G.R. No.

L-20954

May 24, 1967

was inherited by me from my father who is now dead, Clemente Husain. I also declare that we have agreed that if the vendor shall have repaid to the vendee the aforementioned amount of P30.00 within six years from this date, the vendee or his heirs shall execute a document of repurchase in my favor, but if after the said term that he cannot return the aforementioned amount, this document shall be considered absolute and irrevocably consummated and in the meantime the vendee shall be the one to make use of the aforementioned land in accordance with the Ley Hipotecaria. In truth whereof, I have signed this document at Cabatuan, 9th of January, 1919. (Sgd.) TEODORO HUSAIN Signed in the presence of: (sgd.) TOMAS JILOCA (sgd.) EUSEBIO JOCANO

ELIAS GALLAR, plaintiff-appellee, vs. HERMENEGILDA HUSAIN, ET AL., defendants. BONIFACIO HUSAIN, defendant-appellant. D. E. Esmeralda for defendant-appellant. E. B. Treas for plaintiff-appellee. REGALA, J.: This is an appeal directly from the Court of First Instance. A hectare of rice land in Cabatuan, Iloilo, is the subject of this controversy. On January 9, 1919, Teodoro Husain, the owner, sold this land to Serapio Chichirita for P30, reserving for himself the right to repurchase it within six years. The deed of sale, written in Ilongo dialect, is contained in a private instrument, the English translation of which reads: I, Teodoro Husain, single, of legal age, native and resident of the Municipality of Cabatuan, Province of Iloilo, Philippine islands, because of the amount of Thirty Pesos (P30.00), Philippine currency, that was paid to me by Serapio Chichirita, married to Florentina Muyuela of legal age, native and resident of this Municipality of Cabatuan, Province of Iloilo, Philippine Islands, hereby declare that I am selling to the aforementioned vendee Serapio Chichirita, his heirs, and the heirs of the latter, my one parcel of rice land at Barrio Salacay of this Municipality of Cabatuan, and its descriptions are as follows: One parcel of rice land that has a seedling of one cavan of palay, legal measure, bounded on the North, land of Juan Alcayaga, on the East, land of Agapito Suero, on the South, land of Elias Gallar and on the West, land of Juan Mina. The said land

Teodoro Husain did not redeem the land, although shortly after the execution of the deed of sale, that is, on January 28, 1919, the vendee a retro, Chichirita, transferred his right to Graciana Husain, sister of the vendor a retro, in what purports to be a resale of the land. The following annotation appears on the reverse side of the deed of pacto de retro sale: NOTA: The amount stated above, was received by me from Graciana Husain and on my own voluntary will as redemption (gawad) of the same land, and because of this, I am transferring my rights as stated above to Graciana Husain in the presence of her husband Manuel Catalan, and in truth whereof I have signed at Cabatuan, 28 January 1919. Thumb marked Serapio Chichirita

(English translation) Graciana Husain subsequently transferred her rights to the land to appellee Elias Gallar in exchange for one cow. The transaction is recorded in a second note added on the reverse side of the deed of sale. The note reads. OTRA NOTA: The undersigned Graciana Husain, with the consent and knowledge of her husband Manuel Catalan, has agreed with Elias Gallar that all the rights that belongs to her, or she, Graciana Husain, is transferring to the said Elias Gallar in accordance with that stated in the original with the difference that this transfer is definite because it is their agreement in exchange of one head of cow described in the Certificate of Large Cattle existing in the Office of the Municipal treasurer of this town. And in truth whereof, Graciana Husain signed hereunder together with her husband Manuel Catalan. Cabatuan, April 2, 1919. (sgd.) MANUEL CATALAN (English translation) Possession of the land, together with the owner's duplicate of the certificate of title of Teodoro Husain, was delivered on the same occasion to appellee who since then has been in possession of the land. In an affidavit dated March 6, 1928, Chichirita confirmed the "redemption" of the land by Graciana Husain. In another affidavit of the same date, Graciana Husain for her part confirmed having subsequently sold the land to the appellee.1wph1.t In 1960, appellee asked the Cadastral Court for the issuance to him of a transfer certificate of title but the court dismissed his petition for (sgd.) GRACIANA HUSAIN

lack of jurisdiction. (The court, however, granted appellee's request for the amendment of the certificate of title by changing the surname of "Osaen" to "Husain.") He, therefore, filed this suit in the Court of Instance of Iloilo on October 10, 1960 to compel Hermenegilda and Bonifacio Husain, as heirs of Teodoro Husain, to execute a deed of conveyance in his favor so that he could get a transfer certificate of title. He also asked for damages. In their answer, Hermenegilda and Bonifacio Husain denied the sale and contended that the agreement between their father and Serapio Chichirita was that of a mortgage to secure a loan of P30. They claimed that the mortgage had been discharged on January 28, 1919 when Graciana Husain paid Teodoro Husain's debt to Chichirita. Hermenegilda and Bonifacio Husain likewise invoked prescription to bar appellee's action and asked for damages for the value of palay which they claimed they failed to receive on account of appellee's refusal to return possession of the land to them. The trial court found that after acquiring the land from Teodoro Husain, Serapio Chichirita sold it to Graciana Husain who in turn sold it to the appellee. Accordingly, it ordered the appellants to execute a deed of conveyance of the land in favor of the appellee on the authority of our ruling in Sapto v. Fabiana, G.R. No. L-11285, May 16, 1958. From this judgment, Bonifacio Husain brought this appeal to this Court. He contends that the land in question, which is identified as Lot No. 766 of the Cadastral Survey of Cabatuan, Iloilo and covered by Original Certificate of Title No. 4521 of the Register of Deeds of Iloilo, is not the same land which Teodoro Husain sold to Serapio Chichirita on January 9,1919. According to appellant he raised this question at the trial but the lower court passed it up in its decision. The records on appeal do not disclose that appellant made such a claim. About the only hint that he was questioning the identity of the land sold by means of the deed of sale of January 9, 1919 was an objection to a question during the direct examination of the appellee. Thus the following appears on pages 20-21 of the transcript of notes taken on July 5, 1961;

Q According to this Exhibit C, you bought the lot to in Exhibit A which is Lot 766 in question, was bought, by you for one cow. Do you know how much the worth of your cow during that time? ATTY. ESMERALDA [for defendants] Objection, Your Honor. The question is premised on Lot 766 but the document does not mention Lot 766. xxx COURT So your objection is that it lacks basis. ATTY. ESMERALDA It lacks basis, your Honor. Otherwise, the records do not show any allegation made much less evidence presented, by appellant of the supposed difference in the identity of the land sold in the deed of pacto de retro sale and the land now in question. Indeed, the only defense put up by appellant was that the pacto de retro sale was in reality a mortgage and that, at any rate, appellee's action was barred by the statute of limitations. In so doing, appellant joined issues with the appellee and he will not now be permitted to bring up new matters on appeal as this would constitute changing of theory so utterly unfair to the adverse 1 party that the lower court deliberately, perhaps, ignored the point. It may be added that an admission that the land described in the deed of sale and Lot No. 766 are one and the same is implicit in appellant's defense that the deed of sale did not express the true intention of the parties. Still it is argued that no action can be brought on the basis of the deed of sale with a right of repurchase because the land in question was redeemed a few days after it had been sold. While it is indeed xxx xxx

true that the first note written on the reverse side of the deed of sale speaks of the "redemption" of the land, there is no evidence to show that the vendee, Graciana Husain, was acting in behalf of her brother Teodoro Husain, in the exercise the latter's right of redemption. Now, unlike a debt which a third party may satisfy even against the 2 debtor's will the right of repurchase may be exercised only by the 3 vendor in whom the right is recognized by contract or by any person 4 to whom the right may have been transferred. Graciana Husain must, therefore, be deemed to have acquired the land in her own right, subject only to Teodoro Husain's right of redemption. As the new owner she had a perfect right to dispose of the land as she in fact did when she exchanged it for a cattle with the appellee. Now, when Teodoro Husain failed to redeem the land within the stipulated period, i.e., January 9, 1925, its ownership became consolidated in the appellee. True the successive sales are in a 5 private instrument, but they are valid just the same. By the delivery of possession of the land on April 2, 1919 the sale was consummated and title was transferred to the appellee. Indeed, this 6 action is not for specific performance; all it seeks is to quiet title, to remove the cloud cast on appellee's ownership as a result of appellant's refusal to recognize the sale made by their predecessor. And, as plaintiff-appellee is in possession of the land, the action is 7 imprescriptible. Appellant's argument that the action has prescribed would be correct if they were in possession as the action to quiet title would then be an action for recovery of real property which must be brought within the statutory period of limitation governing such 8 actions. Wherefore, the decision appealed from is affirmed, with costs against appellant. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur.

G.R. No. 141964

June 30, 2006

SPOUSES EDESITO and CONSORCIA RAGASA, Petitioners, vs. SPOUSES GERARDO and RODRIGA ROA and the EX-OFFICIO SHERIFF OF QUEZON CITY, Respondents. DECISION CORONA, J.: Edesito and Consorcia Ragasa filed a complaint against private respondents Gerardo and Rodriga Roa and the public respondent ex-officio sheriff of Quezon City founded on the following allegations: On May 10, 1989, plaintiffs [petitioners here] entered into a contract with Oakland Development Resources Corporation for the purchase in installments of a piece of property, with improvements, located at No. 06, Garnet St., Prater Village II, Diliman, Q.C. covered by TCT No. 27946 of the Registry of Deeds for Quezon City and more particularly described in a photocopy of TCT No. 27946 []; Immediately thereafter, plaintiffs took possession of the property covered by TCT No. 27946 of the Registry of Deeds for Quezon City and resided thereat together with their relatives who continued to occupy the same whenever the plaintiffs would leave for Italy where they both worked. Hence, from May of 1989 up to the present date, plaintiffs were in continuous and notorious possession of the property covered by TCT No. 27946 of the Registry of Deeds for Quezon City to the exclusion of others and in the concept of an owner; In March of 1992, plaintiffs were able to fully pay for the agreed purchase price of the property covered by TCT No. 27946 of the Registry of Deeds for Quezon City and accordingly, a Deed of Absolute Sale dated March 12, 1992 was executed by and between Oakland Development Resources Corporation [] and the original owners copy of TCT No. 27946 of the Registry of Deeds for Quezon City accordingly turned over to them;
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However, despite the execution of the Deed of Absolute Sale, Oakland Development Resources Corporation failed to cause the transfer of title to plaintiffs. On the part of plaintiffs, all the while they thought that the Deed of Absolute Sale and possession of the original of the owners copy of TCT No. 27946 of Registry of Deeds for Quezon City was more than sufficient to protect their rights and interests over the property; Sometime March of 1999, during one of the trips of plaintiff Consorcia Ragasa to the Philippines from Italy, upon learning that Oakland Development Resources Corporation was no longer functional as a corporate entity, she decided to cause the transfer of registration of TCT No. 27946 of Registry of Deeds for Quezon City herself since the vendor thereof was apparently in no position to undertake the same; She was thus surprised to learn from the Registry of Deeds for Quezon City that on April 14, 1995, the property in question was sold by defendant Ex-Officio Sheriff of Quezon City [a respondent here] to defendants Sps. Roa [respondents here] as the highest bidder for the price and consideration of P511,000.00 as shown in the Sheriffs Final Deed of Sale []. xxx xxx xxx The levy on attachment and the execution sale undertaken by the Ex-Officio Sheriffs Office of Quezon City is clearly illegal there being no notice given by said individual to the occupants of the property in question. Furthermore, a casual perusal of the Sheriffs Deed of Sale will reveal that the execution price of P511,000.00 is grossly inadequate to pay for real properties listed therein with fair market values conservatively estimated at P3,000,000.00 The case was raffled to Branch 220 of the Quezon City Regional Trial Court (RTC) and was docketed as Civil Case No. Q-99-37908.
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Instead of filing an answer, private respondents moved for the dismissal of the complaint on the grounds of prescription and laches. 3 In an order dated February 3, 2000, the RTC granted the motion. Characterizing the suit as an action "upon an injury to the rights of 4 the plaintiff" which, according to Article 1146 of the Civil Code, must be filed within four years, the RTC held that petitioners action was barred by prescription for having been filed more than four years after the registration of the execution sale. Seeking a reversal of the trial courts order dismissing their complaint, petitioners proceeded forthwith to this Court with the 5 present petition for review on certiorari raising only a pure question 6 of law. We grant the petition. The trial courts order of dismissal was predicated on the theory that the suit petitioners commenced was an "action upon an injury to their rights" contemplated in Article 1146 of the Civil Code. That premise was erroneous. A reading of the allegations in petitioners complaint reveals that the action was essentially one for quieting of title to real property under Article 476 of the Civil Code which states: Whenever there is a cloud on title to real property or any interest therein, by reason of any instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but is in truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an action may be brought to remove such cloud or to quiet the title. An action may also be brought to prevent a cloud being cast upon title to real property or any interest therein. To make out an action to quiet title under the foregoing provision, the initiatory pleading has only to set forth allegations showing that (1) 7 the plaintiff has "title to real property or any interest therein" and (2) the defendant claims an interest therein adverse to the plaintiffs arising from an "instrument, record, claim, encumbrance, or proceeding which is apparently valid or effective but is in truth and in

fact invalid, ineffective, voidable, or unenforceable." Thus, the averments in petitioners complaint that (1) they acquired ownership of a piece of land by tradition or delivery as a consequence of sale and (2) private respondents subsequently purchased the same piece of land at an allegedly void execution sale were sufficient to make out an action to quiet title under Article 476. This being the case, Article 1146 (which refers to actions "upon an 9 injury to the rights of the plaintiff" and "upon a quasi-delict") did not apply. Rather, considering petitioners allegation in their complaint that "from May of 1989 up to the present date, plaintiffs [had been] in continuous and notorious possession of the propertyto the 10 exclusion of others and in the concept of owner[s]" an assertion private respondents never bothered to dispute our ruling in Sapto 11 v. Fabiana should apply: [I]t is an established rule of American jurisprudence (made applicable 12 in this jurisdiction by Art. 480 of the New Civil Code) that actions to quiet title to property in the possession of the plaintiff are imprescriptible. "The prevailing rule is that the right of a plaintiff to have his title to land quieted, as against one who is asserting some adverse claim or lien thereon, is not barred while the plaintiff or his grantors remain in actual possession of the land, claiming to be owners thereof, the reason for this rule being that while the owner in fee continues liable to an action, proceeding, or suit upon the adverse claim, he has a continuing right to the aid of a court of equity to ascertain and determine the nature of such claim and its effect on his title, or to assert any superior equity in his favor. He may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right. But the rule that the statute of limitations is not available as a defense to an action to remove a cloud from title can only be invoked by a complain[ant] when he is in possession. One who claims property which is in the possession of another must, it seems, invoke his remedy within the statutory period." (citations 13 omitted) Accordingly, petitioners action was not subject to prescription.

WHEREFORE, the petition is GRANTED. The February 3, 2000 order of the Regional Trial Court, Branch 220, Quezon City dismissing petitioners complaint is hereby REVERSED and SET ASIDE. Let this case be REMANDED to the court a quo for further proceedings. SO ORDERED.

G.R. No. 167848

April 27, 2007

BANK OF COMMERCE, Petitioner, vs. SPS. PRUDENCIO SAN PABLO, JR., and NATIVIDAD O. SAN PABLO, Respondents. DECISION

RENATO C. CORONA Associate Justice WE CONCUR: REYNATO S. PUNO Acting Chief Justice Chairperson (On Official Business) ANGELINA SANDOVALGUTIERREZ Associate Justice

CHICO-NAZARIO, J.: Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by petitioner Bank of Commerce 1 seeking to reverse and set aside the Decision of the Court of 2 Appeals dated 10 September 2004, and its Resolution dated 10 March 2005. The Court of Appeals, in its assailed Decision and 3 Resolution reversed the Decision of the Regional Trial Court (RTC) of Mandaue City, Branch 56 dated 25 June 2002, which affirmed the 4 Decision, of the Municipal Trial Court (MTC) of Mandaue City, Branch 2, dismissing for lack of merit the complaint against Melencio Santos (Santos) and the Bank of Commerce filed by the respondent Spouses Prudencio (Prudencio) and Natividad (Natividad) San Pablo for the declaration of nullity of the Special Power of Attorney (SPA) and cancellation of Real Estate Mortgage. The dispositive portion of the Court of Appeals Decision reads: WHEREFORE, the Petition for review is GRANTED and the assailed Decision and Order of the Regional Trial Court, Branch 56, Mandaue City, Cebu, in Civil Case 4135-A must be as they are hereby, SET ASIDE. We therefore declare the so-called Special Power of Attorney, the Deed of Real Estate Mortgage and the Foreclosure proceedings to be NULL and VOID ab initio. And, in the meantime, if the subject Lot No. 1882-C-1-A covered by Transfer Certificate of Title No. (26469)-7561 has been sold and a new transfer certificate of title had been issued, let the Registry of deeds of Mandaue City cancel the new title and issue a new one in favor of Natividad O. San Pablo, unless the new title holder is a purchaser in good faith and for value. In the latter case, respondent Bank of Commerce and respondent Melencio G. Santos are hereby held jointly and severally

ADOLFO S. AZCUNA Asscociate Justice

CANCIO C. GARCIA Associate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Acting Chief Justice

liable to petitioners for the fair market value of the property as of the date of finality of this decision. Moreover, private respondents are likewise held jointly and severally liable to petitioners P50,000.00 as moral damages, P25,000.00 as exemplary damages, P25,000.00 plus P1,000.00 per count appearance as attorneys fees and P10,000.00 as litigation expenses. No costs. The antecedent factual and procedural facts of this case are as follows: On 20 December 1994, Santos obtained a loan from Direct Funders Management and Consultancy Inc., (Direct Funders) in the amount 5 of P1,064,000.40. As a security for the loan obligation, Natividad executed a SPA in favor of Santos, authorizing the latter to mortgage to Direct Funders a paraphernal real property registered under her name and covered 7 by Transfer Certificate of Title (TCT) No. (26469)-7561 (subject property). In the Deed of Real Estate Mortgage executed in favor of Direct Funders, Natividad and her husband, Prudencio, signed as the comortgagors of Santos. It was, however, clear between the parties that the loan obligation was for the sole benefit of Santos and the spouses San Pablo merely signed the deed in order to accommodate the former. The aforesaid accommodation transaction was made possible because Prudencio and Santos were close friends and business associates. Indeed, Prudencio was an incorporator and a member of the Board of Directors of Intergems Fashion Jewelries Corporation (Intergems), a domestic corporation in which Santos acted as the President. Sometime in June 1995, the spouses San Pablo received a letter from Direct Funders informing them that Santos failed to pay his loan obligation with the latter. When confronted with the matter, Santos promised to promptly settle his obligation with Direct Funders, which he actually did the following month.
8 6

Upon learning that Santos debt with Direct Funders had been fully settled, the spouses San Pablo then demanded from Santos to turn over to them the TCT of the subject property but the latter failed to do so despite repeated demands. Such refusal prompted the spouses San Pablo to inquire as to the status of the TCT of the subject property with the Register of Deeds of Mandaue City and to their surprise, they discovered that the property was again used by Santos as collateral for another loan obligation he secured from the Bank of Commerce. As shown in the annotation stamped at the back of the title, the spouses San Pablo purportedly authorized Santos to mortgage the subject property to the Bank of Commerce, as evidenced by the SPA allegedly signed by Natividad on 29 March 1995. It was further shown from the annotation at the back of the title that the spouses San Pablo signed a Deed of Real Estate Mortgage over the subject 9 property in favor of Bank of Commerce, which they never did. In order to free the subject property from unauthorized encumbrances, the spouses San Pablo, on 22 December 1995, filed a Complaint seeking for the Quieting of Title and Nullification of the SPA and the deed of real estate mortgage with the prayer for damages against Santos and the Bank of Commerce before the MTC of Mandaue City, Branch 2. In their complaint, the spouses San Pablo claimed that their signatures on the SPA and the Deed of Real Estate Mortgage allegedly executed to secure a loan with the Bank of Commerce were forged. They claimed that while the loan with the Direct Funders was obtained with their consent and direct participation, they never authorized the subsequent loan obligation with the Bank of Commerce. During the pendency of the case, the Bank of Commerce, for nonpayment of the loan, initiated the foreclosure proceedings on the strength of the contested Deed of Real Estate Mortgage. During the auction sale, the Bank of Commerce emerged as the highest bidder and thus a Certificate of Sale was issued under its name.

Accordingly, the spouses San Pablo amended their complaint to 10 include the prayer for annulment of the foreclosure sale. In his Answer, Santos countered that the loan with the Bank of Commerce was deliberately resorted to with the consent, knowledge and direct participation of the spouses San Pablo in order to pay off the obligation with Direct Funders. In fact, it was Prudencio who caused the preparation of the SPA and together with Santos, they went to the Bank of Commerce, Cebu City Branch to apply for the loan. In addition, Santos averred that the spouses San Pablo were receiving consideration from Intergems for extending accommodation transactions in favor of the latter. For its part, Bank of Commerce filed an Answer with Compulsory 12 Counterclaim, alleging that the spouses San Pablo, represented by their attorney-in-fact, Santos, together with Intergems, obtained a loan in the amount of P1,218,000.00. It denied the allegation advanced by the spouses San Pablo that the SPA and the Deed of Real Estate Mortgage were spurious. Since the loan already became due and demandable, the Bank of Commerce sought the foreclosure of the subject property. After the Pre-Trial Conference, trial on the merits ensued. During the trial, Anastacio Barbarona, Jr., the Manager of the Bank of Commerce, Cebu City Branch, testified that the spouses San Pablo personally signed the Deed of Real Estate Mortgage in his 13 presence. The testimony of a document examiner and a handwriting expert, however, belied this claim. The expert witness, after carefully examining the loan documents with the Bank of Commerce, attested that the signatures of the spouses San Pablo on 14 the SPA and the Deed of Real Estate Mortgage were forged. On 10 July 2001, the MTC rendered a Decision, dismissing the complaint for lack of merit. The MTC declared that while it was proven that the signatures of the spouses San Pablo on the loan documents were forged, the Bank of Commerce was nevertheless in good faith. The dispositive portion of the decision reads:
15 11

WHEREFORE, foregoing considered, the instant complaint is hereby ordered DISMISSED for lack of merit. The dismissal of this case is without prejudice to the filing of the appropriate criminal action against those responsible for the falsification of the questioned special power of attorney and deed of real estate mortgage. Aggrieved, the spouses San Pablo appealed the adverse decision to the RTC of Mandaue City, Branch 56, which, in turn, affirmed the 16 unfavorable ruling of the MTC in its Decision promulgated on 25 June 2002. The decretal part of the said decision reads: WHEREFORE, in view of the foregoing, the Court hereby resolves to affirm the assailed Decision. Similarly ill-fated was the Motion for Reconsideration filed by the 17 spouses San Pablo which was denied by the RTC for lack of merit. Unyielding, the spouses San Pablo elevated the matter before the Court of Appeals through a Petition for Review under Rule 42 of the 18 Revised Rules of Court, assailing the adverse decisions of the MTC and RTC. In a Decision dated 10 September 2004, the appellate court granted the petition filed by the spouses San Pablo and reversed the decisions of the MTC and RTC. In setting aside the rulings of the lower courts, the Court of Appeals ruled that since it was duly proven that the signatures of the spouses San Pablo on the loan documents were forged, then such spurious documents could never become a valid source of title. The mortgage contract executed by Santos over the subject property in favor of Bank of Commerce, without the authority of the spouses San Pablo, was therefore unenforceable, unless ratified. The Bank of Commerce is now before this Court assailing the 20 adverse decision rendered by the Court of Appeals. For the resolution of this Court are the following issues: I.
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WHETHER OR NOT THE MTC HAS JURISDICTION TO HEAR THE CASE FILED BY THE SPOUSES SAN PABLO. II. WHETHER OR NOT THE FORGED SPA AND SPECIAL POWER OF ATTORNEY COULD BECOME A VALID SOURCE OF A RIGHT TO FORECLOSE A PROPERTY. III. WHETHER OR NOT THE AWARDS OF DAMAGES, ATTRONEYS FEES AND LITIGATION EXPENSES ARE PROPER IN THE INSTANT CASE. In questioning the adverse ruling of the appellate court, the Bank of Commerce, for the first time in more than 10 years of pendency of the instant case, raises the issue of jurisdiction. It asseverates that since the subject matter of the case is incapable of pecuniary estimation, the complaint for quieting of title and annulment of the SPA, the Deed of Real Estate Mortgage, and foreclosure proceedings should have been originally filed with the RTC and not with the MTC. The decision rendered by the MTC, which did not acquire jurisdiction over the subject matter of the case, is therefore void from the very beginning. Necessarily, the Court of Appeals erred in giving due course to the petition when the tribunal originally trying the case had no authority to try the issue. We do not agree. Upon cursory reading of the records, we gathered that the case filed by the spouses San Pablo before the MTC was an action for quieting of title, and nullification of the SPA, Deed of Real Estate Mortgage, and foreclosure proceedings. While the body of the complaint consists mainly of allegations of forgery, however, the primary object of the spouses San Pablo in filing the same was to effectively free the title from any unauthorized lien imposed upon it.

Clearly, the crux of the controversy before the MTC chiefly hinges on the question of who has the better title over the subject property. Is it the spouses San Pablo who claim that their signatures on the loan document were forged? Or is it the Bank of Commerce which maintains that the SPA and the Deed of Real Estate Mortgage were duly executed and, therefore, a valid source of its right to foreclose the subject property for non-payment of loan? An action for quieting of title is a common law remedy for the removal of any cloud upon or doubt or uncertainty with respect to title to real property. As clarified by this Court in Baricuatro, Jr. v. Court of 21 Appeals : x x x Originating in equity jurisprudence, its purpose is to secure " an adjudication that a claim of title to or an interest in property, adverse to that of the complainant, is invalid, so that the complainant and those claiming under him may be forever afterward free from any danger or hostile claim. In an action for quieting of title, the competent court is tasked to determine the respective rights of the complainant and other claimants, " not only to place things in their proper place, to make the one who has no rights to said immovable respect and not disturb the other, but also for the benefit of both, so that he who has the right would see every cloud of doubt over the property dissipated, and he could afterwards without fear introduce the improvements he may desire, to use, and even to abuse the property as he deems best (citation omitted). Such remedy may be availed of under the circumstances enumerated in the Civil Code: "ART. 476. Whenever there is a cloud on title to real property or any interest therein, by reason of any instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but is in truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an action may be brought to remove such cloud or to quiet the title, An action may also be brought to prevent a cloud from being cast upon title to real property or any interest therein."

The mortgage of the subject property to the Bank of Commerce, annotated on the Spouses San Pablos TCT, constitutes a cloud on their title to the subject property, which may, at first, appear valid and effective, but is allegedly invalid or voidable for having been made without their knowledge and authority as registered owners. We thus have established that the case filed by the spouses San Pablo before the MTC is actually an action for quieting of title, a real action, the jurisdiction over which is determined by the assessed value of 22 the property. The assessed value of the subject property located in Mandaue City, as alleged in the complaint, is P4,900.00, which aptly falls within the jurisdiction of the MTC. According to Section 33 of Batas Pambansa Blg. 129, as amended, otherwise known as The Judiciary Reorganization Act of 1980: Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in Civil Cases. Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise: xxxx (3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of, real property, or any interest therein where the assessed value of the property or interest therein does not exceed twenty thousand pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed value does not exceed Fifty thousand pesos (P50,000.0) exclusive of interest, damages of whatever kind, attorneys fees litigation expenses and costs: Provided, That in cases of land not declared for taxation purposes, the value of such property shall be determined by the assessed value of the adjacent lots. (As amended, R.A. No. 7691.) Even granting for the sake of argument that the MTC did not have jurisdiction over the case, the Bank of Commerce is nevertheless estopped from repudiating the authority of the court to try and decide the case after having actively participated in the proceedings before it and invoking its jurisdiction by seeking an affirmative relief therefrom.

As we have explained quite frequently, a party may be barred from raising questions of jurisdiction when estoppel by laches has set in. Estoppel by laches is failure or neglect for unreasonable and unexplained length of time to do what, by exercising due diligence, ought to have been done earlier, warranting the presumption that the party entitled to assert it has either abandoned it or has acquiesced to the correctness or fairness of its resolution. This doctrine is based on grounds of public policy which, for the peace of the society, requires the discouragement of stale claims, and, unlike the statute of limitations, is not a mere question of time but is principally an issue of inequity or unfairness in permitting a right or claim to be 23 enforced or espoused. In Soliven v. Fastforms Philippines, Inc., we thus ruled: While it is true that jurisdiction may be raised at any time, "this rule presupposes that estoppel has not supervened." In the instant case, respondent actively participated in all stages of the proceedings before the trial court and invoked its authority by asking for an affirmative relief. Clearly, respondent is estopped from challenging the trial courts jurisdiction, especially when the adverse judgment is 24 rendered. Participation in all stages before the trial court, that included invoking its authority in asking for affirmative relief, effectively bars the party 25 by estoppel from challenging the courts jurisdiction. The Court frowns upon the undesirable practice of a party participating in the proceedings and submitting his case for decision and then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction 26 when adverse. We now proceed to resolve the issue of whether a forged SPA or Deed of Real Estate Mortgage could be a source of a valid title. Settled is the fact, as found by the MTC and as affirmed by both the RTC and the Court of Appeals, that the SPA and the Deed of Real Estate Mortgage had been forged. Such fact is no longer disputed by the parties. Thus, the only issue remaining to be threshed out in the instant petition is whether the Bank of Commerce is a mortgagee in good faith. The MTC and the RTC held that the Bank of Commerce

acted in good faith in entering into the loan transaction with Santos, while the Court of Appeals, on the other hand, ruled otherwise. The Bank of Commerce posits that it is a mortgagee in good faith and therefore entitled to protection under the law. It strenuously asserts that it is an innocent party who had no knowledge that the right of Santos to mortgage the subject property was merely simulated. In Cavite Development Bank v. Spouses Lim, the doctrine of mortgagee in good faith, thus:
27

degree of prudence be exercised by the mortgagee. As we have 28 enunciated in the case of Abad v. Guimba: x x x While one who buys from the registered owner does not need to look behind the certificate of title, one who buys from one who is not a registered owner is expected to examine not only the certificate of title but all the factual circumstances necessary for [one] to determine if there are any flaws in the title of the transferor, or in [the] capacity to transfer the land. Although the instant case does not involve a sale but only a mortgage, the same rule applies inasmuch as the law itself includes a mortgagee in the term "purchaser." This principle is applied more strenuously when the mortgagee is a bank or a banking institution. In the case of Cruz v. Bancom Finance Corporation, We ruled: Respondent, however, is not an ordinary mortgagee; it is a mortgagee-bank. As such, unlike private individuals, it 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 29 operations. We never fail to stress the remarkable significance of a banking institution to commercial transactions, in particular, and to the countrys economy in general. The banking system is an indispensable institution in the modern world and plays a vital role in the economic life of every civilized nation. Whether as mere passive entities for the safekeeping and saving of money or as active instruments of business and commerce, banks have become an ubiquitous presence among the people, who have come to regard 30 them with respect and even gratitude and, most of all, confidence. Consequently, the highest degree of diligence is expected, and high 31 standards of integrity and performance are even required, of it. The Bank of Commerce clearly failed to observe the required degree of caution in ascertaining the genuineness and extent of the authority

the Court explained

There is, however, a situation where, despite the fact that the mortgagor is not the owner of the mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale arising there from are given effect by reason of public policy. This is the doctrine of "the mortgagee in good faith" based on the rule that all persons dealing with property covered by the Torrens Certificates of Title, as buyers or mortgagees, are not required to go beyond what appears on the face of the title. The public interest in upholding the indefeasibility of a certificate of title, as evidence of lawful ownership of the land or of any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied upon what appears on the face of the certificate of title. Indeed, a mortgagee has a right to rely in good faith on the certificate of title of the mortgagor of the property given as security, and in the absence of any sign that might arouse suspicion, the mortgagee has no obligation to undertake further investigation. This doctrine presupposes, however, that the mortgagor, who is not the rightful owner of the property, has already succeeded in obtaining Torrens title over the property in his name and that, after obtaining the said title, he succeeds in mortgaging the property to another who relies on what appears on the title. This is not the situation in the case at bar since Santos was not the registered owner for he merely represented himself to be the attorney-in-fact of the spouses San Pablo. In cases where the mortgagee does not directly deal with the registered owner of real property, the law requires that a higher

of Santos to mortgage the subject property. It should not have simply relied on the face of the documents submitted by Santos, as its undertaking to lend a considerable amount of money required of it a greater degree of diligence. That the person applying for the loan is other than the registered owner of the real property being mortgaged should have already raised a red flag and which should have induced the Bank of Commerce to make inquiries into and confirm Santos authority to mortgage the Spouses San Pablos property. A person who deliberately ignores a significant fact that could create suspicion in an otherwise reasonable person is not an innocent 32 purchaser for value. Having laid that the bank of Commerce is not in good faith necessitates us to award moral damages, exemplary damages, attorneys fees and costs of litigation in favor of the spouses San Pablo. Moral damages are not awarded to penalize the defendant but to compensate the plaintiff for the injuries he may have 33 suffered. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the 34 circumstances, such damages are justly due. In the instant case, we find that the award of moral damages is proper. The Bank of Commerce, in allowing Santos to secure a loan out of the property belonging to the spouses San Pablo, without taking the necessary precaution demanded by the circumstances owing to the public policy imbued in the banking business, caused injury to the latter which calls for the imposition of moral damages. As for the award of exemplary damages, we deem that the same is proper for the Bank of Commerce was remiss in its obligation to inquire into the veracity of Santos authority to mortgage the subject property, causing 35 damage to the spouses San Pablo. Finally, we rule that the award of attorneys fees and litigation expenses is valid since the spouses San Pablo were compelled to litigate and thus incur expenses in 36 order to protect its rights over the subject property. Prescinding from the above, we thus rule that the forged SPA and Deed of Real Estate Mortgage is void ab initio. Consequently, the foreclosure proceedings conducted on the strength of the said SPA and Deed of Real Estate Mortgage, is likewise void ab initio. Since the Bank of Commerce is not a mortgagee in good faith or an innocent purchaser for value on the auction sale, it is not entitled to

the protection of its rights to the subject property. Considering further that it was not shown that the Bank of Commerce has already transferred the subject property to a third person who is an innocent purchaser for value (since no intervention or third-party claim was interposed during the pendency of this case), it is but proper that the subject property should be retained by the Spouses San Pablo. WHEREFORE, in view of the foregoing, the instant petition is DENIED. The Decision dated 10 September 2004 rendered by the Court of Appeals in CA-G.R. SP No. 76562, is hereby AFFIRMED. The SPA, the Deed of Real Estate Mortgage, and the Foreclosure Proceedings conducted in pursuant to said deed, are hereby declared VOID AB INITIO. The Register of Deeds of Mandaue City is hereby DIRECTED to cancel Entry Nos. 9089-V.9-D.B and 9084V.9-D.B annotated on TCT No.-(26469)-7561 in the name of Natividad Opolontesima San Pablo. The Bank of Commerce is hereby ORDERED to pay the spouses San Pablo P50,000.00 as moral damages, P25,000.00 as exemplary damages, P20,000.00 as attorneys fees and P20,000.00 as litigation expenses. Cost against the petitioner. SO ORDERED. MINITA V. CHICO-NAZARIO Associate Justice

G.R. No. L-14429

June 30, 1962

RAMON MERCADO, BASILIA MERCADO joined by her husband, FRANCISCO RONQUILLO, plaintiffs-appellants, vs. PIO D. LIWANAG, defendant-appellee. Patricio D. Senador and Ricardo D. Galano for plaintiffs-appellants. D. B. Melliza and D. M. Gangoso for defendant-appellee. MAKALINTAL, J.: The present appeal, taken by the plaintiff from the decision of the Court of First Instance of Rizal (Quezon City), is before us on a certification by the Court of Appeals, the questions involved being purely legal. The case was submitted to the trial court upon the following stipulation of facts: 1. That the complaint filed by the plaintiffs against the defendant seeks to annul a Deed of Sale on the ground of fraud and on the provisions of Article 493 of the Civil Code. 2. That on July 14, 1956, in the City of Manila, Philippines, the plaintiff Ramon Mercado and the defendant Pio D. Liwanag executed a Deed of Sale, photostat copy of which is attached hereto marked as Annex "A" and forming an integral hereof, covering a divided half and described in meter and bounds, or an area of 2,196 square meters at P7.00 per square meter or for a total amount of P15,372.00, of a parcel of land situated at Kangkong, Quezon City, covered Transfer Certificate of Title No. 20805 of the Register of Deeds for the province of Rizal, now Quezon City: 3. That the said T.C.T. No. 20805 containing an area of 4,392 square meters, is issued in the name of the plaintiffs Ramon Mercado and Basilia Mercado as co-owners PRO-INDIVISO, and the sale was without the knowledge and consent of plaintiff Basilia Mercado;

4. That out of the total area of 4,392 square meters, an area consisting of 391 square meters was expropriated by the National Power Corporation sometime in December 1953 at a price of P10.00 per square meter, Civil Case No. Q-829 (Eminent Domain) of the Court of First Instance of Rizal, Quezon City Branch, entitled "National Power Corporation, plaintiff, versus Brigido Almodoban, et als., defendants," but this fact of expropriation came to the knowledge of the defendant Pio D. Liwanag upon the registration of the Deed of Sale Annex "A". . 5. That pursuant to the Deed of Sale Annex "A" T.C.T. No. 32757 was issued in the name of Pio Liwanag and Basilia photostat copy of which is hereto attached and marked as Annex "B". 6. That defendant submits the receipt signed by plaintiff Ramon Mercado dated July 14, 1956 photostat copy of which is attached hereto and marked as Annex "C" and promissory note of the same date for P10,000.00, photostat copy of which is attached hereto and marked is Annex "D" which are both self-explanatory, but plaintiff Ramon Mercado disclaims payment and receipt of such check and promissory note, the check being uncashed and is still in the possession of Atty. Eugenio de Garcia; 7. That plaintiffs and defendant respectfully submit for resolution of this Honorable Court the issue of whether or not the Deed of Sale Annex "A" court be annulled based in the foregoing facts in relation to Article 493 of the Civil Code, setting aside all other issues in the pleadings. Upon the issue thus presented the trial court held that under Article 493 of the Civil Code the sale in question was valid and so dismissed the complaint, without costs. This ruling is now assailed as erroneous. Article 493 provides: Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the

effect of the alienation or the mortgage, with respect to the coowners, shall be limited to the portion which may be alloted to him in the division upon the termination of the co-ownership. Appellants except to the application of this provision in this case for the reason that in the deed of sale sought to be annulled the vendor disposed of a divided and determinate half of the land under co-ownership. The argument, as far as it goes, seems to be tenable. What a co-owner may dispose of under Article 493 is only his undivided aliquot share, which shall be limited to the portion which may be allotted to him upon the termination of the co-ownership. He has no right to divide the property into parts and then convey one part by metes and bounds. Lopez vs. Ilustre, 5 Phil. 567; Gonzales, et al. vs. Itchon, et al., 47 O.G. 6290; Manresa, Vol. 3, 7th ed. p. 630. The pertinent recitals in the disputed deed of sale read: I hereby sell, transfer and convey absolutely and irrevocably unto said Pio D. Liwanag, his heirs, successors, and assigns my rights, title and interest on my chosen portion of the above described property which consist of one-half of aforesaid ownership bounded on the West by Pacifico Gahudo, on the North by Hacienda de Piedad and on the South by Circumferential Road, consisting of 50 meters more or less frontal length along Circumferential Road, and with a total area of 2,196 square meters as indicated in Co-owners Transfer Certificate of Title No. 20805. Nevertheless, upon registration of the sale and cancellation of transfer certificate of title No. 20805 in the names of the previous co-owners, the new transfer certificate that was issued (No. 32757) did not reproduce the description in the instrument but carried the names of appellee Pio D. Liwanag and Basilia Mercado as "co-owners pro-indiviso." There is no suggestion by any of the parties that this new certificate of title is invalid, irregular or inaccurate. There is no prayer that it be canceled. As far as Basilia Mercado is concerned she retains in all their integrity her rights as co-owner which she had before the sale, and consequently, she has no cause to complain. Much less has Ramon Mercado, for it was he who was responsible for whatever indicia there may be in the deed of sale that a determinate portion of the property was being sold, as shown by the second

paragraph thereof, quoted without contradiction in appellee's brief as follows: That the aforesaid Transfer Certificate of Title was originally in my name, but was split into two equal parts by virtue of my desire to donate to my sister-in-law Juana Gregorio an equal half thereof with the understanding that I as donor would have the absolute power to choose from the property owned in common that part which I would like to segregate for myself or my heir and assigns. And of course appellee himself not only does not challenge the new certificate of title, wherein he appears as co-owner of an undivided one-half share, but precisely relies upon it for his defense in this action. The title is the final and conclusive repository of the rights of the new coowners. The question of whether or not the deed of sale should be annulled must be considered in conjunction with the title issued pursuant thereto. Since, according to this title, what appellee acquired by virtue of the sale is only an undivided half-share of the property, which under the law the vendor Ramon Mercado had the absolute right to dispose of, the trial court committed no error in dismissing the action. The end-result of the transaction is in accordance with Article 493 of the Civil Code. 1wph1.t The other point raised by appellants refers to the statement in the dispositive portion of the decision appealed from that "the stipulation with regards to the deed of sale based on the ground of fraud is insufficient for all purposes and besides, no proof showing the allegation of such fraud exists in the accord." It is contended that the trial court erred in making such statement, the same being contrary to the stipulation in which the parties expressly eliminated the issue of fraud. From the entire context of the decision, however, it can be gathered that the case was not decided on the basis of the said issue. In any event, even if the court did err in considering the question of fraud in spite of the stipulation, the error is not a prejudicial one. As far as the dismissal of the actions concerned, it makes no difference whether fraud has not been proven or fraud has been abandoned as an issue by express agreement. WHEREFORE, the decision appealed from is affirmed, with costs against appellants in this instance.

G.R. No. 108952 January 26, 1995 NILO A. MERCADO, petitioner, vs. THE COURT OF APPEALS AND AUREA A. MERCADO, respondents.

university when she comes back. She was not given any receipt for the money handed to her brother. Sometime in 1967, she was informed through letters received from the Philippines coming from her mother and sister that her brother Nilo had already purchased a property located at No. 181 Esteban Abada Street, Quezon City. She never saw the title of the property covered by TCT No. 123560. In 1972, her brother went to the United States and visited her in her house at Jersey City. On this occasion, she asked her brother about the purchase of the property. Her brother responded telling her not to worry for he would give her a paper with respect to that property. In 1978, her brother Nilo sent through their mother an affidavit (Exh. A) wherein Nilo admitted the existence of co-ownership over the property. Through letters, she communicated with her brother Nilo regarding the subject property. In one of those letters (Exh. B), she told her brother to pay her for the lot. In two other letters (Exh. C & D), the same property was the subject matter. She did not receive any reply so she started calling him through the telephone, insisting on the partition of the property because she committed the land as payment to the contractor, Mr. Escora, who constructed her school building in Davao City. Nilo A. Medina (sic), defendant herein, is 57 years old, a graduate of law UP class 1957 and a businessman by occupation. He testified that the plaintiff is his sister. In 1967, he decided to buy a house and lot worth P95,000.00 located at 181 Esteban Abada Street, Quezon City from the spouses Francisco Vargas

PUNO, J.: This is a petition for certiorari to review the Decision of the respondent Court of Appeals dated August 30, 1991 declaring private respondent a co-owner of the lot covered by TCT No. 123560 1 of the Register of Deeds of Quezon City. The facts are well established in the disputed Decision, viz: Plaintiff Aurea A. Mercado seeks the partition and reconveyance to her of one-half of a real property located at No. 181 Esteban Abada Street, Quezon City, described as Lot 17-A, Block 40 in Transfer Certificate of Title No. 123560 of the Registry of Deeds of Quezon City, containing an area of P1,000 square meters, more or less and registered in the name of defendant Nilo A. Mercado. Plaintiff Aurea A. Mercado is 69 years old, still single, a professor, holder of a degree in Ph. D. Data of Philosophy, Research, Statistics and Measurement from the University of Maryland, U.S.A and used to work in the United States. She is a legitimate sister of Nilo A. Mercado. Before she left for the United States in 1964 where she stayed up to 1984, she gave her brother University of the Philippines. She wanted a property near U.P because she planned to teach in the said

and Teresita Vargas. Out of his personal savings, money borrowed from his mother and sister Esmeralda and P20,000.00 borrowed from his sister Aurea, he was able to pay the downpayment of P38,000.00 to spouses Vargas. It was only upon his tender of the downpayment that the spouses executed a Deed of Conditional Sale (Exh. 5). He applied for a housing loan with the Social Security System (System for short) and upon its approval by the System, a Deed of Absolute Sale was executed between him and the spouse Vargas (Exhs. 1, 2, 3, 4 & 6). He paid the amortization for the loan (Exh. 11). However, due to financial reverses, the property was foreclosed by the System (Exh. 9). Fortunately, he was able to redeem the property from the System in 1980 out of the insurance proceeds of his burned property in Davao. A certificate of redemption (Exh. 10) was issued to him and he caused the cancellation of the mortgage with the System. As proof of his ownership, he has the tax declaration (Exh. 8), Transfer Certificate of Title No. 123560 in his name (Exh. 7) and real property tax bill receipts evidencing payment of real estate taxes on the property (Exhs. 13, 13-a). The petition for certiorari was initially denied by this Court in its Resolution on May 17, 1993 for non-compliance with our Revised Circular 1-88, for raising factual issues and for lack of reversible error 3 committed by the respondent Court of Appeals. The Court also denied with finality petitioner's Motion for Reconsideration in a Resolution dated July 14, 1993. The motion raised no substantial argument and the Court found no compelling reason to grant it.
2

On August 23, 1993, however, petitioner filed a Motion for Leave to file a Second Motion for Reconsideration. He argued, among others, that even assuming the correctness of the factual findings of the respondent Court of Appeals, still, there could not be any coownership of the subject property. The Court required private respondent to comment and, in its Resolution of August 22, 1994, granted the Motion "in the interest of justice and considering the crucial importance of the issue of extinguishment of co-ownership" 4 and gave due course to the petition. Extensive memoranda were then filed by the petition. We find no merit in the petition. We sustain the finding of the respondent court that the subject property is co-owned by petitioner and private respondent. This finding is based on the admission made by petitioner himself in his Affidavit (Exh. "A") dated March 2, 1973, which states: AFFIDAVIT That I, NILO A. MERCADO, of legal age, married, Filipino and a resident of Davao City, Philippines, after having been duly sworn to in accordance with law, depose and say the following: That I am the co-owner of a residential land, including all the improvements existing thereon, located at 81 E. Abada, Loyola Heights, Quezon City, with my sister Aurea A. Mercado; That being co-owners, we share equally over the above-mentioned properties, including all the encumbrances and its obligations and liabilities to the Social Security System and other governmental agencies;

That I am executing this affidavit to inform the proper authorities concerned that the parcel of residential land, including the residential house, together with all its liabilities, is owned by me in coownership with Aurea A. Mercado. That I am executing this affidavit freely and voluntarily without any force or intimidation imposed upon me. IN WITNESS WHEREOF, I have hereunto set my hand this 2(nd) day of March, 1973, at the City of Davao City, Philippines.

This affidavit is high quality evidence. It contains admission against interest on the part of petitioner. As a lawyer, petitioner cannot pretend that the plain meaning of his admission eluded his mind. We now come to the issue of whether the mortgage of the subject property to the SSS, its foreclosure and subsequent redemption by the petitioner extinguished private respondent's co-ownership. The applicable law is Article 493 of the New Civil Code which spells out the rights of co-owners over a co-owned property, viz: ( Art. 493. Each co-owner S shall have the full ownership of his part gand of the fruits and benefits pertaining thereto, and d he may therefore alienate, assign or mortgage it . and even substitute another person in its enjoyment, ) except when personal rights are involved. But the effect of the alienation or mortgage, with respect N to the co-owners, shall be limited to the portionIwhich may be allotted to him in the division upon theLtermination of the coownership. (emphasis O ours) Pursuant to this law, a co-owner has A the right to alienate his pro. even without the consent of indiviso share in the co-owned property the other co-owners. Nevertheless, as a mere part owner, he cannot M alienate the shares of the other co-owners. The prohibition is premised on the elementary rule thatE "no one can give what he does R Thus, we held in Bailonnot have" (Nemo dat guod non habet). 5 Casilao vs. Court of Appeals, viz: C A D O

. . . since a co-owner is entitled to sell his undivided share, a sale of the entire property by one-co-owner without the consent of the other co-owners is not null and void. However, only the rights of the co-ownerseller are transferred, thereby making the buyer a co-owner of the property. The proper action in cases like this is not for the nullification of the sale or for the recovery of possession of the thing owned in common from the third person who substituted the co-owner or coowners who alienated their shares, but the DIVISION of the common property of the co-owners who possessed and administered it. In the case at bench, it is established that petitioner, for his own benefit, borrowed money from the SSS and mortgaged the subject property to the SSS on June 5, 1967 without the knowledge and consent of his co-owner, herein private respondent. Necessarily, private respondent could not have helped in the payment of the SSS loan nor could she have redeemed the subject property from the SSS. Under these circumstances, it will not accord with the letter and intent of Article 493 of the Civil Code to rule private respondent lost her part ownership of the subject property finds no warrant both in law and in equity. It will be the height of absurdity to reward petitioner for his illegal act of appropriating the share of private respondent in the subject property. Prescinding from these premises, petitioner's reliance in the case of 6 Tan vs. Court of Appeals is misplaced. In Tan, the disputed property was mortgaged by spouses Tan Tiong Tick and Tan Ong Hun to China Bank. Tan Tiong Tick died. He was survived by his widow and six children, including D. Annie Tan. Meanwhile, China Bank foreclosed the mortgage. It was the highest bidder at the public auction. Thereafter, the heirs of Tan Tiong Tick sought to nullify the real estate mortgage and the foreclosure sale before the defunct CFI of Manila. The widow, Tan Ong Hun, died.

The one-year redemption period lapsed on July 6, 1973, but the heirs of the spouses Tan failed to redeem the property. China Bank then consolidated its ownership over the disputed property and a new title was issued in its name. In the meantime, a compromise agreement was forged between China Bank and the Tan heirs. The Bank allowed the heirs to repurchase the property on or before August 31, 1974, otherwise, it would dispose of the property to another party. Within the agreed period, or on August 30, 1974, only petitioner D. Annie Tan repurchased the entire property using her own funds. The bank, however, insisted that the repurchase be made for or in behalf of the other heirs as well. Left without any choice, D. Annie Tan filed an action in court, asserting her exclusive ownership over the property on the ground that the co-ownership between her and her brothers and sisters had already been extinguished. We sustained her contention and ruled: The first question which arises is the correctness of the assumption that there was a co-ownership among the children of Tan Tiong Tick and Tan Ong Hun when the petitioner purchased and property. Since the lot and its improvements were mortgaged by the deceased parents, there can be no question that a co-ownership existed amount the heirs during the period given by law to redeem the foreclosed property. Redemption by one during this period would have inured to the benefit of all . . . . The records show, however, that when petitioner purchased the disputed property on August 30, 1974, any co-ownership among the brothers and sisters no longer existed. The period to redeem had expired more than one year earlier, on July 6, 1973. The respondent China Bank consolidated its ownership and a new title was issued in the bank's name. When the heirs allowed the one year period to expire without redeeming their parent's former property and permitted the consolidation of ownership and the issuance of a new title, the coownership was extinguished. The challenged ruling

of the respondent court is, therefore, based on erroneous premises. Under Section 63-B of Presidential Decree No. 1529, the Property Registration Decree, in case of non-redemption, the purchaser at the foreclosure sale, meaning the respondent Bank in case of nonredemption, the purchaser at the foreclosure sale, meaning the respondent Bank in this case, is entitled to a new certificate of title in his name after filing the necessary papers with the Register of Deeds. (Spouses Teofisto and Eulalia Verceles v. Court of First Instance of Rizal, et al., G.R. No. 62219, February 28, 1989). It becomes a ministerial duty to place the buyer in possession of the property he now owns. (Banco Filipino v. Intermediate Appellate court, G.R. No. 68878, 142 SCRA 44 [1986]. Ownership, therefore, passed to China Bank and there was no more co-ownership among the heirs. In is thus obvious that the Tan ruling is propped on a different factual setting and hence, is inapplicable to the case at bench. In Tan, ". . . the heirs (i.e., the co-owners) allowed the one year redemption period to expire without redeeming their parents' former property and permitted the consolidation of ownership and the issuance of a new 7 title . . ." in favor of China Bank. By their knowing acts of omission, the heirs in the Tan case allowed the extinction of their coownership. As aforestated, private respondent did not know of the mortgage of their co-owned property in favor of the SSS and the expiry date of its period of redemption. In other words, private respondent did not voluntary relinquish at any period of time her proindiviso share in the subject property. IN VIEW WHEREOF, the Decision of the respondent Court of Appeals dated August 30, 1991 and its Resolution dated January 29, 1993, are affirmed. Costs against petitioner. SO ORDERED.

G.R. No. 182585

November 27, 2009

JOSEPHINE MARMO,* NESTOR ESGUERRA, DANILO DEL PILAR and MARISA DEL PILAR, Petitioners, vs. MOISES O. ANACAY Respondent. DECISION BRION, J.: Before us is the Petition for Review on Certiorari,1 filed by the spouses Josephine Marmo and Nestor Esguerra and the spouses Danilo del Pilar and Marisa del Pilar (collectively, the petitioners), to reverse and set aside the Decision2 dated December 28, 2007 and the Resolution3 dated April 11, 2008 of the Former Special Eleventh Division of the Court of Appeals (CA) in CA-G.R. SP No. 94673. The assailed CA Decision dismissed the petitioners petition for certiorari challenging the Orders dated March 14, 20064 and May 8, 20065 of the Regional Trial Court (RTC), Branch 90, Dasmarias, Cavite in Civil Case No. 2919-03, while the assailed CA Resolution denied the petitioners motion for reconsideration. FACTUAL BACKGROUND The facts of the case, as gathered from the parties pleadings, are briefly summarized below: On September 16, 2003, respondent Moises O. Anacay filed a case for Annulment of Sale, Recovery of Title with Damages against the petitioners6 and the Register of Deeds of the Province of Cavite, docketed as Civil Case No. 2919-03.7 The complaint states, among others, that: the respondent is the bona-fide co-owner, together with his wife, Gloria P. Anacay (now deceased), of a 50-square meter parcel of land and the house built thereon, located at Blk. 54, Lot 9, Regency Homes, Brgy. Malinta, Dasmarias, Cavite, covered by Transfer Certificate of Title (TCT) No. T-815595 of the Register of Deeds of Cavite; they authorized petitioner Josephine to sell the subject property; petitioner Josephine sold the subject property to petitioner Danilo for P520,000.00, payable in monthly installments of P8,667.00 from May 2001 to June 2006; petitioner Danilo defaulted in his installment

payments from December 2002 onwards; the respondent subsequently discovered that TCT No. 815595 had been cancelled and TCT No. T972424 was issued in petitioner Josephines name by virtue of a falsified Deed of Absolute Sale dated September 20, 2001; petitioner Josephine subsequently transferred her title to petitioner Danilo; TCT No. T-972424 was cancelled and TCT No. T-991035 was issued in petitioner Danilos name. The respondent sought the annulment of the Deed of Absolute Sale dated September 20, 2001 and the cancellation of TCT No. T-991035; in the alternative, he demanded petitioner Danilos payment of the balance of P347,000.00 with interest from December 2002, and the payment of moral damages, attorneys fees, and cost of suit. In her Answer, petitioner Josephine averred, among others, that the respondents children, as co-owners of the subject property, should have been included as plaintiffs because they are indispensable parties. 8 Petitioner Danilo echoed petitioner Josephines submission in his Answer. 9 Following the pre-trial conference, the petitioners filed a Motion to Dismiss the case for the respondents failure to include his children as indispensable parties.10 The respondent filed an Opposition, arguing that his children are not indispensable parties because the issue in the case can be resolved without their participation in the proceedings.11 THE RTC RULING The RTC found the respondents argument to be well -taken and thus denied the petitioners motion to dismiss in an Order dated March 14, 2006. 12 It also noted that the petitioners motion was simply filed to delay the proceedings. After the denial of their Motion for Reconsideration, 13 the petitioners elevated their case to the CA through a Petition for Certiorari under Rule 65 of the Rules of Court.14 They charged the RTC with grave abuse of discretion amounting to lack of jurisdiction for not dismissing the case after the respondent failed to include indispensable parties. THE CA RULING

The CA dismissed the petition15 in a Decision promulgated on December 28, 2007. It found that the RTC did not commit any grave abuse of discretion in denying the petitioners motion to dismiss, noting that the respondents children are not indispensable parties. The petitioners moved16 but failed17 to secure a reconsideration of the CA Decision; hence, the present petition. Following the submission of the respondents Comment18 and the petitioners Reply,19 we gave due course to the petition and required the parties to submit their respective memoranda.20 Both parties complied.21 Meanwhile, on April 24, 2009, the petitioners filed with the RTC a Motion to Suspend Proceedings due to the pendency of the present petition. The RTC denied the motion to suspend as well as the motion for reconsideration that followed. The petitioners responded to the denial by filing with us a petition for the issuance of a temporary restraining order (TRO) to enjoin the RTC from proceeding with the hearing of the case pending the resolution of the present petition. THE PETITION and THE PARTIES SUBMISSIONS The petitioners submit that the respondents children, who succeeded their deceased mother as co-owners of the property, are indispensable parties because a full determination of the case cannot be made without their presence, relying on Arcelona v. Court of Appeals,22 Orbeta v. Sendiong,23 and Galicia v. Manliquez Vda. de Mindo.24 They argue that the non-joinder of indispensable parties is a fatal jurisdictional defect. The respondent, on the other hand, counters that the respondents children are not indispensable parties because the issue involved in the RTC whether the signatures of the respondent and his wife in the Deed of Absolute Sale dated September 20, 2001 were falsified - can be resolved without the participation of the respondents children. THE ISSUE

The core issue is whether the respondents children are indispensable parties in Civil Case No. 2919-03. In the context of the Rule 65 petition before the CA, the issue is whether the CA correctly ruled that the RTC did not commit any grave abuse of discretion in ruling that the respondents children are not indispensable parties. OUR RULING We see no merit in the petition. General Rule: The denial of a motion to dismiss is an interlocutory order which is not the proper subject of an appeal or a petition for certiorari.

In the present case, since the petitioners did not wait for the final resolution on the merits of Civil Case No. 2919-03 from which an appeal could be taken, but opted to immediately assail the RTC Orders dated March 14, 2006 and May 8, 2006 through a petition for certiorari before the CA, the issue for us to address is whether the RTC, in issuing its orders, gravely abused its discretion or otherwise acted outside or in excess of its jurisdiction. The RTC did not commit grave abuse of discretion in denying the petitioners Motion to Dismiss; the respondents co -owners are not indispensable parties. The RTC grounded its Order dated March 14, 2006 denying the petitioners motion to dismiss on the finding that the respondents children, as co owners of the subject property, are not indispensable parties to the resolution of the case. We agree with the RTC. Section 7, Rule 3 of the Revised Rules of Court29 defines indispensable parties as parties-in-interest without whom there can be no final determination of an action and who, for this reason, must be joined either as plaintiffs or as defendants. Jurisprudence further holds that a party is indispensable, not only if he has an interest in the subject matter of the controversy, but also if his interest is such that a final decree cannot be made without affecting this interest or without placing the controversy in a situation where the final determination may be wholly inconsistent with equity and good conscience. He is a person whose absence disallows the court from making an effective, complete, or equitable determination of the controversy between or among the contending parties. 30 When the controversy involves a property held in common, Article 487 of the Civil Code explicitly provides that "any one of the co-owners may bring an action in ejectment." We have explained in Vencilao v. Camarenta31 and in Sering v. Plazo32 that the term "action in ejectment" includes a suit for forcible entry (detentacion) or unlawful detainer (desahucio).33 We also noted in Sering that the term "action in ejectment" includes "also, an accion publiciana (recovery of

At the outset, we call attention to Section 1 of Rule 41 25 of the Revised Rules of Court governing appeals from the RTC to the CA. This Section provides that an appeal may be taken only from a judgment or final order that completely disposes of the case, or of a matter therein when declared by the Rules to be appealable. It explicitly states as well that no appeal may be taken from an interlocutory order. In law, the word "interlocutory" refers to intervening developments between the commencement of a suit and its complete termination; hence, it is a development that does not end the whole controversy.26 An "interlocutory order" merely rules on an incidental issue and does not terminate or finally dispose of the case; it leaves something to be done before the case is finally decided on the merits.27 An Order denying a Motion to Dismiss is interlocutory because it does not finally dispose of the case, and, in effect, directs the case to proceed until final adjudication by the court. Only when the court issues an order outside or in excess of jurisdiction or with grave abuse of discretion, and the remedy of appeal would not afford adequate and expeditious relief, will certiorari be considered an appropriate remedy to assail an interlocutory order.28

possession) or accion reinvidicatoria34 (recovery of ownership)." Most recently in Estreller v. Ysmael,35 we applied Article 487 to an accion publiciana case; in Plasabas v. Court of Appeals36 we categorically stated that Article 487 applies to reivindicatory actions. We upheld in several cases the right of a co-owner to file a suit without impleading other co-owners, pursuant to Article 487 of the Civil Code. We made this ruling in Vencilao, where the amended complaint for "forcible entry and detainer" specified that the plaintiff is one of the heirs who coowns the disputed properties. In Sering, and Resuena v. Court of Appeals,37 the co-owners who filed the ejectment case did not represent themselves as the exclusive owners of the property. In Celino v. Heirs of Alejo and Teresa Santiago,38 the complaint for quieting of title was brought in behalf of the co-owners precisely to recover lots owned in common. 39 In Plasabas, the plaintiffs alleged in their complaint for recovery of title to property (accion reivindicatoria) that they are the sole owners of the property in litigation, but acknowledged during the trial that the property is co-owned with other parties, and the plaintiffs have been authorized by the co-owners to pursue the case on the latters behalf. These cases should be distinguished from Baloloy v. Hular40 and Adlawan v. Adlawan41 where the actions for quieting of title and unlawful detainer, respectively, were brought for the benefit of the plaintiff alone who claimed to be the sole owner. We held that the action will not prosper unless the plaintiff impleaded the other co-owners who are indispensable parties. In these cases, the absence of an indispensable party rendered all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to those present. We read these cases to collectively mean that where the suit is brought by a co-owner, without repudiating the co-ownership, then the suit is presumed to be filed for the benefit of the other co-owners and may proceed without impleading the other co-owners. However, where the co-owner repudiates the co-ownership by claiming sole ownership of the property or where the suit is brought against a co-owner, his co-owners are indispensable parties and must be impleaded as party-defendants, as the suit affects the rights and interests of these other co-owners.

In the present case, the respondent, as the plaintiff in the court below, never disputed the existence of a co-ownership nor claimed to be the sole or exclusive owner of the litigated lot. In fact, he recognized that he is a "bonafide co-owner" of the questioned property, along with his deceased wife. Moreover and more importantly, the respondents claim in his complaint in Civil Case No. 2919-03 is personal to him and his wife, i.e., that his and his wifes signatures in the Deed of Absolute Sale in favor of petitioner Josephine were falsified. The issue therefore is falsification, an issue which does not require the participation of the respondents co -owners at the trial; it can be determined without their presence because they are not parties to the document; their signatures do not appear therein. Their rights and interests as co-owners are adequately protected by their co-owner and father, respondent Moises O. Anacay, since the complaint was made precisely to recover ownership and possession of the properties owned in common, and, as such, will redound to the benefit of all the coowners.421avvphi1 In sum, respondents children, as co-owners of the subject property, are not indispensable parties to the resolution of the case. We held in Carandang v. Heirs of De Guzman43 that in cases like this, the co-owners are not even necessary parties, for a complete relief can be accorded in the suit even without their participation, since the suit is presumed to be filed for the benefit of all.44 Thus, the respondents children need not be impleaded as party-plaintiffs in Civil Case No. 2919-03. We cannot subscribe to the petitioners reliance on our rulings in Arcelona v. Court of Appeals,45 Orbeta v. Sendiong46 and Galicia v. Manliquez Vda. de Mindo,47 for these cases find no application to the present case. In these cited cases, the suits were either filed against a co-owner without impleading the other co-owners, or filed by a party claiming sole ownership of a property that would affect the interests of third parties. Arcelona involved an action for security of tenure filed by a tenant without impleading all the co-owners of a fishpond as party-defendants. We held that a tenant, in an action to establish his status as such, must implead all the pro-indiviso co-owners as party-defendants since a tenant who fails to implead all the co-owners as party-defendants cannot establish with finality his tenancy over the entire co-owned land. Orbeta, on the other hand, involved an action for recovery of possession, quieting of title and damages wherein the plaintiffs prayed that they be declared "absolute co-owners" of

the disputed property, but we found that there were third parties whose rights will be affected by the ruling and who should thus be impleaded as indispensable parties. In Galicia, we noted that the complaint for recovery of possession and ownership and annulment of title alleged that the plaintiffs predecessor-in-interest was deprived of possession and ownership by a third party, but the complaint failed to implead all the heirs of that third party, who were considered indispensable parties. In light of these conclusions, no need arises to act on petitioners prayer for a TRO to suspend the proceedings in the RTC and we find no reason to grant the present petition. WHEREFORE, premises considered, we hereby DENY the petition for its failure to show any reversible error in the assailed Decision dated December 28, 2007 and Resolution dated April 11, 2008 of the Court of Appeals in CA-G.R. SP No. 94673, both of which we hereby AFFIRM. Costs against the petitioners. SO ORDERED. ARTURO D. BRION Associate Justice G.R. No. 148103 July 27, 2006

The undisputed facts are: On February 5, 1991, respondent Rosa Baltazar-Ramirez filed with the Regional Trial Court, Branch 27, Lapu-lapu City, a Complaint for Recovery of Hereditary Shares against herein petitioner, Republic of the Philippines, then represented by the Air Transportation Office, docketed as Civil Case No. 2390-L. Respondent alleged in the complaint that petitioner purchased several lots in Lapu-lapu City, including Lot No. 902 and Lot No. 2350, with a combined area of 180,386 square meters, to be used for the construction of the Mactan-Cebu International Airport in Lapu-lapu City. The lots were owned by respondent's father, Gavino Baltazar, who died intestate on April 10, 1957. Petitioner purchased the lots from the children of Gavino Baltazar, namely: Magdalena, Cirila, Bibiana, Anastacio, Isabel, Bernarda, Simeona, and Vidal, all surnamed Baltazar. The sale is evidenced by a Deed of ExtraJudicial Settlement of Estate and Sale dated August 21, 1957. Respondent, the 9th and youngest among Gavino's children, did not participate in the execution of the Extra-Judicial Settlement of Estate and Sale. Not having sold her 1/9 share, with an area of 20,042.88 square meters, she has the right to acquire the same from petitioner Republic. Petitioner can readily give respondent this area because it is part of an unused portion from which her share of the 20,042.88 square meters can be taken. In its answer, petitioner, through the Mactan-Cebu International Airport Authority, denied the material allegations of the complaint, claiming it has no knowledge whether respondent Rosa Baltazar-Ramirez is indeed Gavino's child; and that the ownership of the lots has long been vested in the government through prescription. After the sale in 1957, the government has been in actual and continuous possession of the lots in the concept of an owner for more than 30 years. After hearing, the trial court rendered its Decision dismissing respondent's complaint, holding that her share in the inheritance was repudiated by her brothers and sisters as shown by their statement in the document of Extra-

REPUBLIC OF THE PHILIPPINES/MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. ROSA BALTAZAR-RAMIREZ, respondent. DECISION SANDOVAL-GUTIERREZ, J.: For our resolution is the instant Petition for Review on Certiorari 1 seeking to reverse the Decision2 dated May 8, 2001 of the Court of Appeals in CAG.R. CV No. 56256, entitled "Rosa Baltazar-Ramirez, appellant, versus Republic of the Philippines, appellee."

Judicial Settlement of Estate and Sale that they are the only direct and surviving heirs of Gavino Baltazar. Even if there is no repudiation, respondent's recourse is against her siblings and co-heirs. Petitioner has acquired ownership of the lots by virtue of its continuous possession for about 34 years in the concept of an owner, without any adverse claim from respondent. Her inaction for 34 years constitutes laches. Thus, her complaint should be dismissed. On appeal by respondent, the Court of Appeals, in its Decision dated May 8, 2001 in CA-G.R. CV No. 56256, reversed the trial court's judgment. It held that there is no sufficient evidence showing that respondent's brothers and sisters repudiated her share in the inheritance. Respondent's recourse, therefore, is against petitioner Republic through an action for partition. This is because petitioner Republic has acquired the undivided shares of respondent's siblings. Thus, it has become a co-owner of the lots with respondent, her share being 1/9 of the area. And finally, an action for partition is imprescriptible and cannot be barred by laches. Hence, the instant Petition for Review on Certiorari. Petitioner Republic ascribes to the Court of Appeals the following error: The Court of Appeals erred in declaring the petitioner and respondent Rosa Baltazar-Ramirez as co-owners of the property in dispute. The Court of Appeals in effect ruled that respondent, as an heir of Gavino Baltazar, has retained her 1/9 share in the 2 lots sold by her siblings to petitioner. It follows that respondent and petitioner have become co-owners. And as a co-owner, respondent has the right to demand partition of the lots. It is basic that an action for partition implies that the property is still owned in common. Here, respondent and her siblings are no longer coowners. The lots have been sold to petitioner Republic, a third person. The juridical condition of co-ownership of things or right is terminated: (1) by the consolidation in only one of the owner of all the shares of the others; (2) by the destruction of the thing or the loss of the right (of co-ownership); (3) by prescription in favor of a third person; and (4) by the partition which converts into certain and definite parts the respective undivided shares of the co-owners.

Here, it is clear that upon the sale of the lots by respondent's brothers and sisters to petitioner, the right of co-ownership among them ceased or was lost. We have held that there is juridical dissolution of co-ownership when the thing is sold, either publicly or privately, to third persons. 3 Likewise, a co-ownership is terminated by prescription in favor of a third person, as mentioned above. Records show that the lots were sold in 1957, while respondent's complaint was filed with the trial court only in 1991, or after 34 years. Since 1957, petitioner has been in open, adverse and exclusive possession of the lots in the concept of owner. Under Article 1141 of the Civil Code, real actions over immovables prescribe after 30 years. Considering that petitioner has purchased the lots in good faith and for value, and has been in continuous possession thereof for more than 30 years, it has acquired the right of ownership to the exclusion of herein respondent. If at all, her suit should be against her siblings who deprived her of her lawful share through fraud. In light of the above discussion, we hold that the Court of Appeals erred in declaring the parties as co-owners of the lots in dispute and ordering that further proceedings be conducted by the trial court in accordance with Rule 69 (on partition) of the 1997 Rules of Civil Procedure, as amended. WHEREFORE, we GRANT the instant petition. The assailed Decision of the Court of Appeals in CA-G.R. CV No. 56256 is REVERSED. SO ORDERED. Puno, Chairperson, Corona, Azcuna, Garcia, J.J., concur.