G.R. No.

129760 December 29, 1998

RICARDO CHENG, petitioner,
vs.
RAMON B. GENATO and ERNESTO R. DA JOSE & SOCORRO DA JOSE, respondents.

MARTINEZ, J .:
This petition for review on certiorari seeks to annul and set aside the Decision of the Court of
Appeals (CA)
1
dated July 7, 1997 in CA-G.R. No. CV No. 44706 entitled "Ricardo Cheng,
plaintiff-appellee vs. Ramon B. Genato, defendant-appellant, Ernesto R. Da Jose & Socorro B.
Da Jose, Intervenors-Appellants" which reversed the ruling of the Regional Trial Court, Branch
96 of Quezon City dated January 18, 1994. The dispositive portion of the CA Decision reads:
WHEREFORE, based on the foregoing, appealed decision is hereby REVERSED
and SET ASIDE and judgment is rendered ordering;
1. The dismissal of the complaint;
2. The cancellation of the annotations of the defendant-appellant's Affidavit to
Annul Contract to Sell and plaintiff-appellee's Notice of Adverse Claim in the
subject TCT's, namely, TCT No. T-76.196 (M) and TCT No. T-76.197 (M);
3. Payment by the intervenors-appellants of the remaining balance of the purchase
price pursuant to their agreement with the defendant-appellant to suspend
encashment of the three post-dated checks issued since 1989.
4. Ordering the execution by the defendant-appellant Genato of the Deed of
Absolute Sale over the subject two lots covered by TCT No. T-76.196 (M) and
TCT No. T-76.197 (M) in favor of intervenors-appellants Spouses Da Jose;
5. The return by defendant-appellant Genato of the P50,000.00 paid to him by the
plaintiff-appellee Cheng, and
6. Payment by plaintiff-appellee Cheng of moral damages to herein intervenors-
appellants Da Jose of P100,000.00, exemplary damages of P50,000.00, attorney's
fees of P50,000.00, and costs of suit; and to defendant-appellant, of P100,000.00
in exemplary damages, P50,000.00 in attorney's fees. The amounts payable to the
defendant-appellant may be compensated by plaintiff appellee with the amount
ordered under the immediately foregoing paragraph which defendant-appellant
has to pay the plaintiff-appellee.
SO ORDERED.
2

The antecedents of the case are as follows:
Respondent Ramon B. Genato (Genato) is the owner of two parcels of land located at Paradise
Farms, San Jose del Monte, Bulacan covered by TCT No. T-76.196 (M)
3
and TCT No. T-76.197
(M)
4
with an aggregate area of 35,821square meters, more or less.
On September 6, 1989, respondent Genato entered into an agreement with respondent-spouses
Ernesto R. Da Jose and Socorro B. Da Jose (Da Jose spouses) over the above-mentioned two
parcels of land. The agreement culminated in the execution of a contract to sell for which the
purchase price was P80.00 per square meter. The contract was in a public instrument and was
duly annotated at the back of the two certificates of title on the same day. Clauses 1and 3 thereof
provide:
1. That the purchase price shall be EIGHTY (P80.00) PESOS, Philippine
Currency per square meter, of which the amount of FIFTY THOUSAND
(P50,000.00) PESOS shall be paid by the VENDEE to the VENDOR as partial
down payment at the time of execution of this Contract to Sell.
xxx xxx xxx
3. That the VENDEE, Thirty (30) DAYS after the execution of this contract, and
only after having satisfactorily verified and confirmed the truth and authenticity
of documents, and that no restrictions, limitations, and developments imposed on
and/or affecting the property subject of this contract shall be detrimental to his
interest, the VENDEE shall pay to the VENDOR, NINE HUNDRED FIFTY
THOUSAND (P950,00.00) PESOS. Philippine Currency, representing the full
payment of the agreed Down Payment, after which complete possession of the
property shall be given to the VENDEE to enable him to prepare the premises and
any development therein.
On October 4, 1989, the Da Jose spouses, not having finished verifying the titles mentioned in
clause 3 as aforequoted, asked for and was granted by respondent Genato an extension of another
30 days or until November 5, 1989. However, according to Genato, the extension was granted
on condition that a new set of documents is made seven (7) days from October 4, 1989.
6
This
was denied by the Da Jose spouses.
Pending the effectivity of the aforesaid extension period, and without due notice to the Da Jose
spouses, Genato executed an Affidavit to Annul the Contract to Sell,
7
on October 13, 1989.
Moreover, no annotation of the said affidavit at the back of his titles was made right away. The
affidavit contained, inter alia, the following paragraphs;
xxx xxx xxx
That it was agreed between the parties that the agreed downpayment of
P950,000.00 shall be paid thirty (30) days after the execution of the Contract, that
is on or before October 6, 1989;
The supposed VENDEES failed to pay the said full downpayment even up to this
writing, a breach of contract;
That this affidavit is being executed to Annul the aforesaid Contract to Sell for the
vendee having committed a breach of contract for not having complied with the
obligation as provided in the Contract to Sell;
8

On October 24, 1989, herein petitioner Ricardo Cheng (Cheng) went to Genato's residence and
expressed interest in buying the subject properties. On that occasion, Genato showed to Ricardo
Cheng copies of his transfer certificates of title and the annotations at the back thereof of his
contract to sell with the Da Jose spouses. Genato also showed him the aforementioned Affidavit
to Annul the Contract to Sell which has not been annotated at the back of the titles.
Despite these, Cheng went ahead and issued a check for P50,000.00 upon the assurance by
Genato that the previous contract with the Da Jose spouses will be annulled for which Genato
issued a handwritten receipt (Exh. "D"), written in this wise:
10/24/89
Received from Ricardo Cheng
the Sum of Fifty Thousand Only (P50.000-)
as partial for T-76196 (M)
T-76197 (M) area 35.821 Sq.m.
Paradise Farm, Gaya-Gaya, San Jose Del Monte
P70/m2 Bulacan
plus C. G. T. etc.
Check # 470393 (SGD.) Ramon B. Genato
10/24/89
9

On October 25, 1989, Genato deposited Cheng's check. On the same day, Cheng called up
Genato reminding him to register the affidavit to annul the contract to sell.
10

The following day, or on October 26, 1989, acting on Cheng's request, Genato caused the
registration of the Affidavit to Annul the Contract to Sell in the Registry of Deeds, Meycauayan,
Bulacan as primary entry No. 262702.
11

While the Da Jose spouses were at the Office of the Registry of Deeds of Meycauayan, Bulacan
on October 27, 1989, they met Genato by coincidence. It was only then that the Da Jose spouses
discovered about the affidavit to annul their contract. The latter were shocked at the disclosure
and protested against the rescission of their contract. After being reminded that he (Genato) had
given them (Da Jose spouses) an additional 30-day period to finish their verification of his titles,
that the period was still in effect, and that they were willing and able to pay the balance of the
agreed down payment, later on in the day, Genato decided to continue the Contract he had with
them. The agreement to continue with their contract was formalized in a conforme letter dated
October 27, 1989.
Thereafter, Ramon Genato advised Ricardo Cheng of his decision to continue his contract with
the Da Jose spouses and the return of Cheng's P50,000.00 check. Consequently, on October 30,
1989, Cheng's lawyer sent a letter
12
to Genato demanding compliance with their agreement to
sell the property to him stating that the contract to sell between him and Genato was already
perfected and threatening legal action.
On November 2, 1989, Genato sent a letter
13
to Cheng (Exh. "6") enclosing a BPI Cashier's
Check for P50,000.00 and expressed regret for his inability to "consummate his transaction" with
him. After having received the letter of Genato on November 4, 1989, Cheng, however, returned
the said check to the former via RCPI telegram
14
dated November 6, 1989, reiterating that "our
contract to sell your property had already been perfected."
Meanwhile, also on November 2, 1989, Cheng executed an affidavit of adverse claim
15
and had
it annotated on the subject TCT's.
On the same day, consistent with the decision of Genato and the Da Jose spouses to continue
with their Contract to Sell of September 6, 1989, the Da Jose spouses paid Genato the complete
down payment of P950,000.00 and delivered to him three (3) postdated checks (all dated May 6,
1990, the stipulated due date) in the total amount of P1,865,680.00 to cover full payment of the
balance of the agreed purchase price. However, due to the filing of the pendency of this case, the
three (3) postdated checks have not been encashed.
On December 8, 1989, Cheng instituted a complaint
16
for specific performance to compel
Genato to execute a deed of sale to him of the subject properties plus damages and prayer for
preliminary attachment. In his complaint, Cheng averred that the P50,000.00 check he gave was
a partial payment to the total agreed purchase price of the subject properties and considered as an
earnest money for which Genato acceded. Thus, their contract was already perfected.
In Answer
17
thereto, Genato alleged that the agreement was only a simple receipt of an option-
bid deposit, and never stated that it was a partial payment, nor is it an earnest money and that it
was subject to condition that the prior contract with the Da Jose spouses be first cancelled.
The Da Jose spouses, in their Answer in Intervention,
18
asserted that they have a superior right
to the property as first buyers. They alleged that the unilateral cancellation of the Contract to Sell
was without effect and void. They also cited Cheng's bad faith as a buyer being duly informed by
Genato of the existing annotated Contract to Sell on the titles.
After trial on the merits, the lower court ruled that the receipt issued by Genato to Cheng
unerringly meant a sale and not just a priority or an option to buy. It cannot be true that the
transaction was subjected to some condition or reservation, like the priority in favor of the Da
Jose spouses as first buyer because, if it were otherwise, the receipt would have provided such
material condition or reservation, especially as it was Genato himself who had made the receipt
in his own hand. It also opined that there was a valid rescission of the Contract to Sell by virtue
of the Affidavit to Annul the Contract to Sell. Time was of the essence in the execution of the
agreement between Genato and Cheng, under this circumstance demand, extrajudicial or judicial,
is not necessary. It falls under the exception to the rule provided in Article 1169
19
of the Civil
Code. The right of Genato to unilaterally rescind the contract is said to be under Article
1191
20
of the Civil Code. Additionally, after reference was made to the substance of the
agreement between Genato and the Da Jose spouses, the lower court also concluded that Cheng
should be preferred over the intervenors-Da Jose spouses in the purchase of the subject
properties. Thus, on January 18, 1994 the trial court rendered its decision the decretal portion of
which reads:
WHEREFORE, judgment is hereby rendered:
1. Declaring the contract to sell dated September 6, 1989 executed between
defendant Ramon Genato, as vendor, and intervenors Spouses Ernesto and
Socorro Da Jose, as vendees, resolved and rescinded in accordance with Art.
1191, Civil Code, by virtue of defendant's affidavit to annul contract to sell dated
October 13, 1989 and as the consequence of intervenors' failure to execute within
seven (7) days from October 4, 1989 another contract to sell pursuant to their
mutual agreement with defendant;
2. Ordering defendant to return to the intervenors the sum of P1,000,000.00, plus
interest at the legal rate from November 2, 1989 until full payment;
3. Directing defendant to return to the intervenors the three (3) postdated checks
immediately upon finality of this judgment;
4. Commanding defendant to execute with and in favor of the plaintiff Ricardo
Cheng, as vendee, a deed of conveyance and sale of the real properties described
and covered in Transfer Certificates of Title No. T-76-196 (M) and T-76.197 (M)
of the Registry of Deeds of Bulacan, Meycauayan Branch, at the rate of
P70.000/square meter, less the amount of P50,000.00 alreaddy paid to defendant,
which is considered as part of the purchase price, with the plaintiff being liable
for payment of the capital gains taxes and other expenses of the transfer pursuant
to the agreement to sell dated October 24, 1989; and
5 Ordering defendant to pay the plaintiff and the intervenors as follows:
a/ P50,000.00, as nominal damages, to plaintiff;
b/ P50,000.00, as nominal damages, to intervenors;
c/ P20,000.00, as and for attorney's fees, to plaintiff;
d/ P20,000.00, as and for attorney's fees, to
intervenors; and
e/ Cost of the suit.
xxx xxx xxx
Not satisfied with the aforesaid decision, herein respondents Ramon Genato and Da Jose spouses
appealed to the court a quo which reversed such judgment and ruled that the prior contract to sell
in favor of the Da Jose spouses was not validly rescinded; that the subsequent contract to sell
between Genato and Cheng, embodied in the handwritten receipt, was without force and effect
due to the failure to rescind the prior contract; and that Cheng should pay damages to the
respondents herein being found to be in bad faith.
Hence this petition.
21

This petition for review, assails the Court of Appeals' Decision on the following grounds: (1) that
the Da Jose spouses' Contract to Sell has been validly rescinded or resolved; (2) that Ricardo
Cheng's own contract with Genato was not just a contract to sell but one of conditional contract
of sale which gave him better rights, thus precluding the application of the rule on double sales
under Article 1544, Civil Code; and (3) that, in any case, it was error to hold him liable for
damages.
The petition must be denied for failure to show that the Court of Appeals committed a reversible
error which would warrant a contrary ruling.
No reversible error can be ascribed to the ruling of the Court of Appeals that there was no valid
and effective rescission or resolution of the Da Jose spouses Contract to Sell, contrary to
petitioner's contentions and the trial court's erroneous ruling.
In a Contract to Sell, the payment of the purchase price is a positive suspensive condition, the
failure of which is not a breach, casual or serious, but a situation that prevents the obligation of
the vendor to convey title from acquiring an obligatory force.
22
It is one where the happening of
the event gives rise to an obligation. Thus, for its non-fulfillment there will be no contract to
speak of, the obligor having failed to perform the suspensive condition which enforces a juridical
relation. In fact with this circumstance, there can be no rescission of an obligation that is still
non-existent, the suspensive condition not having occurred as yet.
23
Emphasis should be made
that the breach contemplated in Article 1191 of the New Civil Code is the obligor's failure to
comply with an obligation already extant, not a failure of a condition to render binding that
obligation.
24

Obviously, the foregoing jurisprudence cannot be made to apply to the situation in the instant
case because no default can be ascribed to the Da Jose spouses since the 30-day extension period
has not yet expired. The Da Jose spouses' contention that no further condition was agreed when
they were granted the 30-days extension period from October 7, 1989 in connection with clause
3 of their contract to sell dated September 6, 1989 should be upheld for the following reason, to
wit; firstly, If this were not true, Genato could not have been persuaded to continue his contract
with them and later on agree to accept the full settlement of the purchase price knowing fully
well that he himself imposed such sine qua non condition in order for the extension to be
valid; secondly, Genato could have immediately annotated his affidavit to annul the contract to
sell on his title when it was executed on October 13, 1989 and not only on October 26, 1989 after
Cheng reminded him of the annotation; thirdly, Genato could have sent at least a notice of such
fact, there being no stipulation authorizing him for automatic rescission, so as to finally clear the
encumbrance on his titles and make it available to other would be buyers. It likewise settles the
holding of the trial court that Genato "needed money urgently."
Even assuming in gratia argumenti that the Da Jose spouses defaulted, as claimed by Genato, in
their Contract to Sell, the execution by Genato of the affidavit to annul the contract is not even
called for. For with or without the aforesaid affidavit their non-payment to complete the full
downpayment of the purchase price ipso facto avoids their contract to sell, it being subjected to a
suspensive condition. When a contract is subject to a suspensive condition, its birth or effectivity
can take place only if and when the event which constitutes the condition happens or is
fulfilled.
25
If the suspensive condition does not take place, the parties would stand as if the
conditional obligation had never
existed.
26

Nevertheless, this being so Genato is not relieved from the giving of a notice, verbal or written,
to the Da Jose spouses for his decision to rescind their contract. In many cases,
27
even though we
upheld the validity of a stipulation in a contract to sell authorizing automatic rescission for a
violation of its terms and conditions, at least a written notice must be sent to the defaulter
informing him of the same. The act of a party in treating a contract as cancelled should be made
known to the other.
28
For such act is always provisional. It is always subject to scrutiny and
review by the courts in case the alleged defaulter brings the matter to the proper courts.
In University of the Philippines vs. De Los Angeles,
29
this Court stressed and we quote:
In other words, the party who deems the contract violated may consider it
resolved or rescinded, and act accordingly, without previous court action, but it
proceeds at its own risk. For it is only the final judgment of the corresponding
court that will conclusively and finally settle whether the action taken was or was
not correct in law. But the law definitely does not require that the contracting
party who believes itself injured must first file suit and wait for a judgment before
taking extrajudicial steps to protect its interest. Otherwise, the party injured by the
other's breach will have to passively sit and watch its damages accumulate during
the pendency of the suit until the final judgment of rescission is rendered when
the law itself requires that he should exercise due diligence to minimize its own
damages (Civil Code, Article 2203).
This rule validates, both in equity and justice, contracts such as the one at bat, in order to avoid
and prevent the defaulting party from assuming the offer as still in effect due to the obligee's
tolerance for such non-fulfillment. Resultantly, litigations of this sort shall be prevented and the
relations among would-be parties may be preserved. Thus, Ricardo Cheng's contention that the
Contract to Sell between Genato and the Da Jose spouses was rescinded or resolved due to
Genato's unilateral rescission finds no support in this case.
Anent the issue on the nature of the agreement between Cheng and Genato, the records of this
case are replete with admissions
30
that Cheng believed it to be one of a Contract to Sell and not
one of Conditional Contract of Sale which he, in a transparent turn-around, now pleads in this
Petition. This ambivalent stance of Cheng is even noted by the appellate court, thus:
At the outset, this Court notes that plaintiff-appellee was inconsistent in
characterizing the contract he allegedly entered into. In his complaint.
31
Cheng
alleged that the P50,000.00 down payment was earnest money. And next, his
testimony
32
was offered to prove that the transaction between him and Genato on
October 24, 1989 was actually a perfected contract to sell.
33

Settled is the rule that an issue which was not raised during the trial in the court below cannot be
raised for the first time on appeal.
34
Issues of fact and arguments not adequately brought to the
attention of the trial court need not be and ordinarily will not be considered by a reviewing court
as they cannot be raised for the first time on appeal.
35
In fact, both courts below correctly held
that the receipt which was the result of their agreement, is a contract to sell. This was, in fact
Cheng's contention in his pleadings before said courts. This patent twist only operates against
Cheng's posture which is indicative of the weakness of his claim.
But even if we are to assume that the receipt, Exh. "D," is to be treated as a conditional contract
of sale, it did not acquire any obligatory force since it was subject to suspensive condition that
the earlier contract to sell between Genato and the Da Jose spouses should first be cancelled or
rescinded a condition never met, as Genato, to his credit, upon realizing his error, redeemed
himself by respecting and maintaining his earlier contract with the Da Jose spouses. In fact, a
careful reading of the receipt, Exh. "D," alone would not even show that a conditional contract of
sale has been entered by Genato and Cheng. When the requisites of a valid contract of sale are
lacking in said receipt, therefore the "sale" is neither valid or enfoceable.
36

To support his now new theory that the transaction was a conditional contract of sale, petitioner
invokes the case ofCoronel vs. Court of Appeals
37
as the law that should govern their Petition.
We do not agree. Apparently, the factual milieu in Coronel is not on all fours with those in the
case at bar.
In Coronel, this Court found that the petitioners therein clearly intended to transfer title to the
buyer which petitioner themselves admitted in their pleading. The agreement of the parties
therein was definitively outlined in the "Receipt of Down Payment" both as to property, the
purchase price, the delivery of the seller of the property and the manner of the transfer of title
subject to the specific condition that upon the transfer in their names of the subject property the
Coronels will execute the deed of absolute sale.
Whereas, in the instant case, even by a careful perusal of the receipt, Exh. "D," alone such kind
of circumstances cannot be ascertained without however resorting to the exceptions of the Rule
on Parol Evidence.
To our mind, the trial court and the appellate court correctly held that the agreement between
Genato and Cheng is a contract to sell, which was, in fact, petitioner connection in his pleadings
before the said courts. Consequently, both to mind, which read:
Art. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken possession
thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in
good faith was first in possession; and in the absence thereof, to the person who
presents he oldest title, provided there is good faith.
However, a meticulous reading of the aforequoted provision shows that said law is not apropos
to the instant case. This provision connotes that the following circumstances must concur:
(a) The two (or more) sales transactions in issue must pertain to exactly the same
subject matter, and must be valid sales transactions.
(b) The two (or more) buyers at odds over the rightful ownership of the subject
matter must each represent conflicting interests; and
(c) The two (or more) buyers at odds over the rightful ownership of the subject
matter must each have bought from the very same seller.
These situations obviously are lacking in a contract to sell for neither a transfer of ownership nor
a sales transaction has been consummated. The contract to be binding upon the obligee or the
vendor depends upon the fulfillment or non-fulfillment of an event.
Notwithstanding this contrary finding with the appellate court, we are of the view that the
governing principle of Article 1544, Civil Code, should apply in this situation.
Jurisprudence
38
teaches us that the governing principle is PRIMUS TEMPORE, PORTIOR
JURE (first in time, stronger in right). For not only was the contract between herein respondents
first in time; it was also registered long before petitioner's intrusion as a second buyer. This
principle only applies when the special rules provided in the aforcited article of the Civil Code
do not apply or fit the specific circumstances mandated under said law or by jurisprudence
interpreting the article.
The rule exacted by Article 1544 of the Civil Code for the second buyer to be able to displace the
first buyer are:
(1) that the second buyer must show that he acted in good faith (i.e. in ignorance of the first sale
and of the first buyer's rights) from the time of acquisition until title is transferred to him by
registration or failing registration, by delivery of possession;
39

(2) the second buyer must show continuing good faith and innocence or lack of knowledge of the
first sale until his contract ripens into full ownership through prior registration as provided by
law.
40

Thus, in the case at bar, the knowledge gained by the Da Jose spouses, as first buyers, of the new
agreement between Cheng and Genato will not defeat their rights as first buyers except where
Cheng, as second buyer, registers or annotates his transaction or agreement on the title of the
subject properties in good faith ahead of the Da Jose spouses. Moreover, although the Da Jose
spouses, as first buyers, knew of the second transaction it will not bar them from availing of their
rights granted by law, among them, to register first their agreement as against the second buyer.
In contrast, knowledge gained by Cheng of the first transaction between the Da Jose spouses and
Genato defeats his rights even if he is first to register the second transaction, since such
knowledge taints his prior registration with bad faith.
"Registration", as defined by Soler and Castillo, means any entry made in the books of the
registry, including both registration in its ordinary and strict sense, and cancellation, annotation,
and even marginal notes.
41
In its strict acceptation, it is the entry made in the registry which
records solemnly and permanently the right of ownership and other real rights.
42
We have
ruled
43
before that when a Deed of Sale is inscribed in the registry of property on the original
document itself, what was done with respect to said entries or annotations and marginal notes
amounted to a registration of the sale. In this light, we see no reason why we should not give
priority in right the annotation made by the Da Jose spouses with respect to their Contract to Sell
dated September 6, 1989.
Moreover, registration alone in such cases without good faith is not sufficient. Good faith must
concur with registration for such prior right to be enforceable. In the instant case, the annotation
made by the Da Jose spouses on the titles of Genato of their "Contract To Sell" more than
satisfies this requirement. Whereas in the case of Genato's agreement with Cheng such is
unavailing. For even before the receipt, Exh. "D," was issued to Cheng information of such pre-
existing agreement has been brought to his knowledge which did not deter him from pursuing his
agreement with Genato. We give credence to the factual finding of the appellate court that
"Cheng himself admitted that it was he who sought Genato in order to inquire about the property
and offered to buy the same.
44
And since Cheng was fully aware, or could have been if he had
chosen to inquire, of the rights of the Da Jose spouses under the Contract to Sell duly annotated
on the transfer certificates of titles of Genato, it now becomes unnecessary to further elaborate in
detail the fact that he is indeed in bad faith in entering into such agreement. As we have held
in Leung Yee vs. F.L. Strong Machinery Co.:
45

One who purchases real estate with knowledge of a defect . . . of title in his
vendor cannot claim that he has acquired title thereto in good faith as against . . . .
an interest therein; and the same rule must be applied to one who has knowledge
of facts which should have put him upon such inquiry and investigation as might
be necessary to acquaint him with the defects in the title of his vendor. 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. 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 his vendor's title, will not make him an innocent purchaser for value, if
it afterwards develops that the title was in fact defective, and it appears that he
had such notice of the 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. Good faith, or lack of it, is in its last analysis a question of
intention; but in ascertaining the intention by which one is actuated on a given
occasion, we are necessarily controlled by the evidence as to the conduct and
outward acts by which alone the inward motive may with safety, be determined.
So it is that "the honesty of intention," "the honest lawful intent," which
constitutes good faith implies a "freedom from knowledge and circumstances
which ought to put a person on inquiry," and so it is that proof of such knowledge
overcomes the presumption of good faith in which the courts always indulge in
the absence of the proof to the contrary. "Good faith, or the want of it, is not a
visible, tangible fact that can be seen or touched, but rather a state or condition of
mind which can only be judge of by actual or fancied tokens or signs." (Wilder vs.
Gilman, 55 Vt. 504, 505; Cf. Cardenas vs. Miller, 108 Cal., 250; Breaux-
Renoudet, Cypress Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton
Bros. Co. vs. Bromely, 119 Mich., 8, 10, 17.) (Emphasis ours)
Damages were awarded by the appellate court on the basis of its finding that petitioner "was in
bad faith when he filed the suit for specific performance knowing fully well that his agreement
with Genato did not push through.
46
Such bad faith, coupled with his wrongful interference with
the contractual relations between Genato and the Da Jose spouses, which culminated in his filing
of the present suit and thereby creating what the counsel for the respondents describes as "a
prolonged and economically unhealthy gridlock
47
on both the land itself and the respondents'
rights provides ample basis for the damages awarded. Based on these overwhelming evidence of
bad faith on the part of herein petitioner Ricardo Cheng, we find that the award of damages made
by the appellate court is in order.
WHEREFORE, premises considered, the instant petition for review is DENIED and the assailed
decision is hereby AFFIRMED EN TOTO.

G.R. No. L-20075 November 27, 1968
DANAO COAL MINING SYNDICATE, LTD., applicant, SOUTHWESTERN
UNIVERSITY, petitioner-appellee,
vs.
CENON LAURENTE, oppositor-appellant.
Deen Law Offices for petitioner-appellee.
Ramon Duterte for oppositor-appellant.
REYES, J.B.L., J .:
Forwarded to us for review by the Court of Appeals
1
is this appeal from two orders issued by the
Court of First Instance of Cebu in the latter's capacity as land registration court.
2
The first was a
grant to a buyer's ex parte petition praying, inter alia, for cancellation of annotation of
incumbrances on the transfer certificate of title covering a parcel of land it purchased from the
heirs of registered owner. The second was a denial of a motion for reconsideration of the first
order which was filed by a third person whose interest, purportedly, might have been prejudiced
by the cancellation.
The transfer certificate of title (TCT No. 7567) in question covered a parcel of land situated in
Camansi, Danao, Cebu. The same was issued in 1928 by the Register of Deeds of Cebu in favor
of H. M. H. Nemazee, the proprietor of the original applicant, Danao Coal Mining Syndicate,
Ltd. On the face thereof were annotated the following incumbrances:
(a) the condition that the applicant shall be required to produce from the mining claims
referred to a minimum amount of coal equal to an average daily production of two
hundred tons of twenty hundred and forty English pounds for every day exclusive of
Sundays and holidays, and in the event of the failure of the said Coal Mining Syndicate to
produce such amount of coal, to pay to the Government of the Philippine Islands a
royalty at the rate of twenty centavos per ton upon each and every ton of the deficiency
between the amount actually produced, and the minimum amount herein specified, (b) the
use and occupancy of the surface of the said parcel of land in favor of Filomeno del Mar,
as administrator of Roque del Mar, deceased; Lazaro Osmea, as administrator of Tomas
Osmea, deceased; H. B. Walker, as administrator of Candelario Cuizon, deceased; Juan
Medio, Eleno Hungug, Bernardo Cal, Faustino Batucan, Perfecto Lavador, Agustin Tito
and Salvador Gonzalez in accordance with the agreement dated at Cebu, November 22,
1913.
In a quitclaim deed, dated 14 January 1960, the heirs of Nemazee transferred and quitclaimed in
favor of Southwestern University their rights, title, interest and participation in, including their
mining and leasehold rights over, said land.
Subsequently, Southwestern University petitioned the lower court to order (1) the cancellation of
the aforequoted annotation of incumbrances on the ground that the condition and agreement
constituting the same were cancelled and rendered inoperative by the outbreak of World War II
as well as by the death of all the listed beneficiaries thereof; (2) the registration of the quitclaim
deed; and (3) the cancellation of TCT No. 7567 itself, and issuance of a new certificate of title in
its name. The petition was immediately granted,
3
with the lower court dispensing with the usual
notice to interested parties. A new certificate of title (TCT No. RT-2164) was thereafter issued in
favor of Southwestern University.
On 12 September 1960, one Cenon Laurente moved the lower court to reconsider its order of
cancellation, specifically of the second portion of the annotation of incumbrances in question. He
alleged that Southwestern University had filed an ejectment suit
4
before another branch of the
same court against him and several other occupants of the land covered by TCT No. 7567, over
which land, he claimed, he might possibly have an interest as a purchaser of a certain parcel of
land situated also in Camansi, Danao, Cebu, from Filomeno del Mar, one of the persons in whose
favor "the use of occupancy of the surface of the ... land" covered by said TCT No. 7567 was
reserved. Laurente thus argued that the cancellation of the annotation of the incumbrance in
favor of Filomeno del Mar and others should not have been ordered without giving notice, at
least through publication, to the parties who, like him, being a successor-in-interest of said
Filomeno del Mar, might thereby be adversely affected. Laurente's alleged interest was, however,
never registered.
The motion for reconsideration was denied, as previously intimated. Reasoned the lower court:
The Court is in accord with his contention (that if there should be notice, it should be
limited to the parties annotated in the certificate of title itself, and should not be extended
to subsequent parties who, even granting that they acquired the interests of these persons
annotated in the certificate of title, failed to have their rights accordingly annotated in
said certificate of title) of petitioner Southwestern University, and maintains that
inasmuch as the law specifically provides notice to parties in interest, such notice if any,
should be limited to the parties listed or annotated on the certificate of title. Hence, if
such parties are already dead, as had been alleged and substantiated by petitioner
Southwestern University, then notice to said parties would be superfluous or notice
would not be necessary. The Court acting within its limited jurisdiction as a Court of
Land Registration, can only act on what appears on the face of the certificate of title, and
cannot go beyond what appears therein as movant Cenon Laurente would now want this
Court to believe. Notice by Publication is not necessary in connection with the this
petition which has been duly filed in accordance with Section 112 of Act 496.
Granting that the use and occupancy which was annotated in the certificate of title is a
real right which could be transferred or disposed of by the person named in the certificate
of title to a third person (in this case Cenon Laurente), the latter should have taken the
precaution of having his right annotated on said (certificate of title). His failure to do so
is therefore fatal, in the sense that this Court cannot consider him as a party in interest
who is entitled to notice before the petition for cancellation of incumbrance could be
acted upon ...
5

We find no error in the order appealed from.
Cancellation of registered interests that have terminated and ceased may be ordered by the land
registration court under, and in conformity with, section 112 of Act No. 496, otherwise known as
the Land Registration Act. The new owner, Southwestern University, of the land herein involved
took the right step by petitioning the court under said section to have the registered interests
the deceased persons' rights of use and occupancy of the surface of said land ordered
cancelled on the ground that the same had terminated and ceased. Notice was no longer
necessary for the court to acquire jurisdiction over the petition insofar as the second portion of
the annotation of incumbrances was concerned. With the death of all the registered adverse
claimants thereof, there were no more parties in interest to be notified.
Appelant Laurente was not and can not now be considered a party in interest entitled to notice.
He was, as he is now, a stranger representing no adverse claim as to render the petition for
cancellation controversial and, thereby, divest the lower court of its jurisdiction. For Laurente's
claim avers that the cancellation of the right of the persons recorded as entitled to use and
occupancy of the surface of the land could affect him adversely because the interest acquired by
him from Filomeno del Mar "might be included in that which is referred to in the aforementioned
annotation." (Record on Appeal, page 43) This is too vague and unsubstantial to give him
standing to claim right to notice or to contest the order of cancellation. Before a claimant can be
considered as possessing a genuine adverse interest that would deprive the Registration Court of
jurisdiction to proceed under section 112 of Act 496 in the absence of notice to him, there must
be a showing of the prima facie truth and validity of such adverse interest. Laurente has failed to
make such a showing. His motion merely speaks of a possibility of being prejudiced. He has not
produced and deed of conveyance from Filomeno del Mar, or secondary evidence thereof. A
mere verbal agreement will not do here; there must be a public instrument in order to affect a
stranger (such as the holder of the certificate of title or his successors in interest). For Article
1280, No. 1, of the Civil Code of 1889 (in force in 1920 when Laurente claims to have acquired
title) prescribes:
The following must be reduced to writing in a public instrument:
1. Acts or contracts whose object is the creation, transmission, modification or extinction
of rights which affect immovable property. (Emphasis supplied)
And to affect registered land, such as is covered by the Certificates of Title of appellee
Southwestern University and its predecessor in interest (TCT No. 7567 and RT-2164), the public
document above referred to must be recorded and annotated in the certificate, as pointed out in
the appealed order; and admittedly, there is no record of any deed in favor of Laurente. It is
elementary that, under the Torrens system, registration is the operative act that binds the parties
thereto, without affecting the rights of strangers to such contract (Act 496, section 51) unless
they have actual knowledge thereof,
6
which is not alleged here.
What is worse is that Laurente allowed more than 20 years to elapse without asserting the alleged
conveyance in his favor, when a period of 10 years sufficed under Act 190 (then in force) to bar
any claim to or over real property. Nor has Laurente adequately explained such laches on his
part..
He avers that he could not cause the recording of the conveyance in his favor because the
registered owner resided in Hongkong. This is no excuse, for the claimant could have asked the
proper court to have the owner summoned by publication. Laurente also pleads that the records
of the Cebu Register of Deeds were destroyed in the last war. But the war only broke out in
1941, and the enemy occupied Cebu in 1942, while Laurente's vendor, Filomeno delo Mar,
ceased to be administrator of the Estate of Roque del Mar as far back as 1920, when the
proceedings were closed (Record on Appeal, page 61). Thus, Laurente unaccountably permitted
21 years to elapse without attempting to record or enforce the alleged conveyance in his favor.
All the foregoing circumstances cast a dense pall of doubt over the genuineness and validity of
Laurente's adverse claim, and fully justify its rejection by the lower court.
WHEREFORE, the orders appealed from are sustained and affirmed. Costs against appellant
Cenon Laurente in all instances.

G.R. No. L-79787 June 29, 1989
APOLONIO EGAO AND BEATRIZ EGAO, petitioners,
vs.
THE HONORABLE COURT OF APPEALS (NINTH DIVISION), SEVERO DIGNOS
AND SEVERO BONTILAO,respondents.
Eliud J. Pailagao for petitioners.
Guerrero A. Adaza for private respondents.

PADILLA, J .:
This is a land dispute which culminated in the filing by private respondents Severo Dignos and
Severo Bontilao of a verified complaint for Quieting of Title and/or Recovery of Possession and
Ownership before the RTC of Manolo Fortich, Bukidnon,* against petitioners Apolonio and
Beatriz Egao.
Private respondents' complaint alleged that they are the legitimate owners and possessors of two
(2) parcels of land situated at Lonocan, Manolo Fortich, Bukidnon, per deed of absolute sale
dated 21 December 1979 which, among others, recited thus:
WHEREAS, the abovementioned Parcels of land Lot No. 662 is covered by
Original Certificate of Title No. P-3559 Free Patent No. 298112 registered in the
name of APOLONIO EGAO married to Beatriz Menosa and Lot No. 661 is
covered by Original Certificate of Title No. P-3558 Free Patent No. 303249
registered in the name of RAULITA CONEJOS married to Pedro Conejos, all
transcribed in the Registration Book in the Register of Deeds for the Province of
Bukidnon;
WHEREAS, Lot No. 662 has been transferred in ownership from BEATRIZ
MENOSA EGAO, married to Apolonio Egao in favor of ROBERTO N.
MARFORI per Deed of Absolute Sale executed before Tommy C. Pacana, Notary
Public of Cagayan de Oro City entered in his Notarial Registry under Doc. No.
75; Page No. 15; Book V Series of 1965; and Lot No. 661 likewise has been
transferred in ownership from RAULITA R. CONEJOS in favor of ROBERTO
N. MARFORI per Deed of Absolute Sale executed before Tommy C. Pacana,
Notary Public of Cagayan de Oro City, dated June 3, 1965, entered in his Notarial
Registry under Doc. No. 20; Page 4; Book V; Series of 1965.
WHEREAS, the VENDEES herein is [sic] aware of the fact that the Certificate of
Title over the abovementioned parcels of land have not yet been transferred in
favor of ROBERTO N. MARFORI except for the tax declarations but that the
VENDOR herein is in actual, physical, continuous, uninterrupted, and adverse
possession of the above described parcels of land free from all liens and
encumbrances whatsoever;
1

Allegedly, upon purchase of Lot No. 662 from Roberto Marfori, improvements were introduced
and taxes paid by private respondents. Sometime in June 1983, herein petitioners allegedly
occupied illegally portions of the land.
2

Petitioners' answer to the complaint asserted that Apolonio Egao is the registered owner of the
parcel of land known as Lot No. 662, Pls 854 with an area of 3,451 sq. meters evidenced by OCT
No. P-3559 issued by the Register of Deeds of Bukidnon pursuant to Free Patent No. 298112
dated 12 August 1965; that he (Apolonio Egao) and his family have been in actual, physical,
adverse, open and continuous possession thereof even before the issuance to him of the free
patent; that the land has never been sold by reason of the prohibition against alienation under
Commonwealth Act No. 141 (Public Land Law); and that the instant case was the fourth in a
series filed against the Egaos and is part of respondents' scheme to grab said parcel of land from
the petitioners.
Judge Felicidario M. Batoy ruled in favor of the Egaos, herein petitioners (defendants in the
court a quo), ordering respondent Severo Bontilao (plaintiff in the court a quo) to immediately
deliver to the Egaos the owner's duplicate copy of Original Certificate of Title No. P-3559. Said
trial judge held:
In the instant case, granting arguendo, that defendants executed the 2 documents
in favor of Marfori (Exhs. A & B) after the filing of the application for free patent
but before the issuance of the latter, without the approval of the Director of Lands,
upon issuance of Free Patent No. 29811 2 on August 12, 1965, the said deeds of
sale (Exhs. A & B) were ipso facto cancelled or superseded by said free patent.
Moreover, it appears from the evidence that defendants never vacated or
abandoned their possession of Lot No. 662 as they have continuously lived on
said lot since 1950, a fact admitted by the plaintiffs themselves. And as long as
Original Certificate of Title No. P-3559 remains in the name of defendant
Apolonio Egao, married to Beatriz Menoza Egao, this is the ultimate and best
evidence of title granted by the government which must be honored and respected
by the courts. In a nutshell, the plaintiffs miserably failed to present or show any
title to Lot No. 662, PLS-854 which should be quieted or freed from any cloud of
doubt as prayed for in their complaint and they further failed to show that they are
entitled to the ownership and possession to Lot No. 662, PLS-854.
3

Private respondents went to the Court of Appeals in CA-G.R. No. 09539. Setting aside the RTC
decision, the appellate court ** held, in part, thus-
That the land is titled in the name of defendant Apolonio Egao is not in question.
The main point in issue is whether defendants could validly sell the land to
Marfori who in turn transferred ownership thereof to the plaintiff.
4

Marfori and Egao were both held by the Court of Appeals in pari delicto for violating the five (5)
year restriction under Sec. 118, Commonwealth Act No. 141 as amended by Act No. 496 against
encumbrance or alienation of lands acquired under a free patent or homestead; hence, they
cannot, according to the appellate court, seek affirmative relief, but respondents on the other
hand were declared innocent purchasers for value who obtained the owner's duplicate copy of the
OCT (still in the name of the Egaos) from Marfori who transferred to them (respondents)
physical possession of the property. Finally, the Court of Appeals held:
WHEREFORE, the decision appealed from is hereby SET ASIDE and a new one
is rendered:
1. Declaring the plaintiffs as the absolute owners of the land
known as Lot No. 662, Pls-854 of the Land Registry of Bukidnon;
2. Ordering the Register of Deeds of Bukidnon to effect the
cancellation of Original Certificate of Title No. P-3559 in the name
of Apolonio Egao and in lieu thereof, another one be issued in the
names of plaintiffs, after payment of the proper fees;
3. Ordering the defendants to surrender peaceful possession of the
land to plaintiffs and to desist from further disturbing the
possession over the land of plaintiffs;
4. Ordering the defendants to pay the costs.
SO ORDERED.
5

Petitioners turn to this Court for relief, assailing the appellate court for allegedly committing
grave abuse of discretion amounting to lack of jurisdiction in holding that:
a. Petitioners sold Lot 662 to Roberto Marfori;
b. It was only in 1983 when Petitioners wrested possession over
the land from private respondents;
c. Petitioners never denied the sales made in favor of Marfori, in
their answer;
d. Private Respondents are "innocent purchasers for value.
6

and/or for allegedly deciding questions of substance not in accordance with law and/or
applicable decisions of this Court.
Without giving due course to the petition, the Court required respondents to comment.
7
After
comment, the Court resolved to require petitioners to file a reply, which they did. Respondents
filed a rejoinder. Considering the allegations, issues and arguments adduced, the Court resolved
to give due course to the petition. Upon submission by the parties of their respective
memorandum, the petition was submitted for decision.
8

Validity of the Deeds of Sale executed between Marfori (as purchaser) and the petitioners (as
sellers) is the main issue to be resolved, in determining respondents' right over the disputed land,
the respondents being the transferees of Marfori.
It is undisputed that Free Patent No. 298112 was issued to petitioner Apolonio Egao over Lot
No. 662 on 12 August, 1965. Sec. 118 of Commonwealth Act No. 141, as amended, prohibits the
alienation or encumbrance, within a period of five (5) years from the date of issuance of the
patent, of lands acquired under free patent or homestead. Assuming, arguendo, the authenticity
of the Deeds of Sale executed by the Egaos in favor of Marfori over portions of Lot No. 662 (the
land in question), dated 7 May 1964, 14 January and 6 October 1965, it clearly appears that all
deeds were executed within the prohibited period of five (5) years. As correctly found by the
appellate court-
Section 124 of the Public Land Act provided [sic] that any acquisition,
conveyance, abenation, transfer or other contract made or executed inviolation of
any of the provisions of Sections 118,121,120,122 and 123 of this Act shall be
unlawful, null and void from its execution and shall produce the effect of
annulling and cancelling the grant, title, patent or permit originally issued,
recognized or confirmed, actually or prescriptively, and cause the reversion of the
property and its improvements to the state.
9

Petitioners deny the authenticity and due execution of the notarized deeds of sale in favor of
Marfori, asserting continued ownership over the land by virtue of a Torrens Certificate of Title
issued in their name. While the Court is not satisfied with respondents' explanation of their
failure to present the notaries public (who were residents of a neighboring province) to affirm
their participation in the preparation of the Deeds, the Court also finds as insufficient the mere
denials by petitioners as to due execution and authenticity of said Deeds of Sale. A notarial
document is evidence of the facts in clear unequivocal mariner therein expressed. It has in its
favor the presumption of regularity To contradict all these there must be evidence that is clear,
convincing and more than merely preponderant.
10
The question of authenticity being one of fact,
the Court will not disturb the conclusions of the Court of Appeals on the matter.
Original Certificate of Title No. P-3559 over the land in dispute was issued on 1 March 1966, a
few months after the execution by the Egaos of the last Deed of Sale in favor of Marfori.
11
The
OCT is registered in the name of the Egaos, herein petitioners.
A Torrens title, once registered, cannot be defeated, even by adverse open and notorious
possession. A registered title under the Torrens system cannot be defeated by prescription. The
title, once registered, is notice to the world. All persons must take notice. No one can plead
ignorance of the registration.
12

Contrary to the appellate court's conclusion, respondents are not innocent purchasers for
value.
13
An "innocent purchaser for value" is deemed, under the Torrens system, to include an
innocent lessee, mortgagee or other encumbrancer for value.
14
Where a purchaser neglects to
make the necessary inquiries and closes his eyes to facts which should put a reasonable man on
his guard as to the possibility of the existence of a defect in his vendor's title, and relying on the
belief that there was no defect in the title of the vendor, purchases the property without making
any further investigation, he cannot claim that he is a purchaser in good faith for value.
15

Furthermore, a private individual may not bring an action for reversion or any action which
would have the effect of cancelling a free patent and the corresponding certificate of title issued
on the basis thereof, with the result that the land covered thereby will again form part of the
public domain, as only the Solicitor General or the officer acting in his stead may do so.
16

The rule of pari delicto non oritur actio (where two persons are equally at fault neither party
may be entitled to relief under the law), admits of exceptions and does not apply to an inexistent
contract, such as, a sale void ab initio under the Public Land Act, when its enforcement or
application runs counter to the public policy of preserving the grantee's right to the land under
the homestead law.
17

Sec. 51, par. 2 of the Property Registration Decree (PD 1529), formerly Sec. 50 of the Land
Registration Act (Act No. 496) expressly provides that the registration of the Deed is the
operative act that binds or affects the land insofar as third persons are concerned. The law
requires a higher degree of prudence from one who buys from a person who is not the registered
owner, when the land object of the transaction is registered land. While one who buys from the
registered owner need not look behind the certificate of title, one who buys from another who
is not the registered owner is expected to examine not only the certificate of title but all factual
circumstances necessary for him to determine if there are any flaws in the title of the transferor,
or in his capacity to transfer the land. Failing to exercise caution of any kind whatsoever is
tantamount to bad faith.
18

Deeds of sale of patented lands, perfected within the prohibited five (5) year period are null and
void (Sec. 124, Public Land Act). No title passed from the Egaos to Marfori which could be
validly transferred to herein respondents Bontilao and Dignos. Nemo dat quod non
habet (nobody can dispose of that which does not belong to him).
19

While the government has not taken steps to assert its title, by reversion, to a homestead sold in
violation of the Public Land Act, the vendor or his heirs is better entitled to the possession of the
said, the vendee being in no better situation than any intruder.
20

Accordingly, respondents who are not innocent purchasers for value have no standing to question
petitioners' right to the land and to file an action for quieting of title.
WHEREFORE, the appealed decision of the Court of Appeals in CA G.R. CV No. 09539 is
REVERSED and SET ASIDE. Meanwhile, petitioners as registered owners are entitled to remain
in physical possession of the disputed property. Respondents are ordered to deliver the owner's
duplicate copy of the OCT (No. P-3559) to petitioners, without prejudice to an action for
reversion of the land, which may be instituted by the Solicitor General for the State.

G.R. Nos. L-48971 & 49011 January 22, 1980
PACIFICO GARCIA, petitioner-appellant,
vs.
BENJAMIN M. GOZON, TECLA GUTIERREZ, ROSARIO FELIX, PAULINO D.
BUENAVENTURA, RAYMUNDO DIONISIO, VIRGILIO AUSTRIA and MARCEON
VICENCIO, respondents-appellees;
PHILIPPINE NATIONAL BANK, petitioner-appellant,
vs.
COURT OF APPEALS (Third Division), CAROLINA LAPUZ- GOZON, assisted by her
husband BENJAMIN M. GOZON, TECLA GUTIERREZ, ROSARIO FELIX, PAULINO
D. BUENAVENTURA, RAYMUNDO DIONISIO, VIRGILIO AUSTRIA and MARCEON
VICENCIO, respondents-appellees.
AQUINO, J .:
This case is about the issuance of two or more transfer certificates of title to different persons
for the same lots, or subdivisions thereof, due to the fact that the original title was allegedly not
cancelled when the first transfer certificates of title were issued to replace the original title. The
factual background is as follows:
1. On August 9, 1918, a deed of sale for two parcels of land, E and G (with a total area of more
than seven hectares) of the Hacienda Maysilo, located in Malabon, Rizal and covered by Original
Certificate of Title No. 983, was executed in favor of Ismael Lapus a bona fide occupant thereof.
The deed was executed pursuant to an order of the Court of First Instance of Rizal in Civil Case
No. 391, Negao vs. Vidal, a partition proceeding involving the said hacienda (See Bustamante vs.
Tuason, 47 Phil. 433, 434).
2. The deed of sale was presented for registration at two-twenty five in the afternoon of January
15, 1920 and was recorded as Primary Entry No. 7710. That deed of sale itself contains the
following entries showing that it was annotated on the back of OCT NO. 983:
Presentado en este Registro a las 2:25 de la tarde del dia de hoy segun el Asiento
No. 7710 de tomo 10 del Libro Diario, Pasig, Rizal, Enero 15, 1920.
Register of Deeds (Exh. B-12)
Inscrito el documento que precede al dorso del certificado de Titulo Original No.
983 del Tomo A-9, de inscritor en las paginas 113 y 114 ambos del libro T-25 de
registro como certificados de titulo Nos. 4910 y 4911, archivado en el legajo T-
#4910. Pasig, Rizal, Enero 15, 1920.:
Register of Deeds (Exh. B-1).
However, it seemed that, contrary to the foregoing entry and the official routine or standard
operating procedure, the deed of sale was not annotated on OCT No. 983 and that, consequently,
that title was apparently not cancelled. Why that annotation did not appear in OCT No. 983 and
why there was no notation of the cancellation of that title, as it appeared in1962, is a mystifying
circumstance in this case.
3. As a result of the registration of that deed of sale, Transfer Certificate of 'Title No. 4910 was
issued to Lapus for the two parcels of land, E and G, and I Transfer Certificate of Title No. 4911
was issued for the remaining five lots covered by OCT No. 983 (which embrace an area of more
than two hundred fifty-eight hectares registered in the names of more than twenty-six-co-
owners). TCT Nos. 4910 and 4911 contain the following entries: "Transfer from No. 983.
Originally registered on the 29th day of January, in the year 1917 in Book No. A-9, page 215, of
the said Province of Rizal, pursuant to a decree entered in Case No. 3850."
4. Lapus on different occasions mortgaged the two parcels of land to secure his obligations to the
Philippine National Bank, the Government and the Philippine Trust Company. He died in 1951.
The two parcels of land were inherited by his daughter, Carolina Lapuz-Gozon. She became the
registered owner of the two lots. She subdivided them into fifty-five lots. She sold some of the
subdivision lots to her co-respondents-appellees herein. Lapus and his successors-in-interest
have been in possession of the two parcels even before 1910 or for more than seventy years.
5. Meanwhile, in 1962, certain. alleged heirs (collectively known as the Riveras) of the late
Maria de la Concepcion Vidal filed a motion in Land Registration Cases Nos. 4429 and 4496 of
the Court of First Instance of Rizal, alleging that they were deprived of their participation in the
Hacienda Maysilo covered by OCT No. 983 and for other titles and that, since only OCT No.
983 was supposedly unencumbered, all the land covered by that title should be adjudicated to
them. The court granted the motion. It should be stressed that OCT No. 983 appears to have
remained uncancelled notwithstanding the sale to Lapus of two parcels covered by it and the fact
that it had been replaced by TCT Nos. 4910 and 4911.
6. On June 7, 1963, OCT No. 983 was definitely cancelled and in lieu thereof Transfer
Certificate of Title No. 112236 was issued to the Riveras. Later, Lots 5 and 7 of the said title
(corresponding to parcels E and G which were sold to Ismael Lapus in 1918 as stated earlier)
were assigned by Bartolome Rivera to Sergio Cruz and Pacifico Garcia and TCT Nos. 112743
and 112742 were issued to Cruz and Garcia, respectively. Thus, two sets of transfer certificates
of title for Lots E and G or 5 and 7, originally covered by OCT No. 983, were issued, one to the
heir of Ismael Lapus and another set to the successors-in-interest of the Riveras.
7. On October 22, 1964, Garcia subdivided Lot 7 (G) into Lots A and B. Garcia retained Lot A
and obtained TCT No. 134958 for it. He assigned Lot B to Antonio Muoz on November 5,
1964. As a consequence of the assignment, TCT No. 112742 was cancelled and TCT No. 134957
was issued to Muoz. In 1965, he mortgaged Lot B to the Associated Banking Corporation to
secure a loan of P200,000.
8. On the other hand, on July 17, 1964 Cruz sold to Santiago Go Lot 5 (E) covered by TCT No.
112743. TCT No. 131329 was issued to Go on August 25,1964. On December 23, 1964, Go
mortgaged Lot 6 to the Philippine National Bank (PNB) to secure a loan of P50,000 which was
later increased to P60,000.
9. Muoz and Go did not pay their mortgage debts. The two banks foreclosed the mortgages. The
PNB bought the mortgaged lot at the auction sale held on May 4. 1967. The sheriff issued to it a
certificate of sale dated May 19, 1967 but at that time there was already a notice of lis
pendens annotated on the title of the mortgaged lot. TCT Nos. 212163 and 236881 for the
mortgaged lots were issued to the Associated Banking Corporation and the Philippine National
Bank, respectively.
10. The Riveras and their successors-in-interest have never set foot on the disputed lots.
11. Mrs. Gozon later learned that the Riveras and their successors-in-interest had acquired the
land (more than two hundred fifty-eight hectares) covered by OCT No. 983. Her lawyer and a
surveyor informed her that parcels E and G, which she inherited from her father, were identical
to Lots 5 and 7 which were conveyed to Cruz and Garcia. She registered adverse claims on the
titles covering Lots 5 and 7. On December 27, 1965 she and the persons to whom she had
transferred portions of parcels E and G filed with the Court of First Instance of Rizal at Caloocan
City against the Riveras, Cruz, Muoz, Garcia, Associated Banking Corporation, PNB and others
an action to quiet title and for damages.
12. A notice of lis pendens was annotated on January 25, 1966 on the titles of Garcia, Muoz and
Go. The notice of lis pendens was annotated on the title of the PNB when the sale in its favor
was registered on December 13, 1969.
13. The trial court in its decision of July 30, 1975 declared valid TCT Nos. 141802 to 141855
and 143512 issued to Mrs. Gozon and her co-plaintiffs. It voided TCT No. 112235 issued to the
Riveras and all titles and transactions emanating therefrom insofar as those titles covered the lots
embraced in plaintiffs' titles. The Riveras were ordered to pay the plaintiffs twenty thousand
pesos as attorney's fees.
14. The trial court also ordered Muoz to pay the Associated Banking Corporation, in the event
that the bank would be evicted from the lot covered by TCT No. 212153, two hundred sixty-five
thousand seventy-two pesos and fifteen centavos with twelve percent interest per annum from
the date of the eviction plus ten thousand pesos as attorney's fees.
15. Santiago Go was ordered to pay the PNB, should it be evicted from the lot covered by TCT
No. 236881, the sum of sixty thousand pesos plus nine percent interest per annum from the date
of the eviction and six thousand pesos as attorney's fees.
16. That judgment of the trial court was affirmed by the Court of Appeals in its decision of May
25, 1978. Garcia and the PNB appealed from that decision. The Associated Banking
Corporation, now the Associated Citizens Bank, tried to appeal but it was not able to file its
petition for review (L-49010).
Garcia contends that the Court of Appeals erred in not holding that his title is valid and that the
titles of Ismael Lapus and his successors-in-interest lost their right to the disputed lots due to
their negligence or inaction.
The issue is whether the 1920 title issued to Lapus and the titles derived therefrom should prevail
over the 1963 title issued to the Riveras and the subsequent titles derived from it. Should Lapus'
title prevail even if it was not annotated by the register of deeds on the anterior or parent title
which was not cancelled before 1963? It was that noncancellation which led to the issuance of
the duplicative title to the Riveras and eventually to the execution of the controversial mortgages
and foreclosure sales to the two banks.
We hold that the two appeals have no merit. The title of Lapus and the titles derived therefrom
should be given effect. The title of the Riveras and the titles springing from it are void.
There can be no doubt that Lapus was an innocent purchaser for value. He validly transmitted to
his successors-in-interest his indefeasible title or ownership over the disputed lots or parcels of
land. That title could not be nullified or defeated by the issuance forty-three Years later to other
persons of another title over the same lots due to the failure of the register of deeds to cancel the
title preceding the title issued to Lapuz. This must be so considering that Lapus and his interest
remained in possession of the disputed successors in lots and the rival claimants never possessed
the same.
"The general rule is that in the case of two certificates of title, purporting to include the same
land, the earlier in date prevail, whether the land comprised in the latter certificate be wholly, or
only in part, comprised in the earlier certificate" (Hogg, Australian Torrens System 823, citing
cases and cited in Legarda and Prieto vs. Saleeby, 31 Phil. 590, 595).
"Where two certificates (of title) purport to include the same land, the earlier in date prevails. ...
In successive registrations, where more than once certificate is issued in respect of a party estate
or interest in land, the Person claiming under the prior certificate is entitled to the estate or
interest; and that person is deemed to hold under the prior certificate who is the holder of, or
whose claim is derived directly or indirectly from the person who was the holder of the earliest
certificate issued in respect thereof " (Niblack, Analysis of the Torrens System page 237, cited in
Legarda and Prieto vs. Saleeby,supra, pages 595-6).
And the rule that in case of double registration the owner of the earlier certificate is the owner of
the land applies to the successive vendees of the owners of such certificates. "The vendee of the
earlier certificate would be the owner as against the vendee of the owner of the later certificate"
(Legarda and Prieto vs. Saleeby, supra, pages 597-9).
It is settled that is this jurisdiction the maxim prior est in tempore, potior est in jure (he who is
first in time is preferred in right) is followed in land registration matters (La Urbana vs.
Bernardo, 62 Phil. 790, 806).
Appellant Garcia invokes the ruling that the mere entry of a document in the day or entry book
without noting it on the certificate of title is not a sufficient registration (Bass vs. De la Rama, 73
Phil. 682, 685).
That ruling was superseded by the holding in the later six cases of Levin vs. Bass, 91 Phil. 420,
where a distinction was made between voluntary and involuntary registration, such as the
registration of an attachment, levy upon execution, notice of his pendens, and the like. In cases
of involuntary registration, an entry thereof in the day book is a sufficient notice to all persons
even if the owner's duplicate certificate of title is not presented to the register of deeds.
On the other hand, according to the said cases of Levin vs. Bass, in case of voluntary registration
of documents an innocent purchaser for value of registered land becomes the registered owner,
and, in contemplation of law the holder of a certificate of title, the moment he presents and files a
duly notarized and valid deed of sale and the same is entered in the day book and at the same
time he surrenders or presents the owner's duplicate certificate of title covering the land soldand
pays the registration fees, because what remains to be done lies not within his power to perform.
The register of deeds is duty bound to perform it. (See Potenciano vs. Dineros, 97 Phil. 196.)
The instant case is not Identical to the Bass cases. Here the deed of sale in favor of Lapus, which
was judicially authorized, was entered in the entry book and a new title was issued to him. As
already stated, and this point should be underscored, the deed of sale in favor of Lapus contains
the notation that it was annotated on the back of OCT No. 983(presumably, the original and
owner's duplicate thereof).
But why in 1962 it appeared that no such annotation was found on the back of OCT No. 983,
contrary to what was stated in the 1918 deed of sale, is a mystery that the trill court and the
plaintiffs failed to unravel during the trial. Moreover, the title issued to Lapus contains the usual
notation that it was a transfer from a previous title which in this case was OCT No. 983.
It should be further observed that the deed of sale in favor of Lapus and the titles issued to him
and his successors interest together with his mortgage in 1929 of the disputed lots to the PNB
itself, are all a matter of public record in the registry of deeds.
As stressed in Legarda and Prieto vs. Saleeby, 31 Phil. 590, 600, "the record is notice to all the
world. All persons are charged with the knowledge of what it contains. All persons dealing with
the land so recorded, or any portion of it, must be charged with notice of whatever it contains.
The purchaser is charged with notice of every fact shown by the record and is presumed to know
every fact which the record discloses.
"When a conveyance has been properly recorded, such record is constructive notice of its
contents and all interests, legal and equitable, included therein." "Under the rule of notice, it is
presumed that the purchaser has examined every instrument of record affecting the title. Such
presumption is irrefutable. He is charged with notice of every fact shown by the record and is
presumed to know every fact which an examination of the record would have disclosed"
(Legarda and Prieto vs. Saleeby, supra, page 600).
As Justice Johnson says, "this presumption cannot be overcome by proof of innocence or good
faith. Otherwise, the very purpose and object of the law requiring a record would be destroyed.
Such presumption cannot be defeated by proof of want of knowledge of what the record contains
any more than one may be permitted to show that he was ignorant of the provisions of the law.
The rule that all persons must take notice of the facts which the public record contains is a rule of
law. The rule must be absolute. Any variation would lead to endless confusion and useless
litigation" (Legarda and Prieto vs. Saleeby, supra, pp. 600-601).
As to the PNB's claim that it was a mortgagee and purchaser in good faith and for value, the
Appellate Court held that the bank should have made an on-the-spot investigation of the lot
mortgaged by Go to ascertain whether he was in possession of it or it was claimed by other
persons. Its failure to do so precludes the bank from being considered as a mortgagee in good
faith and for value (Gatioan vs. Gaffud, L-21953, March 28, 1969, 27 SCRA 706).
On the other hand, the trial court held that the PNB was not a buyer in good faith when it bought
Go's lot at the auction sale because there was already a notice of his pendens annotated on his
title.
In the Gatioan case, it appears that in 1935 Rufina Permison secured a Torrens title for a parcel
of land on the basis of a free patent. The land was sold to Encarnacion Gatioan and Transfer
Certificate of Title No. T-1212 was issued to her. She mortgaged the land three times to the PNB
In 1956, the spouses Sixto Gaffud and Villamora Logan were able to secure a Torrens title for
the same lot also on the basis of a free patent. They mortgaged the land also to the PNB. The
Secretary of Agriculture and Natural Resources, on discovering that two Torrens titles were
issued for the same land, recommended the cancellation of the later title issued to the Gaffud
spouses. As the PNB refused to cancel the mortgaged executed by Gatioan, in spite of the fact
that she had made full payment of the mortgage debt, she filed against the Gaffud spouses and
the PNB an action to quiet title.
It was held that Gatioan's title should prevail over that of the Gaffud spouses and that the
mortgage executed by them in favor of the PNB was void. The Gaffud spouse were ordered to
pay damages to Gatioan.
Since the applicable rule in the instant case is that the earlier certificate of title should be
recognized as superior and controlling there is no justification for relying on the doctrine laid
down by Justice Holmes in Eliason vs. Wilborn 281 U.S. 457, that "as between two 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."
There was no breach of trust in this case. What is note. worthy in this case is that after it was
recited in the registered deed of sale that sale was annotated at the back of the title covering the
lots sold, it turned out that the title did not contain such an annotation and that the title was not
cancelled. For that anomaly, the purchaser, Ismael Lapus, the how" of the earlier title, was not
culpable or blameworthy.
WHEREFORE, the judgment of the Court of Appeals, affirming the decision of the trial court,
should stand. Costs against the appellants.

G.R. Nos. 74226-27 July 27, 1989
PEOPLE OF THE PHILIPPINES, petitioner,
vs.
MIZPAH R. REYES, respondent.
Pacianito B. Cabaron for respondent.
Celso C. Dimayuga co-counsel for respondent.

CORTES, J .:
The crime of falsification of a public document carries with it an imposable penalty of prision
correccional in its medium and maximum periods and a fine of not more than P5,000.00 [Art.
172, Revised Penal Code (RPC)]. Being punishable by a correctional penalty, this crime
prescribes in ten (10) years [Art. 90, par. 3 (RPC)]. The ten (10) year prescriptive period
commences to run "from the day on which the crime is discovered by the offended party, the
authorities, or their agents . . ." [Art. 91, (RCP)]. In the instant case, the public document
allegedly falsified was a notarized deed of sale registered on May 26, 1961 with the Register of
Deeds in the name of the accused, private respondent herein, Mizpah R. Reyes. The two
informations for falsification of a public document subject matter of the controversy were,
however, filed only on October 18, 1984. The complainants claim that they discovered the
falsified notarized deed of sale in June 1983. The Court is tasked with determining whether the
crime has prescribed which hinges on whether or not its discovery may be deemed to have taken
place from the time the document was registered with the Register of Deeds, consistent with the
rule on constructive notice.
The antecedent facts are as follows:
The spouses Julio Rizare and Patricia Pampo owned a parcel of land located in Lipa City
registered in their names under TCT No. T-7471. Both are now deceased, the husband having
died on September 6, 1970 and his wife on August 7, 1977. They were survived by the following
children: the accused Mizpah R. Reyes and the complainants Cristina R. Masikat, Julieta R.
Vergara and Aurora Rizare Vda. de Ebueza.
In June 1983, the complainants allegedly discovered from the records of the Register of Deeds of
Lipa City that the abovementioned property had already been transferred in the name of Mizpah
Reyes, single, of legal age, Filipino and resident of the City of Lipa, Philippines" under TCT No.
T-9885. They further allegedly discovered that the conveyance was effected through a notarized
deed of sale executed and signed on May 19, 1961 by their parents Julio Rizare and Patricia
Pampo. The deed of sale was registered with the Register of Deeds of Lipa City on May 26,
1961. Upon examination of the document, they found that the signature of their parents were
allegedly falsified and that accused also made an untruthful statement that she was single
although she was married to one Benjamin Reyes on May 2, 1950. The document was referred
by the complainants to the National Bureau of Investigation (N.B.I.) for examination of the
signatures of their parents and a report was returned with the finding that the signature of Julio
Rizare was genuine but that of Patricia Pampo was forged. Upon complaint by the sisters of the
accused and after conducting an investigation, the fiscal filed with the Regional Trial Court of
Batangas, Branch XIII, Lipa City on October 18, 1984 two (2) informations both for falsification
of public document, the first in Criminal Case No. V-1163, for allegedly making it appear in the
notarized deed of sale that Patricia Pampo, the mother of the accused, participated in the sale of a
parcel of land by falsifying Pampo's signature, and the second in Criminal Case No. V-1164, for
allegedly making an untruthful statement of fact in the deed of sale, more specifically, by stating
that accused was single.
Before arraignment, accused filed a motion to quash both informations on grounds that: (1) "The
criminal action or liability has been extinguished by prescription of the crime in the light
of Cabral v. Puno, 70 SCRA 606;" and (2) "The trial court had no jurisdiction over the offense
charged and the person of accused because of non-compliance with the pre-conciliation
requirement of P.D. No. 1508." [Rollo, p. 33].
The trial court granted the motion and quashed the informations in the two (2) cases stating that:
x x x
...The title, once registered, is a notice to the world. All Persons must take notice. No one can
plead ignorance of registration.
The essence, therefore, of registration is to serve notice to the whole world of the legal status and
the dealing therewith.
If registration is a notice to the whole world, then registration is in itself a notice and therefore,
the prescriptive period of registered document must start to run from the date the same was
annotated in the Register of Deeds.
In these two cases in question, prescriptive period of ten (10) years should have started from
May 26, 1960 (sic).
Considering the lapse of more than twenty (20) years before the two informations were filed, the
crimes for which the accused, Mizpah Reyes, are charged have already prescribed.
WHEREFORE, and as prayed for, Criminal Cases Nos. V-1163 and V-1164 are quashed. [Rollo,
pp. 33-34].
From the trial court's order quashing the two (2) informations, the People, petitioner herein, filed
an appeal with the Court of Appeals (then designated as the Intermediate Appellate Court). In a
decision ** promulgated on April 3, 1986, the Court of Appeals affirmed the trial court's order.
The Court of Appeals rejected the theory of petitioner that the prescriptive period should
commence on June 1983, when the complainants actually discovered the fraudulent deed of sale.
The appellate court sustained the trial court's ruling that the prescriptive period started on May
26, 1961, when the deed of sale was registered with the Register of Deeds of Lipa City. Hence,
this petition for review on certiorari of the decision of the Court of Appeals, filed by the People,
through the Solicitor-General.
Among the authorities relied upon by the Court of Appeals in dismissing petitioner's appeal is
the case of Cabral v. Puno,G.R. No. L-41692, April 30, 1976, 70 SCRA 606, where the Supreme
Court made a statement to the effect that in the crime of falsification of a public document, the
prescriptive period commences from the time the offended party had constructive notice of the
alleged forgery after the document was registered with the Register of Deeds. However,
petitioner contends that this particular statement is not doctrine but merely an obiter dictum.
The Cabral case stemmed from the filing on September 24, 1974 of an information accusing
Eugenio Cabral of the crime of falsification of public document for allegedly falsifying on
August 14, 1948 the signature of the complainant Silvino San Andres in a deed of sale of a
parcel of land. Before arraignment, petitioner moved to quash the information on the ground of
prescription of the crime, as the notarized deed of sale was registered with the Register of Deeds
on August 26, 1948. After hearing the motion, the judge issued a resolution granting the motion
to quash and dismissing the information on the ground of prescription. Private prosecutor filed a
motion for the reconsideration of the resolution. Acting on said motion, the trial court ordered
the fiscal to make known his position. The fiscal filed a comment stating that the crime has not
prescribed as the complainant San Diego claimed that he only discovered the crime in October
1970. Thereafter, the trial court set aside its resolution granting the accused's motion to quash
and reinstated the information. The accused brought the case to the Supreme Court questioning
the trial court's authority to set aside its resolution granting his motion to quash. The Supreme
Court ruled in favor of the accused by holding that the aforementioned resolution has already
become final and executory for failure of the fiscal to file a motion for reconsideration within the
reglementary period. The motion for reconsideration filed by the private prosecutor was
disregarded because of the latter's lack of legal standing. Another reason given by the Court for
its decision is the following:
. . .The Rules of Court is explicit that an order sustaining a motion to quash based on prescription
is a bar to another prosecution for the same offense [Secs. 2(f) and 8, Rule 117, Revised Rules of
Court]. Article 89 of the Revised Penal Code also provides that "prescription of the crime is one
of the grounds for "total extinction of criminal liability." Petitioner was charged with the crime
of falsification under Article 172, sub-paragraphs (1) and (2) of the Revised Penal Code, which
carries an imposable penalty of prision correccional in its medium and maximum periods and a
fine of not more than P5,000.00. This crime prescribes in ten (10) years [Article 90, Revised
Penal Code]. Here, San Diego had actual if not constructive notice of the alleged forgery after
the document was registered in the Register of Deeds on August 26, 1948.
x x x
[Cabral v. Puno, supra at p. 609].
Although the prescription of the crime was not squarely in issue in Cabral, it is apparent that the
statement of the Court on prescription and constructive notice was not totally irrelevant to the
disposition of the case. Moreover, it is not without any legal basis.
The rule is well-established that registration in a public registry is a notice to the whole world.
The record is constructive notice of its contents as well as all interests, legal and equitable,
included therein. All persons are charged with knowledge of what it contains [Legarda and Prieto
v. Saleeby, 31 Phil. 590 (1915); Garcia v. Court of Appeals, G.R. Nos. L-48971 and 49011,
January 22, 1980, 95 SCRA 380; Hongkong and Shanghai Banking Corporation v. Pauli, et al.,
G.R. No. L-38303, May 30, 1988,161 SCRA 634; See also Sec. 52, Pres. Decree No. 1529
(1978)].
Pursuant to this rule, it has been held that a purchaser of registered land is presumed to be
charged with notice of every fact shown by the record. The Court, in explaining the nature of the
rule on constructive notice and the presumption arising therefrom stated in Gatioan v. Gaffud,
G.R. No. L-21953, March 28 1969, 27 SCRA 706, 712-713, that:
x x x
When a conveyance has been properly recorded such record is constructive notice of its contents
and all interests, legal and equitable, included therein ...
Under the rule of notice, it is presumed that the purchaser has examined every instrument of
record affecting the title. Such presumption is irrebutable. He is charged with notice of every fact
shown by the record and is presumed to know every fact which an examination of the record
would have disclosed. This presumption cannot be overcome by proof of innocence or good
faith. Otherwise the very purpose and object of the law requiring a record would be destroyed.
Such presumption cannot be defeated by proof of want of knowledge of what the record contains
any more than one may be permitted to show that he was ignorant of the provisions of the law.
The rule that all persons must take notice of the facts which the public record contains is a rule of
law. The rule must be absolute. Any variation would lead to endless confusion and useless
litigation.
x x x
It has also been ruled that when an extrajudicial partition of the property of the deceased was
executed by some of his heirs, the registration of the instrument of partition with the Register of
Deeds is constructive notice that said heirs have repudiated the fiduciary relationship between
them and the other heirs vis-a-vis the property in question. The heirs who were not included in
the deed of partition are deemed to have notice of its existence from the time it was registered
with the Register of Deeds [De la Cerna v. De la Cerna, G.R. No. L-28838, August 31, 1976, 72
SCRA 514]. Likewise, the rule on constructive notice has been applied in the interpretation of a
provision in the Civil Code on the prescription of actions for annulment of contracts which is
parallel to Art. 91 of the Revised Penal Code. The Civil Code provision states:
Art. 391. The action for annulment shall be brought within four years.
This period shall begin:
x x x
In case of mistake or fraud, from the time of the discovery of the same [Emphasis supplied].
In Armentia v. Patriarca, G.R. No. L-18210, December 29, 1966,18 SCRA 1253, where a
notarial document recorded with the Registry of Deeds was sought to be annulled, the Court,
interpreting the phrase "from the time of the discovery" found in the aforequoted provision of the
Civil Code, ruled that "in legal contemplation, discovery must be reckoned to have taken place
from the time the document was registered in the Register of Deeds, for the familiar rule is that
registration is a notice to the whole world . . ." [See also Avecilla v. Yatco, 103 Phil. 666 (1958);
Gerona v. De Guzman, G.R. No. L-19060, May 29, 1964, 11 SCRA 153; Carantes v. Court of
Appeals, G.R. No. L-33360, April 25, 1977, 76 SCRA 514; Cultura v. Tupacar, G.R. No. L-
48430, December 3, 1985,140 SCRA 311; Cimafranco v. IAC, G.R. No. L-68687, January 31,
1987, 147 SCRA 611; Hongkong and Shanghai Banking Corporation v. Pauli, et al., supra.]
However, petitioner contends that Art. 91 of the Revised Penal Code which states that "the
period of prescription shall commence to run from the day the crime is discovered by the
offended party,the authorities, or their agents. . cannot be construed in the same manner because
the rule on constructive notice is limited in application to land registration cases. It is argued that
haste should be avoided in applying civil law presumptions to criminal suits.
Although caution should be observed in applying the rules of construction in civil cases in the
interpretation of criminal statutes, the Court will not hesitate to do so if the factual and legal
circumstances so warrant. Hence, in Mercado v. Santos, 66 Phil. 215 (1938), the Court applied
the presumption arising from the allowance of a will to bar a criminal action. In theft particular
case, the petitioner filed a petition for the probate of the will of his deceased wife. The will was
duly probated. Sixteen (16) months thereafter, a criminal complaint was filed against petitioner
for falsification or forgery of the will. Petitioner filed a motion to dismiss the case claiming that
the order probating the will is conclusive as to its authenticity and due execution. The motion
having been denied, the petitioner filed a petition for certiorari with the Court of Appeals (CA)
which ruled that "the judgment admitting the will to probate is binding upon the whole world as
to the due execution and genuineness of the will insofar as civil rights and liabilities are
concerned, but not for the purpose of punishment of a crime." But the Supreme Court reversed
the CA decision by ruling that, in accordance with See. 625 of the then Code of Civil Procedure
which provides that "the allowance by the court of a will of real and personal estate shall be
conclusive as to its due execution," *** a criminal action will not lie in this jurisdiction against
the forger of a will which had been duly admitted to probate by a court of competent jurisdiction.
It is, however, insisted in this case that the rule on constructive notice applies only in civil cases.
It is argued that the law on prescription of crimes is founded on a principle different from that of
the law on prescription in civil actions. The difference, it is claimed, precludes the application of
the rule on constructive notice in criminal actions.
The statute of limitations of civil actions was explained in Penales v. Intermediate Appellate
Court, G.R. No. 73611, October 27, 1986, 115 SCRA 223, 228 in the following manner:
Prescription is rightly regarded as a statute of repose whose object is to suppress fraudulent and
stale claims from springing up at great distances of time and surprising the parties or their
representatives when the facts have become obscure from the lapse of time or death or removal
of witnesses . . .
On the other hand, the Court in People v. Moran, 44 Phil. 389, 405-406 (1923), discussed the
nature of the statute of limitations in criminal cases as follows:
x x x
. . . The statute is not a statute of process, to be scantily and grudgingly applied, but an amnesty,
declaring that after a certain time oblivion shall be cast over the offense; that the offender shall
be at liberty to return to his country; and resume his immunities as a citizen; and that from
henceforth he may cease to preserve the proofs of his innocence, for the proofs of his guilt are
blotted out. Hence it is that statutes of limitation are to be liberally construed in favor of the
defendant, not only because such liberality of construction belongs to all acts of amnesty and
grace, but because the very existence of the statute is a recognition and notification by the
legislature of the fact that time, while it gradually wears out proofs of innocence, has assigned to
it fixed and positive periods in which it destroys proofs of guilt. Independently of these views, it
must be remembered that delay in instituting prosecutions is not only productive of expense to
the State, but of peril to public justice in the attenuation and distortion, even by mere natural
lapse of memory, of testimony. It is the policy of the law that prosecutions should be prompt, and
that statutes enforcing such promptitude should be vigorously maintained. They are not merely
acts of grace, but checks imposed by the State upon itself, to exact vigilant activity from its
subalterns, and to secure for criminal trials the best evidence that can be obtained.
x x x
It is evident that there is merit in petitioner's claim that the law on prescription of civil suits is
founded on different policy considerations from that of the law on prescription of criminal
actions. However, the Court does not subscribe to the conclusion that the presumptions and rules
of interpretation used in the law on prescription of civil suits, including the rule on constructive
notice, can not be applied in criminal actions.
The considerations in providing for prescription of civil suits are based mainly on practical and
equitable grounds. The lapse of a considerably long period of time obscures the surrounding
circumstances of a particular claim or right and erodes the integrity of whatever evidence may be
presented in support of an action to enforce or contest such claim or right. Moreover, where a
particular right has accrued in favor of a party, the enjoyment of such right cannot forever be left
on a precarious balance, always susceptible to possible challenge by an adverse party. After a
certain period of time fixed by law, the right enjoyed by a party must be accorded respect by
prohibiting adverse claims the factual basis of which can no longer be verified with certainty.
Hence, the law on prescription of civil suits is properly called a statute of repose.
The practical factor of securing for civil suits the best evidence that can be obtained is also a
major consideration in criminal trials. However, the law on prescription of crimes rests on a
more fundamental principle. Being more than a statute of repose, it is an act of grace whereby
the state, after the lapse of a certain period of time, surrenders its sovereign power to prosecute
the criminal act. While the law on prescription of civil suits is interposed by the legislature as an
impartial arbiter between two contending parties, the law on prescription of crimes is an act of
amnesty and liberality on the part of the state in favor of the offender [People v. Moran, supra, at
p. 405]. Hence, in the interpretation of the law on prescription of crimes, that which is most
favorable to the accused is to be adopted [People v. Moran, supra; People v. Parel, 44 Phil. 437
(1923); People v. Yu Hai, 99 Phil. 725 (1956)]. The application of the rule on constructive notice
in the construction of Art. 91 of the Revised Penal Code would most certainly be favorable to the
accused since the prescriptive period of the crime shall have to be reckoned with earlier, i.e.,
from the time the notarized deed of sale was recorded in the Registry of Deeds. In the instant
case, the notarized deed of sale was registered on May 26, 1961. The criminal informations for
falsification of a public document having been filed only on October 18, 1984, or more than ten
(10) years from May 26, 1961, the crime for which the accused was charged has prescribed. The
Court of Appeals, therefore, committed no reversible error in affirming the trial court's order
quashing the two informations on the ground of prescription.
WHEREFORE, in view of the foregoing, the petition is hereby DENIED and the decision of the
Court of Appeals is AFFIRMED.

G.R. No. L-40824 February 23, 1989
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,
vs.
COURT OF APPEALS and MR. & MRS. ISABELO R. RACHO, respondents.
The Government Corporate Counsel for petitioner.
Lorenzo A. Sales for private respondents.

REGALADO , J .:
Private respondents, Mr. and Mrs. Isabelo R. Racho, together with the spouses Mr. and Mrs
Flaviano Lagasca, executed a deed of mortgage, dated November 13, 1957, in favor of petitioner
Government Service Insurance System (hereinafter referred to as GSIS) and subsequently,
another deed of mortgage, dated April 14, 1958, in connection with two loans granted by the
latter in the sums of P 11,500.00 and P 3,000.00, respectively.
1
A parcel of land covered by
Transfer Certificate of Title No. 38989 of the Register of Deed of Quezon City, co-owned by
said mortgagor spouses, was given as security under the aforesaid two deeds.
2
They also
executed a 'promissory note" which states in part:
... for value received, we the undersigned ... JOINTLY, SEVERALLY and SOLIDARILY,
promise to pay the GOVERNMENT SERVICE INSURANCE SYSTEM the sum of . . . (P
11,500.00) Philippine Currency, with interest at the rate of six (6%) per centum compounded
monthly payable in . . . (120)equal monthly installments of . . . (P 127.65) each.
3

On July 11, 1961, the Lagasca spouses executed an instrument denominated "Assumption of
Mortgage" under which they obligated themselves to assume the aforesaid obligation to the GSIS
and to secure the release of the mortgage covering that portion of the land belonging to herein
private respondents and which was mortgaged to the GSIS.
4
This undertaking was not fulfilled.
5

Upon failure of the mortgagors to comply with the conditions of the mortgage, particularly the
payment of the amortizations due, GSIS extrajudicially foreclosed the mortgage and caused the
mortgaged property to be sold at public auction on December 3, 1962.
6

More than two years thereafter, or on August 23, 1965, herein private respondents filed a
complaint against the petitioner and the Lagasca spouses in the former Court of
First Instance of Quezon City,
7
praying that the extrajudicial foreclosure "made on, their
property and all other documents executed in relation thereto in favor of the Government Service
Insurance System" be declared null and void. It was further prayed that they be allowed to
recover said property, and/or the GSIS be ordered to pay them the value thereof, and/or they be
allowed to repurchase the land. Additionally, they asked for actual and moral damages and
attorney's fees.
In their aforesaid complaint, private respondents alleged that they signed the mortgage contracts
not as sureties or guarantors for the Lagasca spouses but they merely gave their common
property to the said co-owners who were solely benefited by the loans from the GSIS.
The trial court rendered judgment on February 25, 1968 dismissing the complaint for failure to
establish a cause of action.
8

Said decision was reversed by the respondent Court of Appeals
9
which held that:
... although formally they are co-mortgagors, they are so only for accomodation (sic) in that the
GSIS required their consent to the mortgage of the entire parcel of land which was covered with
only one certificate of title, with full knowledge that the loans secured thereby were solely for
the benefit of the appellant (sic) spouses who alone applied for the loan.
x x x x
'It is, therefore, clear that as against the GSIS, appellants have a valid cause for having foreclosed
the mortgage without having given sufficient notice to them as required either as to their
delinquency in the payment of amortization or as to the subsequent foreclosure of the mortgage
by reason of any default in such payment. The notice published in the newspaper, 'Daily Record
(Exh. 12) and posted pursuant to Sec 3 of Act 3135 is not the notice to which the mortgagor is
entitled upon the application being made for an extrajudicial foreclosure. ...
10

On the foregoing findings, the respondent court consequently decreed that-
In view of all the foregoing, the judgment appealed from is hereby reversed, and another one
entered (1) declaring the foreclosure of the mortgage void insofar as it affects the share of the
appellants; (2) directing the GSIS to reconvey to appellants their share of the mortgaged
property, or the value thereof if already sold to third party, in the sum of P 35,000.00, and (3)
ordering the appellees Flaviano Lagasca and Esther Lagasca to pay the appellants the sum of P
10,00.00 as moral damages, P 5,000.00 as attorney's fees, and costs.
11

The case is now before us in this petition for review.
In submitting their case to this Court, both parties relied on the provisions of Section 29 of Act
No. 2031, otherwise known as the Negotiable Instruments Law, which provide that an
accommodation party is one who has signed an instrument as maker, drawer, acceptor of
indorser without receiving value therefor, but is held liable on the instrument to a holder for
value although the latter knew him to be only an accommodation party.
This approach of both parties appears to be misdirected and their reliance misplaced. The
promissory note hereinbefore quoted, as well as the mortgage deeds subject of this case, are
clearly not negotiable instruments. These documents do not comply with the fourth requisite to
be considered as such under Section 1 of Act No. 2031 because they are neither payable to order
nor to bearer. The note is payable to a specified party, the GSIS. Absent the aforesaid requisite,
the provisions of Act No. 2031 would not apply; governance shall be afforded, instead, by the
provisions of the Civil Code and special laws on mortgages.
As earlier indicated, the factual findings of respondent court are that private respondents signed
the documents "only to give their consent to the mortgage as required by GSIS", with the latter
having full knowledge that the loans secured thereby were solely for the benefit of the Lagasca
spouses.
12
This appears to be duly supported by sufficient evidence on record. Indeed, it would
be unusual for the GSIS to arrange for and deduct the monthly amortizations on the loans from
the salary as an army officer of Flaviano Lagasca without likewise affecting deductions from the
salary of Isabelo Racho who was also an army sergeant. Then there is also the undisputed fact, as
already stated, that the Lagasca spouses executed a so-called "Assumption of Mortgage"
promising to exclude private respondents and their share of the mortgaged property from liability
to the mortgagee. There is no intimation that the former executed such instrument for a
consideration, thus confirming that they did so pursuant to their original agreement.
The parol evidence rule
13
cannot be used by petitioner as a shield in this case for it is clear that
there was no objection in the court below regarding the admissibility of the testimony and
documents that were presented to prove that the private respondents signed the mortgage papers
just to accommodate their co-owners, the Lagasca spouses. Besides, the introduction of such
evidence falls under the exception to said rule, there being allegations in the complaint of private
respondents in the court below regarding the failure of the mortgage contracts to express the true
agreement of the parties.
14

However, contrary to the holding of the respondent court, it cannot be said that private
respondents are without liability under the aforesaid mortgage contracts. The factual context of
this case is precisely what is contemplated in the last paragraph of Article 2085 of the Civil Code
to the effect that third persons who are not parties to the principal obligation may secure the
latter by pledging or mortgaging their own property
So long as valid consent was given, the fact that the loans were solely for the benefit of the
Lagasca spouses would not invalidate the mortgage with respect to private respondents' share in
the property. In consenting thereto, even assuming that private respondents may not be assuming
personal liability for the debt, their share in the property shall nevertheless secure and respond
for the performance of the principal obligation. The parties to the mortgage could not have
intended that the same would apply only to the aliquot portion of the Lagasca spouses in the
property, otherwise the consent of the private respondents would not have been required.
The supposed requirement of prior demand on the private respondents would not be in point here
since the mortgage contracts created obligations with specific terms for the compliance thereof.
The facts further show that the private respondents expressly bound themselves as solidary
debtors in the promissory note hereinbefore quoted.
Coming now to the extrajudicial foreclosure effected by GSIS, We cannot agree with the ruling
of respondent court that lack of notice to the private respondents of the extrajudicial foreclosure
sale impairs the validity thereof. In Bonnevie, et al. vs. Court of appeals, et al.,
15
the Court ruled
that Act No. 3135, as amended, does not require personal notice on the mortgagor, quoting the
requirement on notice in such cases as follows:
Section 3. Notice shall be given by posting notices of sale for not less than twenty days in at least
three public places of the municipality where the property is situated, and if such property is
worth more than four hundred pesos, such notice shall also be published once a week for at least
three consecutive weeks in a newspaper of general circulation in the municipality or city.
There is no showing that the foregoing requirement on notice was not complied with in the
foreclosure sale complained of .
The respondent court, therefore, erred in annulling the mortgage insofar as it affected the share
of private respondents or in directing reconveyance of their property or the payment of the value
thereof Indubitably, whether or not private respondents herein benefited from the loan, the
mortgage and the extrajudicial foreclosure proceedings were valid.
WHEREFORE, judgment is hereby rendered REVERSING the decision of the respondent Court
of Appeals and REINSTATING the decision of the court a quo in Civil Case No. Q-9418
thereof.

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.
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 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. N-79073 was cancelled and in lieu thereof, TCT No. N-109417 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

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
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 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.
1
7
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.
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.
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, 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
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.
2
7 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

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 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. . .
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,
3
7 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. N-109417 is hereby
CANCELLED.

G.R. No. L-26699 March 16, 1976
BENITA SALAO, assisted by her husband, GREGORIO MARCELO; ALMARIO
ALCURIZA, ARTURO ALCURIZA, OSCAR ALCURIZA and ANITA ALCURIZA, the
latter two being minors are represented by guardian ad litem, ARTURO
ALCURIZA, plaintiffs-appellants,
vs.
JUAN S. SALAO, later substituted by PABLO P. SALAO, Administrator of the Intestate
of JUAN S. SALAO; now MERCEDES P. VDA. DE SALAO, ROBERTO P. SALAO,
MARIA SALAO VDA. DE SANTOS, LUCIANA P. SALAO, ISABEL SALAO DE
SANTOS, and PABLO P. SALAO, as successors-in-interest of the late JUAN S. SALAO,
together with PABLO P. SALAO, Administrator, defendants-appellants.
Eusebio V. Navarro for plaintiffs-appellants.
Nicolas Belmonte & Benjamin T. de Peralta for defendants-appellants.

AQUINO, J .:
This litigation regarding a forty-seven-hectare fishpond located at Sitio Calunuran, Hermosa,
Bataan involves the law of trusts and prescription. The facts are as follows:
The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit, Malabon, Rizal begot four
children named Patricio, Alejandra, Juan (Banli) and Ambrosia. Manuel Salao died in 1885. His
eldest son, Patricio, died in 1886 survived by his only child. Valentin Salao.
There is no documentary evidence as to what, properties formed part of Manuel Salao's estate, if
any. His widow died on May 28, 1914. After her death, her estate was administered by her
daughter Ambrosia.
It was partitioned extrajudicially in a deed dated December 29, 1918 but notarized on May 22,
1919 (Exh. 21). The deed was signed by her four legal heirs, namely, her three children,
Alejandra, Juan and Ambrosia, and her grandson, Valentin Salao, in representation of his
deceased father, Patricio.
The lands left by Valentina Ignacio, all located at Barrio Dampalit were as follows:
Nature of Land
Area in
square meters
(1) One-half interest in a fishpond which she had inherited from her parents, Feliciano Ignacio
and Damiana Mendoza, and the other half of which was owned by her co-owner, Josefa Sta. Ana
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,700
(2) Fishpond inherited from her parents . . . . . . . . . . . . 7,418
(3) Fishpond inherited from her parents . . . . . . . . . . . . . 6,989
(4) Fishpond with a bodega for salt . . . . . . . . . . . . . . . . 50,469
(5) Fishpond with an area of one hectare, 12 ares and 5 centares purchased from Bernabe and
Honorata Ignacio by Valentina Ignacio on November 9, 1895 with a bodega for salt . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,205
(6) Fishpond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
(7) One-half interest in a fishpond with a total area of 10,424 square meters, the other half was
owned by A. Aguinaldo . . . . . . . . . . . . . . . . . . . . . . . 5,217
(8) Riceland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,454
(9) Riceland purchased by Valentina Ignacio from Eduardo Salao on January 27, 1890 with a
house and two camarins thereon . . . . . . . . . . . . . . . . . . 8,065
(10) Riceland in the name of Ambrosia Salao, with an area of 11,678 square meters, of which
2,173 square meters were sold to Justa Yongco . . . . . . . . . .9,505
TOTAL . . . . . . . . . . . . .. 179,022 square
meters
To each of the legal heirs of Valentina Ignacio was adjudicated a distributive share valued at
P8,135.25. In satisfaction of his distributive share, Valentin Salao (who was then already forty-
eight years old) was given the biggest fishpond with an area of 50,469 square meters, a smaller
fishpond with an area of 6,989 square meters and the riceland with a net area of 9,905 square
meters. Those parcels of land had an aggregate appraised value of P13,501 which exceeded
Valentin's distributive share. So in the deed of partition he was directed to pay to his co-heirs the
sum of P5,365.75. That arrangement, which was obviously intended to avoid the fragmentation
of the lands, was beneficial to Valentin.
In that deed of partition (Exh. 21) it was noted that "desde la muerte de Valentina Ignacio y
Mendoza, ha venido administrando sus bienes la referida Ambrosia Salao" "cuya administracion
lo ha sido a satisfaccion de todos los herederos y por designacion los mismos". It was expressly
stipulated that Ambrosia Salao was not obligated to render any accounting of her administration
"en consideracion al resultado satisfactorio de sus gestiones, mejoradas los bienes y pagodas por
ella las contribusiones (pages 2 and 11, Exh. 21).
By virtue of the partition the heirs became "dueos absolutos de sus respectivas propiedadas, y
podran inmediatamente tomar posesion de sus bienes, en la forma como se han distribuido y
llevado a cabo las adjudicaciones" (page 20, Exh. 21).
The documentary evidence proves that in 1911 or prior to the death of Valentina Ignacio her two
children, Juan Y. Salao, Sr. and Ambrosia Salao, secured a Torrens title, OCT No. 185 of the
Registry of Deeds of Pampanga, in their names for a forty-seven-hectare fishpond located at
Sitio Calunuran, Lubao, Pampanga (Exh. 14). It is also known as Lot No. 540 of the Hermosa
cadastre because that part of Lubao later became a part of Bataan.
The Calunuran fishpond is the bone of contention in this case.
Plaintiffs' theory is that Juan Y. Salao, Sr. and his sister Ambrosia had engaged in the fishpond
business. Where they obtained the capital is not shown in any documentary evidence. Plaintiffs'
version is that Valentin Salao and Alejandra Salao were included in that joint venture, that the
funds used were the earnings of the properties supposedly inherited from Manuel Salao, and that
those earnings were used in the acquisition of the Calunuran fishpond. There is no documentary
evidence to support that theory.
On the other hand, the defendants contend that the Calunuran fishpond consisted of lands
purchased by Juan Y. Salao, Sr. and Ambrosia Salao in 1905, 1906, 1907 and 1908 as, shown in
their Exhibits 8, 9, 10 and 13. But this point is disputed by the plaintiffs.
However, there can be no controversy as to the fact that after Juan Y. Salao, Sr. and Ambrosia
Salao secured a Torrens title for the Calunuran fishpond in 1911 they exercised dominical rights
over it to the exclusion of their nephew, Valentin Salao.
Thus, on December 1, 1911 Ambrosia Salao sold under pacto de retro for P800 the Calunuran
fishpond to Vicente Villongco. The period of redemption was one year. In the deed of sale
(Exh19) Ambrosia confirmed that she and her brother Juan were the dueos proindivisos of the
said pesqueria. On December 7, 1911 Villongco, the vendee a retro, conveyed the same fishpond
to Ambrosia by way of lease for an anual canon of P128 (Exh. 19-a).
After the fishpond was redeemed from Villongco or on June 8, 1914 Ambrosia and Juan sold it
under pacto de retro to Eligio Naval for the sum of P3,360. The period of redemption was also
one year (Exh. 20). The fishpond was later redeemed and Naval reconveyed it to the vendors a
retro in a document dated October 5, 1916 (Exh. 20-a).
The 1930 survey shown in the computation sheets of the Bureau of Lands reveals that the
Calunuran fishpond has an area of 479,205 square meters and that it was claimed by Juan Salao
and Ambrosia Salao, while the Pinanganacan fishpond (subsequently acquired by Juan and
Ambrosia) has an area of 975,952 square meters (Exh. 22).
Likewise, there is no controversy as to the fact that on May 27, 1911 Ambrosia Salao bought for
four thousand pesos from the heirs of Engracio Santiago a parcel of swampland planted
to bacawan and nipa with an area of 96 hectares, 57 ares and 73 centares located at Sitio Lewa,
Barrio Pinanganacan, Lubao, Pampanga (Exh. 17-d).
The record of Civil Case No. 136, General Land Registration Office Record No. 12144, Court of
First Instance of Pampanga shows that Ambrosia Salao and Juan Salao filed an application for
the registration of that land in their names on January 15, 1916. They alleged in their petition that
"han adquirido dicho terreno por partes iguales y por la compra a los herederos del finado, Don
Engracio Santiago" (Exh. 17-a).
At the hearing on October 26, 1916 before Judge Percy M. Moir, Ambrosia testified for the
applicants. On that same day Judge Moir rendered a decision, stating, inter alia, that the heirs of
Engracio Santiago had sold the land to Ambrosia Salao and Juan Salao. Judge Moir "ordena la
adjudicacion y registro del terreno solicitado a nombre de Juan Salao, mayor de edad y de estado
casado y de su esposa Diega Santiago y Ambrosia Salao, de estado soltera y mayor de edad, en
participaciones iguales" (Exh. 17-e).
On November 28, 1916 Judge Moir ordered the issuance of a decree for the said land. The decree
was issued on February 21, 1917. On March 12, 1917 Original Certificate of Title No. 472 of the
Registry of Deeds of Pampanga was issued in the names of Juan Salao and Ambrosia Salao.
That Pinanganacan or Lewa fishpond later became Cadastral Lot No. 544 of the Hermosa
cadastre (Exh. 23). It adjoins the Calunuran fishpond (See sketch, Exh. 1).
Juan Y. Salao, Sr. died on November 3, 1931 at the age of eighty years (Exh. C). His nephew,
Valentin Salao, died on February 9, 1933 at the age of sixty years according to the death
certificate (Exh. A. However, if according to Exhibit 21, he was forty-eight years old in 1918, he
would be sixty-three years old in 1933).
The intestate estate of Valentin Salao was partitioned extrajudicially on December 28, 1934
between his two daughters, Benita Salao-Marcelo and Victorina Salao-Alcuriza (Exh. 32). His
estate consisted of the two fishponds which he had inherited in 1918 from his grandmother,
Valentina Ignacio.
If it were true that he had a one-third interest in the Calunuran and Lewa fishponds with a total
area of 145 hectares registered in 1911 and 1917 in the names of his aunt and uncle, Ambrosia
Salao and Juan Y. Salao, Sr., respectively, it is strange that no mention of such interest was made
in the extrajudicial partition of his estate in 1934.
It is relevant to mention that on April 8, 1940 Ambrosia Salao donated to her grandniece,
plaintiff Benita Salao, three lots located at Barrio Dampalit with a total area of 5,832 square
meters (Exit. L). As donee Benita Salao signed the deed of donation.
On that occasion she could have asked Ambrosia Salao to deliver to her and to the children of
her sister, Victorina, the Calunuran fishpond if it were true that it was held in trust by Ambrosia
as the share of Benita's father in the alleged joint venture.
But she did not make any such demand. It was only after Ambrosia Salao's death that she
thought of filing an action for the reconveyance of the Calunuran fishpond which was allegedly
held in trust and which had become the sole property of Juan Salao y Santiago (Juani).
On September 30, 1944 or during the Japanese occupation and about a year before Ambrosia
Salao's death on September 14, 1945 due to senility (she was allegedly eighty-five years old
when she died), she donated her one-halfproindiviso share in the two fishponds in question to her
nephew, Juan S. Salao, Jr. (Juani) At that time she was living with Juani's family. He was already
the owner of the the other half of the said fishponds, having inherited it from his father, Juan Y.
Salao, Sr. (Banli) The deed of denotion included other pieces of real property owned by
Ambrosia. She reserved for herself the usufruct over the said properties during her lifetime (Exh.
2 or M).
The said deed of donation was registered only on April 5, 1950 (page 39, Defendants' Record on
Appeal).
The lawyer of Benita Salao and the Children of Victorina Salao in a letter dated January 26, 1951
informed Juan S. Salao, Jr. that his clients had a one-third share in the two fishponds and that
when Juani took possession thereof in 1945, he refused to give Benita and Victorina's children
their one-third share of the net fruits which allegedly amounted to P200,000 (Exh. K).
Juan S. Salao, Jr. in his answer dated February 6, 1951 categorically stated that Valentin Salao
did not have any interest in the two fishponds and that the sole owners thereof his father Banli
and his aunt Ambrosia, as shown in the Torrens titles issued in 1911 and 1917, and that he Juani
was the donee of Ambrosia's one-half share (Exh. K-1).
Benita Salao and her nephews and niece filed their original complaint against Juan S. Salao, Jr.
on January 9, 1952 in the Court of First Instance of Bataan (Exh. 36). They amended their
complaint on January 28, 1955. They asked for the annulment of the donation to Juan S. Salao,
Jr. and for the reconveyance to them of the Calunuran fishpond as Valentin Salao's supposed
one-third share in the 145 hectares of fishpond registered in the names of Juan Y. Salao, Sr. and
Ambrosia Salao.
Juan S. Salao, Jr. in his answer pleaded as a defense the indefeasibility of the Torrens title
secured by his father and aunt. He also invoked the Statute of Frauds, prescription and laches. As
counter-claims, he asked for moral damages amounting to P200,000, attorney's fees and
litigation expenses of not less than P22,000 and reimbursement of the premiums which he has
been paying on his bond for the lifting of the receivership Juan S. Salao, Jr. died in 1958 at the
age of seventy-one. He was substituted by his widow, Mercedes Pascual and his six children and
by the administrator of his estate.
In the intestate proceedings for the settlement of his estate the two fishponds in question were
adjudicated to his seven legal heirs in equal shares with the condition that the properties would
remain under administration during the pendency of this case (page 181, Defendants' Record on
Appeal).
After trial the trial court in its decision consisting of one hundred ten printed pages dismissed the
amended complaint and the counter-claim. In sixty-seven printed pages it made a laborious
recital of the testimonies of plaintiffs' fourteen witnesses, Gregorio Marcelo, Norberto
Crisostomo, Leonardo Mangali Fidel de la Cruz, Dionisio Manalili, Ambrosio Manalili,
Policarpio Sapno, Elias Manies Basilio Atienza, Benita Salao, Emilio Cagui Damaso de la Pea,
Arturo Alcuriza and Francisco Buensuceso, and the testimonies of defendants' six witnesses,
Marcos Galicia, Juan Galicia, Tiburcio Lingad, Doctor Wenceslao Pascual, Ciriaco Ramirez and
Pablo P. Salao. (Plaintiffs presented Regino Nicodemus as a fifteenth witness, a rebuttal
witness).
The trial court found that there was no community of property among Juan Y. Salao, Sr.,
Ambrosia Salao and Valentin Salao when the Calunuran and Pinanganacan (Lewa) lands were
acquired; that a co-ownership over the real properties of Valentina Ignacio existed among her
heirr after her death in 1914; that the co-ownership was administered by Ambrosia Salao and that
it subsisted up to 1918 when her estate was partitioned among her three children and her
grandson, Valentin Salao.
The trial court surmised that the co-ownership which existed from 1914 to 1918 misled the
plaintiffs and their witnesses and caused them to believe erroneously that there was a co-
ownership in 1905 or thereabouts. The trial court speculated that if valentin had a hand in the
conversion into fishponds of the Calunuran and Lewa lands, he must have done so on a salary or
profit- sharing basis. It conjectured that Valentin's children and grandchildren were given by
Ambrosia Salao a portion of the earnings of the fishponds as a reward for his services or because
of Ambrosia's affection for her grandnieces.
The trial court rationalized that Valentin's omission during his lifetime to assail the Torrens titles
of Juan and Ambrosia signified that "he was not a co-owner" of the fishponds. It did not give
credence to the testimonies of plaintiffs' witnesses because their memories could not be trusted
and because no strong documentary evidence supported the declarations. Moreover, the parties
involved in the alleged trust were already dead.
It also held that the donation was validly executed and that even if it were void Juan S. Salao, Jr.,
the donee, would nevertheless be the sole legal heir of the donor, Ambrosia Salao, and would
inherit the properties donated to him.
Both parties appealed. The plaintiffs appealed because their action for reconveyance was
dismissed. The defendants appealed because their counterclaim for damages was dismissed.
The appeals, which deal with factual and legal issues, were made to the Court of Appeals.
However, as the amounts involved exceed two hundred thousand pesos, the Court of Appeals
elevated the case to this Court in its resolution of Octoter 3, 1966 (CA-G.R. No. 30014-R).
Plaintiffs' appeal. An appellant's brief should contain "a subject index index of the matter in
the brief with a digest of the argument and page references" to the contents of the brief (Sec. 16
[a], Rule 46, 1964 Rules of Court; Sec. 17, Rule 48, 1940 Rules of Court).
The plaintiffs in their appellants' brief consisting of 302 pages did not comply with that
requirement. Their statements of the case and the facts do not contain "page references to the
record" as required in section 16[c] and [d] of Rule 46, formerly section 17, Rule 48 of the 1940
Rules of Court.
Lawyers for appellants, when they prepare their briefs, would do well to read and re-read section
16 of Rule 46. If they comply strictly with the formal requirements prescribed in section 16, they
might make a competent and luminous presentation of their clients' case and lighten the burden
of the Court.
What Justice Fisher said in 1918 is still true now: "The pressure of work upon this Court is so
great that we cannot, in justice to other litigants, undertake to make an examination of the
voluminous transcript of the testimony (1,553 pages in this case, twenty-one witnesses having
testified), unless the attorneys who desire us to make such examination have themselves taken
the trouble to read the record and brief it in accordance with our rules" (Palara vs. Baguisi 38
Phil. 177, 181). As noted in an old case, this Court decides hundreds of cases every year and in
addition resolves in minute orders an exceptionally considerable number of petitions, motions
and interlocutory matters (Alzua and Arnalot vs. Johnson, 21 Phil. 308, 395; See In re
Almacen, L-27654, February 18, 1970, 31 SCRA 562, 573).
Plaintiffs' first assignment of error raised a procedural issue. In paragraphs 1 to 14 of their first
cause of action they made certain averments to establish their theory that Valentin Salao had a
one-third interest in the two fishponds which were registrered in the names of Juan Y. Salao, Sr.
(Banli) and Ambrosia Salao.
Juan S. Salao, Jr. (Juani) in his answer "specifically" denied each and all the allegations" in
paragraphs I to 10 and 12 of the first cause of action with the qualification that Original
certificates of Title Nos. 185 and 472 were issued "more than 37 years ago" in the names of Juan
(Banli) and Ambrosia under the circumstances set forth in Juan S. Salao, Jr.'s "positive defenses"
and "not under the circumstances stated in the in the amended complaint".
The plaintiffs contend that the answer of Juan S. Salao, Jr. was in effect tin admission of the
allegations in their first cause of action that there was a co-ownership among Ambrosia, Juan,
AIejandra and Valentin, all surnamed Salao, regarding the Dampalit property as early as 1904 or
1905; that the common funds were invested the acquisition of the two fishponds; that the 47-
hectare Calunuran fishpond was verbally adjudicated to Valentin Salao in the l919 partition and
that there was a verbal stipulation to to register "said lands in the name only of Juan Y. Salao".
That contention is unfounded. Under section 6, Rule 9 of the 1940 of Rules of Court the answer
should "contain either a specific dinial a statement of matters in accordance of the cause or
causes of action asserted in the complaint". Section 7 of the same rule requires the defendant to
"deal specificaly with each material allegation of fact the truth of wihich he does not admit and,
whenever practicable shall set forth the substance of the matters which he will rely upon to
support his denial". "Material averments in the complaint, other than those as to the amount
damage, shall be deemed admitted when specifically denied" (Sec. 8). "The defendant may set
forth set forth by answer as many affirmative defenses as he may have. All grounds of defenses
as would raise issues of fact not arising upon the preceding pleading must be specifically
pleaded" (Sec. 9).
What defendant Juan S. Salao, Jr. did in his answer was to set forth in his "positive defenses" the
matters in avoidance of plaintiffs' first cause of action which which supported his denials of
paragraphs 4 to 10 and 12 of the first cause of action. Obviously, he did so because he found it
impracticable to state pierceneal his own version as to the acquisition of the two fishponds or to
make a tedious and repetitious recital of the ultimate facts contradicting allegations of the first
cause of action.
We hold that in doing so he substantially complied with Rule 9 of the 1940 Rules of Court. It
may be noted that under the present Rules of Court a "negative defense is the specific denial of t
the material fact or facts alleged in the complaint essential to plaintiff's cause of causes of
action". On the other hand, "an affirmative defense is an allegation of new matter which, while
admitting the material allegations of the complaint, expressly or impliedly, would nevertheless
prevent or bar recovery by the plaintiff." Affirmative defenses include all matters set up "by of
confession and avoidance". (Sec. 5, Rule 6, Rules of Court).
The case of El Hogar Filipino vs. Santos Investments, 74 Phil. 79 and similar cases are
distinguishable from the instant case. In the El Hogar case the defendant filed a laconic answer
containing the statement that it denied "generally ans specifically each and every allegation
contained in each and every paragraph of the complaint". It did not set forth in its answer any
matters by way of confession and avoidance. It did not interpose any matters by way of
confession and avoidance. It did not interpose any affirmative defenses.
Under those circumstances, it was held that defendant's specific denial was really a general
denial which was tantamount to an admission of the allegations of the complaint and which
justified judgment on the pleadings. That is not the situation in this case.
The other nine assignments of error of the plaintiffs may be reduced to the decisive issue of
whether the Calunuran fishpond was held in trust for Valentin Salao by Juan Y. Salao, Sr. and
Ambrosia Salao. That issue is tied up with the question of whether plaintiffs' action for
reconveyance had already prescribed.
The plaintiffs contend that their action is "to enforce a trust which defendant" Juan S. Salao, Jr.
allegedly violated. The existence of a trust was not definitely alleged in plaintiffs' complaint.
They mentioned trust for the first time on page 2 of their appelants' brief.
To determine if the plaintiffs have a cause of action for the enforcement of a trust, it is necessary
to maek some exegesis on the nature of trusts (fideicomosis). Trusts in Anglo-American
jurisprudence were derived from the fideicommissa of the Roman law (Government of the
Philippine Islands vs. Abadilla, 46 Phil. 642, 646).
"In its technical legal sense, a trust is defined as the right, enforceable solely in equity, to the
beneficial enjoyment of property, the legal title to which is vested in another, but the word 'trust'
is frequently employed to indicate duties, relations, and responsibilities which are not strictly
technical trusts" (89 C.J.S. 712).
A person who establishes a trust is called the trustor; one in whom confidence is reposed as
regards property for the benefit of another person is known as the trustee; and the person for
whose benefit the trust has been created is referred to as the beneficiary" (Art. 1440, Civil Code).
There is a fiduciary relation between the trustee and the cestui que trust as regards certain
property, real, personal, money or choses in action (Pacheco vs. Arro, 85 Phil. 505).
"Trusts are either express or implied. Express trusts are created by the intention of the trustor or
of the parties. Implied trusts come into being by operation of law" (Art. 1441, Civil Code). "No
express trusts concerning an immovable or any interest therein may be proven by parol evidence.
An implied trust may be proven by oral evidence" (Ibid, Arts. 1443 and 1457).
"No particular words are required for the creation of an express trust, it being sufficient that a
trust is clearly intended" (Ibid,Art. 1444; Tuason de Perez vs. Caluag, 96 Phil. 981; Julio vs.
Dalandan, L-19012, October 30, 1967, 21 SCRA 543, 546). "Express trusts are those which are
created by the 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" (89 C.J.S. 72).
"Implied trusts are those which, without being expressed, are deducible from the nature of the
transaction as matters of intent, or which are superinduced on the transaction by operation of law
as matter of equity, independently of the particular intention of the parties" (89 C.J.S. 724). They
are ordinarily subdivided into resulting and constructive trusts (89 C.J.S. 722).
"A resulting trust. is broadly defined as a trust which is raised or created by the act or
construction of law, but in its more restricted sense it is a trust raised by implication of law and
presumed to have been contemplated by the parties, the intention as to which is to be found in
the nature of their transaction, but not expressed in the deed or instrument of conveyance (89
C.J.S. 725). Examples of resulting trusts are found in articles 1448 to 1455 of the Civil Code.
(See Padilla vs. Court of Appeals, L-31569, September 28, 1973, 53 SCRA 168, 179; Martinez
vs. Grao 42 Phil. 35).
On the other hand, a constructive trust is -a trust "raised by construction of law, or arising by
operation of law". In a more restricted sense and as contra-distinguished from a resulting trust, a
constructive trust is "a trust not created by any words, either expressly or impliedly evincing a
direct intension to create a trust, but by the construction of equity in order to satisfy the demands
of justice." It does not arise "by agreement or intention, but by operation of law." (89 C.J.S. 726-
727).
Thus, "if property is acquired through mistake or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for the benefit of the person from whom the property
comes" (Art. 1456, Civil Code).
Or "if a person obtains legal title to property by fraud or concealment, courts of equity will
impress upon the title a so-called constructive trust in favor of the defrauded party". Such a
constructive trust is not a trust in the technical sense. (Gayondato vs. Treasurer of the P. I., 49
Phil. 244).
Not a scintilla of documentary evidence was presented by the plaintiffs to prove that there was an
express trust over the Calunuran fishpond in favor of Valentin Salao. Purely parol evidence was
offered by them to prove the alleged trust. Their claim that in the oral partition in 1919 of the two
fishponds the Calunuran fishpond was assigned to Valentin Salao is legally untenable.
It is legally indefensible because the terms of article 1443 of the Civil Code (already in force
when the action herein was instituted) are peremptory and unmistakable: parol evidence cannot
be used to prove an express trust concerning realty.
Is plaintiffs' massive oral evidence sufficient to prove an implied trust, resulting or constructive,
regarding the two fishponds?
Plaintiffs' pleadings and evidence cannot be relied upon to prove an implied trust. The trial
court's firm conclusion that there was no community of property during the lifetime of Valentina;
Ignacio or before 1914 is substantiated by defendants' documentary evidence. The existence of
the alleged co-ownership over the lands supposedly inherited from Manuel Salao in 1885 is the
basis of plaintiffs' contention that the Calunuran fishpond was held in trust for Valentin Salao.
But that co-ownership was not proven by any competent evidence. It is quite improbable because
the alleged estate of Manuel Salao was likewise not satisfactorily proven. The plaintiffs alleged
in their original complaint that there was a co-ownership over two hectares of land left by
Manuel Salao. In their amended complaint, they alleged that the co-ownership was
over seven hectares of fishponds located in Barrio Dampalit, Malabon, Rizal. In their brief they
alleged that the fishponds, ricelands and saltbeds owned in common in Barrio Dampalit had an
area of twenty-eight hectares, of which sixteen hectares pertained to Valentina Ignacio and
eleven hectares represented Manuel Salao's estate.
They theorized that the eleven hectares "were, and necessarily, the nucleus, nay the very root, of
the property now in litigation (page 6, plaintiffs-appellants' brief). But the eleven hectares were
not proven by any trustworthy evidence. Benita Salao's testimony that in 1918 or 1919 Juan,
Ambrosia, Alejandra and Valentin partitioned twenty-eight hectares of lands located in Barrio
Dampalit is not credible. As noted by the defendants, Manuel Salao was not even mentioned in
plaintiffs' complaints.
The 1919 partition of Valentina Ignacio's estate covered about seventeen hectares of fishponds
and ricelands (Exh. 21). If at the time that partition was made there were eleven hectares of land
in Barrio Dampalit belonging to Manuel Salao, who died in 1885, those eleven hectares would
have been partitioned in writing as in the case of the seventeen hectares belonging to Valentina
Ignacio's estate.
It is incredible that the forty-seven-hectare Calunuran fishpond would be adjudicated to Valentin
Salao mere by by word of mouth. Incredible because for the partition of the seventeen hectares of
land left by Valentina Ignacio an elaborate "Escritura de Particion" consisting of twenty-two
pages had to be executed by the four Salao heirs. Surely, for the partition of one hundred forty-
five hectares of fishponds among three of the same Salao heirs an oral adjudication would not
have sufficed.
The improbability of the alleged oral partition becomes more evident when it is borne in mind
that the two fishponds were registered land and "the act of registration" is "the operative act" that
conveys and affects the land (Sec. 50, Act No. 496). That means that any transaction affecting
the registered land should be evidenced by a registerable deed. The fact that Valentin Salao and
his successors-in-interest, the plaintiffs, never bothered for a period of nearly forty years to
procure any documentary evidence to establish his supposed interest ox participation in the two
fishponds is very suggestive of the absence of such interest.
The matter may be viewed from another angle. As already stated, the deed of partition for
Valentina Ignacio's estate wag notarized in 1919 (Exh. 21). The plaintiffs assert that the two
fishponds were verbally partitioned also in 1919 and that the Calunuran fishpond was assigned to
Valentin Salao as his share.
Now in the partition of Valentina Ignacio's estate, Valentin was obligated to pay P3,355.25 to
Ambrosia Salao. If, according to the plaintiffs, Ambrosia administered the two fishponds and
was the custodian of its earnings, then it could have been easily stipulated in the deed
partitioning Valentina Ignacio's estate that the amount due from Valentin would just be deducted
by Ambrosia from his share of the earnings of the two fishponds. There was no such stipulation.
Not a shred of documentary evidence shows Valentin's participation in the two fishponds.
The plaintiffs utterly failed to measure up to the yardstick that a trust must be proven by clear,
satisfactory and convincing evidence. It cannot rest on vague and uncertain evidence or on loose,
equivocal or indefinite declarations (De Leon vs. Molo-Peckson, 116 Phil. 1267, 1273).
Trust and trustee; establishment of trust by parol evidence; certainty of proof. Where a trust
is to be established by oral proof, the testimony supporting it must be sufficiently strong to prove
the right of the alleged beneficiary with as much certainty as if a document proving the trust
were shown. A trust cannot be established, contrary to the recitals of a Torrens title, upon vague
and inconclusive proof. (Syllabus, Suarez vs. Tirambulo, 59 Phil. 303).
Trusts; evidence needed to establish trust on parol testimony. In order to establish a trust in
real property by parol evidence, the proof should be as fully convincing as if the act giving rise
to the trust obligation were proven by an authentic document. Such a trust cannot be established
upon testimony consisting in large part of insecure surmises based on ancient hearsay. (Syllabus,
Santa Juana vs. Del Rosario 50 Phil. 110).
The foregoing rulings are good under article 1457 of the Civil Code which, as already noted,
allows an implied trust to be proven by oral evidence. Trustworthy oral evidence is required to
prove an implied trust because, oral evidence can be easily fabricated.
On the other hand, a Torrens title is generally a conclusive of the ownership of the land referred
to therein (Sec. 47, Act 496). A strong presumption exists. that Torrens titles were regularly
issued and that they are valid. In order to maintain an action for reconveyance, proof as to the
fiduciary relation of the parties must be clear and convincing (Yumul vs. Rivera and Dizon, 64
Phil. 13, 17-18).
The real purpose of the Torrens system is, to quiet title to land. "Once a title is registered, the
owner may rest secure, without the necessity of waiting in the portals of the court, or sitting in
the mirador de su casa, to avoid the possibility of losing his land" (Legarda and Prieto vs.
Saleeby, 31 Phil. 590, 593).
There was no resulting trust in this case because there never was any intention on the part of Juan
Y. Salao, Sr., Ambrosia Salao and Valentin Salao to create any trust. There was no constructive
trust because the registration of the two fishponds in the names of Juan and Ambrosia was not
vitiated by fraud or mistake. This is not a case where to satisfy the demands of justice it is
necessary to consider the Calunuran fishpond " being held in trust by the heirs of Juan Y. Salao,
Sr. for the heirs of Valentin Salao.
And even assuming that there was an implied trust, plaintiffs' action is clearly barred by
prescription or laches (Ramos vs. Ramos, L-19872, December 3, 1974, 61 SCRA 284; Quiniano
vs. Court of Appeals, L-23024, May 31, 1971, 39 SCRA 221; Varsity Hills, Inc. vs. Navarro, 9,
February 29, 1972, 43 SCRA 503; Alzona vs. Capunitan and Reyes, 114 Phil. 377).
Under Act No. 190, whose statute of limitation would apply if there were an implied trust in this
case, the longest period of extinctive prescription was only ten year (Sec. 40; Diaz vs. Gorricho
and Aguado, 103 Phil. 261, 266).
The Calunuran fishpond was registered in 1911. The written extrajudicial demand for its
reconveyance was made by the plaintiffs in 1951. Their action was filed in 1952 or after the
lapse of more than forty years from the date of registration. The plaintiffs and their predecessor-
in-interest, Valentin Salao, slept on their rights if they had any rights at all. Vigilanti prospiciunt
jura or the law protects him who is watchful of his rights (92 C.J.S. 1011, citing Esguerra vs.
Tecson, 21 Phil. 518, 521).
"Undue delay in the enforcement of a right is strongly persuasive of a lack of merit in the claim,
since it is human nature for a person to assert his rights most strongly when they are threatened
or invaded". "Laches or unreasonable delay on the part of a plaintiff in seeking to enforce a right
is not only persuasive of a want of merit but may, according to the circumstances, be destructive
of the right itself." (Buenaventura vs. David, 37 Phil. 435, 440-441).
Having reached the conclusion that the plaintiffs are not entitled to the reconveyance of the
Calunuran fishpond, it is no longer n to Pass upon the validity of the donation made by Ambrosia
Salao to Juan S. Salao, Jr. of her one-half share in the two fishponds The plaintiffs have no right
and personality to assil that donation.
Even if the donation were declared void, the plaintiffs would not have any successional rights to
Ambrosia's share. The sole legal heir of Ambrosia was her nephew, Juan, Jr., her nearest relative
within the third degree. Valentin Salao, if living in 1945 when Ambrosia died, would have been
also her legal heir, together with his first cousin, Juan, Jr. (Juani). Benita Salao, the daughter of
Valentin, could not represent him in the succession to the estate of Ambrosia since in the
collateral line, representation takes place only in favor of the children of brothers or sisters
whether they be of the full or half blood is (Art 972, Civil Code). The nephew excludes a
grandniece like Benita Salao or great-gandnephews like the plaintiffs Alcuriza (Pavia vs.
Iturralde 5 Phil. 176).
The trial court did not err in dismissing plaintiffs' complaint.
Defendants' appeal. The defendants dispute the lower court's finding that the plaintiffs filed
their action in good faith. The defendants contend that they are entitled to damages because the
plaintiffs acted maliciously or in bad faith in suing them. They ask for P25,000 attorneys fees
and litigation expenses and, in addition, moral damages.
We hold that defemdamts' appeal is not meritorious. The record shows that the plaintiffs
presented fifteen witnesses during the protracted trial of this case which lasted from 1954 to
1959. They fought tenaciously. They obviously incurred considerable expenses in prosecuting
their case. Although their causes of action turned out to be unfounded, yet the pertinacity and
vigor with which they pressed their claim indicate their sincerity and good faith.
There is the further consideration that the parties were descendants of common ancestors, the
spouses Manuel Salao and Valentina Ignacio, and that plaintiffs' action was based on their honest
supposition that the funds used in the acquisition of the lands in litigation were earnings of the
properties allegedly inherited from Manuel Salao.
Considering those circumstances, it cannot be concluded with certitude that plaintiffs' action was
manifestly frivolous or was primarily intended to harass the defendants. An award for damages
to the defendants does not appear to be just and proper.
The worries and anxiety of a defendant in a litigation that was not maliciously instituted are not
the moral damages contemplated in the law (Solis & Yarisantos vs. Salvador, L-17022, August
14, 1965, 14 SCRA 887; Ramos vs. Ramos,supra). The instant case is not among the cases
mentioned in articles 2219 and 2220 of the Civil Code wherein moral damages may be
recovered. Nor can it be regarded as analogous to any of the cases mentioned in those articles.
The adverse result of an action does not per se make the act wrongful and subject the actor to the
payment of moral damages. The law could not have meant to impose a penalty on the right to
litigate; such right is so precious that moral damages may not be charged on those who may
exercise it erroneously. (Barreto vs. Arevalo, 99 Phil. 771. 779).
The defendants invoke article 2208 (4) (11) of the Civil Code which provides that attorney's fees
may be recovered "in case of a clearly unfounded civil action or proceeding against the plaintiff"
(defendant is a plaintiff in his counterclaim) or "in any other case where the court deems it just
and equitable" that attorney's fees should he awarded.
But once it is conceded that the plaintiffs acted in good faith in filing their action there would be
no basis for adjudging them liable to the defendants for attorney's fees and litigation expenses
(See Rizal Surety & Insurance Co., Inc. vs. Court of Appeals, L-23729, May 16, 1967, 20 SCRA
61).
It is not sound public policy to set a premium on the right to litigate. An adverse decision does
not ipso facto justify the award of attorney's fees to the winning party (Herrera vs. Luy Kim
Guan, 110 Phil. 1020, 1028; Heirs of Justiva vs. Gustilo, 61 O. G. 6959).
The trial court's judgment is affirmed. No pronouncement as to costs.

G.R. No. L-22486 March 20, 1968
TEODORO ALMIROL, petitioner-appellant,
vs.
THE REGISTER OF DEEDS OF AGUSAN, respondent-appellee.
Tranquilino O. Calo, Jr. for petitioner-appellant.
Office of the Solicitor General for respondent-appellee.
CASTRO, J .:
On June 28, 1961 Teodoro Almirol purchased from Arcenio Abalo a parcel of land
situated in the municipality of Esperanza, province of Agusan, and covered by original certificate
of title P-1237 in the name of "Arcenio Abalo, married to Nicolasa M. Abalo." Sometime in
May, 1962 Almirol went to the office of the Register of Deeds of Agusan in Butuan City to
register the deed of sale and to secure in his name a transfer certificate of title. Registration was
refused by the Register of Deeds upon the following grounds, inter alia, stated in his letter of
May 21, 1962:
1. That Original Certificate of Title No. P-1237 is registered in the name of Arcenio Abalo,
married to Nicolasa M. Abalo, and by legal presumption, is considered conjugal property;
2. That in the sale of a conjugal property acquired after the effectivity of the New Civil Code it is
necessary that both spouses sign the document; but
3. Since, as in this case, the wife has already died when the sale was made, the surviving husband
can not dispose of the whole property without violating the existing law (LRC Consulta No. 46
dated June 10, 1958).
To effect the registration of the aforesaid deed of absolute Sale, it is necessary that the
property be first liquidated and transferred in the name of the surviving spouse and the heirs of
the deceased wife by means of extrajudicial settlement or partition and that the consent of such
other heir or heirs must be procured by means of another document ratifying this sale executed
by their father.
In view of such refusal, Almirol went to the Court of First Instance of Agusan on a petition
for mandamus (sp. civ. case 151), to compel the Register of Deeds to register the deed of sale
and to issue to him the corresponding transfer certificate of title, and to recover P5,000 in moral
damages and P1,000 attorney's fees and expenses of litigation. It is Almirol's assertion that it is
but a ministerial duty of the respondent to perform the acts required of him, and that he (Almirol)
has no other plain, speedy and adequate remedy in the ordinary course of law.
In his answer with counterclaim for P10,000 damages, the respondent reiterated the
grounds stated in his letter of May 21, 1962, averred that the petitioner has "other legal, plain,
speedy and adequate remedy at law by appealing the decision of the respondent to the Honorable
Commissioner of Land Registration," and prayed for dismissal of the petition.
In its resolution of October 16, 1963 the lower court, declaring that "mandamus does not
lie . . . because the adequate remedy is that provided by Section 4 of Rep. Act 1151", dismissed
the petition, with costs against the petitioner.
Hence the present appeal by Almirol.
The only question of law tendered for resolution is whether mandamus will lie to compel
the respondent to register the deed of sale in question.
Although the reasons relied upon by the respondent evince a sincere desire on his part to
maintain inviolate the law on succession and transmission of rights over real properties, these do
not constitute legal grounds for his refusal to register the deed. Whether a document is valid or
not, is not for the register of deeds to determine; this function belongs properly to a court of
competent jurisdiction.
1

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. (Gabriel vs. Register of Deeds
of Rizal, et al., L-17956, Sept. 30, 1953).
. . . the supposed invalidity of the contracts of lease is no valid objection to their
registration, because invalidity is no proof of their non-existence or a valid excuse for denying
their registration. The law on registration does not require that only valid instruments shall be
registered. How can parties affected thereby be supposed to know their invalidity before they
become aware, actually or constructively, of their existence or of their provisions? If the purpose
of registration is merely to give notice, then questions regarding the effect or invalidity of
instruments are expected to be decided after, not before, registration. It must follow as a
necessary consequence that registration must first be allowed, and validity or effect litigated
afterwards. (Gurbax Singh Pablo & Co. vs. Reyes and Tantoco, 92 Phil. 182-183).
Indeed, a register of deeds is entirely precluded by section 4 of Republic Act 1151 from
exercising his personal judgment and discretion when confronted with the problem of whether to
register a deed or instrument on the ground that it is invalid. For under the said section, when he
is in doubt as to the proper step to be taken with respect to any deed or other instrument
presented to him for registration, all that he is supposed to do is to submit and certify the
question to the Commissioner of Land Registration who shall, after notice and hearing, enter an
order prescribing the step to be taken on the doubtful question. Section 4 of R.A. 1151 reads as
follows:
Reference of doubtful matters to Commissioner of Land Registration. When the
Register of Deeds is in doubt with regard to the proper step to be taken or memorandum to be
made in pursuance of any deed, mortgage, or other instrument presented to him for registration,
or where any party in interest does not agree with the Register of Deeds with reference to any
such matter, the question shall be submitted to the Commissioner of Land Registration either
upon the certification of the Register of Deeds, stating the question upon which he is in doubt, or
upon the suggestion in writing by the party in interest; and thereupon the Commissioner, after
consideration of the matter shown by the records certified to him, and in case of registered lands,
after notice to the parties and hearing, shall enter an order prescribing the step to be taken or
memorandum to be made. His decision in such cases shall be conclusive and binding upon all
Registers of Deeds: Provided, further, That when a party in interest disagrees with the ruling or
resolution of the Commissioner and the issue involves a question of law, said decision may be
appealed to the Supreme Court within thirty days from and after receipt of the notice thereof.
The foregoing notwithstanding, the court a quo correctly dismissed the petition
for mandamus. Section 4 abovequoted provides that "where any party in interest does not agree
with the Register of Deeds . . . the question shall be submitted to the Commissioner of Land
Registration," who thereafter shall "enter an order prescribing the step to be taken or
memorandum to be made," which shall be "conclusive and binding upon all Registers of Deeds."
This administrative remedy must be resorted to by the petitioner before he can have recourse to
the courts.
ACCORDINGLY, the Resolution of the lower court of October 16, 1969, is affirmed, at
petitioner's cost.