the certificate of title of the registered owner, and a description of the land in which the right or interest is claimed. The statement shall be signed and sworn to, and shall state the adverse claimant's residence, and designate a place at which all notices may be served upon him. This statement shall be entitled to registration as an adverse claim and the court, upon petition of any party in interest, shall grant a specific hearing upon the question of the validity of such adverse claim and shall enter such decree

therein as justice and equity may require. If the claim is adjudged to be invalid, the registration shall be cancelled. If in any case the court after notice and hearing shall find that a claim thus registered was frivolous or vexatious, it may tax the adverse claimant. double or treble the costs in its discretion. It is believed that the two notices of adverse claim filed both registries substantially comply with the above legal requirements. And under paragraph 5 of the LRC Circular No. 2, dated July 10. 1954, where the document sought to be registered is sufficient in law and drawn up in accordance with existing requirements, it, becomes incumbent upon the Register of Deeds to perform his ministerial duty without unnecessary delay. The registration of an invalid adverse claim will not do as much harm as the non-registration of a valid one. The notation of an adverse claim, like that of lis pendens, does not create non-existent right or lien and only means that a person who chases or contracts on the property in dispute does so subject to the result or outcome of the dispute.... xxx xxx xxx

In view of the foregoing facts and considerations, this Commission is of the opinion, and so holds, that the notices of verse claim filed by Elisa D. Gabriel with the Registries of Manila and Rizal are registrable. Registration should not however be confused with validity. The registration of the adverse claim will not by itself alone make them valid. Their validity will ultimately decided in Special Proceeding No. 2658 or, in alternative, in the more expeditious remedy

108

provided for in 110 of Act No. 496, i.e., a speedy hearing upon the question the validity of the adverse claim. Oppositor Domingo moved for a reconsideration of above order, contending, in the main, that a Register Deeds exercises some degree of judicial power to determine upon his own responsibility, the legality of instruments brought before him for registration. In other words, oppositor submits that the duties of the Register of Deeds are not wholly ministerial, for they can refuse, and/or suspend the registration of documents when they think they are not valid or not registrable. In denying the motion for reconsideration, the Land Registration Commissioner said, in part The only question resolved by this Commission was the registrability of the two notices of adverse claims. The allegations and counter-allegations of the contending parties on the validity or invalidity of the adverse claims were not considered. They should be addressed to and decided by a competent court. With the denial of the motion for reconsideration, oppositor brought the matter to this Court on appeal, claiming that the Land Registration Commissionerred (1) holding the adverse claims registrable; and (2) in holding that it is the mandatory duty of the Register of Deeds register the instant notices of adverse claims "whether not they are valid, "whether or not they are frivolous merely intended to harass." In addition to the well-taken disquisitions of the L.R.C., it should be observed that section 110 of Act No. 496, which is the legal provision applicable to the case, is divided into two parts: the first refers to the duty of the party who claims any part or interest in registered land adverse to the registered owner, subsequent to the date of the original registration; and the requirements to be

complied with in order that such statement shall been titled to registration as an adverse claim, thus showing the ministerial function of the Register of Deeds, when no defect is found on the face of such instrument; and the second applies only when, after registration of the adverse claim, a party files an appropriate petition with a competent court which shall grant a speedy hearing upon the question of the validity of such adverse claim, and to enter a decree, as justice and equity require; and in this hearing, the competent court shall resolve whether the adverse claim is frivolous or vexatious, which shall serve as the basis in taxing the costs. In the instant case, the first part was already acted upon by the L.P.C. which resolved in favor of the registrability of the two adverse claims and this part should have been considered as closed. What is left, is the determination of the validity of the adverse claims by competent court, after the filing of the corresponding petition for hearing, which the appellant had not done. Anent the second assignment of error, the Land Registration Commission did not state that it was mandatory for a Register of Deeds to register invalid or frivolous documents, or those intended to harass; it merely said that whether the document is invalid, frivolous or intended to harass, is not the duty of a Register of Deeds to decide, but a court of competent jurisdiction, and that it is his concern to see whether the documents sought to be registered conform with the formal and legal requirements for such documents. WHEREFORE, the Resolution of the Land Registration Commission, holding the registrability of the Adverse Claims under consideration, should be, as it is hereby affirmed, with costs against oppositor-appellant Juanita R. Domingo.

109

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Dizon, Regala and Makalintal, concur. Reyes, J.B.L., J., took no part. Footnotes
1

Special Proceeding No. 2658, CFI of Rizal, still pending.

ADVERSE CLAIM EN BANC G.R. No. L-16448 April 29, 1961

REGISTER OF DEEDS OF QUEZON CITY, petitioner; PEOPLE'S HOMESITE AND HOUSING CORPORATION, vendor; and DEVELOPMENT BANK OF THE PHILIPPINES, vendee-appellant, vs. HONESTO G. NICANDRO and ELISA F. NICANDRO, vendeesappellees. Jesus A. Avancea for petitioner. Jose C. Colayco for vendees-appellees. BARRERA, J.: From the resolution of the Land Registration Commissioner on the question submitted to him en consulta by the Register of Deeds of Quezon City(LRC Consulta No. 250), the Development Bank of the Philippines (formerly Rehabilitation Finance Corporation) has appealed to this Court pursuant to Section 4 of Republic Act No. 1151.

There is no controversy as to the following facts: On October 20, 1955, the People's Homesite and Housing Corporation (PHHC) sold to the Rehabilitation Finance Corporation, now the Development Bank of the Philippines (DBP), 159 lots comprised in Blocks 21 to 31 of West Triangle in Diliman, Quezon City; that at that time, all the 159 lots were included in a larger parcel of land covered by TCT No. 1356; that subsequently, without the knowledge of the DBP, the 159 lots were segregated and a new transfer certificate of title No. 36533 covering the same was issued; that the subdivision plan segregating them was not annotated on the bigger title No. 1356, nor the fact that the latter was pro tanto cancelled by the new title No. 36533; that because of these circumstances the sale agreement between appellant DBP and the PHHC, when presented for registration on January 15, 1959, was entered in the day book under date of January 15 and inscribed on TCT No. 1356 as a "sale of unsegregated portions" with the note "new titles to be issued upon presentation of the corresponding subdivision plan and technical descriptions duly approved by the authorities". A month later, or on February 16, 1959, Honesto C. Nicandro and Elisa F. Nicandro presented to the Register of Deeds for registration two deeds of sale executed by the PHHC in their favor, involving Lots Nos. 2 and 4, Block 21, which was later covered, among other lots, by TCT No. 36533. These lots were among the 159 lots already sold to the appellant Development Bank of the Philippines. These deeds of sale of the Nicandros were denied registration for the reason that only photostatic copies of the deeds were presented, the lots were mortgaged to the GSIS whose consent did not appear on the deeds, and they lacked the necessary documentary stamps. On the following day, February 17, the Nicandros filed affidavit of adverse claim over the two lots, which were annotated on TCT No. 36533, and simultaneously filed a petition in the Court of First Instance of Rizal to require the GSIS to surrender the owner's

110

duplicate of said TCT No. 36533 to the Register of Deeds for the annotation of the sale in their favor. Discovering that the lots it had purchased are already covered by TCT No. 36533, the vendee DBP, on March 6, 1959, caused the annotation thereon of its deed of sale of October 20, 1955. It was then found out that the required subdivision plan covering the lots involved in the sale, was already submitted and duly recorded in TCT No. 36533. As a consequence, upon petition of DBP, the Register of Deeds transferred the annotation of the deed of sale of the DBP appearing on TCT No. 1356 to the new TCT No. 36533. As the DBP's demand for the issuance of a new certificate of title in its name was opposed the Nicandros, the Register of Deeds referred the matte en consults to the Land Registration Commissioner. In the meantime, upon order of the Court of First Instance and as prayed for by the Nicandros, the GSIS surrendered the owner's duplicate of TCT No. 36533, and both the a verse claims of the Nicandros and the deed of sale in favor of the Bank were annotated on the back thereof. In his Resolution of July 25, 1959, the Land Registration Commissioner ruled that the annotation on TCT N 1356 of the sale agreement between the PHHC and the vendee DBP, did not constitute registration sufficient to bind innocent third parties (referring to the Nicandros), for the reasons that (1) the deed of October 20, 1955 did not specify that it was a sale of an unsegregated portion of land and the deed, consequently, was defective; (2 when the sale agreement was annotated on TCT No. 3156, the owner's duplicate certificate was not surrendered, an even if it did so, it would have no effect at all as TCT No. 3156 was already cancelled and superseded by TCT No. 36533; and (3) TCT No. 1356, on which said sale was first annotated, no longer covers the 159 lots subject o the sale. It was, therefore, held that the

Nicandros are entitled to the issuance of the corresponding certificate of title, subject to the mortgage in favor of the GSIS. Hence, this appeal by DBP. A careful consideration of the facts and the law involved in this appeal induces us to conclude and hold the Land Registration Commissioner erred in declaring the Nicandros entitled to registration of Lots Nos. 2 an 4 in their names, and in directing the issuance to the of the corresponding certificates. The Commissioner's finding that the sale-contract in favor of the appellant DBP is defective, for failure to specify that it was for an unsegregated portion, is without factual basis. The pertinent provisions of the sale agreement textually read: That for and in consideration of the sum of EIGHT HUNDRED TWO THOUSAND ONE HUNDRED FIFTY-FIVE PESOS AND FIFTY-SIX CENTAVOS (P802,155.56), Philippine Currency, of which the receipt of the amount of FOUR HUNDRED THOUSAND PESOS (P400,000.00) is hereby acknowledged as advance payment to defray the expenses which the PHHC will incur in carrying out the obligations imposed upon it under Conditions Nos. 7 & 8 of this Agreement and the balance to be payable upon compliance by the PHHC of Condition No. 7, the PHHC, by these presents, hereby conveys, sells and transfers unto the RFC the lots in Blocks 21 to 31, West Triangle, totalling 91,188.30 square meters, as listed in the schedule attached hereto as Annex A, described in Annex B, and shown in the plan Annex C. of which lots the PHHC is the absolute owner as evidenced by TCT No. 1356 of the land records of Quezon City, subject to the following terms, and conditions and undertakings: xxx xxx xxx 111

8. The PHHC shall complete the subdivision of this area in accordance with the plan approved by the RFC, secure the approval of the subdivision plan by the Bureau of Lands, the Land Registration Commission and the appropriate court of first instance, and to register said plan with the Register of Deeds of Quezon City, in order that titles to the lots conveyed herein may be issued in favor of the RFC. (Emphasis supplied.) It may be gathered from the foregoing that the subject of the sale were certain "lots in Blocks 21 to 31, West Triangle, totalling 91,188.30 square meters, . . . of which the PHHC is the absolute owner as evidenced by TCT No. 1356"; that while there was a subdivision plan prepared by the PHHC, to which the vendee DBP is agreeable, the same was not yet approved by the proper authorities, nor duly recorded in the Register of Deeds' office at the time of the execution of the contract. Thus, under said agreement, the vendor was still obliged to complete the subdivision of the area, secure its approval by the Bureau of Lands, Land Registration Commission, and the court of first' instance, and cause the registration thereof in the office of the Register of Deeds. Clearly, from the language of the document, the area comprising the 159 lots subject of the sale, although perhaps already surveyed for purposes of segregation, had not yet been officially segregated from the bigger tract of land in the records of the Register of Deeds. In the circumstances, the contract, evidently, is for the sale of an unsegregated portion of West Triangle area owned by the PHHC. And the denomination of the deed simply as a "Deed of Sale" did not transform said contract into one for the sale of a segregated parcel land. The nature of a contract is not determined by title given to it but by the intention of the parties an the legal effect of the instrument.1 The deed of sale favor of the DBP is, clearly, a registerable document.

Too, there was a finding that when the deed of sale was presented for registration, the registrant (DBP) failed to surrender the owner's duplicate certificate; thus, the Commissioner ruled that the annotation thereof on TCT No. 1356 on January 15, 1959, was made in disregard on Section 55 of Act 496, and, consequently, invalid. It appears on record, however, that by virtue of a arrangement between the PHHC and the Register of Deed of Quezon City, the last sheets of the certificates of title covering all the properties of the PHHC were kept in possession of the Register of Deeds, to facilitate the annotation on the certificates of title of the transactions entered into by the housing corporation. (pp. 77-78, Record on Appeal.) To effect registration of lands purchase from the PHHC, therefore, the vendee would only have to present the deed of sale to the Register of Deeds, and the latter, who has with him the corresponding sheets of the owner's duplicate certificates, could already register or annotate the said deed on the corresponding title. We find nothing wrong in this procedure. As so declared by the Land Registration ACT2 the production of the owner's duplicate certificate, whenever any voluntary instrument is presented for registration, is conclusive authority from the registered owner to the register of deeds to enter a new certificate or make the corresponding memorandum of such document. In the instant case, the owner (PHHC) by its delivery of the pertinent sheets of it certificates of title to the Register of Deeds of Quezon City already authorized said official to make the corresponding entries of all transactions entered into by the housing corporation. Neither can it be claimed that the annotation of the deed of sale in favor of the DBP on TCT No. 1356, under date of January 15, 1959, does not constitute sufficient registration to bind third parties. True it may be that when the instrument was presented to the Register 112

of Deeds for registration, and in fact it was so inscribed in the day book, the 159 lots subject of the sale were already covered by a separate certificate of title, TCT No. 36533. It must be remembered, however, that on said date, January 15, 1959, TCT No. 1356 which originally covered the whole tract of land, including the 159 lots, was yet uncancelled nor any inscription appeared thereon to the effect that a new certificate was already issued in respect to the said 159 lots. Evidently, when the DBP presented the deed of sale for registration, there were two subsisting titles covering the y159 lots subject of the sale. As TCT No. 1356, being uncancelled, did, for all intents and purposes, still cover the 159 lots, the annotation thereon of the sale to DBP is valid and effective. For this reason, the Register of Deeds acted correctly in transferring the inscription from TCT No. 1356 to TCT No. 36533 upon discovery that the subdivision plan had already been approved, submitted and annotated, and a new certificate of title issued. Even on this score alone, considering that the adverse claim of the Nicandros was annotates on TCT No. 35633 only on February 17, 1959, whereas the sale to the DBP was registered as of January 15, 1959, the certificate of title on the two lots in controversy should be issued in favor of the first registrant, the DBP. There is, however, another reason why the Commissioner's ruling must be set aside. Although admittedly we have here a case of double sale, actually this is not an instance of double registration. As above stated, only the deed of sale in favor of appellant was inscribed on the certificate of title covering the lots in question. The Nicandros were not able to register their deeds of sale; instead, informed of the prior registration by the DBP, they sought to protect their right by filing adverse claims based on the said deeds of sale under Section 110 of Act 496, which provides:

SEC. 110. Whoever claims any right or interest in registered land adverse to the registered owner, arising subsequent to the date of the original registration, may, if no other provision is made in this Act for registering the same, make a statement in writing setting forth fully his alleged right or interest, and how or under whom acquired, and a reference to the volume and page of the certificate of title of the registered owner, and a description of the land in which the right or interest is claimed. . . . (Emphasis supplied.) It is clear from the above quotation that for this special remedy (adverse claim) to be availed of, it must be shown that there is no other provision in the law for registration of the claimant's alleged right or interest in the property. The herein claim of the Nicandros is based on a perfected contract of sale executed in their favor by the lawful owner of the land. Considering that the Land Registration Act specifically prescribes the procedure for registration of a vendee's right on a registered property,3 the remedy provided in Section 110, which was resorted to and invoked by appellees, would be ineffective for the purpose of protecting their said right or interest on the two lots. WHEREFORE, the Resolution appealed from is hereby set aside, and the Register of Deeds of Quezon City ordered to issue the corresponding certificate of title in favor of appellant DBP. Without costs. So ordered. Bengzon, C.J., Labrador, Concepcion, Reyes, J.B.L., Paredes and Dizon, JJ., concur. Padilla, J., took no part.

Footnotes 113

Morrison v. St. Paul & N.P.R. Co., 63 Minn. 78, 65 N.W. 141, 30 L.R.A. 546; Intermountain Bldg. & Loan Assn. v. Gallegos, C.C.A. W. Va., 59 F. Sd 711, 87 A.L.R., 555.
2

Section 55, Act 496. Section 57, Act 496.

EXECUTION SALE FIRST DIVISION

G.R. No. 130380 March 17, 1999 HEIRS OF GAUDENCIO BLANCAFLOR, petitioner, vs. COURT OF APPEALS and GREATER MANILA EQUIPMENT MARKETING CORPORATION, respondent.

DAVIDE, JR., C.J.:

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This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court of the 4 April 1997 decision 1 of the Court of Appeals affirming in toto the 4 March 1992 decision 2 of the Regional Trial Court (RTC) of Iloilo City, Branch 36, in LRC Cadastral Records Nos. 5913 & 9739. The factual antecedents were summarized by public respondent Court of Appeals as follows. 3 On May 16, 1968, in Civil Case No. 10270 the then Court of First Instance [CFI] of Rizal, 7th Judicial District, Branch 8, Pasig, Rizal rendered judgment in favor of Sarmiento Trading Corporation and against defendant Gaudencio Blancaflor ordering the latter to pay to the former the amount of P9,994.05 with interest thereon at the rate of 12% per annum from June 21, 1967, until fully paid, P500 as attorney's fees and the costs. On August 26, 1968, [a] writ was issued to execute the foregoing judgment, by reason of which at the auction sale conducted by the sheriff Lot No. 22 of the consolidation and subdivision plan Pcs-4577 in Iloilo City belonging to defendant Blancaflor, covered by TCT No. 14749, was sold to Sarmiento Trading Corporation. The certificate of sale was inscribed as a memorandum of encumbrance on TCT No. 14749 under Entry No. 39774 on December 19, 1968. On January 13, 1970, after the one-year period from date of sale, the final deed was issued in favor of Sarmiento Trading Corporation.

On March 20, 1970, upon petition filed the then Court of First Instance of Iloilo in Cadastral Case No. 4, Record No. 9739, ordered [the] cancellation of TCT No. 14749 in the name of defendant Blancaflor and issuance of [a] new certificate of title in lieu thereof in the name of Sarmiento Trading Corporation, which was annotated on TCT No. 14749 as Entry No. 139381. On September 26, 1988, the Deputy Registrar of Deeds of Iloilo City and Assistant Regional Registrar, Region VI, wrote to Gaudencio Blancaflor requesting him to surrender the owner's duplicate copy of TCT No. T-14749 in his possession. On February 10, 1989, no new transfer certificate of title having been issued by the Registrar of Deeds, appellee Greater Manila Equipment Marketing Corporation (formerly Sarmiento Distributors Corporation), filed a petition and on May 25, 1989, an amended petition in the Regional Trial Court praying that the heirs of Gaudencio Blancaflor be ordered to surrender to the owner's duplicate copy of TCT No. T-14749; that should they refuse to do so such owner's duplicate copy of the title be deemed cancelled; and that the notice of levy on execution in Civil Case No. 11562, Philippine Commercial and Industrial Bank vs. Gaudencio Blancaflor and Agapito Labado, be cancelled. 4 After due hearing, the RTC rendered a decision, with the dispositive portion reading as follows:

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WHEREFORE, in the light of the foregoing, the instant petition is hereby GRANTED. As prayed for, the respondent Heirs of Gaudencio Blancaflor are hereby ordered to surrender to this Court within Fifteen (15) days from receipt of copy of this Decision their owner's copy of Transfer Certificate of Title No. T-14749. Failure to do so within the said time will result in the nullification of the same without further orders from this Court in which case, it is already proper for the Registrar of Deeds fort the City of Iloilo to issue a new Certificate of Title over Lot No. 22 in favor of the petitioner. Moreover, Entry No. 81965 in favor of Philippine Commercial and Industrial Bank at the dorsal portion of TCT No. 14749 is hereby ordered cancelled. 5 Petitioners seasonably appealed to the Court of Appeals, which docketed the appeal as CA-G.R. CV No. 38838. Petitioners argued that the process of execution of the decision of the CFI of Rizal had not been completely carried out and that it was only 19 years after the issuance of the final certificate of sale that it was sought to be enforced through the filing of appellee's petition for the surrender of the owner's duplicate copy of TCT No. 14749. Hence, appellee's cause of action had already prescribed. The Court of Appeals affirmed the challenged decision of the trial court, holding as follows: 6 The judgment of the ten Court of First Instance of Rizal against Gaudencio Blancaflor and in favor of

Sarmiento Trading Corporation ordering the former to pay the latter the amount of P9,994.05 with interest thereon at the rate of 12% per annum from June 21, 1967 until fully paid, P500 as attorney's and the costs having become final, the writ to execute it was issued. At the auction sale conducted by the sheriff, the parcel of land, Lot No. 22, covered by TCT No. 14749, belonging to the judgment debtor was sold to the judgment creditor at an execution sale. The certificate of sale was inscribed as a memorandum of encumbrance on TCT No. 14747. After the lapse of one year from the date of sale the final deed was issued in favor of the judgment creditor. Upon petition filed, the then Court of First Instance of Iloilo acting as a cadastral court ordered cancellation of TCT No. 14749 in the name of the judgment debtor and issuance of another in lieu thereof in the name of the judgment creditor, which was annotated on TCT No. 14749. The judgment creditor subsequently transferred and conveyed the parcel of land unto Sarmiento Distributors Corporation. To enable the Registrar of Deeds to issue the corresponding title in appellee's name, the judgment creditor's successor-in-interest, there is a need for the judgment debtor to surrender the owner's duplicate copy of TCT No. T14749, now in the possession of his heirs, the herein appellants. Under Section 107 of the Property Registration Decree, Presidential Decree No. 1529, which provides: Where it is necessary to issue a new certificate of title pursuant to any involuntary instrument which divests the title of the registered owner against his 116

consent or where a voluntary instrument cannot be registered by reason of the refusal or failure of the holder to surrender the owner's duplicate certificate of title, the party in interest may file a petition in court to compel surrender of the same to the Register of Deeds. The court, after hearing, may order the registered owner or any person withholding the duplicate certificate to surrender the same, and direct the entry of a new certificate or memorandum upon such surrender. If the withholding certificates the duplicate certificate is not amenable to the process of the court, or if for any reason the outstanding owner's duplicate certificate cannot be delivered, the court may order the annulment of the same as well as the issuance of a new certificates of title in lieu thereof. Such new certificate and all duplicates thereof shall contain a memorandum of the annulment of the outstanding duplicate the Regional Trial Court, after hearing, is authorized and empowered to order the registered owner of the parcel of land in question or any person withholding the owner's duplicate copy of the certificate or memorandum upon surrender thereof, otherwise if the person withholding said duplicate copy of the certificate is not amenable to the process, the trial Court may order annulment of the same and issuance of a new certificates of title in lieu thereof. That is what the Regional Trial Court did in this case. And that it did correctly and properly. 7 In its Resolution 8 of 25 August 1997, the Court of Appeals denied, for lack of merit, petitioners' motion for reconsideration. 9

In this appeal, petitioners aver that the causes of action of provide respondent below were actually to enforce the following: a) the default decision dated 16 May 1968 in Civil Case No. 10270 of the then CFI of Rizal; the writ of execution dated 13 August 1968 enforcing said decision; and the 13 January 1970 Final Deed of Sale executed by the Sheriff covering TCT No. 14749 and TCT No. 19002; and b) the 20 March 1970 decision of the then CFI of Iloilo directing the Registrar of Deeds of Iloilo City to issue new Transfer Certificate of Title in favor of the petitioner Sarmiento Trading Corporation, cancelling Transfer Certificate of Title No. 14749. Petitioners then argue that these causes of action had already prescribed under Art. 1144 of the New Civil Code, which provides that any action based upon an obligation created by law or upon a judgment must be based brought within ten (10) years from the time the right of action accrues. Petitioners point out that since private respondent belatedly sued to compel surrender of the owner's certificate of title, then either prescription or laches had already set in. Petitioners likewise speculate that private respondent merely waited for the demise of Gaudencio Blancaflor before filing the petition in court on 26 February 1989, when the latter could no longer refute the contentions of the former. Private respondent Greater Manila Equipment Marketing Corporations, and its successor-in-interest, Sarmiento Trading Corporation, dispute petitioners' contentions, maintaining that prescription does not apply in this case because the judgment is not being executed but is merely being completed; moreover, they

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pursued their claim over the subject property through administrative proceedings under Section 78 of Act No. 496. The petition is devoid of merit. A closer examination of the facts discloses that enforcement of the decision in Civil Case No. 10270 of the CFI of Rizal was not the cause of action in private respondent's petition for the Surrender and/or Cancellation of the Owner's Duplicate Copy of Transfer Certificates Title No. 14749. Plainly, the petition was merely a consequence of the execution of the judgment as the judgment in said Civil Case No. 10270 had already been fully enforced. A writ of execution was in fact issued on 26 August 1968, by virtue of which a "Notice of Attachment or Levy" was made by the Sheriff on the property of Blancaflor, including the lot covered by TCT No. 14749. This notice was duly inscribed at the back of TCT No. 14749 was conducted with Sarmiento Trading Corporation emerging as the highest bidder. The latter was awarded the bid and a certificate of sale in its favor was executed by the Sheriff and thereafter inscribed as a memorandum of encumbrance on TCT No. 14749. Subsequently, the Sheriff executed a final deed of sale in favor of Sarmiento Trading Corporation. It is settled that execution is enforced by the fact of levy and sale. 10 The result of such execution sale with Sarmiento Trading Corporation as the highest bidder was that title to Lot No. 22 of TCT No. 14749 vested immediately in the purchaser subject only to the judgment debtor's right to repurchase. 11 Therefore, upon Sarmiento Trading Corporation's purchase of Lot No. 22 covered by TCT No. 14749 at the auction sale, private respondent's successorin-interest had acquired a right over said title. The right acquired by the purchaser at an execution sale is inchoate and does not become absolute until after the expiration of the

redemption period without the right of redemption having been exercised. But inchoate though it be, it is like any other right, entitled to protection and must be respected until extinguished by redemption. 12 Gaudencio Blancaflor was not able to redeem his property after the expiration of the redemption period, which was 12 months after the entry or annotation of the certificate of sale made on the back of TCT No. 14749. Consequently, he had been divested of all his rights to the property. Petitioners' reliance on prescription and laches is unavailing in this instance. It was proper for Sarmiento Trading Corporation to file a petition with the Court of First Instance of Iloilo, acting as a cadastral court, for the cancellation of TCT No. 14749 in the name of Gaudencio Blancaflor and the issuance of another in its name. This is a procedure provided for under Section 78 of Act No. 496 13 and Section 75 of P.D. 1529, 14 which read: Sec. 78. Upon the expiration of the time, if any allowed by law for redemption after registered land has been sold on any description, the person claiming under the execution or under any deed or other instrument made in the course of proceedings to levy such execution or enforce any lien, may petition the court for the entry of a new certificate to him, and the application may be granted: Provided, however, That every new certificate entered under this section shall contain a memorandum of the nature of the proceeding on which it is based: Provided, further, That at any time prior to the entry of a new certificate the registered owner may execution or to enforce liens of any description.

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Sec. 75. Application for new certificate upon expiration of redemption period. Upon the expiration of the time, if any allowed by law for redemption after registered land has been sold on execution, or taken or sold for the enforcement of a lien on any description, except a mortgage lien, the purchaser at such sale or anyone claiming under him may petition the court for the entry of a new certificate of the title to him. Before the entry of a new certificate of title, the registered owner may pursue all legal and equitable remedies to impeach or annul such proceedings. Contrary to the impression of petitioners, it is the certificates of sale issued by the sheriff after the auction sale which has to be registered for such involuntary conveyance to affect the land. On this note, Section 74 of P.D. 1529 clearly provides: Sec. 74. Enforcement of liens on registered land Whenever registered land is sold on execution, or taken or sold for taxes or for any assessment or to enforce a lien of any character, or for any cost and charges incident to such liens, any execution or copy of execution, any officer's return, or any deed, demand, certificate, or affidavit, or other instrument made in the course of the proceedings to enforce such liens and required by law to be recorded, shall be filed with the Register of Deeds of the province or city where the land lies and registered book, and a memorandum made upon the proper certificate of title in each as lien or encumbrance.

As held in Agbulos v. Alberto. 15 It is the law in this jurisdiction that when property brought under the operation of the Land Registration Act is sold, the operative act is the registration of the deed of conveyance. The deed of sale does not "take effect as a conveyance, or bind the land" until it is registered (Section 50, Act No. 496; Tuason v. Raymundo, 28 Phil. 635; Sikatuna v. Guevarra, 43 Phil. 371; Worcester v. Ocampo, 34 Phil. 646). Undoubtedly, to be in consonance with this well settled rule, Section 24, Rule 39 of the Rules of Court, provides that a duplicate of the certificate of sale given by the sheriff who made the auction sale to the purchaser must be filed (registered) in the office of the registered of deeds of the province where the property is situated. Neither are we persuaded by petitioner's argument that the Register of Deeds did not: (a) inform Gaudencio Blancaflor of the levy of TCT No. 14749 and the inscription of the Certificates of Sale on 19 December 1968; (b) notify him of the levy and subsequent sale at public auction; or require Gaudencio Blancaflor to produce his owner's duplicate copy of the title for inscription. Section 52 of P.D. No. 1529 expressly provides: 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 Registrar 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. 119

There was constructive notice of the levy on TCT No. 14749 and the subsequent auction sale, as evidenced by the inscription of both the Notice of Attachment or Levy and the Certificate of Sale at the back of TCT No. 14749. Petitioners are thus barred from claiming that their predecessor-in-interest was not notified of such levy and auction sale. As regards inscription in the owner's duplicate copy of the certificate of title, petitioners have overlooked the fact that what is involved herein is the involuntary conveyance of Lot 22 covered by TCT No. 14749 by way of levy upon execution. In such a case, title is transferred by involuntary alienation and by its very nature such transfer is carried out against the will of the owner. Section 71 of Presidential Decree No. 1529 thus provides: Sec. 71. Surrender of certificate in involuntary dealings. If an attachment or other lien in the nature of involuntary dealing in registered land is registered, and the duplicate certificate is not presented at the time of registration, the Register of Deeds, shall, within thirty-six hours thereafter, send notice by mail to the registered owner, stating that such paper has been registered, and requesting him to send or produce his duplicate certificate so that a memorandum of the attachment or other lien may be made thereon. If the owner neglects or refuses to comply within a reasonable time, the Register of Deeds shall report the matter to the court, and it shall, after notice, enter an order to the owner to produce his certificate at a time and place named therein, and may enforce the order by suitable process. WHEREFORE, the petition is DENIED and the challenged decision of the Court of Appeals is AFFIRMED in toto.

Costs against petitioners. SO ORDERED. Melo, Kapunan and Pardo, JJ., concur. Footnotes 1 Annex "A" of Petition, Rollo, 20-28. Per Ramirez, P., J., with Montenegro, E. and Agcaoili, O., JJ., concurring. 2 Annex "D" of Petition, Rollo, 38-45. Per Judge Quirico G. Defensor. 3 Reference to exhibits have been deleted for convenience. 4 Rollo, 21-22. 5 Id., 44-45. 6 Reference to exhibits have likewise been deleted for convenience. 7 Id., 27-28. 8 Annex "C" of Petition, Rollo, 37. 9 Annex "B" of Petition, Rollo, 3-35. 10 See Jalandoni v. Philippine National Bank, 108 SCRA 102, 104 [1981]. 11 See U.S. v. Painaga, 27 Phil. 18, 22 [1914].

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12 Bautista v. Rule, 85 Phil 39,393 [1950]. 13 The Land Registration Act. 14 Amending and Codifying the Laws Relative to Registration of Property and for Other Purposes. 15 5 SCRA 790, 793 [1962].

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TAX SALE THIRD DIVISION G.R. No. 133698 April 4, 2001

Also assailed is the April 27, 1998 CA Resolution2 which denied petitioners Motion for Reconsideration. The questioned CA ruling affirmed the Decision3 of Branch 7 of the Regional Trial Court (RTC) of Baguio City in Civil Case No. 1456-R. The RTC, in turn, dismissed an action for the annulment of the auction sale of a condominium unit, covered by Condominium Certificate of Title No. 651 and located in Building IV, Europa Condominium Villas, Baguio City. The Facts The CA summarized the antecedents of this case in this wise:4 "On June 28, 1988, [herein petitioners] filed a complaint wherein they alleged, inter alia, that: --They bought the subject property covered by Condominium Certificate of Title No. 651, from its former owner, Elias Imperial, as evidenced by a Deed of Absolute Sale: --On October 15, 1985, *herein Respondent+ Juan D. Hernandez, x x x sued x x x in his capacity as City Treasurer of Baguio City, wrote a letter to the former owner Elias Imperial informing him that the above described property would be sold at public auction on December 9, 1985, x x x to satisfy the delinquent real estate taxes, penalties and cost of sale, and demanded payment of the sum of P4,039.80, representing total taxes due and penalties thereon; --Elias Imperial and his entire family emigrated to Australia in 1974. Elias Imperial never authorized a certain Dante 122

ANTONIO TALUSAN and CELIA TALUSAN, petitioners, vs. HERMINIGILDO* TAYAG and JUAN HERNANDEZ, respondents. PANGANIBAN, J.: For purposes of real property taxation, the registered owner of a property is deemed the taxpayer and, hence, the only one entitled to a notice of tax delinquency and the resultant proceedings relative to an auction sale. Petitioners, who allegedly acquired the property through an unregistered deed of sale, are not entitled to such notice, because they are not the registered owners. Moral lessons: real property buyers must register their purchases as soon as possible and, equally important, they must pay their taxes on time. The Case Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the November 20, 1997 Decision1 of the Court of Appeals (CA) in CA-GR CV No. 41586. The dispositive portion of the challenged Decision is hereunder reproduced as follows: "WHEREFORE, premises considered, the appealed decision (dated February 4, 1993) of the Regional Trial Court (Branch 7) in Baguio City in Civil Case No. 1456-R is hereby AFFIRMED, with costs against plaintiffs/appellants."

Origan x x x to receive any letter or mail matter for and on his behalf; --[Respondent] Hernandez sold the above-described property to *Respondent+ Tayag for P4,400.00 without any notice to the former owner thereof, [or] to [petitioners], and without compliance with the provisions of PD No. 464, as evidenced by the Certificate of Sale; --A final bill of sale was later issued in favor of the *Respondent+ Hermenegildo Tayag. The assessed value alone of the said property is P37,310.00 and the fair market value of the same is more than P300,000.00 and both [respondents] knew these; --The bid price of P4,400 is so unconscionably low and shocking to the conscience, thus, the sale for the alleged unpaid taxes in the sum of P4,039.79, including penalties is null and void ab initio; --*Petitioners+ have been in actual possession of the Unit in question, since they bought the same from its former owners, and their possession is open, public, continuous, adverse and in the concept of owners, while [Respondent] Hermegildo Tayag has never been in possession of the said property; --[Petitioners] through intermediaries offered to pay to the [respondents] the sum of P4,400 plus all interests and expenses which [they] might have incurred x x x but said offer was rejected without any just *or+ lawful cause. There is a need to issue a writ of preliminary injunction to preserve the status quo.

They asked for: moral damages of not less than P50,000.00; exemplary damages of not less than P20,000.00; attorneys fee of P30,000.00, plus appearance fee of P2,000.00 for every appearance; and litigation expenses of not less than P5,000.00 to prosecute the case. (pages 3-8 of the Record) On July 14, 1988, [Respondent] Hermenegildo Tayag filed his [A]nswer with [C]ounterclaim (pages 28-32 of the Record), wherein he substantially denied the allegations in the complaint and, at the same time, raised the following affirmative defenses, among others: --(T)he ownership of the Condominium unit registered under Condominium Certificate of Title No. 651, Baguio City, has been consolidated in his name by virtue of the decision of the Regional Trial Court of Baguio, Branch 6, on September 16, 1987 x x x . The said decision has [become] final and executory as evidenced by the Certificate of Finality issued on October 8, 1987; --[Petitioners have] no cause of action against him, he being a buyer in good faith in a regular and lawful public bidding in which any person is qualified to participate. --The lower court has no jurisdiction over *petitioners+ claim because the *petitioners+ pray for the annulment of the Certificate of the Sale and the Final Bill of Sale, which was affirmed by virtue of the decision of the Regional Trial Court of Baguio, Branch 6, on September 16, 1987 x x x. The said decision has [become] final and executory as evidenced by the Certificate of Finality issued on October 8, 1987;

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--The public auction sale complied with the requirements of Presidential Decree No. 464 hence, the same is lawful and valid: --*Respondent+ Tayag is not bound by the alleged *D+eed of [S]ale in favor of the [petitioners] by Elias [I]mperial, because it was not registered and recorded with the Registry of Deeds of Baguio City. [Respondent] Tayag then prayed for the award in his favor, of: moral damages of at least P50,000.00; exemplary damages; attorneys fees in the sum of P10,000.00; and, expenses of litigation. [Respondent] Hernandez likewise filed an [A]nswer on July 18. 1988, wherein he denied the material averments in the complaint and stated that no irregularity or illegality was committed in the conduct of the proceedings with respect to the delinquent real property of Elias Imperial and the actuations of the defendant herein were all within the limits of his authority and in accordance with the provisions of the law pertaining to delinquent real property, particularly, P.D. 464 otherwise known as the Real Property Tax Code and therefore, no damages may be imputed against him. He also claimed, by way of affirmative defenses, that: --The complaint states no cause of action against the [respondent] herein: --*Petitioners+ have not complied with x x x Section 83 of P.D. No. 464 x x x thus, the case cannot prosper; --Granting that a Deed of Sale was actually issued in favor of the plaintiffs [because of] the fact that it is unregistered,

the same does not bind third persons including defendant herein." In their Complaint, petitioners alleged that on December 7, 1981, they had acquired the condominium from Elias Imperial, the original registered owner, for P100,000. The sale was purportedly evidenced by a Deed of Sale which, however, had not and thenceforth never been registered with the Register of Deeds. Petitioners also averred that on December 9, 1985, Baguio City Treasurer Juan Hernandez sold the property at a public auction due to nonpayment of delinquent real estate taxes thereon. The property was sold to Respondent Herminigildo Tayag for P4,400 which represented the unpaid taxes. Thus, petitioners filed a Complaint seeking the annulment of the auction sale. They cited irregularities in the proceedings and noncompliance with statutory requirements. Dismissing the Complaint, Branch 7 of the RTC of Baguio City cited the December 16, 1987 judgment of Branch 6 of the same court in LRC Adm. Case No.207-R. This earlier Branch 6 Decision had consolidated ownership of the condominium unit in favor of Respondent Tayag. The Branch 7 Decision also cited the May 31, 1988 Order of Branch 5 of the same court which had granted a Petition for the Cancellation of Condominium Certificate of Title No. 651 in the name of Elias Imperial and directed the Register of Deeds to issue a new Certificate of Title in the name of Respondent Tayag. According to the trial court, the Decision in LRC Adm. Case No. 207R had already upheld the legality of the questioned auction sale. Hence, to rule again on the same issue would amount to passing upon a judgment made by a coequal court, contrary to the principle of "conclusiveness of judgment."

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Ruling of the CA The appellate court affirmed the trial courts ruling and ratiocination. The CA explained that LRC Adm. Case No. 207-R had already ruled on the validity of the auction sale of the subject condominium unit. It further sustained the validity of that sale, because the city treasurer complied with the requirements of notice, publication and posting. It added that "[i]f [petitioners] never received the notices sent to Elias Imperial, then they have only themselves to blame for failing to register the deed of sale between them and the former owner x x x." Rejecting petitioners contention that the purchase price was inadequate, the CA ruled that such inadequacy could not nullify the auction sale. It likewise held that petitioners had not established bad faith on the part of respondents in conducting the auction sale. Finally, it agreed with the latters contention that the former were "remiss in causing the registration of the sale in their favor of the subject property and they likewise did not fulfill their obligation to pay taxes. It [is] thus clear x x x they should only have themselves to blame. Laws exist to be followed, failing in which the price must be paid." Hence, this recourse.5 The Issues Petitioners assigned the following alleged errors for the consideration of this Court:6 "I. FIRST ASSIGNMENT OF ERROR The Honorable Court of Appeals grievously erred in failing to consider that the petitioners were deprived of their right

to due process in this case due to the gross and inexcusable negligence of their former counsel who failed to inform them of the decision in this case and protect their interest. "II. SECOND ASSIGNMENT OF ERROR The Honorable Court of Appeals grievously erred in failing to nullify the auction sale of the subject property of petitioners due to alleged tax delinquency when there was no compliance with the mandatory requirement of Section 46 of P.D. 464 that such notice of delinquency of the payment of the property tax should be published. "III. THIRD ASSIGNMENT OF ERROR The Honorable Court of Appeals grievously erred in failing to consider the lack of personal notice of the sale for public auction of the subject property to its owner which nullifies the said proceeding. "IV. FOURTH ASSIGNMENT OF ERROR The Honorable Court of Appeals grievously erred in holding that the decision of the trial court in the petition for the consolidation of the title case filed by the private respondent in LRC Admin. Case 207 is a bar to this proceeding. "V. FIFTH ASSIGNMENT OF ERROR The Honorable Court of Appeals erred in not nullifying the auction sale of subject property on equitable considerations."

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We deem it appropriate to simplify the issues in this wise: (1) whether the RTC Decision in LRC Adm. Case No. 207-R is a bar to this proceeding; and (2) whether the auction sale of the subject condominium unit should be annulled on the grounds of (a) nonpublication of the notice of delinquency for the payment of property tax, (b) lack of personal notice of the sale or public auction of the subject property and (c) equitable considerations. As a preliminary matter, we shall also consider petitioners submission that they were deprived of due process because of their counsels failure to inform them immediately of the receipt of the CA Decision. Preliminary Matter: Negligence of Petitioners Former Counsel Petitioners aver that their former counsel informed them of the CA Decision only on February 5, 1998, more than two months after he had received a copy on December 3, 1997. According to petitioners, their former counsels negligence effectively deprived them of their right to due process. We disagree. Notwithstanding its late filing, their Motion for Reconsideration was accepted and considered by the CA. Hence, this issue has become moot, a fact which petitioners themselves admitted in their Memorandum: "As a matter of fact, in the very resolution of the Court of Appeals of April 27, 1998 (Annex C to Petition) denying the motion for reconsideration, wherein the matter of inexcusable negligence of counsel in not informing petitioners immediately of the decision of the court a quo, were among the grounds thereof, it was held that the issues raised therein had already been considered in the Decision of November 20, 1997. The Court of Appeals obviously considered that the Motion for Reconsideration was validly filed by petitioners so that

the Court of Appeals favorably considered the plea of petitioners to be afforded due process by acting on the Motion for Reconsideration. Otherwise, it could have just denied said Motion for late filing or simply noted the same without action."7 Moreover, petitioners themselves declared in their Reply Memorandum8 that this matter is no longer in issue: "At any rate this issue was raised in the Motion for Reconsideration of the Decision of the appellate court and obviously it was favorably considered as the said Court denied the merit of said Motion by stating that the issues raised have already been treated in the Decision, instead of outrightly denying the same for late filing. Hence, this is no longer in issue in this proceeding."9 First Issue: Bar by Earlier Judgment Petitioners contend that the Decision in LRC Adm. Case No. 207-R, rendered by the Regional Trial Court of Baguio City (Branch 6), did not preclude the filing of a separate action to annul the auction sale. Citing Tiongco v. Philippine Veterans Bank,10 they aver that this RTC Branch had no jurisdiction to rule on the validity of that sale. Hence, its Decision in the LRC case cannot bar the present proceedings. Petitioners reliance on Tiongco is misplaced, considering that its factual incidents are different from those of the present controversy. In that case, the trial court was acting on a Petition for the Surrender of Certificates of Title. In LRC Adm. Case No. 207-R, the trial court was faced with a Petition for Consolidation of Ownership. It had jurisdiction to rule on all matters necessary for the determination of the issue of ownership, including the validity of the auction sale.

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Indeed, this Court in several cases11 has previously declared that a petition for the surrender of the owners duplicate certificate involves contentious questions which should be threshed out in an ordinary case, because the land registration court has no jurisdiction to try them.1wphi1.nt Presidential Decree (PD) 1529, however, intended to avoid a multiplicity of suits and to promote the expeditious termination of cases. In more recent cases,12 therefore, the Court declared that this Decree had eliminated the distinction between general jurisdiction vested in the regional trial court and the latters limited jurisdiction when acting merely as a land registration court. Land registration courts, as such, can now hear and decide even controversial and contentious cases, as well as those involving substantial issues.13 Thus, petitioners err in contending that the RTC is, in a land registration case, barred from ruling on the validity of the auction sale. That court now has the authority to act not only on applications for original registration, but also on all petitions filed after the original registration of title. Coupled with this authority is the power to hear and determine all questions arising upon such applications or petitions.14 Especially where the issue of ownership is ineluctably tied up with the question of registration, the land registration court commits no error in assuming jurisdiction.15 It is equally important to consider that a land registration courts decision ordering the confirmation and the registration of title, being the result of a proceeding in rem, binds the whole world.16 Thus, the trial courts ruling consolidating the ownership and the title of the property in the name of herein respondent is valid and binding not only on petitioners, but also on everyone else who may have any claim thereon. Second Issue:

Validity of the Auction sale Petitioners contend that the auction sale was invalid, because several requisites regarding notice and publication were not satisfied. We are not convinced. It has been held that matters of notice and publication in tax sales are factual questions that cannot be determined by this Court.17 Moreover, a recourse under Rule 45 of the Rules of Court, as in this case, generally precludes the determination of factual issues. This Court will not, as a rule, inquire into the evidence relied upon by the lower courts to support their findings.18 In this case, the CA had already ruled on the question of compliance with the requirements of notice and publication in this wise: "In the case at bench, it cannot be denied that the requirements of notice, publication and posting have been complied with by the public defendant prior to the auction sale wherein the subject condominium unit was sold. x x x Ergo, there was nothing irregular in the questioned public auction -- thus, the validity of the same must be upheld in accordance with the aforementioned cases."19 The CA ruling notwithstanding, we shall proceed to discuss these factual issues in order to assure petitioners of a complete adjudication of their case, and not a mere disposition of procedural technicalities. The Non-Publication of Notice of Real Property Tax Delinquency Petitioners assert that the tax sale should be annulled because of noncompliance with the requirement of publication prescribed in Section 65 of PD 464.

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In this regard, we note that unlike land registration proceedings which are in rem, cases involving an auction sale of land for the collection of delinquent taxes are in personam. Thus, notice by publication, though sufficient in proceedings in rem, does not as a rule satisfy the requirement of proceedings in personam.20 As such, mere publication of the notice of delinquency would not suffice, considering that the procedure in tax sales is in personam. It was, therefore, still incumbent upon the city treasurer to send the notice of tax delinquency directly to the taxpayer in order to protect the interests of the latter. In the present case, the notice of delinquency was sent by registered mail to the permanent address of the registered owner in Manila. In that notice, the city treasurer of Baguio City directed him to settle the charges immediately and to protect his interest in the property. Under the circumstances, we hold that the notice sent by registered mail adequately protected the rights of the taxpayer, who was the registered owner of the condominium unit. For purposes of the real property tax, the registered owner of the property is deemed the taxpayer. Hence, only the registered owner is entitled to a notice of tax delinquency and other proceedings relative to the tax sale. Not being registered owners of the property, petitioners cannot claim to have been deprived of such notice. In fact, they were not entitled to it. Lack of Personal Notice of the Sale or of the Public Auction of the Subject Property Petitioners also contend that the registered owner was not given personal notice of the public auction. They cite Section 73 of PD 464, the pertinent portion of which is reproduced hereunder:

"x x x. Copy of the notices shall forthwith be sent either by registered mail or by messenger, or through messenger, or through the barrio captain, to the delinquent taxpayer, at the address shown in the tax rolls or property tax records of the municipality or city where the property is located, or at his residence, if known to said treasurer or barrio captain. x x x." (Underscoring supplied by petitioners in their Memorandum) According to petitioners, the notice of public auction should have been sent to the address appearing in the tax roll or property records of the City of Baguio. That address is Unit No. 5, Baden #4105, Europa Condominium Villas, Baguio City; not the known address or residence of the registered owner at 145 Ermin Garcia Street, Cubao, Quezon City. They contend that notice may be sent to the residence of the taxpayer, only when the tax roll does not show any address of the property. The above-cited provision, however, shows that the determination of the taxpayers address to which the notice may be sent is the treasurers discretionary prerogative. In this case, the city treasurer deemed it best to send the notice of public auction to the residence of the taxpayer. The former validly exercised this option, inasmuch as the address of the latter was known to him. Moreover, it was more practical and favorable to the registered owner that the notice of delinquency be sent to his permanent residence in Manila, because he was using the subject condominium unit merely as a vacation house and not as a residence. This Court in Pecson v. Court of Appeals21 made a clear and categorical ruling on the matter, when it declared as follows: "Under the said provisions of law, notices of the sale of the public auction may be sent to the delinquent taxpayer, 128

either (I) at the address as shown in the tax rolls or property tax record cards of the municipality or city where the property is located or (ii) at his residence, if known to such treasurer or barrio captain." (emphasis supplied) To reiterate, for purposes of the collection of real property taxes, the registered owner of the property is considered the taxpayer. Although petitioners have been in possession of the subject premises by virtue of an unregistered deed of sale, such transaction has no binding effect with respect to third persons who have no knowledge of it. The importance of registration and its binding effect is stated in Section 51 of the Property Registration Decree or PD 1529, which reads: "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, deeds, mortgages, leases or other voluntary instrument as are sufficient in law. But no deed, mortgage, lease or other voluntary instrument, except a will purporting to convey or effect 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 Registry 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 the city where the land lies."

Thus, insofar as third persons are concerned, it is the registration of the deed of sale that can validly transfer or convey a persons interest in a property.22 In the absence of registration, the registered owner whose name appears on the certificate of title is deemed the taxpayer to whom the notice of auction sale should be sent. Petitioners, therefore, cannot claim to be taxpayers. For this reason, the annulment of the auction sale may not be invoked successfully. The Annulment of the Auction Sale on Equitable Considerations As correctly pointed out by respondents, equitable considerations will not find application, if the statutes or rules of procedure explicitly provide for the requisites and standards by which the matters at bench can be resolved. While it may be assumed that both petitioners and Respondent Tayag are innocent purchasers of the subject property, it is a wellsettled principle that between two purchasers, the one who has registered the sale in ones favor has a preferred right over the other whose title has not been registered, even if the latter is in actual possession of the subject property.23 Likewise, we cannot help but point out the fact that petitioners brought this misfortune upon themselves. They neither registered the Deed of Sale after its execution nor moved for the consolidation of ownership of title to the property in their name. Worse, they failed to pay the real property taxes due. Although they had been in possession of the property since 1981, they did not take the necessary steps to protect and legitimize their interest. Indeed, petitioners suit is now barred by laches.24 The law helps the vigilant, but not those who sleep on their rights, for time is a means

129

of obliterating actions. Verily, time runs against the slothful and the contemners of their own rights.25 WHEREFORE, the Petition is hereby DENIED and the assailed Decision and Resolution AFFIRMED. Costs against petitioners. SO ORDERED.

Petition, pp. 4-5; rollo, pp. 11-12; see also Petitioners Memorandum, pp. 3-4.
7

Petitioners Memorandum, pp. 9-10; rollo, pp. 129-130. Rollo, pp. 145-150. Reply Memorandum, p. 2; rollo, p. 146.

Melo, Vitug, Gonzaga-Reyes, Sandoval-Gutierrez, JJ., concur.

10

Footnote * Spelled "Hermenigildo" in the Petition.

1

212 SCRA 176, August 5, 1992. 11 See Puguid v. Reyes, 20 SCRA 972, August 10, 1967; Tomada v. Tomada, 28 SCRA 1028, July 30, 1969; Santos v. Cruz, 52 SCRA 330, August 30, 1973.
12

Rollo, pp. 47-59; penned by Justice Ramon Mabutas Jr. with the concurrence of Justices Emeterio C. Cui (Division chairman) and Hilarion L. Aquino (member).
2

Rollo, p. 76. Rollo, pp. 77-93; written by Judge Clarence J. Villanueva. CA Decision, pp. 1-3; rollo, pp. 47-49.

Estate of the Late Mercedes Jacob v. CA, 283 SCRA 474, December 22, 1997; Ignacio v. CA, 246 SCRA 242, July 14, 1995; Quiroz v. Munoz, 210 SCRA 60, June 18, 1992; Philippine National Bank v. International Corporate Bank, 199 SCRA 508, July 23, 1991.
13

Ignacio v. Court of Appeals, 246 SCRA 242, July 14, 1995. Ligon v. Court of Appeals, 244 SCRA 693, June 1, 1995.

14

The case was deemed submitted for resolution on September 30, 1999, upon receipt by this Court of Respondent Tayags Memorandum signed by Atty. Renato S. Rondez of Rondez, Rondez and Gandeza Law Offices.. Received earlier were petitioners Memorandum (September 7, 1999) and Reply Memorandum (September 30, 1999) signed by Attys. Emilio A. Gancayco and C. Fortunato R. Balasbas of Gancayco, Balasbas & Associates.

15

Vda. de Arceo v. Court of Appeals, 185 SCRA 489, May 18, 1990.
16

Meneses v. Court of Appeals, 246 SCRA 162, July 14, 1995.

17

De Knecht v. Court of Appeals, 290 SCRA 223, May 20, 1998.

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18

Banaag v. Bartolome, 204 SCRA 924, December 20, 1991; Ching Sui Yong v. Intermediate Appellate Court, 191 SCRA 187, November 6, 1990.
19

CA Decision, p. 10; rollo, p. 56.

20

Pea, Registration of Land Titles and Deeds, 1988 ed., p. 373.

21

222 SCRA 580, 584, May 25, 1993, per Quiason, J.

22

Vda. de Alcantara v. Court of Appeals, 252 SCRA 457, January 29, 1996.
23

Taedo v. Court of Appeals, 252 SCRA 80, January 22, 1996.

24

See Garbin v. Court of Appeals, 253 SCRA 187, February 5, 1996.

25

Salandanan v. Court of Appeals, 290 SCRA 671, June 5, 1998.

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TAX SALE EN BANC G.R. No. L-5301 May 30, 1953

October 28 and November 4 and 11 in Bagong Balita, a newspaper said to on General circulation, and posted at these places: the Court of First Instance in Intramuros, the Post Office, the Supreme Court, the San Andres Public Market and the Paco Public Market, all in Manila. Both parcel was awarded to Lourdes T. Paguio, the herein appellant, as the highest and only bidder for P100.67, which just covered the unpaid tax, penalty and costs, and the City Treasurer these and then issued to her the corresponding certificate of sale. But before the expiration of one year the City Treasurer mailed three letters, the last one being registered, addressed to Amparo Davila Vda. de Barrera at her recorded residence 202 Anda Street, Intramuros, Manila, in which it was stated that her property had been sold to the appellant subject to her right of redemption within one year from the date of sale. All these letters of course were returned the addressee having died and her former home at the above address having been destroyed, and no offer to redeem the property having made within the year prescribe for the purpose, the City Treasurer on may 11, 1949, delivered a final and absolute deed of conveyance to the purchaser. Possessed of the document and for the purpose of registering the same, Mrs. Paguio, on June 16, 1949, filed a petition with the Court of First Instance of manila in G.L.R.O Cadastral Record No 154, Praying the Maria Rozado de Ruiz, the appellee, whom she claimed to have recently discovered to be the registered owner of the lots, be ordered to surrender to the Register of Deeds of her owner's duplicates and that should she fail to do so the said certificates be declared null and void and new ones issued in lieu thereof in her favor free from all and liens and incumbrances. Notified of these petition, Maria Rosado de Ruiz, through counsel, filled an opposition stating that she had not been notified on any 132

LOURDES T. PAGUIO, petitioner-appellant, vs. MARIA ROZADO DE RUIZ, oppositor-appellee. G. T Antaran for appellant. Pacifico de Ocampo for appellee. TUASON, J.: This appeals involves the validity of a sale of two parcels of land on Calle Andas, Intramuros, City of Manila, by the City of Treasurer for deliquency in the payment of taxes. These parcels belonged to Amparo Davila Vda. de Barrera and were assessed for taxation purposes in her name. On July 7, 1943, Mrs. Davila executed a deed donating them to four relatives one of whom was the present appellee. One of the donees having died after- wards, her heirs on January 29, 1946, made an extra-judicial settlement of the decedent's estate under the terms of which the appellee became the sole owner of the two lots. But notwithstanding these transfer of ownership, the parcels were allowed to continue in the original owners name in the real estate register. The tax on the property for the year 1947 not having been paid, and lots were advertised for sole to satisfy the tax, penalty and costs of sale, for the period of 30 days immediately preceeding November 27, the dates set for the sale. To this end notice was publish on

tax deliquency on, or the sale of, the property either by the petitioner or the City Treasurer; that Amparo Davila Vda. de Barrera having ceased on the petitioner did not acquire any right there to under the action sale; that she was on actual possession of the property and could not be deprived for her rights and interest therein, without due process of law. The Court sustained Mrs. Ruiz' opposition on the authority of Lopez vs. Directors of Lands, 47 Phil. 23, and denied the petition. The case of Mercedes D. Valbuena et al. vs. Aurelio Reyes et al.,* G.R. No. 48177, September 30, 1949, is decisive of this appeal. The fact are substantially identical and upon those facts the court, through Mr. Justice Montemayor, said: The death of Mercedes Valbuena in 1931 could, in no manner affect the validity of the tax sale conduct by the City of Treasurer in 1947. It was not necessary for the treasurer to notify her as deliquent taxpayer, of the intended sale of her property. It is true, that ordinarily, to enforce payment of deliquent real estate taxes, the Treasurer may seize and destrain personal property of the deliquent tax payer and sell the same to satisfy the delinquency. In the manner, the office of the Treasurer comes into contact and establishes direct relations with the taxpayer. Said tax payer comes to know that he or she is deliquent. However, in the City of Manila, under section 2498 of the Revised Administrative Code, as amended by Act 4173, the City Treasurer need not seize personal properties but may go directly against the deliquent real property. He need not personally notify the delinquent taxpayer. Under section 2497 of Revised Administrative Code, taxes and penalties assessed against realty shall constitute a lien enforceable against the property whether in the possession of the deliquent or any

subsequent owner. All that the treasurer is required to do by the law is to advertise the property for sale, post notices in public places and in the district where the real estate lies and publish that advertisement or notice thereof in a newspaper of general circulation, once a week for three consecutive weeks. All this, the City of Treasurer has done. He even published in advertisement in three newspaper instead of only one as required by law. And he sent a personal notice to Mercedes Valbuena at her address appearing in his records notifying her that the period of redemption of the parcel of land that had been sold to Aurelio Reyes will expire on May 3, 1939, although been law does not require him to do so. So, the position taken by the plaintiffs appellants that the tax sale of the property in question was invalid because Mercedes Valbuena was not personally notified thereof, is clearly untenable. Much as we may sympathize with the appellee, this is one case where the courts have no option but to apply the law and give the petitioner the remedy seeks. The law is positive and leaves us no choice. It is harsh and drastic, but it is necessary means of insuring the prompt collection of taxes so essential to the life of the Government. Yet it was her gross negligence which brought about the appellee's predicament. Knowing that property to be subject to tax, the neglected to pay her obligation. Vigorous in her protest that she was not given opportunity to protect her rights, she at least neglected to put the Government in a position to allow her the opportunity. And this, notwithstanding the categorical mandate of section 2484 of the Revised Administrative Code, which she was presumed to know, and which make it "the duty of each person" acquiring real estate in the city of make a new declaration thereof, with the advertence that failure to do so shall make the assessment 133

in the name of the previous owner "valid and binding on all persons instead, and for all purposes, as though the same had been assessed in the name of its actual owner." With regrets, we have to, as we hereby do, reverse the appealed order and direct that the petition of appellant be granted, without special finding as to costs. Paras, C.J., Feria, Pablo, Bengzon, Montemayor, Reyes, Jugo, and Labrador, JJ., concur

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ATTACHMENT EN BANC G.R. No. L-4340 May 28, 1952

REBECCA LEVIN, plaintiff-appellee, vs. JOAQUIN V. BASS, defendant-appellant. x---------------------------------------------------------x G.R. No. L-4344 May 28, 1952

REBECCA LEVIN, plaintiff-appellee, vs. JOAQUIN V. BASS, ET AL., defendants. EUGENIO MINTU, defendant-appellant. x---------------------------------------------------------x

JOAQUIN V. BASS, plaintiff-appellant, vs. REBECCA LEVIN, defendant-appellee. x---------------------------------------------------------x

G.R. No. L-4341

May 28, 1952 G.R. No. L-4345 May 28, 1952

JOAQUIN V. BASS, plaintiff-appellee, vs. JOSE C. ROBLES, ET AL., defendants. REBECCA LEVIN, ET EL., intervenors. EUGENIO MINTU, intervenor-appellant. x---------------------------------------------------------x

JOAQUIN V. BASS, plaintiff-appellant, vs. JOSE C. ROBLES and AMINTA T. DE ROBLES, defendants-appellees. x---------------------------------------------------------x G.R. No. L-4346 May 28, 1952

G.R. No. L-4342

May 1952 JOAQUIN V. BASS, plaintiff-appellant, vs. AMINTA T. DE ROBLES, defendant-appellee. Josefina A. Calupitan for defendant-appellant Eugenio Mintu. Jose S. Sarte for defendant-appellant Joaquin V. Bass. Leodegario Alba for petitioner Pastor L. Manlapaz. Mateo M. Nonato for petitioner and appellant Joaquin V. Bass. PADILLA, J.: 135

JOAQUIN V. BASS, plaintiff-appellee, vs. EUGENIO MINTU, defendant-appellant. x---------------------------------------------------------x G.R. No. L-4343 May 28, 1952

G. R. No. L-4340 is an action (case No. 70054 of the Court of First Instance of Manila) for annulment of sales of, and mortgage on, a lot and two houses erected thereon and damages brought by Rebecca Levin against Joaquin V. Bass, Emiliano R. Eustaquio, Co Chin Leng and Eugenio Mintu where the last named defendant is the appellant; G. R. No. L-4343 is the same case where Joaquin V. Bass is the appellant; G.R. No. L-4341 is an action (case No. 71549 of the same court) for detainer brought by Joaquin V. Bass against Jose C. Robles and Aminta T. de Robles, in which Rebecca Levin and Eugenio Mintu intervened, and where the last named intervenor is the appellant; G.R. No. L-4345 is the same case for detainer where Joaquin V. Bass is the appellant; G. R. No. L-4342 is an action (case No. 516 of the same court) for annulment of sale brought by Joaquin V. Bass against Eugenio Mintu where the latter is the appellant; G. R. No. L-4344 is an action (case No. 71159 of the same court) for detainer of a building located at No. 328 San Rafael street brought by Joaquin V. Bass against Rebecca Levin where the former is the appellant; and G. R. No. L-4346 is an action (case No. 2371 of the same court) for detainer brought by Joaquin V. Bass against Aminta T. de Robles where the former is the appellant. The two main cases (G. R. No. L-4340 and No. L-4342) around which others revolve all under the appellate jurisdiction of this court. After a joint hearing the trial court rendered judgment annulling Exhibit A dated 5 January 1944, where it appears that, for and in consideration of P30,000, Rebecca Levin and conveyed to Emiliano Eustaquio a lot containing an area of 317.70 square meters and the house erected thereon bearing No. 326 San Rafael street Manila; Exhibit B dated 30 March 1944, where it appears that, for and in consideration of P38,000, Emiliano R. Eustaquio sold and conveyed to Joaquin V. Bass the same lot and house; and Exhibit C dated 18 February 1944, where it appears that, for and consideration of P65,000, Rebecca Levin sold and conveyed to Joaquin V. Bass a lot containing an area of 1,006.80 square meters and the house

erected thereon bearing No 328 San Rafael Street Manila; to cancel transfer of certificates of title Nos. 73450 and 73451 issued in the name of Joaquin V. Bass and in lieu thereof to issue new Torrens certificates of title in the names of Rebecca Levin, widow, of legal age and resident of the City of Manila at No. 328 San Rafael Street, said new certificates to bear a memorandum of mortgage in favor of Co Chin Leng, entry No. 1616, as said mortgage appears on both transfer certificate of titles Nos. 73450 and 73451 to be cancelled, and the certificate of title to be issued in the name of Rebecca Levin, in lieu of transfer certificate of title No. 73450, to bear a memorandum of a notice of lis pendens noted on said transfer certificate of title in connection with civil case No. 2562 of the Court of First Instance of Manila entitled "Isabelo Martinez vs. Joaquin V. Bass," entry No. 20955; holding that Rebecca Levin is entitled to recover from Joaquin V. Bass," damages for losses which she may suffer by reason of said mortgage annotation and notice of lis pendens; dismissing the complaint of Joaquin V. Bassin civil case No. 516, holding that the deed of sale under certain conditions executed by Joaquin V. Bass in favor of Eugenio Munti is without force and effect as against Rebecca Levin and ordering Joaquin V. Bass to pay Eugenio Mintu the sum of P4,173.16, together with lawful interests thereon from 23 October 1946, the date of the filing of the said answer in said civil case, until paid; dismissing the complaint of Joaquin V. Bass in civil cases Nos. 71159, 71549 and 2371 and declaring Rebecca Levin to be entitled to the payment of rentals by Jose C. Robles and/or Aminta T. de Robles for the use and occupation of the premises at No. 326 San Rafael street, Manila, from 11 March 1945 until the tenants move out of the premises and to receive from the clerk of court the sums of money deposited by Aminta T. de Robles and/or Jose C. Robles by way of rentals for the said property at No. 326 San Rafael street, still remaining in his possession, the said amounts to be applied to the rentals to be granted upon by and between them or those which may be declared by final judgment to be the reasonable compensation for 136

the use of occupation of the premises; and ordering Joaquin V. Bass to render an accounting of the sums of money he had received from the court, or otherwise, as rentals of the house at No. 326 San Rafael street from and after 11 March 1945, and to pay to Rebecca Levin the balance that may result from said accounting. Costs are taxed against Joaquin V. Bass. In 1943 Rebecca Levin was a widow, 65 years old and the registered owner of a lot on which two houses stoodone bearing No. 326 and the other No. 328 San Rafael Street, Manilaas evidenced by transfer certificate of title No. 62680. She was illiterate and knew only how to sign her name. At about the end of December 1943 Joaquin V. Bass called on Rebecca Levin at her house on No. 328 San Rafael street, Manila, and representing himself to be a real estate broker asked her whether she would sell her lot and house at No. 326 adjoining her residence. At that time there lived in the house of Rebecca Levin some Japanese civilians, officers or employees of the Pacific Mining Co., occupying or renting two rooms, Angelita Martinez a brother, and Meliton Villasenor, a houseboy. In addition to P50 collected by her as monthly rental for the house at No 326, the Japanese renting the two rooms paid her P200 monthly and supplied her with rice and other foodstuffs without charge. Rebecca Levin told Joaquin V. Bass that she was not selling her house at No. 326 San Rafael street. On subsequent calls Joaquin V. Bass told Rebecca Levin that it would be to her advantage and benefit to sell the lot and house at No. 326 San Rafael street and with the proceeds of the sale to purchase another house. He told her that if she would not sell the lot and house the Japanese who had been looking for houses to occupy might deprive her thereof without getting anything in exchange therefor. He told her further that by selling her house, which she rented for P50 a month only, and buying for P26,000 one on Antonio Rivera street she would gain because the monthly rental of the latter was P140. She consented to see the house at Antonio Rivera street and went there

accompanied by Joaquin V. Bass and Meliton Villasenor, her houseboy. Joaquin V. Bass pointed to a building (Exhibit G) of for apartments (accessorias) not far from the Tutuban railroad station. They were not able to see the second story of the building because, according to Joaquin V. Bass, the owner had gone to Pampanga. For the second time, they went to see the building on Antonio Rivera street but they again failed to see the second story of the building for the same reason given by Joaquin V. Bass when they went to see it the first time. Relying upon the representations made by Joaquin V. Bass, Rebecca Levin finally consented to sell her house. One of the last days of December 1943 or of the first days of January 1944, while Rebecca Levin was engaged in conversation with Dr. Pastor L. Manlapaz and Angelita Martinez, Joaquin V. Bass called on her bringing along with him certain papers. Upon Joaquin V. Bass" suggestion Rebecca Levin followed by him entered a room adjoining that where she, Dr. Manlapaz and Angelita Martinez were conversing, and upon repeated representations and assurances made by Joaquin V. Bass that the papers he brought were just an authority to sell the house at No. 326 San Rafael street, Rebecca Levin signed five documents and Bass took from her bag which she placed on a small table in the room her residence certificate and the receipt showing payment of realty tax on her property. None of the documents Rebecca Levin signed was left to her. The following day (6 January 1944), Joaquin V. Bass called on Rebecca Levin at her house and handed to her P10,000 saying that it was a partial payment of the purchase price of the lot and house at No. 326 San Rafael street which he represented had been sold to a Japanese and asked her to give him the Torrens title of the house and lot. Upon being informed by her that the Torrens title of the houses and lot was in the possession of the Agricultural and Industrial Bank, to which they were mortgage for P2,000, Joaquin V. Bass took from her P2,000 and requested her to go with him to the Agricultural and Industrial Bank where they paid the mortgage debt of Isidore Reich (presumably the predecessor of the late husband of Rebecca 137

[Exhibit M]) and received a mortgage release and the Torrens certificate of title No. 62680 (Exhibit K and K-1); and on February 1944, she signed a receipt for P2,000 (Exhibits L and L-1). Joaquin V. Bass not only took P2,000 to pay the mortgage debt to the Agricultural and Industrial Bank (Exhibit M) but also the balance of P8,000 telling her that he would pay it to the owner of the building on Antonio Rivera street; that the balance of the repurchase price of her house At No. 326 San Rafael street would be paid to her as soon as the lot and house sold be segragated or separated from the larger lot on which her house at No 328 San Rafael street stood; and that it was necessary to make such subdivision to be approved by the court in order that the sale of her house and lot not to arose any suspicion on her part Joaquin V. Bass gave her a receipt from that partial amount paid for the building on Antonio Rivera street signed by one Mariano Irurin y Reyes but the amount written therein was just P6,000. The signer of the receipt promised to deliver the deed of sale of the building of Antonio Rivera street within 5 days from the date of payment of P20,000, the balance of the purchase price (Exhibit H). Being illiterate Rebecca Levin did not notice that the amount appearing in the receipt was P6,000 instead of P8,000 which was the sum taken from her by Joaquin V. Bass. To make her believe that she was the owner of the building on Antonio Rivera street, Joaquin V. Bass turned over to her the monthly rentals of the building for five months which he claimed he had collected from the tenants of the building. Not long after the signing by Rebecca Levin of the documents giving Joaquin V. Bass authority to sell the house at No. 326 San Rafael street and the pretended purchase by her through him of the building on Antonio Rivera street, the latter called on the former at her house. He found her sick. He told her that he had tested medicine or drug for ailments such as the one she was suffering from and that if she would take it she would feel immediately and completely relieved. He went down. Immediately after his return to the house he called and told the houseboy Meliton Villasenor to bring a glass of water where he diluted the

drug and asked Rebecca Levin to take it. The latter did not hesitate to take it as until then she did not have the least suspicion of him who succeeded in winning and enjoyed her trust and confidence. After taking the medicine she become to vomit and suffer stomach pains and her face and lips became swollen. She went for Dr. Pastor L. Manlapaz who found that she was poisoned. After application of antidotes she recovered from the poisoning. This incident coupled with the failure of Joaquin V. Bass to return to her the documents she had been asking made Rebecca Levin suspicious of him and consulted with Dr. Pastor L. Manlapaz and Filemon Poblador, the latter when working in the office of the President of the Republic. As Poblador was not a lawyer he talked to attorney Esteban Nedruda who being also an employee in the office of the President of the Republic at Malacaang refused to handle the case but promised to investigate it. After investigation Nedruda found that the lots were transferred and registered in the name of Joaquin V. Bass and mortgaged him. Finally, the services of attorney Cesar de Larrazabal on the property of Rebecca Levin which were registered in the office of Register of Deeds of Manila. It was found out that the papers signed by her on 5 January 1944 were a deed of sale of her house and lot at No. 326 San Rafael street for P30,000 in favor of Emiliano R. Eustaquio acknowledge on the same day before notary public Eliezar A. Manikan (Exhibit A) and another deed of sale of her house and a lot No. 328 San Rafael street for P65,000 in favor of Joaquin V. Bass dated 18 February 1944 and acknowledge on that date before the same notary public Elizer A. Manikan (Exhibit C); and that on 30 March 1944, for and in consideration of P38,000, Emiliano R. Eustaquio sold to Joaquin V. Bass the lot and the house at No. 326 San Rafael street (Exhibit B.). Prior to the registration of these three deeds of sale, or on 24 February 1944, a petition was filed by attorney Eliezer A. Manikan in the name of Rebecca Levin praying for the subdivision of parcels of land into two lots-the certificate of title to lot No. 1 containing an area of 317.7 square meters to be issued in the name of Emiliano R. Eustaquio 138

and the certificate of title to lot No. 2 containing an area of 1,006.80 square meters to be issued in the name of Rebecca Levin (Exhibit I). On February 1944, the petition was granted by the Court of First Instance of Manila, Fourth Branch, presided over by Judge Gervasio Diaz, (Exhibit J.) Transfer certificate of title No. 62680 in the name of Rebecca Levin describing a parcel of land located on San Rafael street containing an area of 1,3228.40 square meters entered on September 1941, together with a memorandum of mortgage executed in favor of the Agricultural and Industrial Bank entered on 26 September 1939-a memorandum noted on the previous certificate of title No. 9220-was cancelled, and in lieu thereof Transfer certificate of title No. 71907 in the name of Emiliano R. Eustaquio for a parcel of land containing an area of 317.70 square meters more or less, and the house erected thereon, and transfer certificate of title No. 71908 in the name of Rebecca Levin for the remaining area of 1,006.80 square meters and the house erected thereon, were issued by the Registrar of Deeds of Manila on 27 February 1944, pursuant to the order of the court dated 22 February referred to (Exhibit J). On 11 May 1944, transfer certificate of title No. 71908 in the name of Rebecca Levin was cancelled and in the lieu thereof transfer certificate of title No. 73451 was issued in the name of Joaquin V. Bass by the Registrar of Deeds of Manila; and on 10 April 1944, transfer of certificate of title No. 71907 in the name of Emiliano R. Eustaquio was cancelled and in lieu thereof transfer certificate of title No. 73450 was issued in the name of Joaquin V. Bass by the Registrar of Deeds. On 8 April 1944, to secure the payment of P70,000, together with interests thereon at 5 per cent per annum, payable in five years, Joaquin V. Bass mortgaged to Co Chin Leng the two lots and house selected thereon and the instrument of mortgage was registered on 10 April 1944 on both certificates of title Nos. 73450 and 73451. On 6 July 1944, a notice of lis pendens was noted in the back of transfer certificate of title No. 73450 in connection with civil case No. 2562 of the Court of First Instance of Manila entitled "Isabelo Martinez vs. Joaquin V.

Bass." On October 1944, for and in consideration of P200,000 "presenting circulating currency," Joaquin V. Bass sold to Eugenio Mintu the lot and house at No. 328 San Rafael street desrcibed in transfer certificate of title No. 73450, P90,000 of which was paid on the date of the execution of the deed of sale; P10,000, to be retained by the vendee (Eugenio Mintu) and to be paid to the vendor (Joaquin V. Bass) after the notice of lis pendens in connection with civil case No. 2652 of the Court First Instance of Manila entitled "Isabelo Martinez vs. Joaquin V. Bass" shall have been removed or cancelled; and P100,00, the balance, to be deposited by the vendee (Eugenio Mintu) upon instructions of the vendor (Joaquin V. Bass) with the clerk of court of Manila after return of the former from a trip to Ilocos Norte, the deposit to be made within 30 days from the date of the deed of sale and for the purpose of securing there release of the mortgage in favor of Co Chin Leng, the vendor (Joaquin V. Bass) undertaking to obtain the release of the mortgage on the property sold and to deliver it (the mortgage release) to the vendee (Eugenio Mintu) and the cancellation of the notice of lis pendens on or before 8 April 1945 (Exhibit 3-Mintu). To secure the fulfillment of the undertaking-the mortgage release and cancellation of the notice of lis pendens-the vendor (Joaquin V. Bass) assigned, transferred and conveyed by way of liquidated damages to the vendee (Eugenio Mintu) his title, rights, interest, participation or share in and to lot No. 2, the larger lot on which house No. 328 San Rafael street is errected, and both parties agreed that if the condition provided for in paragraph (d) of the deed of sale be fulfilled, the condition in paragraph (e) thereof relative to the assignment, transfer and conveyance of lot No. 2 to the vendee would be null and void without legal effect, otherwise it would remain in full force and effect. The following clause was inserted with initials of both parties: "force majeure and fortuitous events exempts the vendor from compliance thereto" (Exhibit 3Mintu.) On 1 November 1944, Eugenio Mintu and Jose C. Robles entered into a lease contract on the house and lot No. 326 San 139

Rafael street, Manila (Exhibit 1-Mintu). From November 1944 to January 1945 Jose C. Robles paid to Eugenio Mintu the rental of P45 a month as agreed upon (Exhibit 2-Mintu), but beginning February the rental of the house were not paid to Mintu because there was a dispute as to who was the owner of the house. On 3 November 1944, Eugenio Mintu deposited with the sheriff of Manila for the account of Joaquin V. Bass the sum of P100,416.67 as full payment of the purchase price of the property sold to him on 14 October 1944. The sum of P100,000 is the total of Bass" indebtedness to Co Chin Leng-P70,000 secured by mortgaged and P30,000 unsecured, the sum of P416,67 represents the interest on the amount owned to Co Chin Leng up to the time of the deposit (Exhibit 4-Mintu) and the sum of P158.92 represents the sheriff's fees on the amount deposited (Exhibit 5-Mintu). On November 1944, Eugenio Mintu presented and filed with the office of Registrar of Deeds of Manila the original of the deed of sale (Exhibit E) duly notarized and paid the sum of P224.50: P.50 for entry in the day book; P220 for registration fees; and P4 for the issuance of two titles (Exhibit 6Mintu). On the same date, together with the original deed of sale (Exhibit E) the owner's duplicates of transfer of certificate of title Nos. 73450 and 73451 were presented and filed with the office of Registrar of Deeds of Manila but said documents were not among those salvaged and were presumed to have been lost or burned according to the certification of the Registrar of Deeds in and for the City of Manila (Exhibit 8-Mintu). On 19 January 1945, Eugenio Mintu paid to Joaquin V. Bass the sum of P10,000 in full settlement of the purchase price of the property acquired by him on 14 October 1944 (Exhibit 7-Mintu). On 29 October 1945, a notice of lis pendens was noted at the back of transfer certificate of title No. 70054 of the Court of First Instance of Manila entitled "Rebecca Levin vs. Joaquin V. Bass". Joaquin V. Bass testifies that he acquired the lot and house at No. 328 San Rafael street from Emiliano R. Eustaquio for P38,000 and

the lot and house at No. 328 San Rafael street from Rebecca Levin for P65,000, the first on 30 March 1944 and the second on 18 February 1944; that Rebecca Levin paid him the monthly rental of P150 for the lot and house at No. 328 San Rafael street from March 1944 to January 1945, as shown by the stubs of the receipts issued to her (Exhibits 20-Bass to 20-K-Bass); that Rebecca Levin refused to pay the rental for February unless it was reduced to P100; that on 19 May 1945 he brought against her an action for detainer which on appeal to the Court of First Instance of Manila bears No. 71159; that after he acquired the property at No. 326 San Rafael street from Emiliano R. Eustaquio the latter brought him to the tenant, Rosario Vda. de Altonaga, who left the premises to go to the Cagayan to look for her daughter; that Vicente Tagle rented the premises signing a contract for one year but after 2 or 4 months he left the premises and his daughter Aminta T. de Robles married to Jose C. Robles became the tenant; that in February 1945 Jose C. Robles left the premise after a quarrel he had with his wife Aminta T. de Robles; that in April 1945 he brought against Jose C. Robles and Aminta T. de Robles an action for detainer on which on appeal to the Court of First Instance of Manila bears No. 71549; that on May 1946 Aminta T. de Robles and he signed a lease contract (Exhibit 1Bass); that he did not make Rebecca Levin sign documents authorizing him to sell her house at No. 326 San Rafael street as testified to by Dr. Manlapaz; that he did not show to Rebecca Levin any house on Calle Antonio Rivera to be exchanged with or for her property at No. 326 San Rafael street, as testified to by Dr. Manlapaz, Meliton Villaseor and Angelita Martinez; that it is not true that Rebecca Levin did not receive the consideration for the sale of her house at No. 328 San Rafael street; that on October 1944 he sold for P200,000 the house and lot at No. 326 San Rafael street to Eugenio Mintu, who handed to him P65,000 and a check for P25,000 which the bank refused to cash, but later on Mintu told him that he had deposited funds in the bank and so the check was honored and cashed at the bank of the Philippine Islands; that all in 140

all he was paid P90,000 and P10,000 for 16 gantas of rice given him to Mintu; that the balance of P100,000 was never and has not been paid to him; that he has not given possession of the property to Eugenio Mintu the transaction not having been consummated because of force majeure; and that he was bound to return to Eugenio Mintu the P100,000 received by him. Eliezer A. Manikan, the notary public before whom the deeds of sale sought to be annulled were acknowledged, testifies that Rebecca Levin appeared before him and acknowledged the execution of the documents in favor of Emiliano R. Eustaquio on 5 January 1944 and in favor of Joaquin V. Bass on 18 February 1944. The testimony of Rebecca Levin as to how she consented to sell her house and lot No. 326 San Rafael street and the manner she was induced by Joaquin V. Bass to sign papers which he represented were mere authorization to sell is corroborated by Dr. Pastor L. Manlapuz, Angelita Martinez and Meliton Villasenor. These witnesses had no interest to pervert the truth. Rebecca Levin was not in need of money of fact she led quite a comfortable life. Only because of the misrepresentation that she would gain by selling her house at No. 326 San Rafael street and of the threat made by Joaquin V. Bass that she might lose it did she finally consent to sell it. On the other hand, Joaquin V. Bass has a criminal record was convicted of estafa (Exhibit O) and was involved ina shady deal (Exhibit R) and found to have presented a promisory note for P5,000 and a chattel mortgage which he claimed Rebecca Levin had signed and upon which he brought an action against her for foreclosure (civil case No. 71481, the Court of First Instance of Manila), when in truth and in fact, as pronounced by the trial court, they were not signed and acknowledged by her before a notary public (Exhibit P).

He succeeded in winning the trust and confidence of Rebecca Levin, a widow, 65 years old, a foreigner in this country and without relatives. Joaquin V. Bass claims he was employed at that time by the Manila Electric Co. as mechanical engineer but on cross examination he had to admit that he did not have any degree nor was he licensed by the Government of the Philippines to practice the profession of mechanical engineer. When he was pressed to answer the question whether he was actually employed by the Manila Electric Co. he evaded it by saying that he was employed by White and Co. which owned 60 per cent of the shares of the Manila Electric Co. During the occupation of the country by the enemy he was engaged in the buy and sell business and had no known income. It is unbelieavable that he could acquire the house and lot of Rebecca Levin at No. 328 San Rafael street for P65,000 and the one allegedly sold to Emiliano R. Eustaquio at No. 326, same street, through his machinations, for P38,000. He claims he deposited his money in the Bank of Taiwan but in the same way that he presented his pass book (Exhibit 7) showing his deposits in the Bank of the Philippine Islands, he could have presented the pass book of certificate of deposit of money he had in the Bank of Taiwan, Ltd. In fact, during the occupation of the country by the enemy and before he mortgaged the two houses and lots to Co Chin Leng Joaquin V. Bass had no money. According to Exhibit 7, on 10 April 1944 only he made the first or initial deposit of P50,000 with the Bank of the Philippine Islands. That money must be of the P70,000 loaned to him by Co Chin Leng on April 8 1944 secured by mortgage on the houses and lots he had acquired fraudulently from Rebecca Levin. Eliezer A. Manikan perverted the truth when he testified that P10,000 was paid to or received by Rebecca Levin in his office, whereas Joaquin V. Bass testified that she received it in her house; when he testified that on the date of the excecution of the deed of sale (Exhibit A) by Rebecca Levin, or on 5 January 1944, the Torrens title to the property was brought by her to his office, when in truth 141

and in fact the title was on that date kept by the Agricultural and Industrial Bank and taken from it the following day when the motrgage debt was paid. Eliezer A. Manikan did not tell the truth when he testified that on the date of the execution of the deed of sale by Rebecca Levin the sum of P35,000 in Japanese war notes, consisting of six packages of P10,000 each P10 bills and the rest of P5 bills, was counted by her, because, according to Joaquin V. Bass, Rebecca Levin mortgaged her house to him for P35,000 and later converted it into an absolute sale for P65,000 (Exhibits S and S-1). Eliezer A. Manikan did not tell the truth when he testified that the deed of sale marked Exhibit C was executed two or three weeks after the order of the court-referring to the order approving the subdivisions of the parcels of land of Rebecca Levin into two lots presented for registration on 24 February 1944-because the deed of sale (Exhibit C) dated February 1944 was executed and acknowledged on that date, whereas the court order approving the subdivision and six days before its presentation for registration. On the cross examination Joaquin V. Bass testified that the consideration for the sale of the house and lot on No. 328 San Rafael street consisted of payment in cash of P35,000 and the transfer to or assumption by him of Rebecca Levin's debt for P30,000 to one Concepcion de la Rama. On further crossexamination he testified that the purchase price agreed upon between him and Rebecca Levin was P60,000 plus P2,800 which was not included in the price. There is overwhelming evidence to support the conclusion of the trial court that Rebecca Levin did not execute the deeds of sale Exhibit A and Exhibit C. What she was made to believe she signed was an authorization to sell the house at No. 326 San Rafael street. As to the mortgage in favor of Co Chin Leng we hold that the court below that there is no evidence to show that the mortgage was made in bad faith and without consideration. He must, therefore,

be deemed to be a mortgaged in good faith and for value. As to the sum consigned by Eugenio Mintu for Joaquin V. Bass' account there is no evidence as to the outcome of the complaint for consignation filed 3 November 1944 by Joaquin V. Bass against Co Chin Leng in the Court of First Instance of Manila (case No. 2984). As regards Eugenio Mintu, the evidence shows that he paid P200,000 to Joaquin V. Bass in the manner and form above stated; that the orignal deed of sale (Exhibit E), together with the owner's duplicate certificate of title Nos. 73450 and 73451, was presented for registration on 8 November 1944 in the office of Registrar of Deeds of Manila and entered in the day book-entry No. 27161, but that, according to the certification of the registrar, the original deed of sale and the owner's duplicate certificate of titles have not been found, were not among the salvaged records and were, therefore, presumed to have been lost or burned (Exhibit 8-Mintu). It also appears that the registration free consisting of P.50, the fee for the entry in the day book; P220, the registration fees for a sale of P200,000; and P4, the fee for the issuance of two certificates of title were paid by Eugenio Mintu (Exhibit 6-Mintu). On the other hand, on October 1945, a notice of lis pendens was filed in the office of Registrar of Deeds of Manila and noted on the backof transfer certificate of title Nos. 73450 and 73451 in connection with civil case No. 70054 of Court of First Instance of Manila entitled "Rebecca Levin vs. Joaquin V. Bass et al." The claim of Joaquin V. Bass that the sale between him and Mintu was conditional is devoid of merit, because the conditional part of the deed of sale concerns the guarantee undertaken by him as vendor to obtain the release of the mortgage of Co Chin Leng and the cancellation of the notice of lis pendens in connection with civil case No. 2562 entitled "Isabelo Martinez vs. Joaquin V. Bass," which release and cancellation he promised and would secure on or before 8 April 1945. It is not a condition which, if not fulfilled, would 142

avoid the sale made of the lot and house at No. 328 San Rafael street, but one which, if not performed, would cause the vesting in the vendee (Eugenio Mintu) of the title to the lot and house at No. 328, same street, which was given as security for the fulfillment of the undertaking. We now take up the question between Eugenio Mintu and Rebecca Levin. Under the Torrens system the act of registration is the operative act to convey and affect the land.1 Do the entry in the day book of a deed of sale which was presented and filed together with the owner's duplicate certificate of title with the office of Register of Deeds and full payment of registration fees constituted a complete act of registration which operates to convey and affect the land? In voluntary registration such as sale, mortgage, lease and the like, if the owner's duplicate certificate be not surrendered and presented or if no payment of registration fees be made within 15 days, entry in the day book of the deed of sale does not operate to convey and affect the land sold.2 In voluntary registration, such as an attachment, levy upon, execution, lis pendens and the like entry thereof in the day book is a sufficient notice to all persons of such adversed claim.3 Eugenio Mintu fulfilled or took the steps he was expected to take in order to have the Registrar of Deeds in and for the City of Manila issue to him the corresponding transfer certificate of title on the lot and house at No. 328 San Rafael Street sold to him by Joaquin V. Bass. The evidence shows that Eugenio Mintu is an innocent purchaser for value. Nevertheless, the court below held that the sale made by Bass to Mintu is as against Rebecca Levin without force and effect because of the express provision of law which in part says: . . . Provided, however, That in all cases of registration procured by fraud the owner may pursue all his legal and equitable remedies against the parties to such fraud, without prejudice, however, to the rights of any innocent

holder for value of certificate of title; (Section 55, Act 496, as amended by Act 3322). In other words, the sale made by Joaquin V. Bass to Eugenio Mintu is valid as between them but not as against Rebecca Levin who could avail herself of all her legal and equitable remedies against Joaquin V. Bass and reach the property acquired fraudulently by the latter and subsequently sold to Eugenio Mintu who admittedly is an innocent purchaser for value, for the reason that the later though an innocent purchaser for value is not a holder of a certificate of title. The pronouncement of the court below is to the effect that an innocent purchaser for value has no right to the property because he is not a holder of a certificate of title to such property acquired by him for value in good faith. It amounts to holding that for failure of the Registrar of Deeds to amply and perform his duty an innocent purchaser for value loses that characterhe is not an "innocent holder for value of a certificate of title." The court below has strictly and literally construed the provision of law applicable to the case. If the strict and literal construction of the law made by the court below be the true and correct meaning and intent of the lawmaking body, the act of registrationthe operative act to convey and effect registered propertywould be left to the Registrar of Deeds. True, there is a remedy available to the registrant to compel the Registrar of Deeds to issue him the certificate of title but the step would entail expense and cause unpleasantness. Neither violence to, nor stretching of the meaning of, the law would be done, if we should hold that an innocent purchaser for value of registered land becomes the registered owner and in the contemplation of law the holders of a certificate thereof the moment he presents and files a duly notarized and lawfull deed of sale and the same is entered on the day book and at the same he surrenders or presents the owner's duplicate certificate of title to the property sold and pays the full amount of registration fees, because what remains to be done lies within his power to perform. The Registrar of Deeds is in 143

duty bound to perform it. We believe that is a reasonable and practical interpretation of the law under considerationa construction which would lead to no inconsistency and injustice. Taking into consideration all the circumstances of the case and bearing in mind that the only objective courts must strive to attain is to do justice, we believe that our interpretation of the law applicable to the case at bar subserves the interests of justice. True, Rebecca Levin loses he house and lot No. 326 San Rafael street, but "as between not innocent persons, one of whom must suffer the consequence of a breach of trust, the one who made it possible by his act of confidence must bear the loss."4 We hold, therefore, that Eugenio Mintu is the rightful owner of the lot and house at No. 326 San Rafael street since 8 November 1944 and entitled to collect the rentals due and unpaid from that date until possession of the premises shall have been restored to him and the balance by Joaquin V. Bass of rentals and moneys received by him imputable to such rentals as ordered by the trial court, subject to the registered mortgage in favor of Co Chin Leng. What has been awarded to Rebecca Levin in the judgment appealed from, in so far as the lot and house at No. 326 San Rafael street are concerned, is deemed awarded to Eugenio Mintu. The rest of the judgment appealed from not inconsistent herewith, is affirmed, with costs against Joaquin V. Bass. Let a copy of this decision be furnished the City Fiscal of Manila who is directed an investigation of Joaquin V. Bass and attorney and notary public Eliezer A. Manikan in connection with the execution and acknowledgment of the documents, involved and the testimony given by them in these cases and to take such action as the result of the investigation may warrant.

Paras, C.J., Feria, Pablo, Bengzon, Montemayor, Reyes, and Bautista Angelo JJ., concur.

Separate Opinions TUASON, J., concurring: Crime and fraud can not serviced as the root of a valid title notwithstanding the good faith of the purchase for value. This rule is qualified by the condition that the rightfull owner was not guilty for any negligence contributing to or facilitating the commission of the crime or fraud. Subject to this qualification, the doctrine that, as between two innocent parties, the one who made the crime or fraud possible must bear the loss, should be applied. From the facts of this case, it appears that Rebecca Levin was not free from blame for the issuance of a certificate of title in the names of Bass. With these circumstances in mind, I concur in the foregoing decision.

Footnotes
1

Section 50, Act 496. Sections 55 and 56, Act 496. Villasor vs. Camon et al., 89 Phil., 404.

Eliason vs. Wilborn (1930), 281 U.S 457, 461; Blondeau et al. vs. Nano et al., (1935), 61, Phil. 625, 530.

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EXECUTION SALE EN BANC G.R. No. L-21572 October 4, 1924

security for a debt of P100. Subsequent to the filing of this answer Irineo Valdeavella was impleaded. In his answer he alleges that he is the owner of the land and has been in possession thereof for over fifteen years. The court below rendered judgment in favor of the defendants holding that Irineo Valdeavella was the owner of the parcels of land in question and that, moreover, the sheriff's sale under which the plaintiff claims title to the land was irregular and void inasmuch as there had not been a sufficient levy on the lands, nor a sufficient notice of the sale. From this judgment the plaintiff appeals to this court. In her first assignment of error the appellant maintains that the court erred in holding that Irineo Valdeavella was the owner of the land at the time of the attempted levy of the execution. In our opinion, this assignment of error is well taken. The testimony in support of the claim of Ireneo Valdeavella is so contradictory and inconsistent that no reliance whatever can be placed thereon. Under the second assignment of error the appellant argues that the sale, under execution by virtue of which she claims ownership of the land, was valid. This assignment cannot be sustained. The levy of an execution is defined as the acts by which an officer sets apart of appropriates for the purpose of satisfying the command of the writ, a part or the whole of a judgment debtor's property. In the absence of statutory provisions no special formalities are required for a valid levy, and in regard to real property it has usually been held sufficient if the seizure of the property is made known to the occupants thereof and endorsed on the writ. But it is otherwise where, as in this jurisdiction, the matter

MARCELA LLENARES, plaintiff-appellant, vs. FELISA VALDEAVELLA and ALFONSO ZORETA, defendantsappellees. Domingo Lopez for appellant. Francisco & Lualhati for appellees.

OSTRAND, J.: This is an action in ejectment, the plaintiff alleging that she is the owner of two parcels of land in the barrio of Wacas, municipality of Tayabas, having acquired said parcels by purchase at a sheriff's sale under a writ of execution issued by the justice of the peace of the municipality of Tayabas in a case in which she was the plaintiff and the defendant Felisa Valdeavella and her now deceased husband Zacarias Zabella were the defendants. The defendants Felisa Valdeavella and Alfonso Zoreta in their answer allege that Felisa Valdeavella never has been in possession of the parcels as owner; that she and her husband some four years prior to the filing of the answer (October 22, 1918) were in possession of the land as tenants of Irineo Valdeavella, the true owner of the land; and that the defendant Alfonso Zoreta has been in possession under an agreement made with Zacarias Zabella whereby Zoreta was to have the use and benefit of the land as

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is regulated by statute; there a substantial compliance with the statute is indispensable. The statutory provisions to this case are found in sections 450 and 429 of the Code of Civil Procedure. Section 450 states that property "may be attached on execution in like manner as upon writs of attachment." This provision while permissive in form must, nevertheless, be regarded as mandatory. No other method of effecting the levy is prescribed and it is an old rule that powers through the exercise of which a person may be divested of his property are always strictly construed and that the provisions regulating the procedure in their exercise are mandatory as to the essence of the thing to be done. (Lewis' Sutherland on Statutory Construction, 2d ed., sec. 627.) Section 429 of the Code reads as follows: Real property, standing upon the records in the name of the defendant or not appearing at all upon the record. shall be attached by filing with the registrar of titles of land for the province in which the land is situated, a copy of the order of attachment, together with a description of the property attached, and a notice that it is attached, and by leaving a similar copy of the order, description and notice with an occupant of the property, if there is one. Real property or an interest therein, belonging to the defendant and held by any other person, or standing on the records in the name of any other person, shall be attached by filing with the registrar of land titled in the province in which the land is situated, a copy of the order of attachment, together with a description of the property, and a notice that such real property and any interest of the defendant therein, held by or standing in the name of such

other person (naming him) are attached; and by leaving with the occupant, if any, and with such other person, or his agent, if known and within the province, a copy of the order, description and notice. The registrar must index attachment filed under the first paragraph of this section, in the names, both of the plaintiff and of the defendant, and must index attachments filed under the second paragraph of this section, in the names of the plaintiff and of the defendant and of the person by whom the property is held or in whose name it stands on the records. In the present case it is admitted by the plaintiff that notice of attachment for the execution was not filed with the registrar of deeds and that there was no copy thereof served on the defendants. It is therefore clear that the attempted levy was not made in accordance with the provisions of the statute, and, according to the great weight of authority, a proper levy is indispensable to a valid sale on execution. A sale unless preceded by a valid levy, is void, and the purchaser acquires no title. (Leath vs. Deweese, 162 Ky., 227; Jarboe vs. Hall, 37 Md., 345.) There having been no sufficient levy of the execution in question, the plaintiff took to the property sold thereunder and the present action can therefore not be maintained. 1awph!l.net The judgment appealed from is affirmed, without costs. So ordered. Johnson, Street, Malcolm, Avancea, Villamor and Romualdez, JJ., concur.

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EXECUTION SALE SECOND DIVISION G.R. No. L-69294 June 30, 1987 ZACARIAS COMETA AND HERCO REALTY AND AGRI-DEVELOPMENT CORPORATION, petitioners, vs. HON. INTERMEDIATE APPELLATE COURT AND JOSE FRANCO, respondents.

On November 17, 1981, petitioner Herco Realty and AgriDevelopment Corporation filed with the same Branch XV of the Court of First Instance of Rizal an action to annul the levy on execution and sale at public auction of the real properties. It alleged that the ownership of the lots had been transferred to it by Cometa before the execution sale. It assailed the validity of the levy and sale on the ground that the sheriff, in disregard of the proper procedural practice, immediately proceeded against Cometa's real properties without first exhausting his personal properties, that the properties were sold en masses and not by each parcel, and that the said properties which are commercial lots situated in Guadalupe, Makati and are conservatively valued at P500,000.00 were sold only for P57,396.85, the amount of the judgment. On March 22, 1982, the trial court in the first case issued an order directing the Registrar of Deeds of Rizal to cancel Cometa's certificates of title to the lots and to issue new ones in favor of the respondent. Cometa went to this Court on petition for certiorari questioning the said order. On February 28, 1983, however, the petition was dismissed for lack of merit. On May 13, 1983, the respondent filed with the Regional Trial Court, Branch 140, National Capital Region, a motion for the issuance of a writ of possession. The petitioner opposed the motion on the ground that there is pending before another Regional Trial Court an action for the annulment of the levy and sale of the properties in question. On August 12, 1983, the trial court issued an order granting the motion but the same was reconsidered and set aside on November 18, 1983 on the ground that the issuance of a writ of possession was premature. The respondent instituted a special civil action for certiorari before this Court on June 27, 1984 but the case was referred to the then Intermediate Appellate Court. On October 4, 1984, the appellate court ruled for the respondent and granted the issuance of the writ in his favor. 147

GUTIERREZ, JR., J.: This is a petition for review of the decision of the then Intermediate Appellate Court, now Court of Appeals, granting the issuance of a writ of possession in favor of respondent Jose Franco thus placing him in possession of certain real properties sold to him as judgment creditor and highest bidder at an execution sale. The appellate court reversed an earlier decision of the Regional Trial Court. On July 2, 1976, in a suit for damages filed by respondent Jose Franco, entitled "Jose Franco v. Zacarias Cometa" and docketed as Civil Case No. 17585, the then Court of First Instance of Rizal, Branch XV, awarded to the respondent the sum of P57,396.85. The judgment became final and a writ of execution was issued on March 9, 1978. Thereafter, the sheriff levied on execution three commercial lots of Cometa (Rollo, p. 122) and sold them at public auction on October 17, 1978 to the respondent for the amount of the judgment. The sheriff's return was made on March 12, 1981.

Hence, this petition for certiorari filed by the petitioners Zacarias Cometa and Herco Realty and Agri-Development Corporation. The only issue in this case is whether or not Regional Trial Court, Branch 140, can order petitioner Cometa to deliver the possession of the properties sold at public auction to the respondent in spite of the pendency of Civil Case No. 43846 in another Regional Trial Court for the annulment of the levy and sale of said properties. The petitioners maintain the negative. They allege that the issuance of a writ of possession is premature because the validity of the levy and sale on execution is still in issue. They take exception to the finding of the respondent appellate court that their failure to redeem the properties within the redemption petition period authorized the trial court under Section 35, Rule 39 of the Revised Rules of Court, to place the purchaser or judgment creditor in possession of the said properties. They further assail the respondent court's finding that the "petitioner has only himself to blame that more property was sold by the sheriff, or that the value of the property sold to satisfy his debt far exceeded the judgment against him, for he could, and should, have been present at the auction to direct the manner and order of the sale of his various property (sic)" (Rollo, p. 27). On the other hand, the respondent asserts that this Court disposed of Civil Case No. 17585 when it issued resolutions dated February 9, 1983 and May 4, 1983 denying, for lack of merit, the petitioner's prayer to reverse the trial court's order for entry of judgment and issuance of new certificates of title in favor of the respondent. He states that what the lower court has to do is ministerial and mandatory. He contends that in this case, even Civil Case No. 43846 which seeks the annulment of the levy and sale of the properties may be dismissed on the ground of res judicata.

We sustain the petitioner's view. The resolution of this case calls for a consideration of the nature of a writ of possession as it relates to an execution sale. In the case of Mabale v. Apalisok (88 SCRA 234), this Court held: . . . That writ is available (1) in a land registration proceeding, which is a proceeding in rem (Sec. 17, Act No. 496; Estipona v. Navarro, L-41825, January 30, 1976, 69 SCRA 285, 291); (2) in an extrajudicial foreclosure of a realty mortgage (Sec. 7, Act No. 3135); (3) in a judicial foreclosure of a mortgage, a quasi in rem proceeding, provided that the mortgagor is in possession of the mortgaged realty and no third person, not a party to the foreclosure suit, had intervened (Rivera v. Court of First Instance of Nueva Ecija and Rupac, 61 Phil. 201; Ramos v. Manalac and Lopez, 89 Phil. 270, 275) and (4) in execution sales (last par. of sec. 35, Rule 39, Rules of Court). The possession of the property sold at an execution sale shall be conferred on the purchaser under the conditions set by Section 35 of Rule 39, Rules of Court, to wit: Sec. 35. Deed and possession to be given at expiration of redemption period. By whom executed or given. If no redemption be made within twelve (12) months after the sale, the purchaser, or his assignee, is entitled to a conveyance and possession of the property; or, if so redeemed whenever sixty (60) days have elapsed and no other redemption has been made, and notice thereof given, and the 148

time of redemption has expired, the last redemptioner, or his assignee, is entitled to the conveyance and possession, but in all cases the judgment debtor shall have the entire period of twelve (12) months from the date of the sale to redeem the property. The deed shall be executed by the officer making the sale or by his successor in office, and the latter case shall have the same validity as though the officer making the sale had continued in office and executed it. Upon the execution and delivery of said deed the purchaser, or redemptioner, or his assignee, shall be substituted to and acquire all the right, title, interest and claim of the judgment debtor to the property as of the time of the levy, except as against the judgment debtor in possession, in which case the substitution shall be effective as of the date of the deed. The possession of the property shall be given to the purchaser or last redemptioner by the same officer unless a third party is actually holding the property adversely to the judgment debtor. From the foregoing discussion, it can be seen that the writ of possession may issue in favor of a purchaser in an execution sale when the deed of conveyance has been executed and delivered to him after the period of redemption has expired and no redemption has been made by the judgment debtor. A writ of possession is complementary to a writ of execution (see Vda. de Bogacki v. Inserto, 111 SCRA 356, 363), and in an execution sale, it is a consequence of a writ of execution, a public auction sale, and the fulfillment of several other conditions for conveyance set by

law. The issuance of a writ of possession is dependent on the valid execution of the procedural stages preceding it. Any flaw afflicting any of its stages, therefore, could affect the validity of its issuance. In the case at bar, the validity of the levy and sale of the properties is directly put in issue in another case by the petitioners. This Court finds it an issue which requires pre-emptive resolution. For if the respondent acquired no interest in the property by virtue of the levy and sale, then, he is not entitled to its possession. The respondent appellate court's emphasis on the failure of The petitioner to redeem the properties within the period required by law is misplaced because redemption, in this case, is inconsistent with the petitioner's claim of invalidity of levy and sale. Redemption is an implied admission of the regularity of the sale and would estop the petitioner from later impugning its validity on that ground. (See Castillo v. Nagtalon, 4 SCRA 48,53.) Moreover, equitable considerations constrain us to reverse the decision of the respondent court. The fact is undisputed that the properties in question were sold at an unusually lower price than their true value. Properties worth at least P500,000.00 were sold for only P57,396.85. We do not comment on the consequences of the inadequacy because that is the very issue which confronts the court below in the pending case. It appearing, however, that the issuance of the writ of possession would and might work injustice because the petitioner might not be entitled thereto, we rule that it be withheld. WHEREFORE, the decision appealed from is hereby REVERSED. The order of the trial court dated November 18, 1983 is reinstated. SO ORDERED.

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