HEIRS OF GREGORIO LOPEZ, REPRESENTED BY ROGELIA LOPEZ, ET AL.

, Petitioners, v. DEVELOPMENT BANK OF
THE PHILIPPINES [NOW SUBSTITUTED BY PHILIPPINE INVESTMENT TWO (SPV-AMC), INC.], Respondents.

DECISION

LEONEN, J.:

This case involves the application of the doctrine on innocent purchaser or mortgagee for value.  It also involves the
application of the doctrines on sales by persons who are not owners of the property.

This is a Rule 45 petition1 filed on October 15, 2010, assailing the Court of Appeals May 8, 2009 decision2 and August 16,
2010 resolution.3  The Court of Appeals reversed and set aside the Regional Trial Court’s December 27, 2005 decision,4 which
ordered the nullification of the affidavit of self-adjudication executed by Enrique Lopez, and the documents relating to the
sale and mortgage of the property to respondent Development Bank of the Philippines.

Gregoria Lopez owned a 2,734-square-meter property in Bustos, Bulacan.5  She died on March 19, 19226 and was survived
by her three sons: Teodoro Lopez, Francisco Lopez, and Carlos Lopez.7  Tax Declaration No. 613 was issued under the names
of Teodoro, Francisco, and Carlos.8

Teodoro, Francisco, and Carlos died.9  Only Teodoro was survived by children: Gregorio, Enrique, Simplicio, and Severino.10

Petitioners in this case are Simplicio substituted by his daughter Eliza Lopez, and the heirs of Gregorio and Severino.11 
Enrique is deceased.12

Petitioners discovered that on November 29, 1990, Enrique executed an affidavit of self-adjudication declaring himself to be
Gregoria Lopez’s only surviving heir, thereby adjudicating upon himself the land in Bulacan.13  He sold the property to
Marietta Yabut.14

Petitioners demanded from Marietta the nullification of Enrique’s affidavit of self-adjudication and the deed of absolute
sale.15  They also sought to redeem Enrique’s one-fourth share.16  Marietta, who was already in possession of the property,
refused.17

Sometime in 1993, Marietta obtained a loan from Development Bank of the Philippines (DBP) and mortgaged the property to
DBP as security.18  At the time of the loan, the property was covered by Tax Declaration No. 18727, with the agreement that
the land shall be brought under the Torrens system.19  On July 26, 1993, an original certificate of title was issued in
Marietta’s name.20  Marietta and DBP “executed a supplemental document dated 28 February 1995 placing the subject
[property] within the coverage of the mortgage.”21  The mortgage was annotated to the title.22

Sometime between 1993 and 1994, petitioners filed a complaint23 and an amended complaint24 with the Regional Trial Court
for the annulment of document, recovery of possession, and reconveyance of the property.  They prayed that judgment be
rendered, ordering the annulment of Enrique’s affidavit of self-adjudication, the deed of sale executed by Enrique and
Marietta, and the deed of real estate mortgage executed by Marietta in favor of DBP.25  Petitioners also prayed for the
reconveyance of their three-fourth share in the property, their exercise of their right of redemption of Enrique’s one-fourth
share, as well as attorney’s fees and costs of suit.26

Petitioners caused the annotation of a notice of lis pendens at the back of the original certificate of title.27  The annotation
was inscribed on June 27, 1994.28

Marietta failed to pay her loan to DBP.29 “DBP instituted foreclosure proceedings on the . . . land.”30  It was “awarded the sale
of the [property] as the highest bidder.”31  “The Certificate of Sale was registered with the Register of Deeds . . . on 11
September 1996.”32  Marietta failed to redeem the property.33  The title to the property was “consolidated in favor of DBP.”34

On December 27, 2005, the Regional Trial Court ruled in favor of petitioners.35  The Regional Trial Court found that the
affidavit of self-adjudication and the deed of absolute sale did not validly transfer to Marietta the title to the property.36 
Enrique could not transfer three-fourths of the property since this portion belonged to his co-heirs.37  The Regional Trial Court
also found that Marietta was not an innocent purchaser for value because when the deed of absolute sale was executed, the
property was only covered by a tax declaration in the name of the heirs of Gregoria Lopez,38 thus:

[Marietta] should have looked further into the veracity of vendor Enrique Lopez’ claim of ownership over the subject property
considering that he has not presented her any other proof of his ownership when the said Deed of Absolute Sale was
executed other than his mere allegation of ownership thereof.39

Hence, the issuance of the original certificate of title would not protect Marietta. Title is not vested through a certificate.40  At
best, Marietta’s ownership over the subject property would cover only Enrique’s share.41

The Regional Trial Court also found that DBP was not a mortgagee in good faith because at the time of the execution of the
mortgage contract, a certificate of title was yet to be issued in favor of Marietta.42  Marietta’s title at that time was still based
on a tax declaration.43  Based on jurisprudence, a tax declaration is not a conclusive proof of ownership.44  The DBP should
have exerted due diligence in ascertaining Marietta’s title to the property.45

The Regional Trial Court ordered the nullification of Enrique’s affidavit of self-adjudication, the sale of the three-fourth
portion of the subject property in favor of Marietta, the reconveyance of the three-fourth share of the property in favor of
petitioners, the nullification of the real estate mortgage executed in favor of DBP, and the surrender of possession of the
property to petitioners.46  The trial court also ordered DBP to pay attorney’s fees.

DBP, substituted by Philippine Investment Two (PI Two), appealed to the Court of Appeals.47

The Court of Appeals reversed the decision of the Regional Trial Court in the decision48 promulgated on May 8, 2009.  It held
that DBP was a mortgagee in good faith:

[W]ith the absence of any evidence to show that the DBP was ever privy to the fraudulent execution of the late Enrique
Lopez’ [sic] affidavit of Adjudication over the subject land, the right of the former over the same must be protected and
respected by reason of public policy.49

The dispositive portion of the Court of Appeals’ decision reads:

WHEREFORE, the appeal is GRANTED. The 27 December 2005 Decision of the Regional Trial Court is hereby REVERSED and
SET ASIDE as to defendant-appellant Development Bank of the Philippines and dismissing the complaint against the latter
[now substituted by Philippine Investment Two (SPV-AMC), Inc.]50

The Court of Appeals denied petitioners’ motion for reconsideration on August 16, 2010.51

Petitioners filed a Rule 45 petition52 before this court on October 15, 2010.

The issue in this case is whether the property was validly transferred to Marietta and, eventually, to DBP.

Petitioners argued that the Court of Appeals erred in its application of the doctrine on “innocent purchaser for value.”53  DBP
should have exercised diligence in ascertaining Marietta’s claim of ownership since at the time of the mortgage, the property
was only covered by a tax declaration under Marietta’s name.54  As a financial institution of which “greater care and
prudence”55 is required, DBP should not have relied on the face of a certificate of title to the property.56

On the other hand, DBP’s position, citing Blanco v. Esquierdo,57 was that since its participation in Enrique’s execution of the
affidavit of self-adjudication was not shown on record, it could not have been aware that there was any irregularity in the
sale in favor of Marietta and in her title to the property.58  Moreover, Marietta was in possession of the property at the time of
the contract with DBP.59  Therefore, DBP should enjoy the protection accorded to innocent purchasers for value.60

We find merit in the petition.

I
Validity of Enrique’s affidavit and the sale to Marietta

We have consistently upheld the principle that “no one can give what one does not have.”61  A seller can only sell what he or
she owns, or that which he or she does not own but has authority to transfer, and a buyer can only acquire what the seller
can legally transfer. 62

This principle is incorporated in our Civil Code.  It provides that in a contract of sale, the seller binds himself to transfer the
ownership of the thing sold, thus:

Art. 1458. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver
a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

The seller cannot perform this obligation if he or she does not have a right to convey ownership of the thing.  Hence, Article
1459 of the Civil Code provides:

Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is
delivered.

Title or rights to a deceased person’s property are immediately passed to his or her heirs upon death.63  The heirs’ rights
become vested without need for them to be declared “heirs.”64  Before the property is partitioned, the heirs are co-owners of
the property.65

In this case, the rights to Gregoria Lopez’s property were automatically passed to her sons — Teodoro, Francisco, and Carlos
— when she died in 1922.66  Since only Teodoro was survived by children, the rights to the property ultimately passed to
them when Gregoria Lopez’s sons died.67  The children entitled to the property were Gregorio, Simplicio, Severino, and
Enrique.

Gregorio, Simplicio, Severino, and Enrique became co-owners of the property, with each of them entitled to an undivided
portion of only a quarter of the property.  Upon their deaths, their children became the co-owners of the property, who were
entitled to their respective shares, such that the heirs of Gregorio became entitled to Gregorio’s one-fourth share, and
Simplicio’s and Severino’s respective heirs became entitled to their corresponding one-fourth shares in the property.68

The heirs cannot alienate the shares that do not belong to them. Article 493 of the Civil Code provides:

Art. 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he
may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal
rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the
portion which may be allotted to him in the division upon the termination of the co-ownership.

Since Enrique’s right to the property was limited to his one-fourth share, he had no right to sell the undivided portions that
belonged to his siblings or their respective heirs.  Any sale by one heir of the rest of the property will not affect the rights of
the other heirs who did not consent to the sale.  Such sale is void with respect to the shares of the other heirs.

Regardless of their agreement, Enrique could only convey to Marietta his undivided one-fourth share of the property, and
Marietta could only acquire that share.  This is because Marietta obtained her rights from Enrique who, in the first place, had
no title or interest over the rest of the property that he could convey.

This is despite Enrique’s execution of the affidavit of self-adjudication wherein he declared himself to be the only surviving
heir of Gregoria Lopez.  The affidavit of self-adjudication is invalid for the simple reason that it was false.  At the time of its
execution, Enrique’s siblings were still alive and entitled to the three-fourth undivided share of the property.  The affidavit of
self-adjudication did not have the effect of vesting upon Enrique ownership or rights to the property.

The issuance of the original certificate of title in favor of Marietta does not cure Enrique’s lack of title or authority to convey
his co-owners’ portions of the property.  Issuance of a certificate of title is not a grant of title over petitioners’ undivided
portions of the property.69  The physical certificate of title does not vest in a person ownership or right over a property.70  It
is merely an evidence of such ownership or right.71

Marietta could acquire valid title over the whole property if she were an innocent purchaser for value.  An innocent purchaser
for value purchases a property without any notice of defect or irregularity as to the right or interest of the seller.72  He or she
is without notice that another person holds claim to the property being purchased.73

As a rule, an ordinary buyer may rely on the certificate of title issued in the name of the seller.74  He or she need not look
“beyond what appears on the face [of the certificate of title].”75  However, the ordinary buyer will not be considered an
innocent purchaser for value if there is anything on the certificate of title that arouses suspicion, and the buyer failed to
inquire or take steps to ensure that there is no cloud on the title, right, or ownership of the property being sold.

Marietta cannot claim the protection accorded by law to innocent purchasers for value because the circumstances do not
make this available to her.

In this case, there was no certificate of title to rely on when she purchased the property from Enrique.  At the time of the
sale, the property was still unregistered.  What was available was only a tax declaration issued under the name of “Heirs of
Lopez.”

“The defense of having purchased the property in good faith may be availed of only where registered land is involved and the
buyer had relied in good faith on the clear title of the registered owner.”76  It does not apply when the land is not yet
registered with the Registry of Deeds.

At the very least, the unregistered status of the property should have prompted Marietta to inquire further as to Enrique’s
right over the property.  She did not.  Hence, she was not an innocent purchaser for value.  She acquired no title over
petitioners’ portions of the property.

II
Validity of the mortgage

One of the requisites of a valid mortgage contract is ownership of the property being mortgaged.77  Article 2085 of the Civil
Code enumerates the requisites of a mortgage contract:

Art. 2085. The following requisites are essential to the contracts of pledge and mortgage:

(1) That they be constituted to secure the fulfilment of a principal obligation;

(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;
(3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence
thereof, that they be legally authorized for the purpose.

Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own
property.

Applying this provision and having established that Marietta acquired no valid title or ownership from Enrique over the
undivided portions of the property, this court finds that no valid mortgage was executed over the same property in favor of
DBP.  Without a valid mortgage, there was also no valid foreclosure sale and no transfer of ownership of petitioners’
undivided portions to DBP.

In other words, DBP acquired no right over the undivided portions since its predecessor-in-interest was not the owner and
held no authority to convey the property.

As in sales, an exception to this rule is if the mortgagee is a “mortgagee in good faith.”78  This exception was explained
in Torbela v. Rosario:

Under this doctrine, even if the mortgagor is not the owner of the mortgaged property, the mortgage contract and any
foreclosure sale arising therefrom are given effect by reason of public policy. This principle is based on the rule that all
persons dealing with property covered by a Torrens Certificate of Title, as buyers or mortgagees, are not required to go
beyond what appears on the face of the title. This is the same rule that underlies the principle of "innocent purchasers for
value." The prevailing jurisprudence is that a mortgagee has a right to rely in good faith on the certificate of title of the
mortgagor to the property given as security and in the absence of any sign that might arouse suspicion, has no obligation to
undertake further investigation. Hence, even if the mortgagor is not the rightful owner of, or does not have a valid title to,
the mortgaged property, the mortgagee in good faith is, nonetheless, entitled to protection.79

DBP claims that it is covered by this exception. DBP is mistaken.  The exception applies when, at the time of the mortgage,
the mortgagor has already obtained a certificate of title under his or her name.80  It does not apply when, as in this case, the
mortgagor had yet to register the property under her name.81

The facts show that DBP disregarded circumstances that should have aroused suspicion.  For instance, at the time of the
mortgage with DBP, Marietta only had a tax declaration under her name to show that she was the owner of the property.  A
tax declaration, by itself, neither proves ownership of property nor grants title.  Yet, DBP agreed to accept the property as
security even though Marietta’s claim was supported only by the tax declaration, and a certificate of title was yet to be issued
under her name.

Granting that Marietta was in possession of the property, DBP should have inquired further as to Marietta’s rights over the
property since no certificate of title was issued to her.  DBP took the risks attendant to the absence of a certificate of title.  It
should bear the burden of checking the ownership as well as the validity of the deed of sale.  This is despite the eventual
issuance of a certificate of title in favor of Marietta.

The rule on “innocent purchasers or [mortgagees] for value” is applied more strictly when the purchaser or the mortgagee is
a bank.  Banks are expected to exercise higher degree of diligence in their dealings, including those involving lands.  Banks
may not rely simply on the face of the certificate of title.

Thus, in Cruz v. Bancom Finance Corporation,82 this court ruled that:

Respondent . . . is not an ordinary mortgagee; it is a mortgagee-bank. As such, unlike private individuals, it is expected to
exercise greater care and prudence in its dealings, including those involving registered lands. A banking institution is
expected to exercise due diligence before entering into a mortgage contract. The ascertainment of the status or condition of
a property offered to it as security for a loan must be a standard and indispensable part of its operations.83 (Citations
omitted)

DBP failed to exercise the degree of diligence required of banks when it accepted the unregistered property as security for
Marietta’s loan despite circumstances that should have aroused its suspicion.

Citing Blanco v. Esquierdo, DBP argued that since it did not participate in the dealings between Enrique and Marietta, it
should be considered as an innocent mortgagee for value.

Blanco involves an alleged widow of the deceased who adjudicated to herself the deceased’s property and thereafter
mortgaged the property to DBP.84  The brothers and sisters of the deceased filed an action for the annulment of the affidavit
executed by the alleged widow and the cancellation of the certificate of title under her name.85  The trial court ordered the
cancellation of the certificate of title issued to the alleged widow, including the registration of the mortgage deed.86

In Blanco, this court declared that DBP was a mortgagee in good faith, thus:
The trial court, in the decision complained of, made no finding that the defendant mortgagee bank was a party to the
fraudulent transfer of the land to Fructuosa Esquierdo. Indeed, there is nothing alleged in the complaint which may implicate
said defendant mortgagee in the fraud, or justify a finding that it acted in bad faith. On the other hand, the certificate of title
was in the name of the mortgagor Fructuosa Esquierdo when the land was mortgaged by her to the defendant bank. Such
being the case, the said defendant bank, as mortgagee, had the right to rely on what appeared in the certificate and, in the
absence of anything to excite suspicion, was under no obligation to look beyond the certificate and investigate the title of the
mortgagor appearing on the face of said certificate. (De Lara, et al. vs. Ayroso, 95 Phil., 185; 50 Off. Gaz., 10 4838; Joaquin
vs. Madrid, et al., 106 Phil., 1060). Being thus an innocent mortgagee for value, its right or lien upon the land mortgaged
must be respected and protected, even if the mortgagor obtained her title thereto thru fraud.87

DBP’s reliance on Blanco is misplaced.  In Blanco, the certificate of title had already been issued under the name of the
mortgagor when the property was mortgaged to DBP.  This is not the situation in this case.

To reiterate, the protection accorded to mortgagees in good faith cannot be extended to mortgagees of properties that are
not yet registered or registered but not under the mortgagor’s name.

Therefore, the Regional Trial Court did not err in ordering the nullification of the documents of sale and mortgage.  Contracts
involving the sale or mortgage of unregistered property by a person who was not the owner or by an unauthorized person
are void.

WHEREFORE, the petition is GRANTED.  The decision of the Court of Appeals dated May 8, 2009 and its resolution dated
August 16, 2010 are reversed and SET ASIDE.  The December 27, 2005 decision of the Regional Trial Court
is REINSTATED.

SO ORDERED.

MELECIO DOMINGO, Petitioner, v. SPOUSES GENARO MOLINA AND ELENA B. MOLINA, SUBSTITUTED BY ESTER

MOLINA, Respondents.

DECISION

BRION, J.:

We resolve the petition for review on certiorari1 filed by the petitioner Melecio Domingo (Melecio) assailing the August 9,
2011 decision2 and January 10, 2012 resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 94160.

THE FACTS

In June 15, 1951, the spouses Anastacio and Flora Domingo bought a property in Camiling, Tarlac, consisting of a one-half
undivided portion over an 18,164 square meter parcel of land. The sale was annotated on the Original Certificate of Title
(OCT) No. 16354 covering the subject property.

During his lifetime, Anastacio borrowed money from the respondent spouses Genaro and Elena Molina (spouses Molina). On
September 10, 1978 or 10 years after Flora's death4, Anastacio sold his interest over the land to the spouses Molina to
answer for his debts. The sale to the spouses Molina was annotated at the OCT of the subject property.5 In 1986, Anastacio
died.6

In May 19, 1995, the sale of Anastacio's interest was registered under Transfer Certificate of Title (TCT) No. 2729677 and
transferred the entire one-half undivided portion of the land to the spouses Molina.

Melecio, one of the children of Anastacio and Flora, learned of the transfer and filed a Complaint for Annulment of Title and
Recovery of Ownership (Complaint) against the spouses Molina on May 17, 1999.8

Melecio claims that Anastacio gave the subject property to the spouses Molina to serve as collateral for the money that
Anastacio borrowed. Anastacio could not have validly sold the interest over the subject property without Flora's consent, as
Flora was already dead at the time of the sale.

Melecio also claims that Genaro Molina must have falsified the document transferring Anastacio and Flora's one-half
undivided interest over the land. Finally, Melecio asserts that he occupied the subject property from the time of Anastacio's
death up to the time he filed the Complaint.9

Melecio presented the testimonies of the Records Officer of the Register of Deeds of Tarlac, and of Melecio's nephew, George
Domingo (George).10
The Records Officer testified that he could not locate the instrument that documents the transfer of the subject property
ownership from Anastacio to the spouses Molina. The Records Officer also testified that the alleged sale was annotated at the
time when Genaro Molina's brother was the Register of Deeds for Camiling, Tarlac.11

George, on the other hand, testified that he has been living on the subject property owned by Anastacio since 1986. George
testified, however, that aside from himself, there were also four other occupants on the subject property, namely Jaime
Garlitos, Linda Sicangco, Serafio Sicangco and Manuel Ramos.12

The spouses Molina asserted that Anastacio surrendered the title to the subject property to answer for his debts and told the
spouses Molina that they already own half of the land. The spouses Molina have been in possession of the subject property
before the title was registered under their names and have religiously paid the property's real estate taxes.

The spouses Molina also asserted that Melecio knew of the disputed sale since he accompanied Anastacio several times to
borrow money. The last loan was even used to pay for Melecio's wedding. Finally, the spouses Molina asserted that Melecio
built his nipa hut on the subject property only in 1999, without their knowledge and consent.13

The spouses Molina presented Jaime Garlitos (Jaime) as their sole witness and who is one of the occupants of the subject lot.

Jaime testified that Elena Molina permitted him to build a house on the subject property in 1993. Jaime, together with the
other tenants, planted fruit bearing trees on the subject property and gave portions of their harvest to Elena Molina without
any complaint from Melecio. Jaime further testified that Melecio never lived on the subject property and that only George
Domingo, as the caretaker of the spouses Molina, has a hut on the property.

Meanwhile, the spouses Molina died during the pendency of the case and were substituted by their adopted son, Cornelio
Molina.14

THE RTC RULING

The Regional Trial Court (RTC) dismissed15 the case because Melecio failed to establish his claim that Anastacio did not sell
the property to the spouses Molina.

The RTC also held that Anastacio could dispose of conjugal property without Flora's consent since the sale was necessary to
answer for conjugal liabilities.

The RTC denied Melecio's motion for reconsideration of the RTC ruling. From this ruling, Melecio proceeded with his appeal to
the CA.

THE CA RULING

In a decision dated August 9, 2011, the CA affirmed the RTC ruling in toto.

The CA held that Melecio failed to prove by preponderant evidence that there was fraud in the conveyance of the property to
the spouses Molina. The CA gave credence to the OCT annotation of the disputed property sale.

The CA also held that Flora's death is immaterial because Anastacio only sold his rights, excluding Flora's interest, over the
lot to the spouses Molina. The CA explained that "[t]here is no prohibition against the sale by the widower of real property
formerly belonging to the conjugal partnership of gains"16.

Finally, the CA held that Melecio's action has prescribed. According to the CA, Melecio failed to file the action within one year
after entry of the decree of registration.

Melecio filed a motion for reconsideration of the CA Decision. The CA denied Melecio's motion for reconsideration for lack of
merit.17

THE PETITION

Melecio filed the present petition for review on certiorari to challenge the CA ruling.

Melecio principally argues that the sale of land belonging to the conjugal partnership without the wife's consent is invalid.

Melecio also claims that fraud attended the conveyance of the subject property and the absence of any document evidencing
the alleged sale made the transfer null and void. Finally, Melecio claims that the action has not yet prescribed.

The respondents, on the other hand, submitted and adopted their arguments in their Appeal Brief18.

First, Melecio's counsel admitted that Anastacio had given the lot title in payment of the debt amounting to Php30,000.00.
The delivery of the title is constructive delivery of the lot itself based on Article 1498, paragraph 2 of the Civil Code.
Second, the constructive delivery of the title coupled with the spouses Molina's exercise of attributes of ownership over the
subject property, perfected the sale and completed the transfer of ownership.

THE ISSUES

The core issues of the petition are as follows: (1) whether the sale of a conjugal property to the spouses Molina without
Flora's consent is valid and legal; and (2) whether fraud attended the transfer of the subject property to the spouses Molina.

OUR RULING

We deny the petition.

It is well settled that when the trial court's factual findings have been affirmed by the CA, the findings are generally
conclusive and binding upon the Court and may no longer be reviewed on Rule 45 petitions.19 While mere are exceptions20 to
this rule, the Court finds no applicable exception with respect to the lower courts' finding that the subject property was
Anastacio and Flora's conjugal property. Records before the Court show that the parties did not dispute the conjugal nature
of the property.

Melecio argues that the sale of the disputed property to the spouses Molina is void without Flora's consent.

We do not find Melecio's argument meritorious.

Anastacio and Flora's conjugal partnership was dissolved upon Flora's death.

There is no dispute that Anastacio and Flora Domingo married before the Family Code's effectivity on August 3,
1988 and their property relation is a conjugal partnership.21

Conjugal partnership of gains established before and after the effectivity of the Family Code are governed by the rules found
in Chapter 4 (Conjugal Partnership of Gains) of Title IV (Property Relations Between Husband and Wife) of the Family Code.
This is clear from Article 105 of the Family Code which states:
chanRoblesvirtualLawlibrary

x x x The provisions of this Chapter shall also apply to conjugal partnerships of gains already established between
spouses before the effectivity of this Code, without prejudice to vested rights already acquired in accordance with the Civil
Code or other laws, as provided in Article 256.
The conjugal partnership of Anastacio and Flora was dissolved when Flora died in 1968, pursuant to Article 175 (1)
of the Civil Code22 (now Article 126 (1) of the Family Code).

Article 130 of the Family Code requires the liquidation of the conjugal partnership upon death of a spouse and prohibits any
disposition or encumbrance of the conjugal property prior to the conjugal partnership liquidation, to quote:
chanRoblesvirtualLawlibrary

Article 130. Upon the termination of the marriage by death, the conjugal partnership property shall be liquidated in
the same proceeding for the settlement of the estate of the deceased.

If no judicial settlement proceeding is instituted, the surviving spouse shall liquidate the conjugal partnership property either
judicially or extra-judicially within one year from the death of the deceased spouse. If upon the lapse of the six month
period no liquidation is made, any disposition or encumbrance involving the conjugal partnership property of
the terminated marriage shall be void. x x x (emphases supplied)
While Article 130 of the Family Code provides that any disposition involving the conjugal property without prior liquidation of
the partnership shall be void, this rule does not apply since the provisions of the Family Code shall be "without prejudice to
vested rights already acquired in accordance with the Civil Code or other laws."23

An implied co-ownership among Flora's heirs governed the conjugal properties pending liquidation and
partition.

In the case of Taningco v. Register of Deeds of Laguna,24 we held that the properties of a dissolved conjugal partnership fall
under the regime of co-ownership among the surviving spouse and the heirs of the deceased spouse until final liquidation
and partition. The surviving spouse, however, has an actual and vested one-half undivided share of the properties, which
does not consist of determinate and segregated properties until liquidation and partition of the conjugal partnership.

An implied ordinary co-ownership ensued among Flora's surviving heirs, including Anastacio, with respect to Flora's share of
the conjugal partnership until final liquidation and partition; Anastacio, on the other hand, owns one-half of the original
conjugal partnership properties as his share, but this is an undivided interest.

Article 493 of the Civil Code on co-ownership provides:

chanRoblesvirtualLawlibrary

Article 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and
he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when
personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be
limited to the portion which may be allotted to him in the division upon the termination of the co-ownership.
(399) (emphases supplied)
Thus, Anastacio, as co-owner, cannot claim title to any specific portion of the conjugal properties without an actual partition
being first done either by agreement or by judicial decree. Nonetheless, Anastacio had the right to freely sell and dispose of
his undivided interest in the subject property.

The spouses Molina became co-owners of the subject property to the extent of Anastacio's interest.

The OCT annotation of the sale to the spouses Molina reads that "[o]nly the rights, interests and participation of
Anastacio Domingo, married to Flora Dela Cruz, is hereby sold, transferred, and conveyed unto the said vendees for the
sum of ONE THOUSAND PESOS (P1,000.00) which pertains to an undivided one-half (1/2) portion and subject to all
other conditions specified in the document x x x"25 (emphases supplied). At the time of the sale, Anastacio's undivided
interest in the conjugal properties consisted of: (1) one-half of the entire conjugal properties; and (2) his share as Flora's
heir on the conjugal properties.

Anastacio, as a co-owner, had the right to freely sell and dispose of his undivided interest, but not the interest of his co-
owners. Consequently, Anastactio's sale to the spouses Molina without the consent of the other co-owners was not totally
void, for Anastacio's rights or a portion thereof were thereby effectively transferred, making the spouses Molina a co-owner
of the subject property to the extent of Anastacio's interest. This result conforms with the well-established principle that the
binding force of a contract must be recognized as far as it is legally possible to do so (quando res non valet ut ago, valeat
quantum valere potest).26

The spouses Molina would be a trustee for the benefit of the co-heirs of Anastacio in respect of any portion that might belong
to the co-heirs after liquidation and partition. The observations of Justice Paras cited in the case of Heirs of Protacio Go, Sr.
V. Servacio27 are instructive:
chanRoblesvirtualLawlibrary

x x x [I]f it turns out that the property alienated or mortgaged really would pertain to the share of the surviving spouse, then
said transaction is valid. If it turns out that there really would be, after liquidation, no more conjugal assets then the whole
transaction is null and void. But if it turns out that half of the property thus alienated or mortgaged belongs to the husband
as his share in the conjugal partnership, and half should go to the estate of the wife, then that corresponding to the husband
is valid, and that corresponding to the other is not. Since all these can be determined only at the time the liquidation is over,
it follows logically that a disposal made by the surviving spouse is not void ab initio. Thus, it has been held that the sale of
conjugal properties cannot be made by the surviving spouse without the legal requirements. The sale is void as to the share
of the deceased spouse (except of course as to that portion of the husband's share inherited by her as the surviving spouse).
The buyers of the property that could not be validly sold become trustees of said portion for the benefit of the husband's
other heirs, the cestui que trust ent. Said heirs shall not be barred by prescription or by laches.
Melecio's recourse as a co-owner of the conjugal properties, including the subject property, is an action for partition under
Rule 69 of the Revised Rules of Court. As held in the case of Heirs of Protacio Go, Sr., "it is now settled that the appropriate
recourse of co-owners in cases where their consent were not secured in a sale of the entire property as well as in a sale
merely of the undivided shares of some of the co-owners is an action for PARTITION under Rule 69 of the Revised Rules of
Court."28

The sale of the subject property to the spouses Molina was not attended with fraud.

On the issue of fraud, the lower courts found that there was no fraud in the sale of the disputed property to the spouses
Molina.

The issue of fraud would require the Court to inquire into the weight of evidentiary matters to determine the merits of the
petition and is essentially factual in nature. It is basic that factual questions cannot be cannot be entertained in a Rule 45
petition, unless it falls under any of the recognized exceptions29 found in jurisprudence. The present petition does not show
that it falls under any of the exceptions allowing factual review.

The CA and RTC conclusion that there is no fraud in the sale is supported by the evidence on record.

Melecio's argument that no document was executed for the sale is negated by the CA finding that there was a notarized deed
of conveyance executed between Anastacio and the spouses Molina, as annotated on the OCT of the disputed property.

Furthermore, Melecio's belief that Anastacio could not have sold the property without his knowledge cannot be considered as
proof of fraud to invalidate the spouses Molina's registered title over the subject property.30

Prevailing jurisprudence uniformly holds that findings of facts of the trial court, particularly when affirmed by the Court of
Appeals, are binding upon this Court.31

Considering these findings, we find no need to discuss the other issues raised by Melecio. chanrobleslaw

WHEREFORE, we hereby DENY the petition for review on certiorari. The decision dated August 9, 2011 of the Court of
Appeals in CA-G.R. CV No. 94160 is AFFIRMED.

SO ORDERED. cralawlawlibrary
 TERESA R. IGNACIO, Petitioner, v. RAMON REYES, FLORENCIO REYES, JR., ROSARIO R. DU AND CARMELITA R.
PASTOR, Respondents.

DECISION

PERALTA, J.:

Before this Court is a petition for review on certiorari filed by petitioner Teresa R. Ignacio (Teresa) challenging the
Decision1 and Resolution,2 dated March 27, 2014 and June 27, 2014, respectively, of the Court of Appeals (CA), which
annulled and set aside the Orders dated April 13, 2004 and June 14, 2012 of the Regional Trial Court (RTC) of Pasig City,
Branch 151.

The facts follow:

On July 11, 1967, Angel Reyes (Angel) and Oliva3 R. Arevalo (Oliva) filed before the then Court of First Instance of Rizal (now
RTC of Pasig City, Branch 151) (intestate court) a Petition4 for Letters of Administration of the Estate of their father Florencio
Reyes, Sr. (Florencio Sr.) who died on June 23, 1967, and enumerated therein the surviving heirs, namely: Oliva, Francisca
Vda. de Justiniani (Francisca), Angel, Amparo R. Avecilla (Amparo), Ramon Reyes (Ramon), Teresa, Rosario R. Du (Rosario),
Jose Reyes (Reyes), Soledad Reyes (Soledad), Carmelita5 R. Pastor (Carmelita), and Florencio Reyes, Jr. (Florencio Jr.). On
July 15, 1967, the intestate court appointed Oliva as the special administratrix of the estate of Florencio Sr. (Florencio Sr.
estate), and then as the regular administratrix in an Order dated November 23, 1967.6 Florencio, Jr. replaced Oliva in 1982.
Thereafter, Teresa became the administratrix of the Florencio Sr. estate on August 8, 1994.7

On December 5, 1994, Teresa executed a lease contract over a 398 square meters (sq. m.) parcel of land located at
Magsaysay Avenue, Baguio City covered by Transfer Certificate of Title (TCT) No. T-59201 (Magsaysay property) in favor of
Gonzalo Ong, Virginia Lim, Nino Yu, Francisco Lim and Simona Go.8 In an Order9 dated July 15, 1996, the intestate court
approved the lease contract upon Teresa's motion dated June 4, 1996.

Likewise, on September 26, 1996, the intestate court allowed Teresa to enter into a lease contract over the parcel of land
located at Session Road, Baguio City with a total area of 646 sq. m. covered by TCT No. T-26769 (Session Road property) to
Famous Realty Corporation (FRC).10 Thus, on October 29, 1996, Teresa leased the Session Road property to FRC for the
period of July 1, 1996 to June 30, 2003, with a monthly rental of P135,000.00.11

Sometime in January 1997, Teresa also leased the properties located at Loakan Road, Baguio City covered by TCT Nos. T-
26770 and T-26772 (Loakan and Military Cut-off properties), in favor of ATC Wonderland, Inc. and, subsequently, to Gloria
de Guzman and Sonshine Pre-School for a period often years, effective September 1, 1996 to August 31, 2006.12

On September 25, 2001, herein respondents Ramon, Florencio Jr., Rosario and Carmelita, and the Heirs of Amparo, Intestate
Estate of Soledad, Jose and Intestate Estate of Angel (plaintiffs) filed before the RTC of Baguio City, Branch 3 (Baguio RTC),
three complaints for partition, annulment of lease contract, accounting and damages with prayer for the issuance of a writ of
preliminary injunction against Teresa and the lessees of the subject Baguio properties.13

The plaintiffs alleged in their Complaints14 that, with the exception of the lessees, the parties and the Florencio Sr. estate
own one-tenth (1/10) of each of the Session Road, Loakan and Military Cut-off, and Magsaysay properties. They claimed that
Teresa misrepresented that the Florencio Sr. estate is the sole owner of the properties and leased the same to the other
parties without their conformity. They also asserted in one of their complaints that the Florencio Sr. estate is different from
the Heirs of Florencio Sr. and Heirs of Salud.

They averred that, as co-owners, they have not received their share in the monthly rentals of the properties aforementioned
due to Teresa's failure to duly account for the same. Thus, they are asking for the partition of the properties, for the
accounting of all the rentals, income or profits derived, and deliver the same to the plaintiffs, for the annulment of the lease
contracts and order the lessees to vacate the premises, and for the payment of damages.15

Thereafter, the Baguio RTC directed and commissioned a team of auditors with Leticia Clemente as the head accountant to
conduct an accounting of the properties. Based on the Report,16 Teresa, as administratrix of the Florencio Sr. estate, had a
total cash accountability amounting to Fifteen Million Two Hundred Thirty-Eight Thousand Sixty-Six Pesos and Fifty-One
Centavos (P15,238,066.51). In an Order17 dated August 27, 2003, the Baguio RTC manifested that it shall await a Request
Order from the intestate court regarding the possible distribution of the subject properties.18

Subsequently, on January 19, 2004, respondents and the others filed a motion19 before the intestate court praying for the
issuance of an order allowing the distribution of the heirs' aliquot shares in the co-owned properties' net income, and the
partition of the said properties by the Baguio RTC. However, the intestate court denied the motion in an Order20 dated April
13, 2004, a portion of which reads:
x x x This Court cannot allow the Baguio Court to partition the property of the estate because this Court already has
jurisdiction over the matter. In fact, this Court is wondering why actions for partition are being entertained in other
jurisdictions when such can be readily addressed by this Court as an estate court.

WHEREFORE, finding no merit in the instant motion, the Court hereby DENIES the same.

SO ORDERED.21

In an Order dated June 14, 2012, the intestate court denied respondents' motion for reconsideration dated May 12, 2004,
thus:

Thus finding no sufficient reasons to reverse and set aside this court's Order dated April 13, 2004 considering the pendency
before this court of the other incidents involving the Baguio properties including the sale of Session Road property covered by
TCT No. 26769 and even the distribution of the proceeds of the sale thereof with hearings conducted on the Financial Report
(Re: Proceeds of the Sale of the Property at Session Road in Baguio City), and recently with the filing of the Proposed Project
of Partition/ Amended Proposed Project of Partition, as such, the Motion for Reconsideration dated May 12, 2004 is DENIED.

The continuation of presentation of evidence for the Heirs of Carmelita Clara Pastor et. (sic) al. re: Removal of Adminstratix/
Motion to Liquidate and Reimburse Cash Advances is previously set on August 15, 2012 at 1:30 in the afternoon.

SO ORDERED.22

Thereafter, the respondents filed before the CA a petition for certiorari assailing the Orders dated April 13, 2004 and June 14,
2012 of the intestate court disallowing the partition of the Baguio properties.

In a Decision dated March 27, 2014, the CA granted the petition and annulled and set aside the assailed Orders of the
intestate court. The dispositive portion of the Decision states:

WHEREFORE, the instant Petition is GRANTED. The Assailed Orders of the Regional Trial Court of Pasig City, Branch 151,
dated April 13, 2004 and June 14, 2012 are ANNULLED and SET ASIDE. Petitioners' motion to allow partition and distribution
of shares over properties Co-Owned by the Estate and the Heirs [l]ocated in Baguio City, is GRANTED.

On the other hand, the Regional Trial Court of Baguio City, Branch 3, before which court Special Civil Actions Nos. 5055-R,
5056-R, and 5057-R are pending, is DIRECTED to partition the Baguio Properties among the registered co-owners thereof.

SO ORDERED.23

Upon denial of her motion for reconsideration, Teresa filed before this Court the instant petition raising the following issues:

I. THERE IS AN APPEAL OR OTHER PLAIN, SPEEDY AND [ADEQUATE] REMEDY IN THE ORDINARY COURSE OF LAW
[AVAILABLE] TO THE RESPONDENTS.
II. RESPONDENTS ARE, IN EFFECT, ASKING THE TRIAL COURT TO VIOLATE THE RULES OF COURT.
III. IN LEGAL CONTEMPLATION, THE CHALLENGED ORDERS WERE NOT ISSUED WITH GRAVE ABUSE OF DISCRETION.

The Court finds the instant petition without merit.

Teresa argues that there is an appeal or other plain, speedy and adequate remedy in the ordinary course of law available.
She maintains that the intestate court asserted its jurisdiction and authority over the subject properties and proceeded to
conduct hearings to resolve the issues of accounting, payment of advances, and distribution of assets and the proceeds of
the sale of the estate properties. The Baguio RTC opted to defer and not to proceed with the cases. Thus, it is logical and
proper that the respondents ask the Baguio RTC to proceed with the case and then appeal the same if denied.24 Teresa
further avers that it is not disputed that the obligations enumerated in Section 1,25 Rule 90 of the Rules of Court has not yet
been fully paid. Thus, it would be premature for the trial court to allow the advance distribution of the estate. A partial and
premature distribution of the estate may only be done upon posting of a bond, conditioned upon the full payment of the
obligations, which was not done in the present case.

We note, however, that in her Partial Motion to Dismiss26 dated July 1, 2016 before this Court, Teresa now agrees with the
findings of the CA that the Magsaysay property is co-owned by the parties, and should not be covered by the estate
proceedings.27

As a rule, a petition for certiorari under Rule 65 of the Rules of Court is valid only when the question involved is an error of
jurisdiction, or when there is grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the court or
tribunals exercising quasi-judicial functions.28 In this case, the propriety of the special civil action for certiorari as a remedy
depended on whether the assailed orders of the RTC were final or interlocutory in nature.29 This Court has distinguished the
interlocutory and final orders, as follows:

A "final" judgment or order is one that finally disposes of a case, leaving nothing more to be done by the Court
in respect thereto, e.g., an adjudication on the merits which, on the basis of the evidence presented at the trial, declares
categorically what the rights and obligations of the parties are and which party is in the right; or a judgment or order that
dismisses an action on the ground, for instance, of res judicata or prescription. Once rendered, the task of the Court is
ended, as far as deciding the controversy or determining the rights and liabilities of the litigants is concerned. Nothing more
remains to be done by the Court except to await the parties' next move (which among others, may consist of the filing of a
motion for new trial or reconsideration, or the taking of an appeal) and ultimately, of course, to cause the execution of the
judgment once it becomes "final" or, to use the established and more distinctive term, "final and executory."

xxx xxx xxx

Conversely, an order that does not finally dispose of the case, and does not end the Court's task of adjudicating
the parties' contentions and determining their rights and liabilities as regards each other, but obviously
indicates that other things remain to be done by the Court, is "interlocutory" e.g., an order denying a motion to
dismiss under Rule 16 of the Rules, or granting a motion for extension of time to file a pleading, or authorizing amendment
thereof, or granting or denying applications for postponement, or production or inspection of documents or things,
etc. Unlike a "final" judgment or order, which is appealable, as above pointed out, an "interlocutory" order may
not be questioned on appeal except only as part of an appeal that may eventually be taken from the final
judgment rendered in the case.30

The assailed April 13, 2004 and June 14, 2012 Orders denying respondents' motion to allow the distribution of the estate's
and co-owners' shares in the subject properties were interlocutory. This is because such denial was not a final determination
of their alleged co-ownership. In fact, the intestate court merely asserted its jurisdiction over the properties which were
allegedly co-owned with the Florencio Sr. estate.

Jurisprudence teaches that jurisdiction of the trial court as an intestate court is special and limited as it relates only to
matters having to do with the probate of the will and/or settlement of the estate of deceased persons, but does not extend to
the determination of questions of ownership that arise during the proceedings. This is true whether or not the property is
alleged to belong to the estate.31

Furthermore, the doctrine that "in a special proceeding for the probate of a will, the question of ownership is an extraneous
matter which the probate court cannot resolve with finality" applies with equal force to an intestate proceeding as in the case
at bar.32 Thus:

"[A] probate court or one in charge of proceedings whether testate or intestate cannot adjudicate or determine title to
properties claimed to be a part of the estate and which are claimed to belong to outside parties. All that the said court could
do as regards said properties is to determine whether they should or should not be included in the inventory or list of
properties to be administered by the administrator. If there is not dispute, well and good, but if there is, then the parties, the
administrator, and the opposing parties have to resort to an ordinary action for a final determination of the conflicting claims
of title because the probate court cannot do so."33

Corollarily, in the case of Agtarap v. Agtarap, et al.34 the Court enumerated the instances when the intestate court may pass
upon the issue of ownership, to wit:

However, this general rule is subject to exceptions as justified by expediency and convenience.

First, the probate court may provisionally pass upon in an intestate or a testate proceeding the question of inclusion in, or
exclusion from, the inventory of a piece of property without prejudice to the final determination of ownership in a separate
action. Second, if the interested parties are all heirs to the estate, or the question is one of collation or advancement, or the
parties consent to the assumption of jurisdiction by the probate court and the rights of third parties are not impaired, then
the probate court is competent to resolve issues on ownership. Verily, its jurisdiction extends to matters incidental or
collateral to the settlement and distribution of the estate, such as the determination of the status of each heir and whether
the property in the inventory is conjugal or exclusive property of the deceased spouse.35

From the foregoing, this Court holds that the general rule on the limited jurisdiction of the RTC as intestate court is
applicable in Special Civil Action Nos. 5055-R and 5056-R. As to the Magsaysay property in Special Civil Action No. 5057-R, it
is evident from the certificate of title that the rights of parties other than the heirs of Florencio Sr. will be impaired should the
intestate court decide on the ownership of the property.

We note that respondents presented certificates of title of the properties registered under their names and the Florencio Sr.
estate, and their respective shares.36 As pronounced in Bolisay v. Judge Alcid:37
In regard to such incident of inclusion or exclusion, We hold that if a property covered by Torrens Title is involved, the
presumptive conclusiveness of such title should be given due weight, and in the absence of strong compelling evidence to the
contrary, the holder thereof should be considered as the owner of the property in controversy until his title is nullified or
modified in an appropriate ordinary action, particularly, when as in the case at bar, possession of the property itself is in the
persons named in the title.38

As such, they are considered the owners of the properties until their title is nullified or modified in an appropriate ordinary
action. The co-ownership of the said properties by virtue of the certificates of title is a common issue in the complaints for
partition filed before the Baguio RTC. Thus, the intestate court committed grave abuse of discretion when it asserted
jurisdiction over the subject properties since its jurisdiction relates only to matters having to do with the settlement of the
estate of deceased persons. Any decision that the intestate court would render on the title of the properties would at best be
merely provisional in character, and would yield to a final determination in a separate action.

An action for partition under Rule 69 of the Rules of Court is typically brought by a person claiming to be the owner of a
specified property against a defendant or defendants whom the plaintiff recognizes to be his co-owners,39 and is premised on
the existence or non-existence of co-ownership between the parties.40 As discussed in Lim De Mesa v. Court of Appeals,41 the
determination of the existence of co-ownership is the first stage to accord with the remedy of judicial partition, thus:

The first stage of an action for judicial partition and/or accounting is concerned with the determination of whether or not a
co-ownership in fact exists and a partition is proper, that is, it is not otherwise legally proscribed and may be made by
voluntary agreement of all the parties interested in the property. This phase may end in a declaration that plaintiff is not
entitled to the desired partition either because a co-ownership does not exist or a partition is legally prohibited. It may also
end, on the other hand, with an adjudgment that a co-ownership does in truth exist, that partition is proper in the premises,
and that an accounting of rents and profits received by the defendant from the real estate in question is in order. In the
latter case, "the parties may, if they are able to agree, make partition among themselves by proper instruments of
conveyance, and the court shall confirm the partition so agreed upon by all the parties." In either case, whether the action is
dismissed or partition and/or accounting is decreed, the order is a final one and may be appealed by any party aggrieved
thereby.

In this regard, the Baguio RTC shirked from its duty when it deferred the trial to await a request order from the intestate
court regarding the possible distribution. In fact, it has not yet made a definite ruling on the existence of co-ownership.
There was no declaration of entitlement to the desired partition either because a co-ownership exists or a partition is not
legally prohibited. As this Court is not a trier of facts, it is for the trial court to proceed and determine once and for all if there
is co-ownership and to partition the subject properties if there is no legal prohibition. It is also best for the Baguio RTC to
settle whether the respondents are claiming ownership over the properties by virtue of their title adverse to that of their late
father and his estate and not by any right of inheritance.

WHEREFORE, the petition for review on certiorari filed by petitioner Teresa R. Ignacio is hereby DENIED. The Decision and
Resolution, dated March 27, 2014 and June 27, 2014, respectively, of the Court of Appeals in CA-G.R. SP No. 127151 are
herebyAFFIRMED with MODIFICATION, such that the Regional Trial Court of Baguio City, Branch 3
is DIRECTED to RESUME trial on the merits in Special Civil Action Nos. 5055-R, 5056-R, and 5057-R to determine the
ownership of the subject properties and to partition as co-owners, if proper.

SO ORDERED.
TWIN TOWERS CONDOMINIUM CORPORATION, Petitioner, v. THE COURT OF APPEALS, ALS MANAGEMENT &
DEVELOPMENT CORPORATION, ANTONIO LITONJUA and SECURITIES AND EXCHANGE
COMMISSION, Respondents.

DECISION

CARPIO, J.:

The Case

Before us is a petition for review on certiorari1 to nullify the Decision2 dated August 31, 1995 of the Court of Appeals
and its Resolution3 dated January 16, 1996 denying petitioners motion for reconsideration. The Court of Appeals
dismissed petitioners appeal from the Decision en banc4 of the Securities and Exchange Commission, which reversed
the order of the SEC Hearing Officer.5 The Court of Appeals dismissed the appeal for lack of merit and for non-
compliance with the requirement on certification of non-forum shopping.6 cräläwvirtualibräry

The Antecedent Facts

On June 30, 1988, petitioner Twin Towers Condominium Corporation ("petitioner" for brevity) filed a complaint7 with
the Securities and Exchange Commission ("SEC" for brevity) against respondents ALS Management & Development
Corporation ("ALS" for brevity) and Antonio Litonjua ("Litonjua" for brevity). The complaint prayed that ALS and
Litonjua be ordered to pay solidarily the unpaid condominium assessments and dues with interests and penalties
covering the four quarters of 1986 and 1987 and the first quarter of 1988.

The complaint alleged, among others, that petitioner, a non-stock corporation, is organized for the sole purpose of
holding title to and managing the common areas of Twin Towers Condominium ("Condominium" for brevity).
Membership in petitioner corporation is compulsory and limited to all registered owners of units in the Condominium.
ALS, as registered owner of Unit No. 4-A ("Unit" for brevity) of the Condominium, is a member of petitioner. Litonjua,
who is the corporate president of ALS, occupies the Unit.

Petitioner collects from all its members quarterly assessments and dues as authorized by its Master Deed and
Declaration of Restrictions ("Master Deed" for brevity) and its By-Laws. As of the filing of the complaint with the SEC,
petitioners records of account show that ALS failed to pay assessments and dues starting 1986 up to the first quarter
of 1988. Petitioner claimed against both ALS and Litonjua P118,923.20 as unpaid assessments and dues. This amount
includes accrued interests of P30,808.33 and penalty charges of P7,793.34, plus P 1,500.00 as unpaid contingency
fund assessment for 1987.8 cräläwvirtualibräry

In their joint Answer with Counterclaim, ALS and Litonjua asserted that petitioner failed to state a cause of action
against Litonjua. ALS and Litonjua argued that petitioners admission that ALS and not Litonjua is the registered owner
of the Unit and member of petitioner exonerates Litonjua from any liability to petitioner. While ALS is a juridical
person that cannot by itself physically occupy the Unit, the natural person who physically occupies the Unit does not
assume the liability of ALS to petitioner. Neither does the agent who acts for the corporation become personally liable
for the corporations obligation.

As counterclaim, ALS claimed damages against petitioner arising from petitioners act of repeatedly preventing ALS, its
agents and guests from using the parking space, swimming pool, gym, and other facilities of the Condominium. In
addition, Litonjua claimed damages against petitioner for the latters act of including Litonjuas name in the list of
delinquent unit owners which was posted on petitioners bulletin board.9 cräläwvirtualibräry

On December 11, 1991, the SEC Hearing Officer ordered petitioner to pay Litonjua moral and exemplary damages for
maliciously including Litonjuas name in the list of delinquent unit owners and for impleading him as a respondent. On
the other hand, the SEC Hearing Officer ordered ALS to pay the assessments and dues to petitioner.10 However, the
Hearing Officer did not determine the exact amount to be paid by ALS because petitioner failed to lay down the basis
for computing the unpaid assessments and dues.11 The dispositive portion of the decision reads thus:

"WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Ordering respondent ALS to pay the legal assessments/dues due the complainant within thirty (30) days from
finality of this Decision; and
2. Ordering the complainant to pay respondent Antonio Litonjua the sum of THREE HUNDRED THOUSAND PESOS
(P300,000.00) as moral damages, FIFTY THOUSAND PESOS (P50,000.00) as exemplary damages, and TWO
HUNDRED THOUSAND PESOS (P200,000.00) as and by way of attorneys fees.

SO ORDERED."12 cräläwvirtualibräry

Not satisfied with the SEC Hearing Officers decision, both parties filed their respective appeals to the SEC en
banc.13 Petitioner assailed the award of moral and exemplary damages as well as attorneys fees in favor of Litonjua.
On the other hand, ALS appealed that portion of the decision ordering it to pay to petitioner the assessments and
dues.

In a decision dated July 30, 1993, the SEC en banc nullified the award of damages and attorneys fees to Litonjua on
the ground that the SEC had no jurisdiction over Litonjua. The SEC en banc held that there is no intra-corporate
relationship between petitioner and Litonjua who is not the registered owner of the Unit and thus, not a member of
petitioner. The SEC en banc stated that petitioner could not invoke the doctrine of piercing the veil of ALS corporate
fiction since disregarding the corporate entity is a function of the regular courts.

Furthermore, the SEC en banc remanded the case to the Hearing Officer to determine the value of the services
petitioner failed to render to ALS because of the latters non-use of the Condominium facilities. The SEC en banc  ruled
that the value of these services could be deducted from the unpaid assessments and dues that ALS owes petitioner.

Thus, the SEC en banc  declared:

"WHEREFORE, in view of the foregoing, the order appealed from is hereby reversed insofar as it awards moral and
exemplary damages and attorneys fees to respondent Litonjua as the same is null and void for lack of jurisdiction of
this Commission over the said party.14 cräläwvirtualibräry

As regards that portion of the appealed Order directing respondent ALS to pay the legal assessment/dues to the
complainant TTC within thirty (30) [days] from finality of the said decision, the same is hereby modified by remanding
the case to the hearing officer for determination of the value of the services withheld by the complainant TTC
from respondent ALS in order that the same may be deducted from the amount of legal assessments and dues which
the respondent corporation shall pay to the complainant.

SO ORDERED."15 (Emphasis supplied)

Petitioner appealed the SEC en banc Decision to the Court of Appeals contending grave error or grave abuse of
discretion by the SEC en banc.

The Ruling of the Court of Appeals

The Court of Appeals dismissed petitioners appeal on both procedural and substantive grounds. Procedurally, the
Court of Appeals found the petition defective for failure to contain a sworn certification of non-forum shopping as
required by Section 6 of Administrative Circular No. 1-95 and Section 2 of Revised Circular No. 28-91.

On the merits, the Court of Appeals substantially affirmed the decision of the SEC en banc that there is no ground to
pierce the veil of ALS corporate fiction. The Court of Appeals held that there is nothing in the records to show that ALS
is engaged in unlawful, business or that Litonjua is using ALS to defraud third parties. The fact alone that ALS is in
arrears in paying its assessments and dues does not make ALS or Litonjua guilty of fraud which would warrant
piercing the corporate veil of ALS. Thus, it was improper for petitioner to post Litonjuas name instead of ALS in the list
of delinquent unit owners since Litonjua is not a member of petitioner.

The Court of Appeals also sustained the claim of petitioner against ALS for unpaid assessments and dues but found
that petitioner failed to substantiate by preponderance of evidence the basis for computing the unpaid assessments
and dues. Thus, the Court of Appeals remanded the case to the SEC Hearing Officer for further reception of evidence
and for determination of the exact amount of ALS liability to petitioner. The Court of Appeals, however, directed the
SEC Hearing Officer to deduct from ALS unpaid assessments and dues the value of the services denied to ALS because
of the latters non-use of the Condominium facilities. In allowing the deduction, the Court of Appeals declared the
Condominiums House Rule 26.3 as ultra vires.  House Rule 26.3, which petitioner claims as its basis for denying the
use of the Condominium facilities to ALS, authorizes withholding of the use of the Condominium facilities from
delinquent unit owners. The Court of Appeals, however, ruled that petitioner is not expressly authorized by its Master
Deed and By-Laws to prohibit delinquent members from using the facilities of the Condominium.
The Court of Appeals went further and declared the interest and penalty charges prescribed by House Rule 26.516 on
delinquent accounts as exorbitant or grossly excessive, although this was not raised as an issue. While in its
complaint, petitioner sought to recover P118,923.20 as unpaid assessments and dues, in its amended petition for
review, petitioner sought P994,529.75, more than eight times the amount it originally claimed from ALS.17 cräläwvirtualibräry

In the dispositive portion of its assailed decision, the Court of Appeals declared:

"WHEREFORE, the instant petition is hereby DENIED and is accordingly DISMISSED."18 cräläwvirtualibräry

Hence, this petition.

The Issues

In its Memorandum, petitioner assigns the following errors in the decision of the Court of Appeals:

1. "IN DISMISSING THE PETITION ALLEGEDLY BECAUSE OF PETITIONERS FAILURE TO COMPLY WITH THE PERTINENT
PROVISIONS OF SUPREME COURT CIRCULAR NOS. 1-95 AND 28-91 ON THE CERTIFICATION AGAINST FORUM
SHOPPING;"

2. "IN ORDERING A REMAND OF THE CASE BACK TO THE HEARING OFFICER FOR THE RECEPTION OF EVIDENCE FOR
SERVICES SUPPOSEDLY NOT RENDERED BY PETITIONER;"

3. "IN DECLARING HOUSE RULE NO. 26.3 AS ULTRA VIRES;"

4. "IN FINDING THE PENALTIES AND INTERESTS PRESCRIBED IN HOUSE RULE 26.519 AS EXORBITANT AND GROSSLY
EXCESSIVE;"

5. "IN REFUSING TO RECOGNIZE THE FACT THAT RESPONDENT LITONJUA AND NOT ALS IS THE REAL OWNER OF
APARTMENT UNIT 4-A;" and

6. "IN FAILING TO FIND THAT THERE IS ON RECORD OVERWHELMING EVIDENCE TO SHOW THE BASIS OF THE DUES
AND ASSESSMENTS BEING COLLECTED FROM THE PRIVATE RESPONDENTS."20

The Ruling of the Court

The petition is partly meritorious.

A perusal of the foregoing issues readily reveals that petitioner raises two aspects of the case for consideration - the
procedural aspect and the substantive aspect.

We will discuss the procedural aspect first.

Non-compliance with Supreme Court Circular No. 1-95 and Revised Circular No. 28-91.

Petitioner submits that the Court of Appeals erred in dismissing its appeal for non-compliance with Supreme Court
Circular No. 1-95 and Revised Circular No. 28-91. Petitioner asserts that when it filed its petition, both circulars were
not yet in full force.

Petitioner filed its petition for review with the Court of Appeals on August 18, 1993 and its amended petition on
September 3, 1993. Both the original and amended petitions were filed before the effectivity of Revised Administrative
Circular No. 1-95 on June 1, 1995. However, contrary to petitioners claim, before the issuance of Revised
Administrative Circular No. 1-95, there was already an existing circular requiring a sworn certification of non-forum
shopping from a party filing a petition for review with the Court of Appeals.

Circular No. 28-91, which took effect on January 1, 1992, required a sworn certification of non-forum shopping in
cases filed with the Court of Appeals and the Supreme Court. Circular No. 28-91 specifically provides for summary
dismissal of petitions which do not contain a sworn certification of non-forum shopping. Sections 2 and 3 of Circular
No. 28-91 state:
"2. Certification  - The party must certify under oath that he has not commenced any other action or proceeding
involving the same issues in the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other
tribunal or agency, and that to the best of his knowledge, no such action or proceeding is pending in the Supreme
Court, the Court of Appeals, or different Divisions thereof, or any other tribunal or agency. If there is any action
pending, he must state the status of the same. If he should learn that a similar action or proceeding has been filed or
is pending before the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other tribunal or
agency, he should notify the court, tribunal or agency within five (5) days from such notice.

3. Penalties -

a. Any violation of this Circular shall be a cause for the summary dismissal of the multiple petition or complaint.

x x x."

Clearly, petitioner cannot claim that at the time of the filing of its petitions with the Court of Appeals, it was not
required under any existing Supreme Court Circular to include in its petitions a sworn certification of non-forum
shopping. Circular No. 28-91 applies in the instant case, being the Circular in force at the time. Petitioner cannot even
feign ignorance of Circular No. 28-91 as its petitions were filed more than one year after the Circulars effectivity. The
rule against forum shopping has long been established and Circular No. 28-91 merely formalized the prohibition and
provided the appropriate penalties against violators.21cräläwvirtualibräry

The Court of Appeals did not err in dismissing the petition for this procedural lapse. However, special circumstances or
compelling reasons may justify relaxing the rule requiring certification on non-forum shopping.22 Technical rules of
procedure should be used to promote, not frustrate justice. While the swift unclogging of court dockets is a laudable
objective, granting substantial justice is an even more urgent ideal.23 The certificate of non-forum shopping is a
mandatory requirement. Nonetheless, this requirement must not be interpreted too literally to defeat the ends of
justice.24
cräläwvirtualibräry

In the instant case, the merits of petitioners case should be considered special circumstances or compelling reasons
that justify tempering the hard consequence of the procedural requirement on non-forum shopping. In the interest of
justice, we reinstate the petition.

Essentially, the substantive issues for resolution in the instant petition can be summarized into four, as follows:

1. Whether petitioner can collect assessments and dues despite its denial to ALS of the use of the Condominium
facilities pursuant to House Rule 26.3;

2. Whether ALS can validly offset against its unpaid assessments and dues the value of the services withheld by
petitioner;

3. Whether a remand of the case to the proper trial court is necessary to determine the amounts involved; and

4. Whether the penalties prescribed in House Rule 26.2 are grossly excessive and exorbitant.

First Issue: Payment of assessments and dues.

Petitioners authority to assess dues.

Petitioner was organized to hold title to the common areas of the Condominium and to act as its management body.
The Condominium Act, the law governing condominiums, states that:

"Title to the common areas, including the land, or the appurtenant interests in such areas, may be held by a
corporation specially formed for the purpose (hereinafter known as the "condominium corporation") in which the
holders of separate interests shall automatically be members or shareholders, to the exclusion of others, in proportion
to the appurtenant interest of their respective units in the common areas. xxx"25 cräläwvirtualibräry

The Condominium Act provides that the Master Deed may authorize the condominium corporation to collect
"reasonable assessments to meet authorized expenditures."26 For this purpose, each unit owner "may be assessed
separately for its share of such expenditures in proportion (unless otherwise provided) to its owners fractional interest
in the common areas."27 Also, Section 20 of the Condominium Act declares:
"Section 20. An assessment upon any condominium made in accordance with a duly registered declaration of
restrictions shall be an obligation of the owner  thereof at the time the assessment is made. xxx" (Emphasis
supplied)

Petitioner is expressly authorized by its Master Deed to impose reasonable assessments on its members to maintain
the common areas and facilities of the Condominium. Section 4, Part II of petitioners Master Deed provides:

"Section 4. ASSESSMENTS. From and after date Ayala Investment & Development Corporation formally conveys the
condominium project to the Condominium Corporation, the owner of each unit shall be proportionately liable
for the common expenses of the condominium project, which shall be assessed against each unit owner in
the project and paid to the Condominium Corporation  as provided in Part I Section 8 (b) hereof at such times
and in such manner as shall be provided in the By-Laws of the Condominium Corporation,

a.) Regular assessments for such amounts as shall be necessary to meet the operating expenses of the
Condominium Corporation  as well as such amounts, determined in accordance with the provisions of the By-Laws,
to be made for the purpose of creating and maintaining a special fund for capital expenditures on the common areas
of the project; including the cost of extraordinary repairs, reconstruction or restoration necessitated by damage,
depreciation, obsolescence, expropriation or condemnation of the common areas or part thereof, as well as the cost of
improvements or additions thereto authorized in accordance with the provisions of the By-Laws;

b.) xxx

c.) There may be assessed against the unit owners, in the manner prescribed herein or in the By-Laws of the
Condominium Corporation, such other assessments as are not specifically provided for herein;

d.) The amount of any such assessment, plus interest penalties, attorneys fees and other charges incurred for the
collection of such assessment, shall constitute a lien upon the unit and on the appurtenant interest of the unit owner
in the Condominium Corporation. Such lien shall be constituted in the manner provided in the By-Laws of the
Condominium Corporation. The foreclosure, transfer of conveyance, as well as redemption of the unit shall include the
unit owners appurtenant interest in the Condominium Corporation. The Condominium Corporation shall have the
power to bid at the foreclosure sale."28

Thus, petitioners right to collect assessments and dues from its members and the corollary obligation of its members
to pay are beyond dispute.

There is also no question that ALS is a member of petitioner considering that ALS is the registered owner of the Unit.
Under the automatic exclusive membership clause in the Master Deed,29 ALS became a regular member of petitioner
upon its acquisition of a unit in the Condominium.

As a member of petitioner, ALS assumed the compulsory obligation to share in the common expenses of the
Condominium. This compulsory obligation is further emphasized in Section 8, paragraph c, Part I of the Master Deed,
to wit:

"Each member of the Condominium Corporation shall share in the common expenses of the condominium project
in the same sharing or percentage stated xxx"30 (Emphasis supplied)

Undoubtedly, as a member of petitioner, ALS is legally bound to pay petitioner assessments and dues LO maintain the
common areas and facilities of the Condominium. ALS obligation arises from both the law and its contract with the
Condominium developer and other unit owners.

Petitioners Master Deed provides that a member of the Condominium corporation shall share in the common expenses
of the condominium project.31 This obligation does not depend on the use or non-use by the member of the common
areas and facilities of the Condominium. Whether or not a member uses the common areas or facilities, these areas
and facilities will have to be maintained. Expenditures must be made to maintain the common areas and facilities
whether a member uses them frequently, infrequently or never at all.

ALS asserts that the denial by petitioner to ALS and Litonjua of the use of the Condominium facilities deprived
petitioner of any right to demand from ALS payment of any condominium assessments and dues. ALS contends that
the right to demand payment of assessments and dues carries with it the correlative obligation to allow the use of the
Condominium facilities. ALS is correct if it had not defaulted on its assessment and dues before the denial of the use
of the facilities. However, the records clearly show that petitioner denied ALS and Litonjua the use of the facilities
only after ALS had defaulted on its obligation to pay the assessments and dues. The denial of the use of the facilities
was the sanction for the prior default incurred by ALS.

In essence, what ALS wants is to use its own prior non-payment as a justification for its future non-payment of its
assessments and dues. Stated another way, ALS advances the argument that a contracting party who is guilty of first
breaching his obligation is excused from such breach if the other party retaliates by refusing to comply with his own
obligation.

This obviously is not the law. In reciprocal obligations, when one party fulfills his obligation, and the other does not,
delay by the other begins. Moreover, when one party does not comply with his obligation, the other party does not
incur delay if he does not perform his own reciprocal obligation because of the first partys non-compliance. This is
embodied in Article 1169 of the Civil Code, the relevant provision of which reads:

"In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a
proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by
the other begins."

Thus, before ALS incurred its arrearages, petitioner allowed ALS to use the facilities. However, ALS subsequently
defaulted and thus incurred delay. It was only then that petitioner disallowed ALS and Litonjua from using the
facilities. Clearly, petitioners denial to ALS of the Condominium facilities, after ALS had defaulted, does not constitute
a valid ground on the part of ALS to refuse paying its assessments and dues.

Validity of House Rule 26.3.

Petitioners House Rules and Regulations ("House Rules" for brevity) expressly authorize denial of the use of
condominium facilities to delinquent members. Specifically, House Rule 26.3 provides that:

"26. ASSESSMENTS:

xxx

26.3 Names of unit owners with delinquent accounts who fail to pay two consecutive quarters shall be posted in the
bulletin board. Unit owners with delinquent accounts, their tenants, guests/visitors and relatives shall not
be allowed the use of all facilities of the condominium such as the swimming pool, gym, social hall,
etc."  (Emphasis supplied)

The issue on the validity of House Rule 26.3 was raised for the first time on appeal. It is settled that an issue not
raised during trial could not be raised for the first time on appeal as to do so would be offensive to the basic rules of
fair play, justice, and due process.32 Nonetheless, the Court of Appeals opted to address this issue.

Petitioner justifies House Rule 26.3 by invoking Section 36, paragraph 11 of the Corporation Code which grants every
corporation the power "to exercise such powers as may be essential or necessary to carry out its purpose or purposes
as stated in its Articles of Incorporation." Petitioner was organized for the main purpose of holding title to and
managing the common areas of the Condominium. Petitioner claims that there is here implied the power to enact such
measures as may be necessary to carry out the provisions of the Articles of Incorporation, By-Laws and Master Deed
to deal with delinquent members. This, asserts petitioner, includes the power to enact House Rule 26.3 to protect and
safeguard the interests not only of petitioner but also of its members.

For their part, ALS and Litonjua assail the validity of House Rule 26.3 alleging that it is ultra vires.  ALS and Litonjua
maintain that neither the Master Deed nor the By-Laws of petitioner expressly authorizes petitioner to prohibit
delinquent members from using the Condominium facilities. Being ultra vires, House Rule 26.3 binds no one. Even
assuming that House Rule 26.3 is intra vires, the same is iniquitous, unconscionable, and contrary to morals, good
customs and public policy. Thus, ALS claims it can validly deduct the value of the services withheld from the
assessments and dues since it was barred from using the Condominium facilities for which the assessments and dues
were being collected.

The Court of Appeals sustained respondents argument and declared House Rule 26.3 ultra vires  on the ground that
petitioner is not expressly authorized by its Master Deed or its By-Laws to promulgate House Rule 26.3.
House Rule 26.3 clearly restricts delinquent members from the use and enjoyment of the Condominium facilities. The
question is whether petitioner can validly adopt such a sanction to enforce the collection of Condominium assessments
and dues.

We rule that House Rule 26.3 is valid.

Section 45 of the Corporation Code provides:

"Sec. 45. Ultra vires acts of corporations. - No corporation under this code shall possess or exercise any corporate
powers except those conferred by this Code or by its articles of incorporation and except such as are necessary or
incidental to the exercise of the powers so conferred."

The term ultra vires  refers to an act outside or beyond corporate powers, including those that may ostensibly be
within such powers but are, by general or special laws, prohibited or declared illegal.33 The Corporation Code defines
an ultra vires act as one outside the powers conferred by the Code or by the Articles of Incorporation, or beyond what
is necessary or incidental to the exercise of the powers so conferred. Moreover, special laws governing certain classes
of corporations, like the Condominium Act, also grant specific corporate powers to corporations falling under such
special laws.

The Condominium Act, petitioners By-Laws and the Master Deed expressly  empower petitioner to promulgate House
Rule 26.3. Section 9 of the Condominium Act provides:

"Section 9. The owner of a project shall, prior to the conveyance of any condominium therein, register a declaration of
restrictions relating to such project, which restrictions xxx shall inure to and bind all condominium owners in the
project. xxx The Register of Deeds shall enter and annotate the declaration of restrictions upon the certificate of title
covering the land included within the project, if the land is patented or registered under the Land Registration or
Cadastral acts.

xxx

Such declaration of restrictions, among other things, may also provide:

(a) As to any management body-

1. For the powers thereof, Including power to enforce the provisions of the declaration of restrictions;

xxx

3. Provisions for maintenance  xxx and other services benefiting the common areas, xxx" (Emphasis supplied)

The Condominium Act clearly provides that the Master Deed may expressly empower the management body,
petitioner in the instant case, to enforce all provisions in the Master Deed and Declaration of Restrictions.

Pursuant to Section 9 (a) (1) and (3) of the Condominium Act, the Master Deed expressly authorizes petitioner to
exercise all the powers granted to the management body by the Condominium Act, petitioners Articles of
Incorporation and By-Laws, the Master Deed, and the Corporation Code. Section 3, Part II of the Master Deed reads:

"Section 3. MANAGEMENT BODY. - The Condominium Corporation to be formed and organized pursuant to Section 7
of Part I, above, shall constitute the management body of the project. As such management body, the powers of
the Condominium Corporation shall be such as are provided by the Condominium Act, by the Articles of
Incorporation and the By-Laws of the Corporation, by this instrument and by the applicable provisions of
the Corporation Code as are not inconsistent with the Condominium Act. Among such powers but not by way
of limitation, it shall have the power to enforce the provisions thereof in accordance with the By-Laws of the
corporation." (Emphasis supplied)

Thus, the Master Deed clearly empowers petitioner to enforce the provisions of the Master Deed in accordance with
petitioners By-Laws.

Petitioners By-Laws expressly authorize petitioners Board of Directors to promulgate rules and regulations on the use
and enjoyment of the common areas. Thus, paragraph 2, Section 2 of petitioners By-Laws states:
"Without limiting the general nature of the foregoing powers, the Board of Directors shall have the power to enforce
the limitations, restrictions, and conditions contained in the Master Deed and Declaration of Restrictions of the
project; promulgate rules and regulations concerning the use, enjoyment and occupancy of the units,
common areas and other properties in the condominium project,  to make and collect assessments against
members as unit owners to defray the costs and expenses of the condominium project and the corporation and to
secure by legal means the observance of the provisions of the Condominium Act, the Master Deed, the Articles of
Incorporation, these By-Laws, and the rules and regulations promulgated by it in accordance herewith. The members
of the corporation bind themselves to comply faithfully with all these provisions."34 (Emphasis supplied)

Evidently, the Condominium Act, the Master Deed and petitioners By-Laws grant petitioner the express power to
promulgate rules and regulations concerning the use, enjoyment and occupancy of the common areas.

Moreover, House Rule 26.3, which prohibits delinquent members from using the common areas, is necessary to
ensure maintenance of the common areas. Petitioners purpose in enacting House Rule 26.3 is to enforce effectively
the provisions of the Master Deed. House Rule 26.3 is well within the powers of petitioner to adopt as the same is
reasonably necessary to attain the purpose for which both petitioner and the Condominium project were created.
Thus, Section 7 of the Master Deed declares:

"Section 7. CONDOMINIUM CORPORATION. - A corporation to be known as THE TWIN TOWERS CONDOMINIUM

(hereinafter referred to as the "Condominium Corporation"), shall be formed and organized pursuant to the
Condominium Act and the Corporation Code to hold title to all the aforestated common areas of the condominium
project including the land, to manage THE TWIN TOWERS CONDOMINIUM and to do such other things as may be
necessary, incidental and convenient to the accomplishment of said purposes  xxx"35 (Emphasis supplied)

Petitioner would be unable to carry out its main purpose of maintaining the Condominium common areas and facilities
if members refuse to pay their dues and yet continue to use these areas and facilities. To impose a temporary ban on
the use of the common areas and facilities until the assessments and dues in arrears are paid is a reasonable measure
that petitioner may undertake to compel the prompt payment of assessments and dues.

Second Issue: Offsetting the value of services withheld against ALS unpaid assessments and dues.

ALS claim for reduction of its assessments and dues because of its non-use of the Condominium facilities.

We rule that ALS has no right to a reduction of its assessments and dues to the extent of its non-use of the
Condominium facilities. ALS also cannot offset damages against its assessments and dues because ALS is not entitled
to damages for alleged injury arising from its own violation of its contract. Such a breach of contract cannot be the
source of rights or the basis of a cause of action.36 To recognize the validity of such claim would be to legalize ALS
breach of its contract.

ALS claim for unrendered repair services barred by estoppel.

ALS also justifies its non-payment of dues on the ground of the alleged failure of petitioner to repair the defects in ALS
Unit. However, this claim for unrendered repairs was never raised before the SEC Hearing Officer or the SEC en
banc.  The issue on these alleged unrendered repairs, which supposedly caused ALS Unit to deteriorate, was raised for
the first time on appeal. The Court of Appeals did not pass upon the same.

Neither in the proceedings in the SEC nor in the appellate court did ALS present evidence to substantiate its allegation
that petitioner failed to render the repair services. Also, ALS failed to establish whether it claimed for the costs of the
repair because ALS advanced these expenses, or for the value of damages caused to the Unit by the water leakage.

ALS is therefore barred at this late stage to interpose this claim. In Del Rosario v. Bonga,37 the Court held:

"As a rule, no question will be entertained on appeal unless it has been raised in the court below. Points of law,
theories, issues and arguments not brought to the attention of the lower court need not be, and ordinarily will not be,
considered by a reviewing court, as they cannot be raised for the first time at that late stage. Basic considerations of
due process impel this rule."

As this claim was a separate cause of action which should have been raised in ALS Answer with Counterclaim, ALS
failure to raise this claim is deemed a waiver of the claim.

Third Issue: Remand of the case to the proper trial court.

Question of fact.

The Court of Appeals ruled that there is a need to remand the case considering that there is no sufficient evidence on
record to establish the amount of petitioners claim against ALS for unpaid assessments and dues.

The question of whether petitioners claim of P994,529.75 for unpaid assessments and dues against ALS is supported
by sufficient evidence is a purely factual issue and inevitably requires the weighing of evidence. This Court is not a
trier of facts, and it is not the function of this Court to re-examine the evidence submitted by the parties.38 In cases
brought before this Court from the Court of Appeals under Rule 45 of the Rules of Court, this Courts jurisdiction is
limited to reviewing errors of law which must be distinctly set forth.39 In this mode of appeal, the findings of fact of
the Court of Appeals and other courts of origin are conclusive.40cräläwvirtualibräry

Jurisprudence is settled that:

"(a)s a rule, the jurisdiction of this Court in cases brought to it from the Court of Appeals xxx is limited to the review
and revision of errors of law allegedly committed by the appellate court, as its findings of fact are deemed conclusive.
As such this Court is not duty-bound to analyze and weigh all over again the evidence already considered in the
proceedings below."41 cräläwvirtualibräry

This rule admits of several exceptions. This Court may review the findings of fact of the Court of Appeals:

"(a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on speculations, surmises or
conjectures; (c) when the inference made is manifestly mistaken, absurd or impossible; (d) when the judgment of the
Court of Appeals was based on a misapprehension of facts; (e) when the factual findings are conflicting; (F) when the
Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the
admissions of both appellant and appellee; (g) when the Court of Appeals manifestly overlooked certain relevant facts
not disputed by the parties and which, if properly considered, would justify a different conclusion; and, (h) where the
findings of fact of the Court of Appeals are contrary to those of the trial court, or are mere conclusions without citation
of specific evidence, or where the facts set forth by the petitioner are not disputed by the respondent, or where the
findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence
on record."42cräläwvirtualibräry

However, none of these exceptions exists in the instant case.

The SEC Hearing Officer found that, while petitioner is entitled to collect the unpaid assessments and dues from ALS,
petitioner has failed to establish clearly the basis for computing the correct amount of the unpaid assessments and
dues. Indeed, there is no evidence laying down the basis of petitioners claim other than allegations of previous
demands and statements of accounts. Whether petitioner has sufficiently established its claim by preponderance of
evidence requires an examination of the probative weight of the evidence presented by the parties. Evidently, this is a
question of fact the resolution of which is beyond the purview of the petition for review where only errors of law may
be raised. On the other hand, the decision of the Court of Appeals, finding insufficient evidence on record, was made
under its power to review both questions of fact and law.

Remand to the proper trial court.

While we sustain the ruling of the Court of Appeals, the case can no longer be remanded to the SEC Hearing Officer.
Republic Act No. 8799, which took effect on August 8, 2000, transferred SECs jurisdiction over cases involving intra-
corporate disputes to courts of general jurisdiction or the appropriate regional trial courts. Section 5.2 of R.A. No.
8799 reads:

"5.2. The Commissions jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is
hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court; Provided, That the
Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise
jurisdiction over these cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate
disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this Code.
The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June
2000 until finally disposed."

Based on the Resolution issued by this Court in AM No. 00-8-10-SC,43 the Court Administrator and the Securities and
Exchange Commission should cause the transfer of the records of SEC-AC Nos. 377 and 378 to the proper regional
trial court for further reception of evidence and computation of the correct amount of assessments and dues that ALS
shall pay to petitioner.
Fourth Issue: Penalties prescribed in House Rule 26.2.

ALS and Litonjua did not question before either the SEC or the Court of Appeals the validity of the penalties prescribed
in the Condominiums House Rule 26.2. Nevertheless, the Court of Appeals ruled that House Rule 26.2 prescribes
grossly excessive penalties and interests. The resolution of this issue is not necessary in arriving at a complete and
just resolution of this case. At any rate, we find the interest and penalties prescribed under House Rule 26.2
reasonable considering the premier location of the Condominium at the heart of Makati City. It is inevitable that ALS
unpaid assessments and dues would escalate because ALS delinquency started since 1986.

House Rule 26.2 clearly provides for a 24% interest and an 8% penalty, both running annually, on the total amount
due in case of failure to pay, to wit:

"26.2. Late payment of accounts of members shall be charged an interest rate of 24% per annum. In addition, a
penalty at the rate of 8% per annum shall be charged on delinquent accounts. The 24% interest shall be imposed on
unpaid accounts starting with the 21st day of the quarter until fully paid."

To reiterate, the Condominium Act expressly provides that the Master Deed may empower the management body of
the Condominium "to enforce the provisions of the declaration of restrictions."44 The Master Deed authorizes
petitioner, as the management body, to enforce the provisions of the Master Deed in accordance with petitioners By-
Laws. Thus, petitioners Board of Directors is authorized to determine the reasonableness of the penalties and interests
to be imposed against those who violate the Master Deed. Petitioner has validly done this by adopting the House
Rules.

The Master Deed binds ALS since the Master Deed is annotated on the condominium certificate of title of ALS Unit.
The Master Deed is ALS contract with all Condominium members who are all co-owners of the common areas and
facilities of the Condominium. Contracts have the force of law between the parties and are to be complied with in good
faith.45 From the moment the contract is perfected, the parties are bound to comply with what is expressly stipulated
as well as with what is required by the nature of the obligation in keeping with good faith, usage and the law.46 Thus,
when ALS purchased its Unit from petitioner, ALS was bound by the terms and conditions set forth in the contract,
including the stipulations in the House Rules of petitioner, such as House Rule 26.2.

In sum, as a member of petitioner, ALS is indisputably bound by the Condominiums House Rules which are authorized
by the By-Laws, the Master Deed and the Condominium Act.

Award of attorneys fees.

The award of attorneys fees as damages is the exception rather than the rule. The general rule is that attorneys fees
cannot be recovered as part of damages because of the policy that no premium should be placed on the right to
litigate.47 Counsels fees are not awarded every time a party prevails in a suit.48 An award of attorneys fees and
expenses of litigation is proper under the instances provided for in Article 2208 of the Civil Code, one of which is
where the defendant acted in gross and evident bad faith. In this case, however, we find no cogent reason to award
attorneys fees in the absence of showing of gross and evident bad faith on the part of ALS in refusing to satisfy
petitioners claim.

WHEREFORE, the petition is GRANTED and the assailed Decision of the Court of Appeals is SET ASIDE. ALS
Management & Development Corporation is ordered to pay Twin Towers Condominium Corporation all overdue
assessments and dues, including interest and penalties from date of default, as shall be determined by the proper
Regional Trial Court in accordance with this Decision. The proper Regional Trial Court shall complete the computation
within sixty (60) days from its receipt of this Decision and the records of SEC-AC Nos. 377 and 378. Costs of suit
against ALS Management & Development Corporation.
G.R. No. L-18009             January 10, 1923

EMILIO PUNSALAN, ET AL., plaintiffs-appellants,

vs.
C. BOOT LIAT, ET AL., defendants-appellants.

Yeager and Armstrong, C. A. Sobral and Lorenzo and Mañalac for plaintiffs-appellants.
Kincaid, Perkins and Kincaid and P. J. Moore for defendants-appellants.

AVANCEÑA, J.:

On or about the 13th of July, 1920, a Moro by the name of Tamsi saw from the Cawit-Cawit shores in the Province
of Zamboanga, a big bulky object in the distance which attracted his attention. Thereupon, together with another
Moro named Bayrula, he went in a small boat to investigation and found it to be a large fish. They then returned to
shore, where they met other Moros and requested their help to catch the fish. They went in three small boats, there
being then in one, seven in the other, and five in the third, twenty-two men, in all, twenty-one of whom are plaintiffs
herein, and the remaining one named Ahamad is defendant. After having arrived at the place where the fish was,
which was found to be a whale, they proceeded to pull it toward the shore up to the mouth of the river, where they
quartered it, having found in its abdomen a great quantity of ambergris, which was placed in three sacks, two of
which were full and the other half full, and taken to the house of Maharaja Butu, where they left it to the care of
Ahamad. Then the contents of the two full sacks were placed in three trunks. All of these twenty-two persons made
an agreement that they were to be the sole owners of this ambergris and that none of them could sell it without the
consent of the rest. As to the half sack of amber they agreed that some of them should take it to Zamboanga to sell
for the purpose of ascertaining the market price of the ambergris, in order that they might dispose of the rest
accordingly. Some of them, with Tamsi in charge, went to Zamboanga to sell the half sack of amber where they did
dispose of it to a Chinaman, Cheong Tong, for the sum of P2,700, which amount was distributed among all the
parties in interest. Then they offered to sell for the sum of P12,000 to the Chinamen, Cheong Tong and Lim Chiat,
the rest of the amber contained in the two sacks which had been left in the house of Maharaja Butu, for
safekeeping, and a document (Exhibit A) to this effect was executed by Lim Chiat and Cheong Tong, on the one
hand, and Tamsi, Imam Lumuyod, and Imam Asakil, on the other. Thereupon they went to Cawit-Cawit on board the
launch Ching-kang to get the amber so sold.

It appears that there were other people in Zamboanga who knew of the existence of this ambergris in the house of
Maharaja Butu. While the above related events were taking place, Mr. Henry E. Teck, who was one of those having
knowledge of the existence of this amber in Cawit-Cawit and of the fact that the launch Ching-kang had left for
Cawit-Cawit, proposed to the master of the revenue cutter Mindoro to go to Cawit-Cawit to seize some supposedly
contraband opium. After transmitting this information to the Collector of Customs, he, the master of the Mindoro,
immediately proceeded to Cawit-Cawit. There were on board the vessel Mr. Teck, some Chinamen, among whom
were C. Boon Liat, Ong Chua, and Go Tong, and some Moros who, according to Mr. Teck, were to assist in the
arrest of the smugglers. Upon the arrival of the Mindoro at Cawit-Cawit, the master, accompanied by Mr. Teck and
some Moros, went to the house of Maharaja Butu. As is to be presumed, this information about the supposed
contraband opium was but a trick to have the Mindoro at their disposal. The master proceeded to search the house,
stating that he had information to the effect that there was contraband opium and as a result of the search, he found
three large trunks containing a black substance which had a bad odor. He then asked the owner of the house to
whom those three trunks belonged, and the latter pointed to Ahamad who was present and who stated that the
contents came from the abdomen of a large fish. The master, however, said that it was opium and told Ahamad that
he would take the three trunks on board the ship. Then Ahamad and other Moros asked permission of the master to
accompany him on the voyage to Zamboanga, to which the master consented. When already on board and during
the voyage the master became convinced that the contents of the three trunks were not opium.

During the voyage, Mr. Teck offered to purchase the amber contained in the three trunks, but Ahamad refused to
sell it for the reason that he was not the sole owner thereof, but owned it in common with other persons who were in
Zamboanga. However Mr. Teck, aided by his companions who wielded some influence in Zamboanga, insisted that
Ahamad should sell them the amber, telling him not to be afraid of his companions, as he would answer for
whatever might happen. With this promise of protection, Ahamad decided to sell the amber for P7,500 and received
P2,500 as part payment on account of this price, a bill of sale having been signed by Ahamad, Maharaja Butu and
three Moros more. The balance of this price was paid later.
When Cheong Tong, Lim Chiat, and the Moros who had gone to Cawit-Cawit on board the launch Ching-
kang arrived at the house of Maharaja Butu, they found that the amber they had purchased from Tamsi and his
companions was no longer there.

The plaintiffs are twenty-one of the twenty-two Moros who had caught the whale, and Lim Chiat and Cheong Tong,
who had purchased from Tamsi and his companions the amber contained in the three trunks deposited in the house
of Maharaja Butu for safekeeping. They claim the 80-½ kilos of ambergris contained in three trunks, or its value in
the amount o P60,000, and damages in the sum of P20,000. This action is brought against C. Boon Liat, Ong Chua,
Go Tong, Henry E. Teck, and the Moro, Ahamad, the first four being the persons who purchased this same amber
from the one last named while on board the revenue cutter Mindoro.

It appears from the foregoing that the amber in question was the undivided common property of the plaintiffs (with
the exception of Lim Chiat and Cheong Tong) and the defendant Ahamad. This common ownership was acquired
by occupancy (arts. 609 and 610 of the Civil Code), so that neither Tamsi, Imam Lumuyod, or Imam Asakil had any
right to sell it, as they did, to Lim Chiat and Cheong Tong, nor had the Moro Ahamad any right to sell this same
amber, as he did, to C. Boon Liat, Ong Chua, Go Tong, and Henry E. Teck. There was an agreement between the
coowners not to sell this amber without the consent of all. Both sales having been made without the consent of all
the owners, the same have no effect, except as to the portion pertaining to those who made them (art. 399, Civil
Code).

Although the original complaint filed in this case was entitled as one for replevin, in reality, from its allegations, the
action herein brought is the ordinary one for the recovery of the title to, and possession of, this amber. It is no bar to
the bringing of this action that the defendant Ahamad is one of the coowners. The action for recovery which each
coowner has, derived from the right of ownership inherent in the coownership, may be exercised not only against
strangers but against the coowners themselves, when the latter perform, with respect to the thing held in common,
acts for their exclusive benefit, or of exclusive ownership, or which are prejudicial to, and in violation of, the right of
the community. (Decision of the supreme court of Spain of June 22, 1892.) In this case the selling of the amber by
the defendant Ahamad as his exclusive property and his attitude in representing himself to be the sole owner
thereof place him in the same position as the stranger who violates any right of the community. He is not sued in this
case as a coowner, for the cause of action is predicated upon the fact that he has acted not as a coowner, but as an
exclusive owner of the amber sold by him.

As to the sale made by Ahamad, it is urged that the purchaser acted in good faith. It is contended that the latter did
not know that the amber belonged to some others besides Ahamad. But the evidence shows otherwise. Henry E.
Teck himself admitted that on the occasion of the sale of the amber he really had promised Ahamad to protect him,
and although he said that the promise made by him had reference to the contingency of the amber proving to be
opium, as the master of the revenue cutter Mindoro believed, this is incredible, because he could not make Ahamad
such a promise, nor could such a promise, if made, have any influence on the mind of Ahamad, inasmuch as the
latter knew that the amber was not opium. If, as Henry E. Teck admits, he made Ahamad this promise of protection,
it should have been only on account of Ahamad's refusal to sell the amber due to the fact that he was not the sole
owner thereof.

With regard to the action of the trial court in not admitting Exhibits 1 and 2 offered by the defendants, we believed
that it was no error. These documents are affidavits signed by Paslangan, and the best evidence of their contents
was the testimony of Paslangan himself whom the plaintiffs had the right to cross-examine. Moreover, they are
substantially the same as the statements made by Paslangan at the trial when testifying as witness for the
defendants, and for this reason the ruling of the trial court excluding these documents would not, at all events, affect
the merits of the case.

In the complaint it is alleged that the value of the amber is P60,000. Upon the evidence adduced on this point, and
taking into account that the defendant, Henry E. Teck, himself, testifying as witness, has stated that this amber was
worth P1,200 per kilo, we accept this estimated value set forth in the complaint.

The decision of the court below contains the following order for judgment:

Wherefore, it is the judgment and order of the court that the defendants C. Boon Liat, Henry E. Teck,
Ahamad Ong Chua, and Go Tong deliver to the plaintiffs, Emilio Punsalan, Bayrula, Daring Gumuntol,
Mohamad, Insael, Dunkaland, Tahil, Dambul, Dagan, Sabay, Sahibul, Pingay, Mujahad, Amilol, Baraula,
 Saraban, Lim Chiat, and Cheong Tong twenty-twenty-first (20/21) of the amber in question, or, in default
thereof, to pay them its value of twelve thousand pesos (P12,000), less one-twenty-first of said amount.

Therefore, the judgment appealed from is affirmed, with the only modification that the value of the amber which is
the subject-matter of this action shall be P60,000, without special finding as to the costs of this instance. So ordered.

Araullo, C. J., Malcolm, Villamor, Ostrand, Johns, and Romualdez, JJ., concur.
Street, J., reserves his vote.

GR No. L-47996 May 9, 1941

ENGRACIA LAVADIA AND OTHERS, plaintiffs and appeals, vs. ROSARIO

COSME DE MENDOZA AND OTHERS, defendants and appellants.

Messrs. L. Fernandez Lavadia and Aurelio Palileo representing the appeals.

Messrs. Ortega and Ortega on behalf of the appellants.

DIAZ, J .:

The object of litigation between the plaintiffs and the defendants in the Court
of First Instance of Laguna, were the possession and custody of certain jewels
that some six pious ladies of the municipality of Pagsanjan, Laguna, called
Martina, Matea, Isabel, Paula, Pia and Engracia surnamed all Lavadia, they had
sent to make 1880, with their own money, to adorn and decorate with them
the Image of Our Lady of Guadalupe, patron of the mentioned municipality,
retaining them for themselves, their ownership not ceasing but only their use
to the referred Image, for the indicated purpose. The plaintiffs and the
defendants, with the exception of Engracia Lavadia, which was one of the six,
are descendants of the other five primitive owners of the jewels in
question. Because the defendant Rosario Cosme de Mendoza who is one of the
descendants of Paula Lavadia, who ultimately had custody of those, wanted to
hand over the crown that was part of them, to the Catholic Bishop of Lipa, to
have her in her possession but subject to the use of the Image of Our Lady of
Guadalupe, according to the will of their owners, the descendants of the three,
(Isabel Lavadia, Matea Lavadia and Martina Lavadia), Engracia Lavadia who
are the plaintiffs, promoted this cause in the Court of its origin, to claim the
possession and custody of all the aforementioned jewelry. These are none
other than those described in paragraph 3 of the lawsuit.    chanroblesvirtualawlibrary chanrobles virtual law library
The Court decided the case against the defendants, declaring that the plaintiffs
owning four sixths were unimportant of the jewels subject to question, and the
defendants, of two sixths only, those had perfect right to determine who
should take care of their custody; and that, having decided to entrust this is to
Engracia Lavadia, one of the primitive owners, ordered that the defendant
Rosario Cosme de Mendoza deliver all of them to said plaintiff. Against this
decision of the Court, the defendants filed an appeal, believing that the Court
erred (1) in declaring that the appellant Rosario Cosme de Mendoza, and his
antigresors in the possession of the aforementioned jewels, acted only as
depositories, and not fiduciaries ; (2) by declaring that the appellants own
four-sixths of those, and that they are responsible for said reason to exercise
the right to designate the person to whom they entrust their custody; (3) by
declaring that the appellant Rosario Cosme de Mendoza, being a co-owner and
fiduciary of said jewels, cannot be deprived of her administration and custody,
except for reasons that incapacitate her to do so, which are to execute acts
contrary to the willingness of its primitive owners, and to dispose of the
aforementioned jewelry at will; (4) by declaring that Pia Lavadia and his
descendants, until arriving at Rosario Cosme de Mendoza, who had had
custody and possession of the aforementioned jewels, have faithfully
performed their duties; and finally (5) by denying your request for a new
hearing.   
chanroblesvirtualawlibrary chanrobles virtual law library

To have a thorough idea of the facts, let us explain them below, following the
story that the Court makes of them in their decision appealed, since neither
the appellants nor the appeals discuss them:

The object of the cause are the jewels of the image of the Virgin of Our Lady
of Guadalupe, in the municipality of Pagsanjan, Laguna, and consist of a gold
crown embedded with diamonds and diamonds, a diamonds and diamonds
choker, a belt also embedded with diamonds and diamonds, a gold necklace
also completely encrusted with diamonds, a gold bracelet embedded with
diamonds and diamonds, a golden silver plate where the above-mentioned
jewels are placed, and other various pieces of gold or of golden silver for the
decoration of the clothing of this image of Our Lady of Guadalupe. All of these
jewels are currently locked up at the Bank of the Philippine Islands because
the defendant Rosario Cosme de Mendoza had deposited them there.    chanroblesvirtualawlibrary chanrobles virtual law library

The crown and the jewels described above were made around 1880 at the
expense of six ladies residents of the municipality of Pagsanjan, Laguna. They
were the sisters Paula Lavadia and Pia Lavadia, the sisters Martina Lavadia and
Matea Lavadia, and the sisters Isabel Lavadia and Engracia Lavadia. These
ladies contributed jewelry that they had for the preparation of the crown and
with them the jewels described above were made, also contributing the money
with which they were made. All these ladies and they have passed away, with
the exception of the plaintiff Mrs. Engracia Lavadia Vda. Fernandez's The other
plaintiffs are the legal heirs of Isabel Lavadia, Matea Lavadia and Martina
Lavadia, while the defendant Rosario Cosme de Mendoza and her co-
defendants are legitimate heirs and descendants of Paula Lavadia.    chanroblesvirtualawlibrary chanrobles virtual law library

The crown and jewels were ordered to be made for the use of the owner of the
municipality of Pagasanjan, Ntra.Sra. from Guadalupe. When they had finished
making, their owners agreed that these jewels would stay with the taxpayer
Pia Lavadia. She had these jewels in her custody until her death in 1882, when
her sister Paula Lavadia succeeded her in their custody. On the death of Paula
Lavadia, of the care, preservation and custody of said jewels, Pedro Rosales,
and his son, Paz Rosales, died, in turn he succeeded in said custody,
conservation and care. Upon the death of Paz Rosales, the crown and jewels
were taken to the custody of her husband Baldomero Cosme. After Baldomero
Cosme, these jewels passed to Manuel Soriano who, in turn, was succeeded in
custody, conservation and administration by the defendant Rosario Cosme de
Mendoza. Every year from 1880 to date, the jewels in question were used to
decorate the image of Our Lady of Guadalupe in Pagsanjan, and none of those
who have been keeping or guarding these jewels had intended to possess
them as an exclusive owner. The defendant Rosario Cosme de Mendoza and
her co-defendants do not claim to own the aforementioned jewelry. Indeed, in
the intestate of the late Baldomero Cosme, special action No. 5494 of this
Court of First Instance, said defendant and his co-defendants have told the
Court that they have never had claims to claim the domain of said jewels or
any part of the same. ( See Exhibits B-2 by B-3.) Chanrobles virtual law library

On February 9, 1938, the defendant Rosario Cosme de Mendoza, in her

capacity as administrator of the intestate of the late Baldomero Cosme,
notified all persons interested in said jewels that she wanted to formally
deliver said jewels to Mr. Bishop of Lina on Next Saturday, that is, on February
12, 1938, informing them to witness the act of delivery ( See Exhibit
4). Indeed, on February 12, 1938, the defendant and her husband made
formal delivery of the jewels, granting the corresponding document for that
purpose, a document that was presented as Exhibit E of the plaintiffs and 2 of
the defendants. Not being the plaintiffs satisfied with this delivery, about six
people and the plaintiffs in this case granted a document, designating the
plaintiff Engracia Lavadia as a collector, who would take care of the crown and
the jewelry in question ( See Exhibit 3). Having raised the question of who
should have the crown and jewels in question in their custody, and having
come to the knowledge of the Bishop of Lipa, this, in turn, on June 21, 1938,
granted a deed waiving custody and administration of said crown and jewelry
( See Exhibit D of the plaintiffs and 1 of the defendants).
Based on the facts reported, the Court declared that the contract between the
primitive owners of the jewels in dispute and the first of them that had
custody of them, was the deposit, as this contract is finalized in articles 1758
and following of the Civil Code. Pia Lavadia first, and then Paula Lavadia and
the descendants of the latter being one of them the appellant Rosario Cosme
Mendoza, received and possessed, one after the other, those referred, only for
custody purposes; Well, as the Court emphasizes in its decision, neither those
nor the latter used them for their own benefit. If it was by virtue of a deposit
agreement that the jewels were received, first by Pia and Paula, and then by
the descendants of the latter including the appellant Rosario Cosme de
Mendoza, it is clear that there is an obligation on the part of this to return
them to their owners as soon as they claim them. This is stated in article 1766
of the Civil Code that says:

The depositary is obliged to keep the thing and rescind it, when requested, to
the depositor, or to his or her causes, or to the person who had been
designated in the contract. Your responsibility regarding the guard and the
loss of the thing, will be governed by the provisions of the tit. I of this book.

The restitution must be made with all the fruits and accessions of the
deposited thing, if it has them, without being given to the depositary to retain
it, as Sanchez Roman comments, (IV Sanchez Roman, 885), even under the
pretext of obtaining compensation of other credits or to compensate for
expenses made for their conservation.   chanroblesvirtualawlibrary chanrobles virtual law library

The primitavas owners of the jewels in question, agreed to entrust the custody
of them to some of them, reserving themselves for their property. This goes to
show that the appellants' theory that the contract they had is not a deposit
because after all, as they say, the jewels cannot be considered as belonging to
others with respect to Rosario Cosme de Mendoza, because she descends of
one of its first owners, it has no strength, because even among commoners of
one thing, one of them can be a depositary, and when it is, it is subject to the
same obligations imposed by the law on any depositary, with respect to the
conservation of the thing with the care, diligence and interest of a good
parent.

Joint owner The fact that the depositary is a joint owner of the res does not
alter the degree of diligence required of him. (18 CJ, 570).

The appeals are descendants and legal heirs of Isabel Lavadia, Matea Lavadia
and Martina Lavadia; and Engracia Lavadia, whom they appointed to take over
the custody of the jewels subject to question, is one of the primitive owners of
them; and the appellants are in turn the descendants and heirs of Pia Lavadia
and PaulaLavadia. Not showing anywhere due to the six primitive owners did
not contribute to the making or acquisition of the jewelry so many times
mentioned, in the same proportion, the most reasonable conclusion is - and
this is sustained by a presumption of law, (Art, 393, Civil Code ) -, that all of
them apportioned the coast of the same paying each one, an equal fee. If this
is true, then we must accept the Court's conclusion that the appellants own
four-sixths of said jewels, and that the appellants are not only the two-sixths
remaining. Therefore, having decided most of the appeals, entrust the custody
and administration of these jewels to be able to faithfully comply with the will
of their primitive owners, the appealed Engracia Lavadia, the only survivor of
them, their decision must be respected, because for the administration and
better enjoyment of the common thing, according to article 398 of the Civil
Code, the agreements of the majority of the participants are mandatory.    chanroblesvirtualawlibrary chanrobles virtual law library

The argument that Rosario Cosme de Mendoza and his predecessors have
been faithfully performing their duties as depositaries, does not argue in favor
of the proposition that the deposit should not be withdrawn, because the
deposit contract is such that it allows the depositor to withdraw from the
depositary the thing deposited, at any time you would like, especially when the
last one, as in the case of Rosario Cosme de Mendoza, has executed an act
contrary to the order received, entrusting or trying to entrust another, the
custody and administration of the deposited thing, on its own account and
without the consent of the depositors or their heirs.    chanroblesvirtualawlibrary chanrobles virtual law library

Having not found any error in the decision appealed by the Court, we hereby
confirm it, condemning the appellants to pay the costs. That's how it is
ordered.   
chanroblesvirtualawlibrary chanrobles virtual law library

Imperial, Laurel, Moran and Horrilleno, MM., Are satisfied.

 MANUEL MELENCIO, MARIANO MELENCIO, PURA MELENCIO, and CARIDAD MELENCIO, Plaintiffs-Appellants, v.
DY TIAO LAY, Defendant-Appellee.

Jose V. Valladolid, Jose P. Melencio and Camus & Delgado for Appellants.

Araneta & Zaragoza for Appellee.

SYLLABUS

1. CIVIL CODE; COMMUNITY OF PROPERTY; ALTERNATIONS. — Article 397 of the Civil Code provides: "None of the owners
shall, without the consent of the others, make any alternations in the common property even though such alterations might
be advantageous to all." While the property referred to in this case was leased, without the consent of all the coowners,
building thereon one house and three warehouse, it cannot be considered that the alterations are of sufficient importance to
nullify the lease, especially so since none of the coowners objected to such alterations until over twenty years after the
execution of the contract of lease.

2. ID.; ID.; CONTRACT OF LEASE; RESCISSION. — The provision in the contract that the lessee, at any time before he
erected any building on the land, might rescind the lease, can hardly be regarded as a violation of article 1256 of the Civil
Code.

3. ID.; ID.; ID.; ANNULMENT. — In this case only a small majority of the coowners executed the lease here in question, and
according to the terms of the contract the lease might be given a duration of sixty years. This is an open violation of article
1548 of the Civil Code and the contract of the lease herein in question should therefore be declared null and void.

DECISION

OSTRAND, J.:

On August 1, 1927, the plaintiffs, Manuel, Mariano, Pura and Caridad Melencio, brought the present action against the
defendant-appellee, Dy Tiao Lay, for the recovery of the possession of a parcel of land situated in the town of Cabanatuan,
Nueva Ecija, and containing an area of 4,628.25 square meters. The plaintiffs further demand a monthly rental of P300 for
the use and occupation of the parcel from May, 1926, until the date of the surrender to them of the possession thereof; and
that if it is found that the said appellee was occupying the said parcel of land by virtue of a contract of lease, such contract
should be declared null and void for lack of consent, concurrence, and ratification by the owners thereof.

In his answer, the defendant pleaded the general issue, and as special defenses, he alleged in substance that he was
occupying the said tract of land by virtue of a contract of lease executed on July 24, 1905, in favor of his predecessor in
interest, by Ruperta Garcia, Pedro Melencio, Juliana Melencio, and Ruperto Melencio under the terms specified therein, and
which contract is still in force; that Liberata Macapagal, the mother of the plaintiffs, in her capacity as judicial administratrix
of the estate of Ramon Melencio, one of the original coowners of the parcel of land in question, actually recognized and
ratified the existence and validity of the contract aforesaid by virtue of the execution of a public document by her on or about
November 27, 1920, and by collecting from the assignees of the original lessee the monthly rent for the premises until April
30, 1926; and that said defendant deposits with the clerk of court the sum of P20.20 every month as rent thereof and that
as a counterclaim, he seeks the recovery of P272 for goods and money delivered by him to the plaintiffs.

The plaintiffs filed a reply to the answer alleging, among other things, that Ruperta Garcia was not one of the coowners of
the land in question; that the persons who signed the alleged contract of lease never represented themselves as being the
sole and exclusive owners of the land subject to the lease as alleged by the defendant in his answer; that the said contract of
lease of July 24, 1905, is null and void for being executed without the intervention and consent of two coowners, Ramon
Melencio and Jose P. Melencio, and without the marital consent of the husbands of Juliana and Ruperta Melencio; that the
lessee has repeatedly violated the terms and conditions of the said contract; and that Liberata Macapagal, in her capacity as
administratrix of the property of her deceased husband, could not lawfully and legally execute a contract of lease with the
conditions and terms similar to that of the one under consideration, and that from this it follows that she could not ratify the
said lease as claimed by the defendant.

On January 21, 1928, Liberta Macapagal Viuda de Melencio, duly appointed and qualified as administratrix of the estate of
her deceased husbands, Ramon Melencio, filed a petition praying to be allowed to join the plaintiffs as party to the present
case, which petition was granted in open court on January 31, 1928. Her amended complaint of intervention of February 14,
1928, contains allegations similar to those alleged in the complaint of the original plaintiffs, and she further alleges that the
defendant-appellee has occupied the land in question ever since November, 1920, under and by virtue of a verbal contract of
lease for a term from month to month. To this complaint of intervention, the defendant-appellee filed an answer reproducing
the allegations contained in his answer to the complaint of the original plaintiffs and setting up prescription as a further
special defense.

It appears from the evidence that the land in question was originally owned by one Julian Melencio. He died prior to the year
1905 leaving his widow, Ruperta Garcia, and his five children, Juliana, Ramon, Ruperta, Pedro R., and Emilio Melencio. Emilio
Melencio also died before ’905, his son Jose P. Melencio, then a minor, succeeding to his interest in the said parcel of land by
representation. A question has been raised as to whether the land was community property of the marriage of Julian
Melencio and Ruperta Garcia, but the evidence is practically undisputed that Ruperta Garcia in reality held nothing but a
widow’s usufruct in the land.

On July 24, 1905, Ruperta Garcia, Pedro R. Melencio, Juliana Melencio, and Ruperta Melencio executed a contract of lease of
the land in favor of one Yap Kui Chin, but neither Jose P. Melencio nor Ramon Melencio were mentioned in the lease. The
term of the lease was for twenty years, extendible for a like period at the option of the lessee. The purpose of the lessee was
to establish a rice mill on the land, with the necessary buildings for warehouses and for quarters for the employees, and it
was further stipulated that at the termination of the original period of the lease, or the extension thereof, the lessors might
purchase all the buildings and improvements on the land at a price to be fixed by experts appointed by the parties, but that
if the lessors should fail to take advantage of that privilege, the lease would continue for another and further period of
twenty years. The document was duly acknowledged but was never recorded with the register of deeds. The original rent
agreed upon was P25 per month, but by reason of the construction of a street through the land, the monthly rent was
reduced to P20.20.

Shortly after the execution of the lease, the lessee took possession of the parcel in question and erected the mill as well as
the necessary buildings, and it appears that in matters pertaining to the lease, he dealt with Pedro R. Melencio, who from
1905 until his death in 1920, acted as manager of the property held in common by the heirs of Julian Melencio and Ruperta
Garcia. The original lessee, Yap Kui Chin, died in 1912, and the lease, as well as the other property, was transferred to Uy
Eng Jui who again transferred it to Uy Eng Jui & Co., an unregistered partnership. Finally the lease came into the hands of Dy
Tiao Lay, the herein Defendant-Appellee.

Ramon Melencio died in 1914, and his widow, Liberata Macapagal, was appointed administratrix of his estate. In 1913 the
land which includes the parcel in question was registered under the Torrens system. The lease was not mentioned in the
certificate of title, but it was stated that one house and three warehouses on the land were the property of Yap Kui Chin.

In 1920 the heirs of Julian Melencio made an extrajudicial partition of parts of the inheritance, and among other things, the
land here in question fell to the share of the children of Ramon Melencio, who are the original plaintiffs in the present case.
Their mother, Liberta Macapagal, as administratrix of the estate of her deceased husband, Ramon, collected the rent for the
lease at the rate of P20.20 per month until the month of May, 1926, when she demanded of the lessee that the rent should
be increased to P300 per month, and she was then informed by the defendant that a written lease existed and that according
to the terms thereof, the defendant was entitled to an extension of the lease at the original rental. The plaintiffs insisted that
they never had any knowledge of the existence of such a contract of lease and maintained that in such case the lease was
executed without their consent and was void. It may be noted that upon careful search, a copy of the contract of lease was
found among the papers of the deceased Pedro R. Melencio. Thereafter the present action was brought to set aside the lease
and to recover possession of the land. Upon trial, the court below rendered judgment in favor of the defendant declaring the
lease valid and ordering the plaintiffs to pay the P272 demanded by the defendant in his counterclaim. From this judgment
the plaintiffs appealed.

The contention of the appellants is that the aforesaid contract of lease (Exhibit C) is null and void for the following
reasons: jgc:chanrobles.com.ph

"1. That Exhibit C calls for an alteration of the property in question and therefore ought to have been signed by all the
coowners as by law required in the premises.

"2. That the validity and fulfillment of the said agreement of lease were made to depend upon the will of the lessee
exclusively.

"3. That the said contract of lease being for a term of over six years, the same is null and void pursuant to the provision of
article 1548 of the Civil Code.

"4. That the duration of the same is unreasonably long, thus being against public policy.

"5. That the defendant-appellee and his predecessors in interest repeatedly violated the provisions of the agreements." cralaw virtua1aw library

The first proposition is based on article 397 of the Civil Code which provides that "none of the owners shall, without the
consent of the others, make any alterations in the common property even though such alterations might be advantageous to
all." We do not think that the alterations are of sufficient importance to nullify the lease, especially so since none of the
coowners objected to such alterations until over twenty years after the execution of the contract of lease. The decision of this
court in the case of Enriquez v. A. S. Watson & Co. (22 Phil., 623), contains a full discussion of the effect of alterations of
lease community property, and no further discussion upon that point need here be considered.

The second proposition is likewise of little merit. Under the circumstances, the provision in the contract that the lessee, at
any time before he erected any building on the land, might rescind the lease, can hardly be regarded as a violation of article
1256 of the Civil Code.

The third and fourth propositions are, in our opinion, determinative of the controversy. The court below based its decision
principally on the case of Enriquez v. A. S. Watson & Co. (22 Phil., 623), and on the resolution of the Direccion General de los
Registros dated April 26, 1907. (Jurisprudecia Civil, vol. 107, p. 222.) An examination of the Enriquez case will show that it
differs materially from the present. In that case all of the coowners of a lot and building executed a contract of lease of the
property for the term of eighteen years in favor of A. S. Watson & Co.; one of the owners was a minor, but he was
represented by his legally appointed guardian, and the action of the latter in signing the lease on behalf of the minor was
formally approved by the Court of First Instance. In the present case only a small majority of the coowners executed the
lease here in question, and according to the terms of the contract the lease might be given a duration of sixty years; that is
widely different from a lease granted by all of the coowners for a term of only eighteen years.

The resolution of April 26, 1907, is more in point. It relates to the inscription or registration of a contract of lease of some
pasture grounds. The majority of the coowners of the property executed the lease for the term of twelve years, but when the
lessees presented the lease for inscription in the registry of property, the registrar denied the inscription on the ground that
the term of the lease exceeded six years and that therefore the majority of the coowners lacked authority to grant the lease.
The Direccion General de los Registros held that the contract of lease for a period exceeding six years, constitutes a real right
subject to registry and that the lease in question was valid.

The conclusions reached by the Direccion General led to considerable criticism and have been overruled by a decision of the
Supreme Court of Spain dated June 1, 1909. In that decision the court made the following statement of the case
(translation): jgc:chanrobles.com.ph

"The joint owners of 511 out of 1,000 parts of the realty denominated El Mortero, leased out the whole property for twelve
years to Doña Josefa de la Rosa; whereupon the Count and Countess Trespalacios together with other coowners brought this
suit to annul the lease and, in view of the fact that the land was indivisible, prayed for its sale by public auction and the
distribution of the price so obtained; they alleged that they neither took part nor consented to the lease; that the decision of
the majority of part owners referred to in article 398 of the Code, implies a common deliberation on the step to be taken, for
to do without it, would, even more than to do without the minority, be nothing less than plunder; and that, even if this
deliberation were not absolutely necessary, the power of the majority would still be confined to decisions touching the
management and enjoyment of the common property, and would not include acts of ownership, such as a lease for twelve
years, which according to the Mortgage Law gives rise to a real right, which must be recorded, and which can be performed
only by the owners of the property leased.

"The part owners who had executed the contract prayed in reconvention that it be held valid for all the owners in common,
and if this could not be, then for all those who had signed it, and for the rest, for the period of six years; and the Audiencia
of Caceres having rendered judgment holding the contract null and void, and ordering the sale of the realty and the
distribution of the price, the defendants appealed alleging under the third and fourth assignments of error, that the judgment
was a violation of article 398 of the Civil Code, which is absolute and sets no limit of time for the efficacy of the decisions
arrived at by the majority of the part owners for the enjoyment of the common property, citing the decisions of June 30th,
1897, of July 8th, 1902, and of October 30th, 1907; under the fifth assignment of error the appellants contended that in
including joint owners among those referred to in said article, which sets certain limits to the power of leasing, in the course
of the management of another’s property, the court applied article 1548 unduly; and by the seventh assignment of error,
they maintained the judgment appealed from also violated article 1727, providing that the principal is not bound where his
agent has acted beyond his authority; whence it may be inferred, that if in order to hold the contract null and void, the
majority of the part owners are looked upon as managers or agents exercising limited powers, it must at least be conceded
that in so far as the act in question lies within the scope of their powers, it is valid; the contract cannot be annulled in toto."
virtua1aw library
cralaw

The Supreme Court held that the appeal from the decision of the Audiencia of Caceres was not well taken and expressed the
following consideranda: jgc:chanrobles.com.ph

"Considering that, although as a rule the contract of lease constitutes an act of management, as this court has several times
held, cases may yet arise, either owing to the nature of the subject matter, or to the period of duration, which may render it
imperative to record the contract in the registry of property, in pursuance of the Mortgage Law, where the contract of lease
may give rise to a real right in favor of the lessee, and it would then constitute such a sundering of the ownership as
transcends mere management; in such cases it must of necessity be recognized that the part owners representing the
greater portion of the property held in common have no power to lease said property for a longer period than six years
without the consent of all the coowners, whose proprietary rights, expressly recognized by the law, would by contracts of
long duration be restricted or annulled; and as under article 1548 of the Civil Code such contracts cannot be entered into by
the husband with respect to his wife’s property, by the parent or guardian with respect to that of the child or ward, and by
the manager in default of special power, since the contract of lease only produces personal obligations, and cannot without
the consent of all persons interested or express authority from the owner, be extended to include stipulations which may
alter its character, changing it into a contract of partial alienation of the property leased;

"Considering that, applying this doctrine to the case before us, one of the grounds upon which the judgment appealed from,
denying the validity of the lease made by the majority of the part owners of the pasture land El Mortero is based, must be
upheld; to wit, that the period of duration is twelve years and the consent of all the coowners has not been obtained; hence,
the third, fourth, and fifth assignments of error are without merit; firstly, because article 398 of the Civil Code, alleged to
have been violated, refers to acts decided upon by the majority of the part owners, touching the management and
enjoyment of the common property, and does not contradict what we have stated in the foregoing paragraph; secondly,
because although the cases cited were such as arose upon leases for more than sixty years, yet this point was not raised on
appeal, and could not therefore be passed upon; and thirdly, because it cannot be denied that there is an analogy between a
manager without special authority, who is forbidden by article 1548 of the Code to give a lease for a period of over six years,
and the joint owners constituting a legal majority, who may decide to lease out the indivisible property, with respect to the
shares of the other coowners; and having come to the conclusion that the contract is null and void, there is no need to
discuss the first two assignments of error which refer to another of the bases adopted, however erroneously, by the trial
court;

"Considering that the sixth assignment of error is without merit, inasmuch as the joint ownership of property is not a sort of
agency and cannot be governed by the provisions relating to the latter contract; whence, article 1727 of the Code alleged to
have been violated, can no more be applied, than, the question of the validity or nullity of the lease being raised, upon the
contract as celebrated, it would be allowable to modify a posteriori some one or other of the main conditions stipulated, like
that regarding the duration of the lease, for this would amount to a novation; still less allowable would it be to authorize
diverse periods for the different persons unequally interested in the fulfillment." cralaw virtua1aw library

Taking into consideration articles 398, 1548, and 1713 of the Civil Code and following the aforesaid decision of June 1,1909,
we hold that the contract of lease here in question is null and void.

It has been suggested that by reason of prescription and by acceptance of benefits under the lease, the plaintiffs are
estopped to question the authority for making the lease. To this we may answer that the burden of proof of prescription
devolved upon the defendant and that as far as we can find, there is no proof that Ramon Melencio and his successor over
had knowledge of the existence of the lease in question prior to 1926. We cannot by mere suspicion conclude that they were
informed of the existence of the document and its terms; it must be remembered that under a strict interpretation of the
terms of the lease, the lessees could remain indefinitely in their tenancy unless the lessors could purchase the mill and the
buildings on the land. In such circumstances, better evidence than that presented by the defendant in regard to the plaintiffs’
knowledge of the lease must be required.

The fact that Ramon during his lifetime received his share of the products of land owned in common with his coheirs is not
sufficient proof of knowledge of the existence of the contract of lease when it is considered that the land in question was only
a small portion of a large tract which Pedro R. Melencio was administering in connection with other community property.

The appealed judgment as to the validity of the lease is therefore reversed, and it is ordered that the possession of the land
in controversy be delivered to the intervenor Liberata Macapagal in her capacity as administratrix of the estate of the
deceased Ramon Melencio. It is further ordered that the defendant pay to said administratrix a monthly rent of P50 for the
occupation of the land from May 1st, 1926, until the land is delivered to the administratrix. The sum of P272 demanded by
the defendant in his counterclaim may be deducted from the total amount of the rent due and unpaid. The buildings erected
on the land by the defendant and his predecessors in interest may be removed by him, or otherwise disposed of, within six
months from the promulgation of this decision. Without costs. So ordered.

Avanceña, C.J., Malcolm, Johns, Romualdez and Villa-Real, JJ., concur.

Separate Opinions

JOHNSON, J.:

I reserve my vote.

STREET and VILLAMOR, JJ., dissenting: chanrob1es virtual 1aw library

Although the name of Ramon Melencio, father of the plaintiffs in this action, was not in fact signed to the lease in question,
and the lease did not even so much as mention him as one of the coowners, the undersigned are nevertheless of the opinion
that Ramon Melencio, and his children after him, are estopped from questioning said lease, for the reason that, from 1905 to
the time of his death in 1914, Ramon Melencio enjoyed the benefits of the lease, as did his widow and children after him,
until May, 1926, when the widow repudiated the lease, as a preliminary to the bringing of this action by the plaintiffs. By
their acceptance of the benefits of the lease over so long a period, the persons now questioning the lease and their father,
their predecessor in interest, are estopped to question the authority for making the lease. This estoppel cures the want of the
special power contemplated in article 1548 of the Civil Code.

In addition to the estoppel arising from the acceptance of benefits under the lease, an estoppel further arises from the fact
that Ramon Melencio, during the years following the execution of the lease, stood and saw the lessees place upon the
property improvements of a value of more than P100,000, for which reason, also equity will not permit the lease to be
disturbed to the prejustice of the lessee.

To exhibit the foregoing proposition fully, it is necessary to understand the facts relative to the controversy. These are
substantially as follows:
chanrob1es virtual 1aw library

The land covered by the original ease, having an area of some 6,000 square meters, is located in the town of Cabanatuan
and was formerly the property of one Julian Melencio, married to Ruperta Garcia. After the death of Julian Melencio, his
widow, Ruperta Garcia, united, in 1905, with three of their children, namely, Pedro R., Juliana, and Ruperta, in executing, in
favor of Yap Kui Chin, as lessee, the lease which is the subject of this controversy. The consideration mentioned in the lease
was the sum of P25 per month. On August 2, 1907, at the request of Pedro R. Melencio, another document was drawn
changing the superficial configuration of the leased land but preserving its original extension of 6,000 square meters. This
change was made for the purpose of giving Pedro R. Melencio space upon which to construct a house on the part segregated
from the original mass. In 1915 a new street, passing through the leased property, was opened in Cabanatuan; and Pedro R.
Melencio, acting for the lessors, reduced the monthly rent from P25 to P20, to correspond with the reduction in the area of
the leased land resulting from the occupation of part of it by the street.

At the time the lease was made there was living one Ramon Melencio, son of Julian Melencio and Ruperta Garcia and brother
of the heirs who signed the lease. Also before this time there had been another brother named Emilio Melencio. But Emilio
was lead and his only surviving son, Jose P. Melencio, was a mall boy then under the tutelage of his uncle Pedro R. Melencio.
The lease referred to is not and never has been questioned by any of the persons, or descendants of the persons, who signed
the instrument. Neither has it been questioned by Jose P. Melencio, son of Emilio. Nor was the lease questioned in life by
Ramon Melencio, who died in 1914; and the only persons raising a question as to its validity are four of the five children of
Ramon, the same being the plaintiffs in this case.

By a series of changes not necessary to be here recounted, the rights of the original lessee became vested in the defendant,
Dy Tiao Lay. At the time of the institution of the present action the defendant, Dy Tiao Lay, had a rice mill, consisting of
valuable buildings and improvements, constructed on the land, and valued, it is alleged, at P160,000; but during the time of
the pendency of this action a fire occurred which seems to have destroyed the mill and improvements with the exception of a
camarin valued at some P15,000.

In November, 1920, the children of Julian Melencio and Ruperta Garcia executed a partial extra-judicial partition of the
properties belonging to their father’s estate; and the land covered by this lease was assigned to Liberata Macapagal, widow
of Ramon Melencio, in right of her deceased husband Ramon and as representative of the children. It will be noted that the
land encumbered by the lease was thus assigned precisely to the family of the deceased brother, Ramon Melencio, who at
the same time was the sole living brother whose name was not signed to the lease.

At the time the lease was executed, Pedro R. Melencio was in fact the manager of the common ancestral estate belonging to
himself and his brothers and sisters; and he continued as such until 1920. After the partition, or partial partition, of the
fraternal estate in 1920, Liberata Macapagal Viuda de Ramon Melencio succeeded to the office of manager, or guardian, of
the estate of her children, at least with respect to the parcel now in question.

It will be noted as an important fact that every dollar due as rent from the leased land was paid by the lessee, from the time
when rent first became due, and these payments were made first to Pedro R. Melencio as manager of the common estate
pertaining to himself and his brothers and sisters, until 1920, when the rents began to be paid to Liberata Macapagal in the
right of herself and children. In April, 1926, Liberta ceased to collect the rent, and in May, thereafter, she refused to accept
payment of the monthly installment of rent then due. For this reason the defendant has been making a consignation of the
corresponding rent for the benefit of the lessors in the office of the provincial treasurer. No question is made that during the
life of Ramon Melencio he received his share of the monthly rental from the property in question; nor is there any question
that thereafter his widow and children received their share of the same until the property was assigned in partition to
Liberata Macapagal and her children, after which they received all of the rent, until Liberata refused longer to accept it.

The undersigned concur in the proposition that the lease signed in 1905 was not per se binding on Ramon Melencio, first,
because he was not a party to that lease; and, secondly, because the making of a lease for twenty years, extendible under
certain circumstances for a second and third period of equal duration, was an act of rigorous alienation and not a mere act of
management and enjoyment such as is contemplated in article 398 of the Civil Code. (Sentencia, June 1, 1909; Ruiz, Cod.
Civ., vol. 4, p. 502.) Neither do we pause to argue that the contract might have been considered valid under the doctrine of
this court stated in Eleizequi v. Manila Lawn Tennis Club (2 Phil., 309). At any rate the lease did not purport to bind Ramon,
and he was not even mentioned therein as one of the coowners.

But it is to be noted that none of the parties signatory to the lease have at any time sought to abrogate the contract; and
some of the children of Ramon Melencio only are before the court as actors in this case seeking to set the contract aside.
Under these circumstances the undersigned are of the opinion that Ramon Melencio was at the time of his death bound by
the lease, from his having participated for years in the benefits derived from the contract, and that his children, who derive
their rights from him, are likewise bound.

It is well established that an estate in land may be virtually transferred from one man to another without a writing, by the
failure of the owner to give notice of his title to the purchaser under circumstances where the omission to do so would
operate as a fraud (Kirk v. Hamilton, 102 U. S., 68, 77; 26 Law. ed., 79). This doctrine is so universally accepted that a bare
reference to general treatises on the subject of estoppel is necessary (10 R. C. L., p. 694; 21 C. J., pp. 1154, 1160, 1206,
1207, 1209); and the estoppel is as effective with respect to a lease as it is with respect to a deed of absolute conveyance
(21 C. J., 1213).

In the case before us Ramon Melencio lived in the town where the land covered by this lease was located, and every time he
went abroad he must have seen the valuable improvements which the original lessee, or his successors in interest, were
erecting and had erected upon part of the common ancestral estate. But from the date the lease was executed until his death
Ramon Melencio did nothing except to receive such portion of the rent as pertained to him Under these circumstances, even
if his brother Pedro R. Melencio had conveyed the property away by deed of absolute alienation, Ramon would have been
legally bound. It is but natural that so long as he lived after the lease was made, no complaint was ever registered by him
against its validity.

And if Ramon Melencio was estopped, of course his children are estopped, for their rights are of a purely derivative
character. In the case before us a period of more than twenty-one years elapsed between the time of lease was made and
the date when it was first called in question by the widow.

But Manuel Melencio, the oldest of the heirs who are suing in this case, says that he did not know the terms of the lease until
a short while before this action was instituted, when he called upon the widow of his uncle Pedro and found a copy of the
lease after searching among his uncle’s papers. It is not surprising that this plaintiff, who was hardly more than a baby when
the lease was made, should not have known about the terms of the contract. But it was all the time safely kept among the
papers of his uncle Pedro, who, as already stated, was manager of the common estate of the brothers and sisters. Ramon
Melencio is now dead and of course cannot speak as to whether he knew the terms of the agreement. But he should be
presumed to have known its terms, because he was enjoying benefits from month to month under it, and he had the means
of knowledge immediately at hand, namely be recourse to a trusted brother in whose custody the contract was preserved. In
addition to this, we note that when property was assigned to Liberta Macapagal and her children. The suggestion that the
terms of the lease were unknown to the plaintiffs is of little weight and of no legal merit. We note that the lease was never
registered, but this fact makes no difference in a lawsuit between the parties to the lease, or their successors in interest.

We are of the opinion that the judgment should be affirmed.

G.R. No. L-3404             April 2, 1951

ANGELA I. TUASON, plaintiff-appellant,
vs.
ANTONIO TUASON, JR., and GREGORIO ARANETA, INC., defendants-appellees.

Alcuaz & Eiguren for appellant.

Araneta & Araneta for appellees.

MONTEMAYOR, J.:

In 1941 the sisters Angela I. Tuason and Nieves Tuason de Barreto and their brother Antonio Tuason Jr., held a
parcel of land with an area of 64,928.6 sq. m. covered by Certificate of Title No. 60911 in Sampaloc, Manila, in
common, each owning an undivided 1/3 portion. Nieves wanted and asked for a partition of the common property,
but failing in this, she offered to sell her 1/3 portion. The share of Nieves was offered for sale to her sister and her
brother but both declined to buy it. The offer was later made to their mother but the old lady also declined to buy,
saying that if the property later increased in value, she might be suspected of having taken advantage of her
daughter. Finally, the share of Nieves was sold to Gregorio Araneta Inc., a domestic corporation, and a new
Certificate of Title No. 61721 was issued in lieu of the old title No. 60911 covering the same property. The three co-
owners agreed to have the whole parcel subdivided into small lots and then sold, the proceeds of the sale to be later
divided among them. This agreement is embodied in a document (Exh. 6) entitled "Memorandum of Agreement"
consisting of ten pages, dated June 30, 1941.

Before, during and after the execution of this contract (Exh. 6), Atty. J. Antonio Araneta was acting as the attorney-
in-fact and lawyer of the two co-owners, Angela I. Tuason and her brother Antonio Tuason Jr. At the same time he
was a member of the Board of Director of the third co-owner, Araneta, Inc.

The pertinent terms of the contract (Exh. 6) may be briefly stated as follows: The three co-owners agreed to improve
the property by filling it and constructing roads and curbs on the same and then subdivide it into small lots for sale.
Araneta Inc. was to finance the whole development and subdivision; it was prepare a schedule of prices and
conditions of sale, subject to the subject to the approval of the two other co-owners; it was invested with authority to
sell the lots into which the property was to be subdivided, and execute the corresponding contracts and deeds of
sale; it was also to pay the real estate taxes due on the property or of any portion thereof that remained unsold, the
expenses of surveying, improvements, etc., all advertising expenses, salaries of personnel, commissions, office and
legal expenses, including expenses in instituting all actions to eject all tenants or occupants on the property; and it
undertook the duty to furnish each of the two co-owners, Angela and Antonio Tuason, copies of the subdivision
plans and the monthly sales and rents and collections made thereon. In return for all this undertaking and obligation
assumed by Araneta Inc., particularly the financial burden, it was to receive 50 per cent of the gross selling price of
the lots, and any rents that may be collected from the property, while in the process of sale, the remaining 50 per
cent to be divided in equal portions among the three co-owners so that each will receive 16.33 per cent of the gross
receipts.

Because of the importance of paragraphs 9, 11 and 15 of the contract (Exh. 6), for purposes of reference we are
reproducing them below:

(9) This contract shall remain in full force and effect during all the time that it may be necessary for the
PARTY OF THE SECOND PART to fully sell the said property in small and subdivided lots and to fully
collect the purchase prices due thereon; it being understood and agreed that said lots may be rented while
there are no purchasers thereof;

(11) The PARTY OF THE SECOND PART (meaning Araneta Inc.) is hereby given full power and authority
to sign for and in behalf of all the said co-owners of said property all contracts of sale and deeds of sale of
the lots into which this property might be subdivided; the powers herein vested to the PARTY OF THE
SECOND PART may, under its own responsibility and risk, delegate any of its powers under this contract to
any of its officers, employees or to third persons;

(15) No co-owner of the property subject-matter of this contract shall sell, alienate or dispose of his
ownership, interest or participation therein without first giving preference to the other co-owners to purchase
and acquire the same under the same terms and conditions as those offered by any other prospective
purchaser. Should none of the co-owners of the property subject-matter of this contract exercise the said
preference to acquire or purchase the same, then such sale to a third party shall be made subject to all the
conditions, terms, and dispositions of this contract; provided, the PARTIES OF THE FIRST PART (meaning
Angela and Antonio) shall be bound by this contract as long as the PARTY OF THE SECOND PART,
namely, the GREGORIO ARANETA, INC. is controlled by the members of the Araneta family, who are
stockholders of the said corporation at the time of the signing of this contract and/or their lawful heirs;

On September 16, 1944, Angela I. Tuason revoked the powers conferred on her attorney-in-fact and lawyer, J.
Antonio Araneta. Then in a letter dated October 19, 1946, Angela notified Araneta, Inc. that because of alleged
breach of the terms of the "Memorandum of Agreement" (Exh. 6) and abuse of powers granted to it in the document,
she had decided to rescind said contract and she asked that the property held in common be partitioned. Later, on
November 20, 1946, Angela filed a complaint in the Court of First Instance of Manila asking the court to order the
partition of the property in question and that she be given 1/3 of the same including rents collected during the time
that the same including rents collected during the time that Araneta Inc., administered said property.

The suit was administered principally against Araneta, Inc. Plaintiff's brother, Antonio Tuason Jr., one of the co-
owners evidently did not agree to the suit and its purpose, for he evidently did not agree to the suit and its purpose,
for he joined Araneta, Inc. as a co-defendant. After hearing and after considering the extensive evidence introduce,
oral and documentary, the trial court presided over by Judge Emilio Peña in a long and considered decision
dismissed the complaint without pronouncement as to costs. The plaintiff appealed from that decision, and because
the property is valued at more than P50,000, the appeal came directly to this Court.

Some of the reasons advanced by appellant to have the memorandum contract (Exh. 6) declared null and void or
rescinded are that she had been tricked into signing it; that she was given to understand by Antonio Araneta acting
as her attorney-in-fact and legal adviser that said contract would be similar to another contract of subdivision of a
parcel into lots and the sale thereof entered into by Gregorio Araneta Inc., and the heirs of D. Tuason, Exhibit "L",
but it turned out that the two contracts widely differed from each other, the terms of contract Exh. "L" being relatively
much more favorable to the owners therein the less favorable to Araneta Inc.; that Atty. Antonio Araneta was more
or less disqualified to act as her legal adviser as he did because he was one of the officials of Araneta Inc., and
finally, that the defendant company has violated the terms of the contract (Exh. 6) by not previously showing her the
plans of the subdivision, the schedule of prices and conditions of the sale, in not introducing the necessary
improvements into the land and in not delivering to her her share of the proceeds of the rents and sales.
We have examined Exh. "L" and compared the same with the contract (Exh. 6) and we agree with the trial court that
in the main the terms of both contracts are similar and practically the same. Moreover, as correctly found by the trial
court, the copies of both contracts were shown to the plaintiff Angela and her husband, a broker, and both had every
opportunity to go over and compare them and decide on the advisability of or disadvantage in entering into the
contract (Exh. 6); that although Atty. Antonio Araneta was an official of the Araneta Inc.; being a member of the
Board of Directors of the Company at the time that Exhibit "6" was executed, he was not the party with which Angela
contracted, and that he committed no breach of trust. According to the evidence Araneta, the pertinent papers, and
sent to her checks covering her receive the same; and that as a matter of fact, at the time of the trial, Araneta Inc.,
had spent about P117,000 in improvement and had received as proceeds on the sale of the lots the respectable
sum of P1,265,538.48. We quote with approval that portion of the decision appealed from on these points:

The evidence in this case points to the fact that the actuations of J. Antonio Araneta in connection with the
execution of exhibit 6 by the parties, are above board. He committed nothing that is violative of the fiduciary
relationship existing between him and the plaintiff. The act of J. Antonio Araneta in giving the plaintiff a copy
of exhibit 6 before the same was executed, constitutes a full disclosure of the facts, for said copy contains all
that appears now in exhibit 6.

Plaintiff charges the defendant Gregorio Araneta, Inc. with infringing the terms of the contract in that the
defendant corporation has failed (1) to make the necessary improvements on the property as required by
paragraphs 1 and 3 of the contract; (2) to submit to the plaintiff from time to time schedule of prices and
conditions under which the subdivided lots are to be sold; and to furnish the plaintiff a copy of the
subdivision plans, a copy of the monthly gross collections from the sale of the property.

The Court finds from the evidence that he defendant Gregorio Araneta, Incorporated has substantially
complied with obligation imposed by the contract exhibit 6 in its paragraph 1, and that for improvements
alone, it has disbursed the amount of P117,167.09. It has likewise paid taxes, commissions and other
expenses incidental to its obligations as denied in the agreement.

With respect to the charged that Gregorio Araneta, Incorporated has failed to submit to plaintiff a copy of the
subdivision plains, list of prices and the conditions governing the sale of subdivided lots, and monthly
statement of collections form the sale of the lots, the Court is of the opinion that it has no basis. The
evidence shows that the defendant corporation submitted to the plaintiff periodically all the data relative to
prices and conditions of the sale of the subdivided lots, together with the amount corresponding to her. But
without any justifiable reason, she refused to accept them. With the indifferent attitude adopted by the
plaintiff, it was thought useless for Gregorio Araneta, Incorporated to continue sending her statement of
accounts, checks and other things. She had shown on various occasions that she did not want to have any
further dealings with the said corporation. So, if the defendant corporation proceeded with the sale of the
subdivided lots without the approval of the plaintiff, it was because it was under the correct impression that
under the contract exhibit 6 the decision of the majority co-owners is binding upon all the three.

The Court feels that recission of the contract exhibit 6 is not minor violations of the terms of the agreement,
the general rule is that "recission will not be permitted for a slight or casual breach of the contract, but only
for such breaches as are so substantial and fundamental as to defeat the object of the parties in making the
agreement" (Song Fo & Co. vs. Hawaiian-Philippine Co., 47 Phil. 821).

As regards improvements, the evidence shows that during the Japanese occupation from 1942 and up to 1946, the
Araneta Inc. although willing to fill the land, was unable to obtain the equipment and gasoline necessary for filling
the low places within the parcel. As to sales, the evidence shows that Araneta Inc. purposely stopped selling the lots
during the Japanese occupantion, knowing that the purchase price would be paid in Japanese military notes; and
Atty. Araneta claims that for this, plaintiff should be thankfull because otherwise she would have received these
notes as her share of the receipts, which currency later became valueles.

But the main contention of the appellant is that the contract (Exh. 6) should be declared null and void because its
terms, particularly paragraphs 9, 11 and 15 which we have reproduced, violate the provisions of Art. 400 of the Civil
Code, which for the purposes of reference we quote below:

ART. 400. No co-owner shall be obliged to remain a party to the community. Each may, at any time, demand
the partition of the thing held in common.
 Nevertheless, an agreement to keep the thing undivided for a specified length of time, not exceeding ten
years, shall be valid. This period may be a new agreement.

We agree with the trial court that the provisions of Art. 400 of the Civil Code are not applicable. The contract (Exh.,
6) far from violating the legal provision that forbids a co-owner being obliged to remain a party to the community,
precisely has for its purpose and object the dissolution of the co-ownership and of the community by selling the
parcel held in common and dividing the proceeds of the sale among the co-owners. The obligation imposed in the
contract to preserve the co-ownership until all the lots shall have been sold, is a mere incident to the main object of
dissolving the co-owners. By virtue of the document Exh. 6, the parties thereto practically and substantially entered
into a contract of partnership as the best and most expedient means of eventually dissolving the co-ownership, the
life of said partnership to end when the object of its creation shall have been attained.

This aspect of the contract is very similar to and was perhaps based on the other agreement or contract (Exh. "L")
referred to by appellant where the parties thereto in express terms entered into partnership, although this object is
not expressed in so many words in Exh. 6. We repeat that we see no violation of Art. 400 of the Civil Code in the
parties entering into the contract (Exh. 6) for the very reason that Art. 400 is not applicable.

Looking at the case from a practical standpoint as did the trial court, we find no valid ground for the partition insisted
upon the appellant. We find from the evidence as was done by the trial court that of the 64,928.6 sq. m. which is the
total area of the parcel held in common, only 1,600 sq. m. or 2.5 per cent of the entire area remained unsold at the
time of the trial in the year 1947, while the great bulk of 97.5 per cent had already been sold. As well observed by
the court below, the partnership is in the process of being dissolved and is about to be dissolved, and even
assuming that Art. 400 of the Civil Code were applicable, under which the parties by agreement may agree to keep
the thing undivided for a period not exceeding 10 years, there should be no fear that the remaining 1,600 sq. m.
could not be disposed of within the four years left of the ten-years period fixed by Art. 400.

We deem it unnecessary to discuss and pass upon the other points raised in the appeal and which counsel for
appellant has extensively and ably discussed, citing numerous authorities. As we have already said, we have
viewed the case from a practical standpoint, brushing aside technicalities and disregarding any minor violations of
the contract, and in deciding the case as we do, we are fully convinced that the trial court and this Tribunal are
carrying out in a practical and expeditious way the intentions and the agreement of the parties contained in the
contract (Exh. 6), namely, to dissolve the community and co-ownership, in a manner most profitable to the said
parties.

In view of the foregoing, the decision appealed from is hereby affirmed. There is no pronouncement as to costs.

So ordered.
G.R. No. 156536             October 31, 2006

JOSEPH CUA, petitioner,
vs.
GLORIA A. VARGAS, AURORA VARGAS, RAMON VARGAS, MARITES VARGAS, EDELINA VARGAS AND
GEMMA VARGAS, respondents.

DECISION

AZCUNA, J.:

This is a petition for review under Rule 45 of the Rules of Court seeking the reversal of the decision1 dated March
26, 2002, and the resolution2 dated December 17, 2002, of the Court of Appeals in CA-G.R. SP No. 59869 entitled
"Gloria A. Vargas, Aurora Vargas, Ramon Vargas, Marites Vargas, Edelina Vargas and Gemma Vargas v. Joseph
Cua."

The facts are as follows:

A parcel of residential land with an area of 99 square meters located in San Juan, Virac, Catanduanes was left
behind by the late Paulina Vargas. On February 4, 1994, a notarized Extra Judicial Settlement Among Heirs was
executed by and among Paulina Vargas' heirs, namely Ester Vargas, Visitacion Vargas, Juan Vargas, Zenaida V.
Matienzo, Rosario V. Forteza, Andres Vargas, Gloria Vargas, Antonina Vargas and Florentino Vargas, partitioning
and adjudicating unto themselves the lot in question, each one of them getting a share of 11 square meters.
Florentino, Andres, Antonina and Gloria, however, did not sign the document. Only Ester, Visitacion, Juan, Zenaida
and Rosario signed it. The Extra Judicial Settlement Among Heirs was published in the Catanduanes Tribune for
three consecutive weeks.3

On November 15, 1994, an Extra Judicial Settlement Among Heirs with Sale4 was again executed by and among the
same heirs over the same property and also with the same sharings. Once more, only Ester, Visitacion, Juan,
Zenaida and Rosario signed the document and their respective shares totaling 55 square meters were sold to
Joseph Cua, petitioner herein.

According to Gloria Vargas, the widow of Santiago Vargas and one of respondents herein, she came to know of the
Extra Judicial Settlement Among Heirs with Sale dated November 16, 1994 only when the original house built on the
lot was being demolished sometime in May 1995.5 She likewise claimed she was unaware that an earlier Extra
Judicial Settlement Among Heirs dated February 4, 1994 involving the same property had been published in the
Catanduanes Tribune.6

After knowing of the sale of the 55 square meters to petitioner, Gloria Vargas tried to redeem the property, with the
following letter7 sent to petitioner on her behalf:

29th June 1995

Mr. Joseph Cua

Capilihan, Virac, Catanduanes

Sir:
 This is in behalf of my client, Ms. Aurora Vargas,8 (c/o Atty. Prospero V. Tablizo) one of the lawful heirs of
the late Paulina Vargas, original owner of Lot No. 214 of Virac, Poblacion covered by ARP No. 031-0031 in
her name.

I understand that a document "Extra Judicial Settlement Among Heirs with Sale" was executed by some of
my client's co-heirs and alleged representatives of other co-heirs, by virtue of which document you acquired
by purchase from the signatories to the said document, five (5) shares with a total area of fifty-five square
meters of the above-described land.

This is to serve you notice that my client shall exercise her right of legal redemption of said five (5) shares as
well as other shares which you may likewise have acquired by purchase. And you are hereby given an
option to agree to legal redemption within a period of fifteen (15) days from your receipt hereof.

Should you fail to convey to me your agreement within said 15-day-period, proper legal action shall be taken
by my client to redeem said shares.

Thank you.

Very truly yours,

(Sgd.)
JUAN G. ATENCIA

When the offer to redeem was refused and after having failed to reach an amicable settlement at the barangay
level,9 Gloria Vargas filed a case for annulment of Extra Judicial Settlement and Legal Redemption of the lot with the
Municipal Trial Court (MTC) of Virac, Catanduanes against petitioner and consigned the amount of P100,000 which
is the amount of the purchase with the Clerk of Court on May 20, 1996.10 Joining her in the action were her children
with Santiago, namely, Aurora, Ramon, Marites, Edelina and Gemma, all surnamed Vargas.

Subsequently, Carlos Gianan, Jr. and Gloria Arcilla, heirs of the alleged primitive owner of the lot in question, Pedro
Lakandula, intervened in the case.11

Respondents claimed that as co-owners of the property, they may be subrogated to the rights of the purchaser by
reimbursing him the price of the sale. They likewise alleged that the 30-day period following a written notice by the
vendors to their co-owners for them to exercise the right of redemption of the property had not yet set in as no
written notice was sent to them. In effect, they claimed that the Extra Judicial Settlement Among Heirs and the Extra
Judicial Settlement Among Heirs with Sale were null and void and had no legal and binding effect on them.12

After trial on the merits, the MTC rendered a decision13 in favor of petitioner, dismissing the complaint as well as the
complaint-in-intervention for lack of merit, and declaring the Deed of Extra Judicial Settlement Among Heirs with
Sale valid and binding. The MTC upheld the sale to petitioner because the transaction purportedly occurred after the
partition of the property among the co-owner heirs. The MTC opined that the other heirs could validly dispose of
their respective shares. Moreover, the MTC found that although there was a failure to strictly comply with the
requirements under Article 1088 of the Civil Code14 for a written notice of sale to be served upon respondents by the
vendors prior to the exercise of the former's right of redemption, this deficiency was cured by respondents' actual
knowledge of the sale, which was more than 30 days before the filing of their complaint, and their consignation of
the purchase price with the Clerk of Court, so that the latter action came too late. Finally, the MTC ruled that
respondents failed to establish by competent proof petitioner's bad faith in purchasing the portion of the property
owned by respondents' co-heirs.15

On appeal, the Regional Trial Court (RTC), Branch 42, of Virac, Catanduanes affirmed the MTC decision in a
judgment dated November 25, 1999. The matter was thereafter raised to the Court of Appeals (CA).

The CA reversed the ruling of both lower courts in the assailed decision dated March 26, 2002, declaring that the
Extra Judicial Settlement Among Heirs and the Extra Judicial Settlement Among Heirs with Sale, dated February 4,
1994 and November 15, 1994, respectively, were void and without any legal effect. The CA held that, pursuant to
Section 1, Rule 74 of the Rules of Court, 16 the extrajudicial settlement made by the other co-heirs is not binding
upon respondents considering the latter never participated in it nor did they ever signify their consent to the same.

His motion for reconsideration having been denied, petitioner filed the present petition for review.

The issues are:

Whether heirs are deemed constructively notified and bound, regardless of their failure to participate therein,
by an extrajudicial settlement and partition of estate when the extrajudicial settlement and partition has been
duly published; and,

Assuming a published extrajudicial settlement and partition does not bind persons who did not participate
therein, whether the written notice required to be served by an heir to his co-heirs in connection with the sale
of hereditary rights to a stranger before partition under Article 1088 of the Civil Code17 can be dispensed with
when such co-heirs have actual knowledge of the sale such that the 30-day period within which a co-heir
can exercise the right to be subrogated to the rights of a purchaser shall commence from the date of actual
knowledge of the sale.

Petitioner argues, as follows:

Firstly, the acquisition by petitioner of the subject property subsequent to the extrajudicial partition was valid
because the partition was duly published. The publication of the same constitutes due notice to respondents and
signifies their implied acquiescence thereon. Respondents are therefore estopped from denying the validity of the
partition and sale at this late stage. Considering that the partition was valid, respondents no longer have the right to
redeem the property.

Secondly, petitioner is a possessor and builder in good faith.

Thirdly, the MTC had no jurisdiction over the complaint because its subject matter was incapable of pecuniary
estimation. The complaint should have been filed with the RTC.

Fourthly, there was a non-joinder of indispensable parties, the co-heirs who sold their interest in the subject property
not having been impleaded by respondents.

Fifthly, the appeal to the CA should have been dismissed as it was not properly verified by respondents. Gloria
Vargas failed to indicate that she was authorized to represent the other respondents (petitioners therein) to initiate
the petition. Moreover, the verification was inadequate because it did not state the basis of the alleged truth and/or
correctness of the material allegations in the petition.

The petition lacks merit.

The procedure outlined in Section 1 of Rule 74 is an ex parte proceeding. The rule plainly states, however, that
persons who do not participate or had no notice of an extrajudicial settlement will not be bound thereby.18 It
contemplates a notice that has been sent out or issued before any deed of settlement and/or partition is agreed
upon (i.e., a notice calling all interested parties to participate in the said deed of extrajudicial settlement and
partition), and not after such an agreement has already been executed19 as what happened in the instant case with
the publication of the first deed of extrajudicial settlement among heirs.

The publication of the settlement does not constitute constructive notice to the heirs who had no knowledge or did
not take part in it because the same was notice after the fact of execution. The requirement of publication is geared
for the protection of creditors and was never intended to deprive heirs of their lawful participation in the decedent's
estate. In this connection, the records of the present case confirm that respondents never signed either of the
settlement documents, having discovered their existence only shortly before the filing of the present complaint.
Following Rule 74, these extrajudicial settlements do not bind respondents, and the partition made without their
knowledge and consent is invalid insofar as they are concerned.
This is not to say, though, that respondents' co-heirs cannot validly sell their hereditary rights to third persons even
before the partition of the estate. The heirs who actually participated in the execution of the extrajudicial settlements,
which included the sale to petitioner of their pro indiviso shares in the subject property, are bound by the same.
Nevertheless, respondents are given the right to redeem these shares pursuant to Article 1088 of the Civil Code.
The right to redeem was never lost because respondents were never notified in writing of the actual sale by their co-
heirs. Based on the provision, there is a need for written notice to start the period of redemption, thus:

Should any of the heirs sell his hereditary rights to a stranger before the partition, any or all of the co-heirs
may be subrogated to the rights of the purchaser by reimbursing him for the price of the sale, provided they
do so within the period of one month from the time they were notified in writing of the sale by the
vendor. (Emphasis supplied.)

It bears emphasis that the period of one month shall be reckoned from the time that a co-heir is notified in writing by
the vendor of the actual sale. Written notice is indispensable and mandatory,20 actual knowledge of the sale acquired
in some other manner by the redemptioner notwithstanding. It cannot be counted from the time advance notice is
given of an impending or contemplated sale. The law gives the co-heir thirty days from the time written notice of the
actual sale within which to make up his or her mind and decide to repurchase or effect the redemption.21

Though the Code does not prescribe any particular form of written notice nor any distinctive method for written
notification of redemption, the method of notification remains exclusive, there being no alternative provided by
law.22 This proceeds from the very purpose of Article 1088, which is to keep strangers to the family out of a joint
ownership, if, as is often the case, the presence of outsiders be undesirable and the other heir or heirs be willing
and in a position to repurchase the share sold.23

It should be kept in mind that the obligation to serve written notice devolves upon the vendor co-heirs because the
latter are in the best position to know the other co-owners who, under the law, must be notified of the sale.24 This will
remove all uncertainty as to the fact of the sale, its terms and its perfection and validity, and quiet any doubt that the
alienation is not definitive.25 As a result, the party notified need not entertain doubt that the seller may still contest the
alienation. 26

Considering, therefore, that respondents' co-heirs failed to comply with this requirement, there is no legal
impediment to allowing respondents to redeem the shares sold to petitioner given the former's obvious willingness
and capacity to do so.

Likewise untenable is petitioner's contention that he is a builder in good faith. Good faith consists in the belief of the
builder that the land the latter is building on is one's own without knowledge of any defect or flaw in one's
title.27 Petitioner derived his title from the Extra Judicial Settlement Among Heirs With Sale dated November 15,
1994. He was very much aware that not all of the heirs participated therein as it was evident on the face of the
document itself. Because the property had not yet been partitioned in accordance with the Rules of Court, no
particular portion of the property could have been identified as yet and delineated as the object of the sale. This is
because the alienation made by respondents' co-heirs was limited to the portion which may be allotted to them in
the division upon the termination of the co-ownership. Despite this glaring fact, and over the protests of
respondents, petitioner still constructed improvements on the property. For this reason, his claim of good faith lacks
credence.

As to the issue of lack of jurisdiction, petitioner is estopped from raising the same for the first time on appeal.
Petitioner actively participated in the proceedings below and sought affirmative ruling from the lower courts to
uphold the validity of the sale to him of a portion of the subject property embodied in the extrajudicial settlement
among heirs. Having failed to seasonably raise this defense, he cannot, under the peculiar circumstances of this
case, be permitted to challenge the jurisdiction of the lower court at this late stage. While it is a rule that a
jurisdictional question may be raised at any time, an exception arises where estoppel has already supervened.

Estoppel sets in when a party participates in all stages of a case before challenging the jurisdiction of the lower
court. One cannot belatedly reject or repudiate its decision after voluntarily submitting to its jurisdiction, just to
secure affirmative relief against one's opponent or after failing to obtain such relief. The Court has, time and again,
frowned upon the undesirable practice of a party submitting a case for decision and then accepting the judgment,
only if favorable, and attacking it for lack of jurisdiction when adverse.28
Petitioner's fourth argument, that there is a non-joinder of indispensable parties, similarly lacks merit. An
indispensable party is a party-in-interest without whom there can be no final determination of an action and who is
required to be joined as either plaintiff or defendant.29 The party's interest in the subject matter of the suit and in the
relief sought is so inextricably intertwined with the other parties that the former's legal presence as a party to the
proceeding is an absolute necessity. Hence, an indispensable party is one whose interest will be directly affected by
the court's action in the litigation. In the absence of such indispensable party, there cannot be a resolution of the
controversy before the court which is effective, complete, or equitable.30

In relation to this, it must be kept in mind that the complaint filed by respondents ultimately prayed that they be
allowed to redeem the shares in the property sold by their co-heirs. Significantly, the right of the other heirs to sell
their undivided share in the property to petitioner is not in dispute. Respondents concede that the other heirs acted
within their hereditary rights in doing so to the effect that the latter completely and effectively relinquished their
interests in the property in favor of petitioner. Petitioner thus stepped into the shoes of the other heirs to become a
co-owner of the property with respondents. As a result, only petitioner's presence is absolutely required for a
complete and final determination of the controversy because what respondents seek is to be subrogated to his
rights as a purchaser.

Finally, petitioner contends that the petition filed by respondents with the CA should have been dismissed because
the verification and certificate of non-forum shopping appended to it were defective, citing specifically the failure of
respondent Gloria Vargas to: (1) indicate that she was authorized to represent her co-respondents in the petition,
and (2) state the basis of the alleged truth of the allegations.

The general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs or petitioners in a
case and the signature of only one of them is insufficient.31 Nevertheless, the rules on forum shopping, which were
designed to promote and facilitate the orderly administration of justice, should not be interpreted with such absolute
literalness as to subvert their own ultimate and legitimate objective. Strict compliance with the provisions regarding
the certificate of non-forum shopping merely underscores its mandatory nature in that the certification cannot be
altogether dispensed with or its requirements completely disregarded.32 Under justifiable circumstances, the Court
has relaxed the rule requiring the submission of such certification considering that although it is obligatory, it is not
jurisdictional.33

Thus, when all the petitioners share a common interest and invoke a common cause of action or defense, the
signature of only one of them in the certification against forum shopping substantially complies with the rules.34 The
co-respondents of respondent Gloria Vargas in this case were her children. In order not to defeat the ends of justice,
the Court deems it sufficient that she signed the petition on their behalf and as their representative.

WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioner.

SO ORDERED.
ROSARIO VICTORIA AND ELMA PIDLAOAN, Petitioners, v. NORMITA JACOB PIDLAOAN, HERMINIGILDA PIDLAOAN
AND EUFEMIA PIDLAOAN, Respondents.

DECISION

BRION, J.:

We resolve the petition for review on certiorari filed by petitioners to challenge the March 26, 2010 decision1 and March
15, 2011 resolution of the Court of Appeals (CA) in CA-G.R. CV No. 89235. The Regional Trial Court's (RTC) ruled that Elma
Pidlaoan (Elma) donated only half of the property to Normita Jacob Pidlaoan (Normita). The CA reversed the RTC's decision
and ruled that Elma donated her entire property to Normita. The Court is called upon to ascertain the true nature of the
agreement between Elma and Normita.

THE ANTECEDENTS

The petitioners Rosario Victoria (Rosario) and Elma lived together since 1978 until Rosario left for Saudi Arabia.

In 1984, Elma bought a parcel of land with an area of 201 square meters in Lucena City and was issued Transfer Certificate
of Title (TCT) No. T-50282.2 When Rosario came home, she caused the construction of a house on the lot but she left again
after the house was built.3

Elma allegedly mortgaged the house and lot to a certain Thi Hong Villanueva in 1989.4 When the properties were about to be
foreclosed, Elma allegedly asked for help from her sister-in-law, Eufemia Pidlaoan (Eufemia), to redeem the property.5 On
her part, Eufemia called her daughter abroad, Normita, to lend money to Elma. Normita agreed to provide the funds.6

Elma allegedly sought to sell the land.7 When she failed to find a buyer, she offered to sell it to Eufemia or her daughter.8

On March 21, 1993, Elma executed a deed of sale entitled "Panananto ng Pagkatanggap ng Kahustuhang Bayad"
transferring the ownership of the lot to Normita.9 The last provision in the deed of sale provides that Elma shall eject the
person who erected the house and deliver the lot to Normita.10 The document was signed by Elma, Normita, and two
witnesses but it was not notarized.

When Elma and Normita were about to have the document notarized, the notary public advised them to donate the lot
instead to avoid capital gains tax.11 On the next day, Elma executed a deed of donation in Normita's favor and had it
notarized. TCT No. T-50282 was cancelled and TCT No. T-70990 was issued in Normita's name.12 Since then, Normita had
been paying the real property taxes over the lot but Elma continued to occupy the house.

Rosario found out about the donation when she returned to the country a year or two after the transaction.13

In 1997, the petitioners filed a complaint for reformation of contract, cancellation of TCT No. T-70990, and damages with
prayer for preliminary injunction against Eufemia, Normita, and Herminigilda Pidlaoan (respondents).

The petitioners argued that: first, they co-owned the lot because both of them contributed the money used to purchase
it; second, Elma and Normita entered into an equitable mortgage because they intended to constitute a mortgage over the
lot to secure Elma's loan but they executed a deed of sale instead; and third, the deed of donation was simulated because
Elma executed it upon the notary public's advice to avoid capital gains tax.14

In their answer, the respondents admitted that the deed of donation was simulated and that the original transaction was a
sale.15 They argued, however, that there was no agreement to constitute a real estate mortgage on the lot.16

The RTC ruled that Rosario and Elma co-owned the lot and the house.17 Thus, Elma could only donate her one-half share in
the lot.18

Hence, the respondents appealed to the CA.

THE CA RULING

The CA reversed the RTC's decision and dismissed the petitioners' complaint.

The CA held that Elma and Normita initially entered into two agreements: a loan and a sale. They entered into a loan
agreement when Elma had to pay Thi Hong Villanueva to redeem the property. Thereafter, Elma sold the property to
Normita. They subsequently superseded the contract of sale with the assailed deed of donation.

The CA also held that the deed of donation was not simulated. It was voluntarily executed by Elma out of gratitude to
Normita who rescued her by preventing the foreclosure of the lot. Moreover, the deed of donation, being a public document,
enjoys the presumption of regularity. Considering that no conclusive proof was presented to rebut this presumption, the deed
of donation is presumed valid.

The CA denied the petitioners' motion for reconsideration; hence, this petition.

THE PETITIONERS' ARGUMENTS

In their petition, the petitioners argue that: (1) Rosario is a co-owner because she caused the construction of the house,
which has a higher market value than the lot; (2) the deed of donation is simulated; (3) the transaction was a mere
equitable mortgage; and (4) the CA unduly disturbed the RTC's factual findings. The petitioners emphasize that the
respondents have consistently admitted in their answer that the deed of donation was simulated; therefore, the CA should
not have reversed the RTC's decision on that point.

In their three-page comment, the respondents insist that the CA correctly dismissed the complaint. They stressed that the
petitioners were the ones who argued that the deed of donation was simulated but the CA ruled otherwise. Furthermore, the
petition involves questions of facts and law outside the province of the Supreme Court. Hence, the petition must be
dismissed.

THE COURT'S RULING

We PARTIALLY GRANT the petition.

The issues before the Court are: (1) whether Rosario is a co-owner; (2) whether the deed of donation was simulated; and
(3) whether the transaction between Elma and Normita was a sale, a donation, or an equitable mortgage. Considering that
these issues are inter-related, we shall jointly discuss and resolve them.

At the outset, we note that the issues raised by the petitioners in the present case require a review of the factual
circumstances. As a rule, only questions of law may be raised in a petition for review on certiorari under Rule 45 of the Rules
of Court.

The Court distinguished between a question of law and a question of fact in a number of cases. A question of law arises when
there is doubt on what the law is on a certain set of fact, while a question of fact exists when there is doubt as to the truth or
falsity of the alleged facts.19 For a question to be one of law, it must not involve an examination of the probative value of the
evidence presented by the litigants.20 If the issue invites a review of the evidence on record, the question posed is one of
fact.21

The factual findings of the CA are conclusive and binding and are not reviewable by the Court, unless the case falls under any
of the recognized exceptions.22 One of these exceptions is when the findings of the RTC and the CA are contradictory, as in
the present case.

By granting the appeal and dismissing the petitioners' complaint, the CA effectively ruled that the transfer of ownership
involved the entire lot rather than only half of it as the RTC held. The lower courts' differing findings provide us sufficient
reason to proceed with the review of the evidence on record.23

First, we rule that Elma transferred ownership of the entire lot to Normita.

One who deals with property registered under the Torrens system has a right to rely on what appears on the face of the
certificate of title and need not inquire further as to the property's ownership.24 A buyer is charged with notice only of the
claims annotated on the title.25 The Torrens system was adopted to best guarantee the integrity of land titles and to protect
their indefeasibility once the claim of ownership is established and recognized.26

In the present case, the records of the case show that Elma alone purchased the lot in 1984 from its previous
owners.27 Accordingly, TCT No. T-50282 was issued solely in her name. Thus, Normita bought the lot relying on the face of
the TCT that Elma and no other person owned it.

We acknowledge that registration under the Torrens system does not create or vest title. A certificate of title merely serves
as an evidence of ownership in the property. Therefore, the issuance of a certificate of title does not preclude the possibility
that persons not named in the certificate may be co-owners of the real property, or that the registered owner is only holding
the property in trust for another person.28

In the present case, however, the petitioners failed to present proof of Rosario's contributions in purchasing the lot from its
previous owners. The execution of the transfer documents solely in Elma's name alone militate against their claim of co-
ownership. Thus, we find no merit in the petitioners' claim of co-ownership over the lot.

At this point, we address the petitioners' claim that Rosario co-owned the lot with Elma because the value of the house
constructed by Rosario on it is higher than the lot's value. We find this argument to be erroneous.

We hold that mere construction of a house on another's land does not create a co-ownership. Article 484 of the Civil Code
provides that co-ownership exists when the ownership of an undivided thing or right belongs to different persons. Verily, a
house and a lot are separately identifiable properties and can pertain to different owners, as in this case: the house belongs
to Rosario and the lot to Elma.

Article 448 of the Civil Code provides that if a person builds on another's land in good faith, the land owner may either: (a)
appropriate the works as his own after paying indemnity; or (b) oblige the builder to pay the price of the land. The law does
not force the parties into a co-ownership.29 A builder is in good faith if he builds on a land believing himself to be its owner
and is unaware of the defect in his title or mode of acquisition.30

As applied in the present case, Rosario's construction of a house on the lot did not create a co-ownership, regardless of the
value of the house. Rosario, however, is not without recourse in retrieving the house or its value. The remedies available to
her are set forth in Article 448 of the Civil Code.

Second, on the nature of the transaction between Elma and Normita, we find that the deed of donation was simulated
and the parties' real intent was to enter into a sale.

The petitioners argue that the deed of donation was simulated and that the parties entered into an equitable mortgage.31 On
the other hand, the respondents deny the claim of equitable mortgage32 and argue that they validly acquired the
property via sale.33 The RTC ruled that there was donation but only as to half of the property. The CA agreed with the
respondents that the deed of donation was not simulated, relying on the presumption of regularity of public documents.

We first dwell on the genuineness of the deed of donation. There are two types of simulated documents - absolute and
relative. A document is absolutely simulated when the parties have no intent to bind themselves at all, while it is relatively
simulated when the parties concealed their true agreement.34 The true nature of a contract is determined by the parties'
intention, which can be ascertained from their contemporaneous and subsequent acts.35

In the present case, Elma and Normita's contemporaneous and subsequent acts show that they were about to have the
contract of sale notarized but the notary public ill-advised them to execute a deed of donation instead. Following this advice,
they returned the next day to have a deed of donation notarized. Clearly, Elma and Normita intended to enter into a sale that
would transfer the ownership of the subject matter of their contract but disguised it as a donation. Thus, the deed of
donation subsequently executed by them was only relatively simulated.

The CA upheld the deed of donation's validity based on the principle that a notarized document enjoys the presumption of
regularity. This presumption, however, is overthrown in this case by the respondents' own admission in their answer that the
deed of donation was simulated.

Judicial admissions made by a party in the course of the proceedings are conclusive and do not require proof.36 Notably, the
respondents explicitly recognized in their answer that the deed of donation was simulated upon the notary public's advice
and that both parties intended a sale.37

In paragraphs 5 and 6 of the answer,38 the respondents stated thus:

chanRoblesvirtualLawlibrary

5. That defendants admit the allegations in paragraph 9 which readily acknowledges that there was indeed an agreement to
sell the property of plaintiff, Elma Pidlaoan to defendant, Normita Pidlaoan (Normita, for brevity) for which a Deed of
Absolute Sale was drafted and executed;

6. That defendants admit the simulation of the Deed of Donation in paragraph 10 of the Complaint, but deny the
remainder, the truth being that Elma Pidlaoan herself offered her property for sale in payment of her loans from Normita.
(Emphasis supplied)
Having admitted the simulation, the respondents can no longer deny it at this stage. The CA erred in disregarding this
admission and upholding the validity of the deed of donation.

Considering that the deed of donation was relatively simulated, the parties are bound to their real agreement.39 The records
show that the parties intended to transfer the ownership of the property to Normita by absolute sale. This intention is
reflected in the unnotarized document entitled "Panananto ng Pagkatanggap ng Kahustuhang Bayad."40 cralawred

We have discussed that the transaction was definitely not one of donation. Next, we determine whether the parties' real
transaction was a sale or an equitable mortgage.

The petitioners insist that the deed of sale is an equitable mortgage because: (i) the consideration for the sale was grossly
inadequate; (ii) they remained in possession of the property; (iii) they continuously paid the water and electric bills; (iv) the
respondents allowed Victoria to repay the "loan" within three months;41 (v) the respondents admitted that the deed of
donation was simulated; and (vi) the petitioners paid the taxes even after the sale.

Notably, neither the CA nor the RTC found merit in the petitioners' claim of equitable mortgage. We find no reason to
disagree with these conclusions.

An equitable mortgage is one which, although lacking in some formality or other requisites demanded by statute,
nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing
impossible or contrary to law.42 Articles 1602 and 1604 of the Civil Code provide that a contract of absolute sale shall be
presumed an equitable mortgage if any of the circumstances listed in Article 1602 is attendant.
Two requisites must concur for Articles 1602 and 1604 of the Civil Code to apply: one, the parties entered into a contract
denominated as a contract of sale; and two, their intention was to secure an existing debt by way of mortgage.43

In the present case, the unnotarized contract of sale between Elma and Normita is denominated as "Panananto ng
Pagkatanggap ng Kahustuhang Bayad."44 Its contents show an unconditional sale of property between Elma and Normita. The
document shows no intention to secure a debt or to grant a right to repurchase. Thus, there is no evidence that the parties
agreed to mortgage the property as contemplated in Article 1602 of the Civil Code. Clearly, the contract is not one of
equitable mortgage.

Even assuming that Article 1602 of the Civil Code applies in this case, none of the circumstances are present to give rise to
the presumption of equitable mortgage. One, the petitioners failed to substantiate their claim that the sale price was
unusually inadequate.45 In fact, the sale price of P30,000.00 is not unusually inadequate compared with the lot's market
value of P32,160 as stated in the 1994 tax declaration. Two, the petitioners continued occupation on the property was
coupled with the respondents' continuous demand for them to vacate it. Third, no other document was executed for the
petitioners to repurchase the lot after the sale contract was executed. Finally, the respondents paid the real property taxes
on the lot.46 These circumstances contradict the petitioners' claim of equitable mortgage.

A review of the sale contract or the "Panananto ng Pagkatanggap ng Kahustuhang Bayad" shows that the parties intended no
equitable mortgage. The contract even contains Elma's undertaking to remove Rosario's house on the property.47 This
undertaking supports the conclusion that the parties executed the contract with the end view of transferring full ownership
over the lot to Normita.

In sum, we rule that based on the records of the case, Elma and Normita entered in a sale contract, not a donation. Elma
sold the entire property to Normita. Accordingly, TCT No. T-70990 was validly issued in Normita's name. chanrobleslaw

WHEREFORE, we hereby PARTIALLY GRANT the petition. The March 26, 2010 decision and March 15, 2011 resolution of
the Court of Appeals in CA-G.R. CV No. 89235 are hereby AFFIRMED with the MODIFICATION that the parties entered into
a contract of sale, not a donation, and that petitioner Elma Pidlaoan sold the whole disputed property to respondent Normita
Jacob Pidlaoan. Costs against the petitioners.

SO ORDERED. cralawlawlibrary

G.R. No. 176598               July 9, 2014

PETRONIO CLIDORO, DIONISIO CLIDORO, LOLITA CLIDORO, CALIXTO CARD ANO, JR., LOURDES
CLIDORO-LARIN, MATEO CLIDORO and MARLIZA CLIDORO-DE UNA, Petitioners,
vs.
AUGUSTO JALMANZAR, GREGORIO CLIDORO, JR., SENECA CLIDORO-CIOCSON, MONSERAT CLIDORO-
QUIDAY, CELESTIAL CLIDORO-BINASA, APOLLO CLIDORO, ROSALIE CLIDORO-CATOLICO, SOPHIE
CLIDORO, and JOSE CLIDORO, JR., Respondents.

DECISION

PERALTA, J.:

This deals with the Petition for Review on Certiorari under Rule 45 of the Rules of Court praying that the Decision  of 1

the Court of Appeals (CA), dated October 17, 2006, and its Resolution  dated February 6, 2007, denying herein
2

petitioner's motion for reconsideration of the Decision, be reversed and set aside.

The antecedent facts, as set forth in the CA Decision, are undisputed, to wit:

The instant appeal stemmed from a complaint, docketed as Civil Case No. T-2275 for revival of judgment filed by
Rizalina Clidoro, et al. against Onofre Clidoro, et al., praying that the Decisiondated November 13, 1995 of the Court
of Appeals (CA) in CA-G.R. CV No. 19831, which affirmed with modification the RTC Decision dated March 10,
1988 in Civil Case No. T-98 for partition, berevived and that the corresponding writ of execution be issued. The
dispositive portion ofthe CA Decision reads:

The estate of the late Mateo Clidoro, excepting that described in paragraph (i) of the Complaint, is hereby ordered
partitioned in the following manner:

1. One-fifth portion to the Plaintiffs-Appellees, by right of representation to the hereditary share of Gregorio Clidoro,
Sr.;

2. One-fifth portion to Defendant-Appellant Antonio Clidoro or his legal heirs;

3. One-fifth portion to Appellant Josaphat Clidoro;

4. One-fifth portion to Appellant Aida Clidoro; 5. One-tenth portion to Gregoria Clidoro, as her legitime in the
hereditary share of Onofre Clidoro; and

6. One-tenth portion to Catalino Morate, as successor-ininterest to the legitime of Consorcia Clidoro.

SO ORDERED.

On September 3, 2003, defendants-appellees except Gregoria Clidoro-Palanca, moved to dismiss the said
complaint on the following grounds: "1.) The petition, not being brought up against the real partiesin-interest, is
dismissible for lack of cause of action; 2.) The substitution of the parties defendant is improper and is not in
accordance with the rules; 3.) Even if the decision is ordered revived, the same cannot be executed since the legal
requirements of Rule 69, Section 3 of the 1997 Rules of Civil Procedure has not been complied with; and 4.) The
Judgment of the Honorable Court ordering partition is merely interlocutory as it leaves something more to be done
to complete the disposition of the case."

After the filing of plaintiffs-appellants' Comment/Opposition to the Motion to Dismiss, defendants-appellees' Reply,
plaintiffs-appellants' Rejoinder and defendants-interestedparties' Sur-Rejoinder, the RTC issued the assailed Order
dated December 8, 2003 dismissing the instant complaint for lack of cause of action, the pertinent portion of which
reads:

"xxx

The complaint shows that most of the parties-plaintiffs, partiesdefendants and interested parties are already
deceased and have no more natural or material existence. This is contrary to the provision of the Rules (Sec. 1,
Rule 3, 1997 Rules of Civil Procedure). They could no longer be considered as the real parties-in-interest. Besides,
pursuant to Sec. 3, Rule 3 (1997 Rules of Civil Procedure), where the action is allowed to be prosecuted or
defended by a representative or someone acting in fiduciary capacity, the beneficiary shall be included in the title of
the case. In the instant case the beneficiaries are already deceased persons. Also, the Complaint states thatthey
were the original parties in Civil Case No. T-98 for Partition, but this is not so (paragraph 2). Some of the parties are
actually not parties to the original case, but representing the original parties who are indicated as deceased.

From the foregoing, the Court finds the instant complaint to be flawed in form and substance. The suit is not brought
by the real parties-ininterest, thus a motion to dismiss on the ground that the complaint states no cause of action is
proper (Section 1(g), Rule 16).

WHEREFORE, the instant complaint is ordered DISMISSED for lack of cause of action.

SO ORDERED."

Plaintiffs-appellants moved for reconsideration of the foregoing Order with prayer to admit the attached Amended
Complaint impleading the additional heirs of the interested party Josaphat Clidoro and the original plaintiffs Rizalina
Clidoro-Jalmanzar, Cleneo Clidoro and Aristoteles Clidoro. The same was,however, denied in the second assailed
order. x x x
3
Respondents then appealed to the CA, and on October 17, 2006, the CA promulgated its Decision reversing and
setting aside the Orders of the RTC, and remanding the case to the RTC for further proceedings. Petitioners’ motion
for reconsideration of the Decision was denied per Resolution dated February 6, 2007.

Hence, the present petition where the following issues are raised:

A. THE HONORABLE COURT OF APPEALS FAILED TO CONSIDER THAT THERE WAS NO PROPER
SUBSTITUTION OF PARTIES IN THE INSTANT ACTION FOR REVIVAL OF JUDGMENT.

B. THE HONORABLE COURT OF APPEALS ERRED IN CONSIDERING THE RESPONDENTS AS WELL AS THE
PETITIONERS AS THE REAL PARTIES-IN-INTEREST.

C. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT AMENDMENT TO PLEADINGS WAS
PROPERLY MADE AND IS APPLICABLE TO THE INSTANT ACTION.

D. THE HONORABLE COURT OFAPPEALS ERRED IN RULING THAT THERE WAS MERE MISJOINDER OF
PARTIES IN THE INSTANT ACTION. 4

The petition deserves scant consideration.

Reduced to its essence, the pivotal issue here is whether the complaint for revival of judgment may be dismissed for
lack of cause of action as it was not brought by or against the real parties-in-interest.

First of all, the Court emphasizes that lack of cause of action is not enumerated under Rule 16 of the Rules of Court
as one of the grounds for the dismissal of a complaint. As explained in Vitangcol v. New Vista Properties, Inc.,  to
5

wit:

Lack of cause of action is, however, not a ground for a dismissal of the complaint through a motion to dismiss under
Rule 16 of the Rules of Court, for the determination of a lack of cause of action can only be made during and/or after
trial. What is dismissible via that mode is failure of the complaint to state a cause of action. Sec. 1(g) of Rule 16 of
the Rules of Court provides that a motion may be made on the ground "that the pleading asserting the claim states
no cause of action."

The rule is that in a motion to dismiss, a defendant hypothetically admits the truth ofthe material allegations of the
ultimate facts contained in the plaintiff's complaint. When a motion to dismiss is grounded on the failure tostate a
cause of action, a ruling thereon should, as rule, be based only on the facts alleged in the complaint.x x x

xxxx

In a motion to dismiss for failureto state a cause of action, the focus is on the sufficiency, not the veracity, of the
material allegations. The test of sufficiency of facts alleged in the complaint constituting a cause of action lies on
whether or not the court, admitting the facts alleged, could render a valid verdict in accordance with the prayer of the
complaint.x x x6

Again, in Manaloto v. Veloso III,  the Court reiterated as follows:

7

When the ground for dismissal is that the complaint states no cause of action, such fact can be determined only
from the facts alleged in the complaint and fromno other, and the court cannot consider other matters aliunde. The
test, therefore, is whether, assuming the allegations of fact in the complaint to be true, a valid judgment could be
rendered in accordance withthe prayer stated therein. 8

In this case, it was alleged in the complaint for revival of judgment that the parties therein were also the parties inthe
action for partition. Applying the foregoing test of hypothetically admitting this allegation in the complaint, and not
looking into the veracity of the same, it would then appear that the complaint sufficiently stated a cause of action as
the plaintiffs in the complaint for revival of judgment (hereinafter respondents), as the prevailing parties in the action
for partition, had a right to seek enforcement of the decision in the partition case.
It should be borne in mind that the action for revival of judgment is a totally separate and distinct case from the
original Civil Case No. T-98 for Partition. As explained in Saligumba v. Palanog,  to wit:
9

An action for revival of judgment is no more than a procedural means of securing the execution of a previous
judgment which has become dormant after the passage of five years without it being executed upon motion of the
prevailing party. It isnot intended to re-open any issue affecting the merits of the judgment debtor's case nor the
propriety or correctness of the first judgment. An action for revival of judgment is a new and independent action,
different and distinct fromeither the recovery of property case or the reconstitution case [in this case, the original
action for partition], wherein the cause of action is the decision itself and not the merits of the action upon which the
judgment sought to be enforced is rendered. x x x 10

With the foregoing in mind, it is understandable that there would be instances where the parties in the original case
and in the subsequent action for revival of judgment would not be exactly the same. The mere fact that the names
appearing as parties in the the complaint for revival of judgment are different from the names of the parties in the
original case would not necessarily mean that theyare not the real parties-in-interest. What is important is that, as
provided in Section 1, Rule 3 of the Rules of Court, they are "the party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit." Definitely, as the prevailing parties in the previous
case for partition, the plaintiffs in the case for revival of judgment would be benefited by the enforcement of the
decision in the partition case.

Moreover, it would appear that petitioners are mistaken in alleging that respondents are not the real parties-in-
interest. The complaint for revival of judgment impleaded the following parties:

[[reference - http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/july2014/176598.pdf]]

PLAINTIFFS DEFENDANTS

1. Rizalina Clidoro (deceased) 1. Onofre Clidoro (deceased) rep.

rep. herein by Augusto Jalmanzar by Gregoria Clidoro-Palanca

(daughter)

2. Gregorio Clidoro, Jr. 2. Antonio Clidoro (deceased)

herein rep. by Petronio Clidoro,

3. Urbana Costales (deceased) 3. Carmen Clidoro-Cardano, rep.

by Calixto Cardano, Jr. (husband)

4. Cleneo Clidoro (deceased) 4. Dionisio Clidoro

5. Seneca Clidoro Ciocson 5. Lourdes Clidoro-Lari

6. Monserrat Clidoro 6. Lolita Clidoro

7. Celestial Clidoro 7. Mateo Clidoro

8. Aristoteles Clidoro (deceased) INTERESTED PARTIES

9. Apollo Clidoro 1. AidaClidoro (deceased)

10. Rosalie Clidoro 2. Josaphat Clidoro (deceased),

herein rep. by Marliza Clidoro-De

Una
 11. Sophie Clidoro  

12. Jose Clidoro, Jr.  

On the other hand, the parties to the original case for partition are named as follows:

[[reference - http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/july2014/176598.pdf]]

PLAINTIFFS DEFENDANTS

1. Rizalina Clidoro 1. Onofre Clidoro

2. Gregorio Clidoro, Jr. 2. Antonio Clidoro

3. Sofia Cerdena INTERESTED PARTIES

4. Urbana Costales 1. Aida Clidoro

5. Cleneo Seneca 2. Josaphat Clidoro

6. Monserrat Clidoro  

7. Celestial Clidoro  

8. Aristoteles Clidoro  

9. Apollo Clidoro  

10. Rosalie Clidoro  

A comparison of the foregoing would show that almost all of the plaintiffs in the original case for partition, in whose
favor the court adjudged certain shares in the estate of deceased Mateo Clidoro, are also the plaintiffs in the action
for revival of judgment. Meanwhile, the defendants impleaded in the action for revival are allegedly the
representatives of the defendants in the original case, and this appears to hold water, as Gregoria ClidoroPalanca,
named as the representative of defendant Onofre Clidoro in the complaint for revival of judgment, was also
mentioned and awarded a portion of the estate in the judgment in the original partition case. In fact, the trial court
itself stated in its Order  of dismissal dated December 8, 2003, that "[s]ome of the parties are actually not parties to
11

the original case, but representing the original parties who are indicated as deceased."

In Basbas v. Sayson,  the Court pointed out that even just one of the co-owners, by himself alone, can bring an
12

action for the recovery of the coowned property, even through an action for revival of judgment, because the
enforcement of the judgment would result in such recovery of property. Thus, as in Basbas, it is not necessary in
this case that all of the parties, in whose favor the case for partition was adjudged, be made plaintiffs to the action
for revival of judgment. Any which one of said prevailing parties, who had an interest in the enforcement of the
decision, may file the complaint for revival of judgment, even just by himself.

Verily, the trial court erred in dismissing the complaint for revival of judgment on the ground of lack of, or failure to
state a cause of action. The allegations in the complaint, regarding the parties' interest in having the decision in the
partition case executed or implemented, sufficiently state a cause of action. The question of whether respondents
were the real partiesin-interest who had the right to seek execution of the final and executory judgment in the
partition case should have been threshed out in a full-blown trial.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals, dated October 17, 2006, and its
Resolution dated February 6, 2007 in CA-G.R. No. 82209, are hereby AFFIRMED in toto.

G.R. No. 210252               June 16, 2014

VILMA QUINTOS, represented by her Attorney-in-Fact FIDEL I. QUINTOS, JR.; FLORENCIA I. DANCEL,
represented by her Attorney-in-Fact FLOVY I. DANCEL; and CATALINO L. IBARRA, Petitioners,
vs.
PELAGIA I. NICOLAS, NOLI L. IBARRA, SANTIAGO L. IBARRA, PEDRO L. IBARRA, DAVID L. IBARRA,
GILBERTO L. IBARRA, HEIRS OF AUGUSTO L. IBARRA, namely CONCHITA R., IBARRA, APOLONIO
IBARRA, and NARCISO IBARRA, and the spouses RECTO CANDELARIO and ROSEMARIE
CANDELARIO, Respondents.

DECISION

VELASCO, JR., J.:

The Case

Before the Court is a Petition for Review on Certiorari filed under Rule 45 challenging the Decision  and
1

Resolution  of the Court of Appeals (CA) in CA-G.R. CV No. 98919 dated July 8, 2013 and November 22, 2013,
2

respectively. The challenged rulings affirmed the May 7, 2012 Decision  of the Regional Trial Court (RTC), Branch
3

68 in Camiling, Tarlac that petitioners and respondents are co-owners of the subject property, which should be
partitioned as per the subdivision plan submitted by respondent spouses Recto and Rosemarie Candelario.

The Facts

As culled from the records, the facts of the case are as follows:

Petitioners Vilma Quintos, Florencia Dancel, and Catalino Ibarra, and respondents Pelagia Nicolas, Noli Ibarra,
Santiago Ibarra, Pedro Ibarra, David Ibarra, Gilberto Ibarra, and the late Augusto Ibarra are siblings. Their parents,
Bienvenido and Escolastica Ibarra, were the owners of the subject property, a 281 sqm. parcel of land situated
along Quezon Ave., Poblacion C, Camiling, Tarlac, covered by Transfer Certificate Title (TCT) No. 318717.

By 1999, both Bienvenido and Escolastica had already passed away, leaving to their ten (10) children ownership
over the subject property. Subsequently, sometime in 2002, respondent siblings brought an action for partition
against petitioners. The case was docketed as Civil Case No. 02-52 and was raffled to the RTC, Branch 68,
Camiling, Tarlac. However, in an Order  dated March 22, 2004, the trial court dismissed the case disposing as
4

follows:

For failure of the parties, as well as their counsels, to appear despite due notice, this case is hereby DISMISSED.

SO ORDERED.

As neither set of parties appealed, the ruling of the trial court became final, as evidenced by a Certificate of
Finality  it eventually issued on August 22, 2008.
5

Having failed to secure a favorable decision for partition, respondent siblings instead resorted to executing a Deed
of Adjudication  on September 21, 2004 to transfer the property in favor of the ten (10) siblings. As a result, TCT No.
6

318717 was canceled and in lieu thereof, TCT No. 390484 was issued in its place by the Registry of Deeds of
Tarlac in the names of the ten (10) heirs of the Ibarra spouses.

Subsequently, respondent siblings sold their 7/10 undivided share over the property in favor of their co-respondents,
the spouses Recto and Rosemarie Candelario. By virtue of a Deed of Absolute Sale  dated April 17, 2007 executed
7

in favor of the spouses Candelario and an Agreement of Subdivision  purportedly executed by them and petitioners,
8

TCT No. 390484 was partially canceled and TCT No. 434304 was issued in the name of the Candelarios, covering
the 7/10portion.

On June 1, 2009, petitioners filed a complaint for Quieting of Title and Damages against respondents wherein they
alleged that during their parents’ lifetime, the couple distributed their real and personal properties in favor of their ten
(10) children. Upon distribution, petitioners alleged that they received the subject property and the house
constructed thereon as their share. They likewise averred that they have been in adverse, open, continuous, and
uninterrupted possession of the property for over four (4) decades and are, thus, entitled to equitable title thereto.
They also deny any participation in the execution of the aforementioned Deed of Adjudication dated September 21,
2004 and the Agreement of Subdivision. Respondents countered that petitioners’ cause of action was already
barred by estoppel when sometime in 2006, one of petitioners offered to buy the 7/10 undivided share of the
respondent siblings. They point out that this is an admission on the part of petitioners that the property is not entirely
theirs. In addition, they claimed that Bienvenido and Escolastica Ibarra mortgaged the property but because of
financial constraints, respondent spouses Candelario had to redeem the property in their behalf. Not having been
repaid by Bienvenido and Escolastica, the Candelarios accepted from their co-respondents their share in the subject
property as payment. Lastly, respondents sought, by way of counterclaim, the partition of the property.

Docketed as Civil Case No. 09-15 of the RTC of Camiling, Tarlac, the quieting of title case was eventually raffled to
Branch 68 of the court, the same trial court that dismissed Civil Case No. 02-52. During pre-trial, respondents, or
defendants a quo, admitted having filed an action for partition, that petitioners did not participate in the Deed of
Adjudication that served as the basis for the issuance of TCT No. 390484, and that the Agreement of Subdivision
that led to the issuance of TCT No. 434304 in favor of respondent spouses Candelario was falsified.  Despite the
9

admissions of respondents, however, the RTC, through its May 27, 2012 Decision, dismissed petitioners’ complaint.
The court did not find merit in petitioners’ asseverations that they have acquired title over the property through
acquisitive prescription and noted that there was no document evidencing that their parents bequeathed to them the
subject property. Finding that respondent siblings were entitled to their respective shares in the property as
descendants of Bienvenido and Escolastica Ibarra and as co-heirs of petitioners, the subsequent transfer of their
interest in favor of respondent spouses Candelario was then upheld by the trial court. The dispositive portion of the
Decision reads:

WHEREFORE, premises considered, the above-entitled case is hereby Dismissed.

Also, defendants-spouses Rosemarie Candelario and Recto Candelario are hereby declared as the absolute
owners of the 7/10 portion of the subject lot.

Likewise, the court hereby orders the partition of the subject lots between the herein plaintiffs and the defendants-
spouses Candelarios.

SO ORDERED.

Aggrieved, petitioners appealed the trial court’s Decision to the CA, pleading the same allegations they averred in
their underlying complaint for quieting of title. However, they added that the partition should no longer be allowed
since it is already barred by res judicata, respondent siblings having already filed a case for partition that was
dismissed with finality, as admitted by respondents themselves during pre-trial.

On July 8, 2013, the CA issued the assailed Decision denying the appeal. The fallo reads: WHEREFORE, premises
considered, the Decision dated May 7, 2012 of the Regional Trial Court of Camiling, Tarlac, Branch 68, in Civil Case
No. 09-15, is hereby AFFIRMED.

SO ORDERED.

Similar to the trial court, the court a quo found no evidence on record to support petitioners’ claim that the subject
property was specifically bequeathed by Bienvenido and Escolastica Ibarra in their favor as their share in their
parents’ estate. It also did not consider petitioners’ possession of the property as one that is in the concept of an
owner. Ultimately, the appellate court upheld the finding that petitioners and respondent spouses Candelario co-own
the property, 30-70 in favor of the respondent spouses.

As regards the issue of partition, the CA added:

x x x Since it was conceded that the subject lot is now co-owned by the plaintiffs-appellants, (with 3/10 undivided
interest) and defendants-appellees Spouses Candelarios (with 7/10 undivided interest) and considering that
plaintiffs-appellants had already constructed a 3-storey building at the back portion of the property, then partition, in
accordance with the subdivision plan (records, p. 378) undertaken by defendants-appellants [sic] spouses, is in
order.10
On November 22, 2013, petitioners’ Motion for Reconsideration was denied. Hence, the instant petition.

Issues

In the present petition, the following errors were raised:

I. THE COURT OF APPEALS MANIFESTLY OVERLOOKED RELEVANT AND UNDISPUTED FACTS

WHICH, IF PROPERLY CONSIDERED, WOULD JUSTIFY PETITIONERS’ CLAIM OF EQUITABLE TITLE.

II. THE COURT OF APPEALS ERRED WHEN IT AFFIRMED THE ORDER OF PARTITION DESPITE THE
FACT THAT THE COUNTERCLAIM FOR PARTITION, BASED ON THE DEED OF ABSOLUTE SALE
EXECUTED IN 2007, IS BARRED BY LACHES.

III. THE COURT OF APPEALS RENDERED A SUBSTANTIALLY FLAWED JUDGMENT WHEN IT

NEGLECTED TO RULE ON PETITIONERS’ CONTENTION THAT THE COUNTERCLAIM FOR
PARTITION IS ALSO BARRED BY PRIOR JUDGMENT, DESPITE ITS HAVING BEEN SPECIFICALLY
ASSIGNED AS ERROR AND PROPERLY ARGUED IN THEIR BRIEF, AND WHICH, IF PROPERLY
CONSIDERED, WOULD JUSTIFY THE DISMISSAL OF THE COUNTERCLAIM.

IV. THE COURT OF APPEALS ERRED WHEN IT ORDERED PARTITION IN ACCORDANCE WITH THE
SUBDIVISION PLAN MENTIONED IN ITS DECISION, IN CONTRAVENTION OF THE PROCEDURE
ESTABLISHED IN RULE 69 OF THE RULES OF CIVIL PROCEDURE. 11

To simplify, the pertinent issues in this case are as follows:

1. Whether or not the petitioners were able to prove ownership over the property;

2. Whether or not the respondents’ counterclaim for partition is already barred by laches or res judicata; and

3. Whether or not the CA was correct in approving the subdivision agreement as basis for the partition of the
property.

The Court’s Ruling

The petition is meritorious in part.

Petitioners were not able to prove equitable title or ownership over the property

Quieting of title is a common law remedy for the removal of any cloud, doubt, or uncertainty affecting title to real
property.  For an action to quiet title to prosper, two indispensable requisites must concur, namely: (1) the plaintiff or
12

complainant has a legal or equitable title to or interest in the real property subject of the action; and (2) the deed,
claim, encumbrance, or proceeding claimed to be casting cloud on the title must be shown to be in fact invalid or
inoperative despite its prima facie appearance of validity or efficacy.  In the case at bar, the CA correctly observed
13

that petitioners’ cause of action must necessarily fail mainly in view of the absence of the first requisite.

At the outset, it must be emphasized that the determination of whether or not petitioners sufficiently proved their
claim of ownership or equitable title is substantially a factual issue that is generally improper for Us to delve into.
Section 1, Rule 45 of the Rules of Court explicitly states that the petition for review on certiorari "shall raise only
questions of law, which must be distinctly set forth." In appeals by certiorari, therefore, only questions of law may be
raised, because this Court is not a trier of facts and does not normally undertake the re-examination of the evidence
presented by the contending parties during the trial.  Although there are exceptions  to this general rule as
14 15

eloquently enunciated in jurisprudence, none of the circumstances calling for their application obtains in the case at
bar. Thus, We are constrained to respect and uphold the findings of fact arrived at by both the RTC and the CA.

In any event, a perusal of the records would readily show that petitioners, as aptly observed by the courts below,
indeed, failed to substantiate their claim. Their alleged open, continuous, exclusive, and uninterrupted possession of
the subject property is belied by the fact that respondent siblings, in 2005, entered into a Contract of Lease with the
Avico Lending Investor Co. over the subject lot without any objection from the petitioners.  Petitioners’ inability to
16

offer evidence tending to prove that Bienvenido and Escolastica Ibarra transferred the ownership over the property
in favor of petitioners is likewise fatal to the latter’s claim. On the contrary, on May 28, 1998, Escolastica Ibarra
executed a Deed of Sale covering half of the subject property in favor of all her 10 children, not in favor of
petitioners alone.17

The cardinal rule is that bare allegation of title does not suffice. The burden of proof is on the plaintiff to establish his
or her case by preponderance of evidence.  Regrettably, petitioners, as such plaintiff, in this case failed to discharge
18

the said burden imposed upon them in proving legal or equitable title over the parcel of land in issue. As such, there
is no reason to disturb the finding of the RTC that all 10 siblings inherited the subject property from Bienvenido and
Escolastica Ibarra, and after the respondent siblings sold their aliquot share to the spouses Candelario, petitioners
and respondent spouses became co-owners of the same.

The counterclaim for partition is not barred by prior judgment

This brings us to the issue of partition as raised by respondents in their counterclaim. In their answer to the
counterclaim, petitioners countered that the action for partition has already been barred by res judicata.

The doctrine of res judicata provides that the judgment in a first case is final as to the claim or demand in
controversy, between the parties and those privy with them, not only as to every matter which was offered and
received to sustain or defeat the claim or demand, but as to any other admissible matter which must have been
offered for that purpose and all matters that could have been adjudged in that case.  It precludes parties from
19

relitigating issues actually litigated and determined by a prior and final judgment.  As held in Yusingco v. Ong Hing
20

Lian:21

It is a rule pervading every well-regulated system of jurisprudence, and is put upon two grounds embodied in
various maxims of the common law; the one, public policy and necessity, which makes it to the interest of the state
that there should be an end to litigation — republicae ut sit finis litium; the other, the hardship on the individual that
he should be vexed twice for the same cause — nemo debet bis vexari et eadem causa. A contrary doctrine would
subject the public peace and quiet to the will and neglect of individuals and prefer the gratitude identification of a
litigious disposition on the part of suitors to the preservation of the public tranquility and happiness. 22

The rationale for this principle is that a party should not be vexed twice concerning the same cause. Indeed, res
judicata is a fundamental concept in the organization of every jural society, for not only does it ward off endless
litigation, it ensures the stability of judgment and guards against inconsistent decisions on the same set of facts. 23

There is res judicata when the following requisites are present: (1) the formal judgment or order must be final; (2) it
must be a judgment or order on the merits, that is, it was rendered after a consideration of the evidence or
stipulations submitted by the parties at the trial of the case; (3) it must have been rendered by a court having
jurisdiction over the subject matter and the parties; and (4) there must be, between the first and second actions,
identity of parties, of subject matter and of cause of action.24

In the case at bar, respondent siblings admit that they filed an action for partition docketed as Civil Case No. 02-52,
which the RTC dismissed through an Order dated March 22, 2004 for the failure of the parties to attend the
scheduled hearings. Respondents likewise admitted that since they no longer appealed the dismissal, the ruling
attained finality. Moreover, it cannot be disputed that the subject property in Civil Case No. 02-52 and in the present
controversy are one and the same, and that in both cases, respondents raise the same action for partition. And
lastly, although respondent spouses Candelario were not party-litigants in the earlier case for partition, there is
identity of parties not only when the parties in the case are the same, but also between those in privity with them,
such as between their successors-in-interest. 25

With all the other elements present, what is left to be determined now is whether or not the dismissal of Civil case
No. 02-52 operated as a dismissal on the merits that would complete the requirements of res judicata.

In advancing their claim, petitioners cite Rule 17, Sec. 3 of the Rules of Court, to wit:
Section 3. Dismissal due to fault of plaintiff. — If, for no justifiable cause, the plaintiff fails to appear on the date of
the presentation of his evidence in chief on the complaint, or to prosecute his action for an unreasonable length of
time, or to comply with these Rules or any order of the court, the complaint may be dismissed upon motion of the
defendant or upon the court’s own motion, without prejudice to the right of the defendant to prosecute his
counterclaim in the same or in a separate action. This dismissal shall have the effect of an adjudication upon the
merits, unless otherwise declared by the court.

The afore-quoted provision enumerates the instances when a complaint may be dismissed due to the plaintiff's fault:
(1) if he fails to appear on the date for the presentation of his evidence in chief on the complaint; (2) if he fails to
prosecute his action for an unreasonable length of time; or (3) if he fails to comply with the Rules or any order of the
court. The dismissal of a case for failure to prosecute has the effect of adjudication on the merits, and is necessarily
understood to be with prejudice to the filing of another action, unless otherwise provided in the order of dismissal.
Stated differently, the general rule is that dismissal of a case for failure to prosecute is to be regarded as an
adjudication on the merits and with prejudice to the filing of another action, and the only exception is when the order
of dismissal expressly contains a qualification that the dismissal is without prejudice.  In the case at bar, petitioners
26

claim that the Order does not in any language say that the dismissal is without prejudice and, thus, the requirement
that the dismissal be on the merits is present.

Truly, We have had the occasion to rule that dismissal with prejudice under the above-cited rule amply satisfies one
of the elements of res judicata.  It is, thus, understandable why petitioners would allege res judicata to bolster their
27

claim. However, dismissal with prejudice under Rule 17, Sec. 3 of the Rules of Court cannot defeat the right of a co-
owner to ask for partition at any time, provided that there is no actual adjudication of ownership of shares yet.
Pertinent hereto is Article 494 of the Civil Code, which reads:

Article 494. No co-owner shall be obliged to remain in the co-ownership. Each co-owner may demand at any time
the partition of the thing owned in common, insofar as his share is concerned.

Nevertheless, an agreement to keep the thing undivided for a certain period of time, not exceeding ten years, shall
be valid. This term may be extended by a new agreement.

A donor or testator may prohibit partition for a period which shall not exceed twenty years. Neither shall there be any
partition when it is prohibited by law. No prescription shall run in favor of a co-owner or co-heir against his co-
owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership. (emphasis supplied)

From the above-quoted provision, it can be gleaned that the law generally does not favor the retention of co-
ownership as a property relation, and is interested instead in ascertaining the co-owners’ specific shares so as to
prevent the allocation of portions to remain perpetually in limbo. Thus, the law provides that each co-owner may
demand at any time the partition of the thing owned in common.

Between dismissal with prejudice under Rule 17, Sec. 3 and the right granted to co-owners under Art. 494 of the
Civil Code, the latter must prevail. To construe otherwise would diminish the substantive right of a co-owner through
the promulgation of procedural rules. Such a construction is not sanctioned by the principle, which is too well settled
to require citation, that a substantive law cannot be amended by a procedural rule.  This further finds support in Art.
28

496 of the New Civil Code, viz:

Article 496.Partition may be made by agreement between the parties or by judicial proceedings.  Partition shall be
1âwphi1

governed by the Rules of Court insofar as they are consistent with this Code.

Thus, for the Rules to be consistent with statutory provisions, We hold that Art. 494, as cited, is an exception to Rule
17, Sec. 3 of the Rules of Court to the effect that even if the order of dismissal for failure to prosecute is silent on
whether or not it is with prejudice, it shall be deemed to be without prejudice.

This is not to say, however, that the action for partition will never be barred by res judicata. There can still be res
judicata in partition cases concerning the same parties and the same subject matter once the respective shares of
the co-owners have been determined with finality by a competent court with jurisdiction or if the court determines
that partition is improper for co-ownership does not or no longer exists.
So it was that in Rizal v. Naredo,  We ruled in the following wise:
29

Article 484 of the New Civil Code provides that there is co-ownership whenever the ownership of an undivided thing
or right belongs to different persons. Thus, on the one hand, a co-owner of an undivided parcel of land is an owner
of the whole, and over the whole he exercises the right of dominion, but he is at the same time the owner of a
portion which is truly abstract. On the other hand, there is no co-ownership when the different portions owned by
different people are already concretely determined and separately identifiable, even if not yet technically described.

Pursuant to Article 494 of the Civil Code, no co-owner is obliged to remain in the co-ownership, and his proper
remedy is an action for partition under Rule 69 of the Rules of Court, which he may bring at anytime in so far as his
share is concerned. Article 1079 of the Civil Code defines partition as the separation, division and assignment of a
thing held in common among those to whom it may belong. It has been held that the fact that the agreement of
partition lacks the technical description of the parties’ respective portions or that the subject property was then still
embraced by the same certificate of title could not legally prevent a partition, where the different portions allotted to
each were determined and became separately identifiable.

The partition of Lot No. 252 was the result of the approved Compromise Agreement in Civil Case No. 36-C, which
was immediately final and executory. Absent any showing that said Compromise Agreement was vitiated by fraud,
mistake or duress, the court cannot set aside a judgment based on compromise. It is axiomatic that a compromise
agreement once approved by the court settles the rights of the parties and has the force of res judicata. It cannot be
disturbed except on the ground of vice of consent or forgery.

Of equal significance is the fact that the compromise judgment in Civil Case No. 36-C settled as well the question of
which specific portions of Lot No. 252 accrued to the parties separately as their proportionate shares therein.
Through their subdivision survey plan, marked as Annex "A" of the Compromise Agreement and made an integral
part thereof, the parties segregated and separately assigned to themselves distinct portions of Lot No. 252. The
partition was immediately executory, having been accomplished and completed on December 1, 1971 when
judgment was rendered approving the same. The CA was correct when it stated that no co-ownership exist when
the different portions owned by different people are already concretely determined and separately identifiable, even
if not yet technically described. (emphasis supplied)

In the quoted case, We have held that res judicata applied because after the parties executed a compromise
agreement that was duly approved by the court, the different portions of the owners have already been ascertained.
Thus, there was no longer a co-ownership and there was nothing left to partition. This is in contrast with the case at
bar wherein the co-ownership, as determined by the trial court, is still subsisting 30-70 in favor of respondent
spouses Candelario. Consequently, there is no legal bar preventing herein respondents from praying for the
partition of the property through counterclaim.

The counterclaim for partition is not barred by laches

We now proceed to petitioners’ second line of attack. According to petitioners, the claim for partition is already
barred by laches since by 1999, both Bienvenido and Escolastica Ibarra had already died and yet the respondent
siblings only belatedly filed the action for partition, Civil Case No. 02-52, in 2002. And since laches has allegedly
already set in against respondent siblings, so too should respondent spouses Candelario be barred from claiming
the same for they could not have acquired a better right than their predecessors-in-interest.

The argument fails to persuade.

Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which––by the
exercise of due diligence––could or should have been done earlier. It is the negligence or omission to assert a right
within a reasonable period, warranting the presumption that the party entitled to assert it has either abandoned or
declined to assert it.  The principle is a creation of equity which, as such, is applied not really to penalize neglect or
30

sleeping upon one’s right, but rather to avoid recognizing a right when to do so would result in a clearly inequitable
situation. As an equitable defense, laches does not concern itself with the character of the petitioners’ title, but only
with whether or not by reason of the respondents’ long inaction or inexcusable neglect, they should be barred from
asserting this claim at all, because to allow them to do so would be inequitable and unjust to petitioners. 31
As correctly appreciated by the lower courts, respondents cannot be said to have neglected to assert their right over
the subject property. They cannot be considered to have abandoned their right given that they filed an action for
partition sometime in 2002, even though it was later dismissed. Furthermore, the fact that respondent siblings
entered into a Contract of Lease with Avico Lending Investor Co. over the subject property is evidence that they are
exercising rights of ownership over the same.

The CA erred in approving the Agreement for Subdivision

There is merit, however, in petitioners’ contention that the CA erred in approving the proposal for partition submitted
by respondent spouses. Art. 496, as earlier cited, provides that partition shall either be by agreement of the parties
or in accordance with the Rules of Court. In this case, the Agreement of Subdivision allegedly executed by
respondent spouses Candelario and petitioners cannot serve as basis for partition, for, as stated in the pre-trial
order, herein respondents admitted that the agreement was a falsity and that petitioners never took part in preparing
the same. The "agreement" was crafted without any consultation whatsoever or any attempt to arrive at mutually
acceptable terms with petitioners. It, therefore, lacked the essential requisite of consent. Thus, to approve the
agreement in spite of this fact would be tantamount to allowing respondent spouses to divide unilaterally the
property among the co-owners based on their own whims and caprices. Such a result could not be countenanced.

To rectify this with dispatch, the case must be remanded to the court of origin, which shall proceed to partition the
property in accordance with the procedure outlined in Rule 69 of the Rules of Court.

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

SO ORDERED.