Title

Spouses Co Chien vs. Sta. Lucia Realty and Development, Inc.

Case Ponente Decision Date

G.R. No. 162090 PUNO, C.J Jan 31, 2007

A couple seeks a refund of their down payment on a property purchase,

claiming that the contract was void due to the lack of required documents,
but the Supreme Court rules in favor of the respondents, stating that the
absence of the documents did not automatically invalidate the contract and
the petitioners were estopped from raising the issue due to their delay in
asserting their rights and attempts to renegotiate the contract.

Case Digest (G.R. No. 162090)

Comprehensive

Facts:

In the case of "Spouses Howard T. Co Chien and Susan Y. Co Chien v. Sta. Lucia
Realty & Development, Inc. and Alsons Land Corporation," the petitioners, spouses
Howard T. Co Chien and Susan Y. Co Chien, entered into a Contract to Sell with the
respondents, Sta. Lucia Realty & Development, Inc. (Sta. Lucia) and Alsons Land
Corporation (Alsons), on December 20, 1995. The contract involved the purchase of
Lot No. 16, Block No. 1, Phase I of the Eagle Ridge Golf and Residential Estates (Eagle
Ridge) in General Trias, Cavite, for a lump sum price of PHP 1,293,300.00. The
petitioners paid a down payment of PHP 581,535.00 after receiving a 10% discount on
the purchase price. The contract stipulated that the balance was to be paid upon
delivery of the title to the land. At the time of the contract's execution, the
respondents did not possess a License to Sell and a Certi!cate of Registration from
the Housing and Land Use Regulatory Board (HLURB), which were only issued in
July 1997. On January 19, 1998, Sta. Lucia informed the petitioners that the title was
ready for delivery and demanded the balance payment. Instead of paying, the
petitioners attempted to negotiate for a further discount or exchange the property for
a better lot. When they failed to pay within seven days, the respondents forfeited the
10% discount. On June 16, 1999, the petitioners demanded a refund of their down
payment, claiming the contract was void due to the lack of required documents at
the time of execution. The HLURB Arbiter initially ruled in favor of the petitioners,
but the HLURB Board reversed this decision. The O"ce of the President and the
Court of Appeals subsequently a"rmed the HLURB Board's decision, leading to the
present petition.

Issue:

1. Does the absence of the Certi!cate of Registration and License to Sell at the time
of execution render the Contract to Sell and its addendum null and void?

2. Are the petitioners guilty of laches or estoppel?

Ruling:

1. The Supreme Court ruled that the absence of the Certi!cate of Registration and
License to Sell at the time of execution did not render the Contract to Sell and its
addendum null and void.

2. The Supreme Court found the petitioners guilty of laches or estoppel.

Ratio:

The Supreme Court held that while Presidential Decree No. 957 (P.D. 957) mandates
the possession of a Certi!cate of Registration and License to Sell before selling
subdivision lots or condominium units, it does not stipulate that the absence of these
documents automatically nulli!es a contract. The law penalizes the sale without
these documents but does not void contracts that are otherwise validly entered into.
The Court emphasized that P.D. 957 aims to prevent fraudulent practices in the real
estate industry and ensure developers' compliance with their obligations. However,
in this case, there was no evidence of fraud or bad faith by the respondents. The
respondents had applied for the necessary documents, which were issued before the
demand for the balance payment. The petitioners' delay in asserting their rights and
their attempt to renegotiate the contract indicated a tacit rati!cation of the contract's
validity. Consequently, the petitioners were estopped from claiming the contract was
void due to the lack of the required documents at the time of execution. The Court
a"rmed the decision of the Court of Appeals, which upheld the validity of the
Contract to Sell and denied the petitioners' claim for a refund.
 Title
Spouses Co Chien vs. Sta. Lucia Realty and Development, Inc.

Case Ponente Decision Date

G.R. No. 162090 PUNO, C.J Jan 31, 2007

A couple seeks a refund of their down payment on a property purchase,

claiming that the contract was void due to the lack of required documents,
but the Supreme Court rules in favor of the respondents, stating that the
absence of the documents did not automatically invalidate the contract and
the petitioners were estopped from raising the issue due to their delay in
asserting their rights and attempts to renegotiate the contract.

FIRST DIVISION

G.R. No. 162090. January 31, 2007.

SPOUSES HOWARD T. CO CHIEN and SUSAN Y. CO CHIEN, petitioners, vs. STA. LUCIA
REALTY & DEVELOPMENT, INC., and ALSONS LAND CORPORATION, respondents.

DECISION

PUNO, C.J p:

This case is a Petition for Certiorari under Rule 45 of the Revised Rules of Court
appealing the decision of the Court of Appeals in CA G.R. SP No. 78161 entitled "Spouses
Howard T. Co Chien & Susan Y. Co Chien v. Sta. Lucia Realty & Development, Inc. and Alsons
Land Corporation."

The facts are undisputed.

Sometime in December 1995, private respondents Sta. Lucia Realty & Development,
Inc. (Sta. Lucia) and Alsons Land Corporation (Alsons) o!ered for sale to the general public
parcels of land and golf shares to the Eagle Ridge Golf and Residential Estates (Eagle Ridge)
in General Trias, Cavite. 1 Sta. Lucia, as the developer, owns 60% of Eagle Ridge while
Alsons, the owner of the land, owns the remaining 40% by virtue of a joint venture
agreement. Fil-Estate Realty Corporation (Fil-Estate) was commissioned to sell the
subdivision lots and/or golf shares under an Exclusive Marketing Agreement executed on
December 5, 1995. 2

On December 20, 1995, Sta. Lucia and Alsons entered into a Contract to Sell, including
an addendum to the same, with the petitioners, spouses Howard T. Co Chien and Susan Y.
Co Chien (Spouses Co Chien). According to the Contract to Sell, Spouses Co Chien shall
purchase Lot No. 16, Block No. 1, Phase I of Eagle Ridge with an area of three hundred one
(301) square meters for a lump sum price of one million two hundred ninety three thousand
three hundred pesos (P1,293,300.00), with one half of the purchase price as down payment
to be paid upon signing the contract and the balance upon delivery of the title to the land to
Spouses Co Chien. The petitioners were also given a 10% discount on the purchase price and
thereafter they paid a down payment of "ve hundred eighty one thousand "ve hundred
thirty "ve pesos (P581,535.00), after the discount. It was also agreed in the addendum to the
Contract to Sell that the 10% discount deducted from the down payment shall be forfeited
and added to the balance, should Spouses Co Chien fail to pay the said balance within seven
(7) days from notice that the title to the subject property is ready for delivery. 3

At the time the Contract to Sell was executed, the private respondents did not possess
a License to Sell and a Certi"cate of Registration from the Housing and Land Use Regulatory
Board (HLURB) as required under Sections 4 and 5 of Presidential Decree No. 957 (P.D. 957).
The License and Certi"cate were issued only in July 1997, one year and six months after the
execution of the Contract to Sell between the petitioners and the private respondents. 4

On January 19, 1998, Sta. Lucia informed the petitioners that the title to the property
was ready for delivery and demanded the payment of the balance of the purchase price.
Instead of paying the balance, Spouses Co Chien tried to negotiate for a further discount or,
in the alternative, to exchange the property for a better lot in Eagle Ridge. When Spouses Co
Chien failed to pay within seven days from notice of the availability of the title, the private
respondents forfeited the 10% discount previously given to the petitioners in accordance
with the contract and its addendum. 5

On June 16, 1999, Spouses Co Chien sent a written demand to Sta. Lucia for the
refund of their down payment on the ground that the Contract to Sell was void for the
reason that at the time of its execution, December 20, 1995, the private respondents had no
Certi"cate of Registration and License to Sell as required by Sections 4 and 5 of P.D. 957. 6
On July 6, 1999, failing to receive a favorable response from the private respondents,
Spouses Co Chien "led a complaint with the HLURB. 7

On May 30, 2001, the HLURB Arbiter ruled in favor of Spouses Co Chien ordering Sta.
Lucia and Alsons to refund the down payment with legal interest from July 6, 1999 and to
further pay the petitioners P10,000.00 as attorney's fees. The HLURB Arbiter ruled that the
lack of Certi"cate of Registration and License to Sell at the time of execution of the Contract
to Sell resulted in the nulli"cation of the contract. 8

On appeal, the HLURB Board of Commissioners (the HLURB Board) reversed the
HLURB Arbiter's decision and held that the Contract to Sell was valid and ordered Spouses
Co Chien to pay the private respondents the balance of P646,150.00 without penalty interest.
The HLURB Board also ordered Sta. Lucia and Alsons to pay jointly and severally an
administrative "ne of P20,000.00 for two counts of violation of Section 4 of P.D. 957 and
another P20,000.00 for two counts of violation of Section 5 of the same decree. 9

Spouses Co Chien then appealed to the O#ce of the President. In a decision dated
June 10, 2003, the O#ce of the President a#rmed the decision of the HLURB Board in toto.
Not satis"ed with the aforementioned ruling, Spouses Co Chien "led a Petition for Review
with the Court of Appeals. 10

On February 10, 2004, the Court of Appeals denied the petition and a#rmed the
decision of the O#ce of the President. 11

Hence, this petition.

The primary issues in this case are as follows: (1) whether the absence of the
Certi"cate of Registration and License to Sell at the time of execution rendered the Contract
to Sell and its addendum null and void; and (2) whether the petitioners are guilty of laches
or estoppel. CTacSE

We will discuss the issues seriatim.

It is the contention of the petitioners that the lack of Certi"cate of Registration (the
Certi"cate) and License to Sell (the License) on the part of the private respondents at the
time the contract was executed rendered the Contract to Sell null and void, thus, entitling
them to a refund of their down payment. Spouses Co Chien aver that the use of the words
"shall not" and the phrase "unless he shall have "rst obtained a license to sell within two
weeks from the registration of such project" in Section 5 of P.D. 957 indicate that the absence
of the Certi"cate and License render the contract null and void. 12 The private respondents,
on the other hand, state that the provision of law invoked by Spouses Co Chien does not
provide that the absence of the Certi"cate and License at the time the contract was executed
would automatically invalidate the contract. 13 The private respondents assert that the Sec.
5, P.D. 957 is merely directory as it does not a!ect substantial rights, does not relate to the
essence of a sale and compliance therewith is simply a matter of administrative
convenience. 14

Sections 4 and 5 of P.D. 957 state:

Sec. 4. Registration of Projects

...

The owner or the real estate dealer interested in the sale of lots or units, respectively,
in such subdivision project or condominium project shall register the project with the
Authority by "ling therewith a sworn registration statement containing the following
information:

...

The subdivision project of the condominium project shall be deemed registered upon
completion of the above publication requirement. The fact of such registration shall be
evidenced by a registration certi"cate to be issued to the applicant-owner or dealer.

Sec. 5. License to Sell. Such owner or dealer to whom has been issued a registration
certi"cate shall not, however, be authorized to sell any subdivision lot or condominium unit
in the registered project unless he shall have "rst obtained a license to sell the project within
two weeks from the registration of such project.

The Authority, upon proper application therefor, shall issue to such owner or dealer
of a registered project a license to sell the project if, after an examination of the registration
statement "led by said owner or dealer and all the pertinent documents attached thereto, he
is convinced that the owner or dealer is of good repute, that his business is "nancially stable,
and that the proposed sale of the subdivision lots or condominium units to the public would
not be fraudulent. 15

The same decree further states:

Sec. 38. Administrative Fines. The Authority may prescribe and impose "nes not
exceeding ten thousand pesos for violations of the provisions of this Decree or of any rule or
regulation thereunder. Fines shall be payable to the Authority and enforceable through writs
of execution in accordance with the provisions of the Rules of Court.

Sec. 39. Penalties. Any person who shall violate any of the provisions of this Decree
and/or any rule or regulation that may be issued pursuant to this Decree shall, upon
conviction, be punished by a "ne of not more than twenty thousand (P20,000.00) pesos
and/or imprisonment of not more than ten years: Provided, That in the case of corporations,
partnership, cooperatives, or associations, the President, Manager or Administrator or the
person who has charge of the administration of the business shall be criminally responsible
for any violation of this Decree and/or the rules and regulations promulgated pursuant
thereto. 16

P.D. 957 is a law that seeks to regulate the sale of subdivision lots and condominiums
in view of the increasing number of incidents wherein "real estate subdivision owners,
developers, operators, and/or sellers have reneged on their representations and obligations
to provide and maintain properly" 17 the basic requirements and amenities, as well as
"reports of alarming magnitude . . . of swindling and fraudulent manipulations perpetrated
by unscrupulous subdivision and condominium sellers and operators." 18 As such, P.D. 957
requires the registration not just of the developers, sellers, brokers and/or owners of the
project but also of the project itself. 19 Upon registration of the project, a license to sell must
be obtained prior to the sale of the subdivision lots or condominium units therein. 20 The
law also provides for the suspension and revocation of the registration and license in certain
instances, as well as the procedure to be observed in the event thereof. 21 Finally, the law
provides for administrative "nes and other penalties in case of violation of, or non-
compliance with its provisions. 22

A review of the relevant provisions of P.D. 957 reveals that while the law penalizes the
selling of subdivision lots and condominium units without prior issuance of a Certi"cate of
Registration and License to Sell by the HLURB, it does not provide that the absence thereof
will automatically render a contract, otherwise validly entered, void. The penalty imposed
by the decree is the general penalty provided for the violation of any of its provisions. 23 It is
well-settled in this jurisdiction that the clear language of the law shall prevail. 24 This
principle particularly enjoins strict compliance with provisions of law which are penal in
nature, or when a penalty is provided for the violation thereof. With regard to P.D. 957,
nothing therein provides for the nulli"cation of a contract to sell in the event that the seller,
at the time the contract was entered into, did not possess a certi"cate of registration and
license to sell. 25 Absent any speci"c sanction pertaining to the violation of the questioned
provisions (Secs. 4 and 5), the general penalties provided in the law shall be applied. The
general penalties for the violation of any provisions in P.D. 957 are provided for in Sections
38 and 39. As can clearly be seen in the aforequoted provisions, the same do not include the
nulli"cation of contracts that are otherwise validly entered. aScIAC

As found by the Court of Appeals, in the case at bar, the requirements of Sections 4
and 5 of P.D. 957 do not go into the validity of the contract, such that the absence thereof
would automatically render the contract null and void. It is rather more of an administrative
convenience in order to allow for a more e!ective regulation of the industry. 26 While it is
the intent of the prohibition in Section 5 of P.D. 957 "to prevent cases of swindling and
fraudulent manipulations perpetrated by unscrupulous subdivision and condominium
sellers and operators" 27 and to ensure that "penalties be imposed on fraudulent practices
and manipulations committed in connection therewith," 28 such does not obtain in this case,
as it is undisputed that the title to the subject property has been available for more than a
year, and the Eagle Ridge project was almost 100% completed, before Spouses Co Chien
decided to have the Contract declared void and to seek a refund of their down payment.
Contrary to Spouses Co Chien's bare allegations of bad faith on the part of the private
respondents, the Court of Appeals found that at the time the Contract to Sell was executed,
the applications for the Certi"cate and the License were already pending with the HLURB
but were only issued several months thereafter. 29 More importantly, when Spouses Co
Chien received notice of the availability of the title to the subject property, the private
respondents had long since been issued the Certi"cate and License. It was in fact Spouses
Co Chien who, instead of paying the balance as required in the contract, sought to
renegotiate the same, and failing therein, sought to nullify the contract a year and a half after
notice that the title to the subject property, free from any liens and encumbrance, was
already available for delivery.

One of the purposes of P.D. 957 is to discourage and prevent unscrupulous owners,
developers, agents and sellers from reneging on their obligations and representations to the
detriment of innocent purchasers. The law mandates HLURB to closely regulate, supervise
and monitor the real estate industry, particularly residential developments such as
subdivisions and condominium projects. To this end, P.D. 957 provides for the issuance,
suspension, revocation and even the outright denial of registration and license to
developers, agents and the project itself, as well as penalties for the non-compliance with
the requirements provided therein. It does not, however, provide for the nulli"cation of a
contract, due to the lack of registration and license at the moment of execution, which in
this case was thereafter undisputedly issued by HLURB. As correctly averred by respondent
Alsons, the requirement for registration and license is primarily directed at preventing
fraudulent schemes from being perpetrated on the public who seek to have their own abode.
30 No fraud has been alleged, much less proven, by Spouses Co Chien in the present case.
The lack of certi"cate and registration, without more, while penalized under the law, is not
in and of itself su#cient to render a contract void. Such a de"ciency, however, together with
other relevant factors may be duly considered in nullifying a contract, should the
circumstances so demand.

The second issue in the instant petition is whether or not estoppel bars the claim of
Spouses Co Chien. There are generally three kinds of estoppel: (1) estoppel in pais; (2)
estoppel by deed; and (3) estoppel by laches. In the "rst classi"cation, a person is considered
in estoppel if by his conduct, representations or admissions or silence when he ought to
speak out, whether intentionally or through culpable negligence, "causes another to believe
certain facts to exist and such other rightfully relies and acts on such belief, as a
consequence of which he would be prejudiced if the former is permitted to deny the
existence of such facts." 31 Estoppel by deed, on the other hand, occurs when a party to a
deed and his privies are precluded from denying any material fact stated in the said deed as
against the other party and his privies. 32 Estoppel by laches is considered an equitable
estoppel wherein a person who failed or neglected to assert a right for an unreasonable and
unexplained length of time is presumed to have abandoned or otherwise declined to assert
such right and cannot later on seek to enforce the same, to the prejudice of the other party,
who has no notice or knowledge that the former would assert such rights and whose
condition has so changed that the latter cannot, without injury or prejudice, be restored to
his former state. 33

In the present case, Spouses Co Chien only demanded a refund and alleged the
nullity of the Contract due to lack of the Certi"cate and License after it failed to renegotiate
for a better lot or a bigger discount, or three and a half (3-1/2) years after the execution of the
contract, and one and a half (1-1/2) years from notice of the availability of the title and the
demand for full payment. Due to the unexplained delay in the assertion of their rights
despite the opportunity to do so, Spouses Co Chien are now estopped from raising the issue
of lack of the Certi"cate and License, particularly since the same have long since been
issued to the private respondents. In fact, there is nothing left for the ful"llment of the
obligations set forth in the Contract to Sell and its addendum, except for the payment of the
balance by Spouses Co Chien so that the title to the property can "nally be transferred in
their name. Further, the act of renegotiating the Contract to Sell may be considered a tacit
rati"cation of whatever defect the contract allegedly su!ers from.

It is well-settled that the terms of a contract have the force of law between the parties.
34 As such, the terms thereof shall govern their relationship, rights and obligations in
connection with the same. Obligations arising from contracts should be complied with in
good faith. Unless the stipulations in the contract are contrary to law, morals, good customs,
public order or public policy, the same are binding as between the parties. 35 In the instant
case, as previously discussed, the Contract to Sell between Spouses Co Chien and private
respondents Sta. Lucia and Alsons has all the essential requisites of a valid and binding
contract. While there is non-compliance with the requirements in Sections 4 and 5 of P.D.
957 due to the lack of the Certi"cate and License at the moment of execution, such defect
does not a!ect the intrinsic validity of the contract, particularly in this case wherein the said
Certi"cate and License have been issued prior to the demand for the payment of the balance
of the purchase price and the project is almost 100% complete and operational.

IN VIEW WHEREOF, the petition is DENIED. The decision of the Court of Appeals in
CA-G.R. SP No. 78161 is AFFIRMED in toto.

Costs against petitioners.

SO ORDERED.

Sandoval-Gutierrez, Corona, Azcuna and Garcia, JJ., concur.

 Title
Philippine Carpet Manufacturing Corp. vs. Tagyamon

Case Ponente Decision Date

G.R. No. 191475 PERALTA, J Dec 11, 2013

The Supreme Court a!rms the Court of Appeals' decision to reinstate

employees and award them full backwages and moral damages, ruling that
their termination was invalid and their quitclaims were illegal, applying the
doctrine of stare decisis based on the factual circumstances of a previous
case.

Case Digest (G.R. No. 191475)

Comprehensive

Facts:

Petitioner Philippine Carpet Manufacturing Corporation (PCMC) is a corporation

engaged in the manufacturing of wool and yarn carpets and rugs. The respondents,
Ignacio B. Tagyamon, Pablito L. Luna, Fe B. Badayos, Grace B. Marcos, Rogelio C.
Nemis, Roberto B. Ilao, Anicia D. Dela Cruz, and Cynthia L. Comandao, were regular
and permanent employees of PCMC. On March 15, 2004, Tagyamon, Luna, Badayos,
Dela Cruz, and Comandao received a memorandum of dismissal citing a slump in
market demand and the need to downsize due to un-competitiveness and external
factors like the September 11 attacks and the Middle East war. They were informed
that their employment would be terminated e"ective April 15, 2004. Marcos, Ilao,
and Nemis claimed they were dismissed on March 31, 2004, for similar reasons,
although PCMC argued they voluntarily retired and executed Deeds of Release,
Waiver, and Quitclaim.

Respondents #led separate complaints for illegal dismissal, which were

consolidated. They relied on a previous Supreme Court decision in the Philippine
Carpet Employees Association (PHILCEA) case, arguing that PCMC did not su"er
losses and that their acceptance of separation pay and signing of quitclaims did not
bar their claims. PCMC defended its actions as a management prerogative and
argued that respondents #led their complaints belatedly, invoking laches and
estoppel.
The Labor Arbiter (LA) dismissed the complaints for lack of merit, #nding that
respondents voluntarily retired and were re-employed on a contractual basis before
being terminated and paid separation bene#ts. The National Labor Relations
Commission (NLRC) a!rmed the LA's decision, emphasizing laches. The Court of
Appeals (CA) reversed these decisions, refused to apply laches, and applied the
doctrine of stare decisis based on the PHILCEA case, ordering respondents'
reinstatement with backwages and moral damages.

Issue:

1. Was the termination of respondents' employment valid?

2. Should the doctrine of stare decisis be applied based on the PHILCEA case?

3. Are the quitclaims and waivers executed by the respondents valid?

4. Can the principle of laches be invoked to bar respondents' claims?

Ruling:

1. The termination of respondents' employment was invalid.

2. The doctrine of stare decisis should be applied based on the PHILCEA case.

3. The quitclaims and waivers executed by the respondents are invalid.

4. The principle of laches cannot be invoked to bar respondents' claims.

Ratio:

The Supreme Court upheld the CA's decision, a!rming that the respondents'
termination was invalid. The Court reiterated that laches, being a doctrine in equity,
cannot be invoked to resist the enforcement of an existing legal right when the claim
is #led within the statutory period. The respondents #led their complaints within the
four-year prescriptive period, making laches inapplicable.

The Court applied the doctrine of stare decisis, noting that the factual circumstances
of the present case were substantially similar to those in the PHILCEA case. Both
cases involved the same period, issuance of similar memoranda, implementation of
voluntary retirement and retrenchment programs, and execution of deeds of release,
waiver, and quitclaim. The Court found that PCMC acted in bad faith by
misrepresenting its #nancial condition to justify the termination programs, as
evidenced by its substantial earnings, purchase of new machinery, declaration of
cash dividends, hiring of new employees, and authorization of overtime work.

The Court also held that the quitclaims and waivers executed by the respondents
were invalid because they were based on PCMC's fraudulent misrepresentation of its
#nancial condition. The respondents' consent was vitiated by mistake or fraud,
making the quitclaims illegal. The amounts received by respondents as
consideration for signing the quitclaims should be deducted from their respective
monetary awards.
 Title
Philippine Carpet Manufacturing Corp. vs. Tagyamon

Case Ponente Decision Date

G.R. No. 191475 PERALTA, J Dec 11, 2013

The Supreme Court a!rms the Court of Appeals' decision to reinstate

employees and award them full backwages and moral damages, ruling that
their termination was invalid and their quitclaims were illegal, applying the
doctrine of stare decisis based on the factual circumstances of a previous
case.

THIRD DIVISION

G.R. No. 191475. December 11, 2013.

PHILIPPINE CARPET MANUFACTURING CORPORATION, PACIFIC CARPET

MANUFACTURING CORPORATION, MR. PATRICIO LIM and MR. DAVID LIM, petitioners, vs.
IGNACIO B. TAGYAMON, PABLITO L. LUNA, FE B. BADAYOS, GRACE B. MARCOS, ROGELIO
C. NEMIS, ROBERTO B. ILAO, ANICIA D. DELA CRUZ and CYNTHIA L. COMANDAO,
respondents.

DECISION

PERALTA, J p:

The Case

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the Court of Appeals (CA) Decision 1 dated July 7, 2009 and Resolution 2 dated February 26,
2010 in CA-G.R. SP No. 105236. The assailed decision granted the petition for certiorari "led
by respondents Ignacio B. Tagyamon (Tagyamon), Pablito I. Luna (Luna), Fe B. Badayos
(Badayos), Grace B. Marcos (Marcos), Rogelio C. Nemis (Nemis), Roberto B. Ilao (Ilao), Anicia
D. Dela Cruz (Dela Cruz), and Cynthia L. Comandao (Comandao), the dispositive portion of
which reads:
 WHEREFORE, the petition is GRANTED. The private respondent is hereby ordered to
reinstate the petitioners with full backwages less the amounts they received as separation
pays. In case reinstatement would no longer be feasible because the positions previously
held no longer exist, the private respondent shall pay them backwages plus, in lieu of
reinstatement, separation pays equal to one (1) month pay, or one-half (1/2) month pay for
every year of service, whichever is higher. In addition, the private respondent is hereby
ordered to pay the petitioners moral damages in the amount of P20,000.00 each.

SO ORDERED. 3

The Facts

Petitioner Philippine Carpet Manufacturing Corporation (PCMC) is a corporation

registered in the Philippines engaged in the business of manufacturing wool and yarn
carpets and rugs. 4 Respondents were its regular and permanent employees, but were
a#ected by petitioner's retrenchment and voluntary retirement programs. cEASTa

On March 15, 2004, Tagyamon, 5 Luna, 6 Badayos, 7 Dela Cruz, 8 and Comandao 9
received a uniformly worded Memorandum of dismissal, to wit:

This is to inform you that in view of a slump in the market demand for our products
due to the un-competitiveness of our price, the company is constrained to reduce the
number of its workforce. The long-term e#ects of September 11 and the war in the Middle
East have greatly a#ected the viability of our business and we are left with no recourse but
to reorganize and downsize our organizational structure.

We wish to inform you that we are implementing a retrenchment program in

accordance with Article 283 of the Labor Code of the Philippines, as amended, and its
implementing rules and regulations.

In this connection, we regret to advise you that you are one of those a#ected by the
said exercise, and your employment shall be terminated e#ective at the close of working
hours on April 15, 2004.

Accordingly, you shall be paid your separation pay as mandated by law. You will no
longer be required to report for work during the 30-day notice period in order to give you
more time to look for alternative employment. However, you will be paid the salary
corresponding to the said period. We shall process your clearance and other documents and
you may claim the payables due you on March 31, 2004.

Thank you for your services and good luck to your future endeavors. 10

As to Marcos, Ilao, and Nemis, they claimed that they were dismissed e#ective March
31, 2004, together with "fteen (15) other employees on the ground of lack of market/slump in
demand. 11 PCMC, however, claimed that they availed of the company's voluntary retirement
program and, in fact, voluntarily executed their respective Deeds of Release, Waiver, and
Quitclaim. 12 AcaEDC

Claiming that they were aggrieved by PCMC's decision to terminate their

employment, respondents "led separate complaints for illegal dismissal against PCMC,
Paci"c Carpet Manufacturing Corporation, Mr. Patricio Lim and Mr. David Lim. These cases
were later consolidated. Respondents primarily relied on the Supreme Court's decision in
Philippine Carpet Employees Association (PHILCEA) v. Hon. Sto. Tomas (Philcea case), 13 as
to the validity of the company's retrenchment program. They further explained that PCMC
did not, in fact, su#er losses shown by its acts prior to and subsequent to their termination.
14 They also insisted that their acceptance of separation pay and signing of quitclaim is not a
bar to the pursuit of illegal dismissal case. 15

PCMC, for its part, defended its decision to terminate the services of respondents
being a necessary management prerogative. It pointed out that as an employer, it had no
obligation to keep in its employ more workers than are necessary for the operation of his
business. Thus, there was an authorized cause for dismissal. Petitioners also stressed that
respondents belatedly "led their complaint as they allowed almost three years to pass
making the principle of laches applicable. Considering that respondents accepted their
separation pay and voluntarily executed deeds of release, waiver and quitclaim, PCMC
invoked the principle of estoppel on the part of respondents to question their separation
from the service. Finally, as to Marcos, Ilao and Nemis, PCMC emphasized that they were
not dismissed from employment, but in fact they voluntarily retired from employment to
take advantage of the company's program. 16

On August 23, 2007, Labor Arbiter (LA) Donato G. Quinto, Jr. rendered a Decision
dismissing the complaint for lack of merit. 17 The LA found no $aw in respondents'
termination as they voluntarily opted to retire and were subsequently re-employed on a
contractual basis then regularized, terminated from employment and were paid separation
bene"ts. 18 In view of respondents' belated "ling of the complaint, the LA concluded that
such action is a mere afterthought designed primarily for respondents to collect more
money, taking advantage of the 2006 Supreme Court decision. 19

On appeal, the National Labor Relations Commission (NLRC) sustained the LA

decision. 20 In addition to the LA ratiocination, the NLRC emphasized the application of the
principle of laches for respondents' inaction for an unreasonable period. ECDaTI

Still undaunted, respondents elevated the matter to the CA in a petition for certiorari.
In reversing the earlier decisions of the LA and the NLRC, the CA refused to apply the
principle of laches, because the case was instituted prior to the expiration of the prescriptive
period set by law which is four years. It stressed that said principle cannot be invoked
earlier than the expiration of the prescriptive period. 21 Citing the Court's decision in the
Philcea case, the CA applied the doctrine of stare decisis, in view of the similar factual
circumstances of the cases. As to Ilao, Nemis and Marcos, while acknowledging their
voluntary resignation, the CA found the same not a bar to the illegal dismissal case because
they did so on the mistaken belief that PCMC was losing money. 22 With the foregoing
"ndings, the CA ordered that respondents be reinstated with full backwages less the
amounts they received as separation pay. In case of impossibility of reinstatement, the CA
ordered PCMC to pay respondents backwages and in lieu of reinstatement, separation pay
equal to one month pay or 1/2 month pay for every year of service whichever is higher, plus
moral damages. 23

The Issues

Aggrieved, petitioners come before the Court in this petition for review on certiorari
based on this ground, to wit:

IN RENDERING ITS DISPUTED DECISION AND RESOLUTION, THE COURT A QUO

HAS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND/OR
ESTABLISHED JURISPRUDENCE.
 a) Res Judicata should not be followed if to follow it is to perpetuate error (Philippine
Trust Co., and Smith Bell & Co. vs. Mitchell, 59 Phil. 30, 36 (1933). The (Supreme) Court is not
precluded from rectifying errors of judgment if blind and stubborn adherence to the
doctrine of immutability of "nal judgments would involve the sacri"ce of justice for
technicality (Heirs of Maura So vs. Obliosca, G.R. No. 147082, January 28, 2008, 542 SCRA
406) DaIACS

b) Not all waivers and quitclaims are invalid as against public policy. Waivers that
represent a voluntary and reasonable settlement of the laborer's claims are legitimate and
should be respected by the Court as the law between the parties (Gamo-gamo vs. PNOC
Shipping and Transport Corp., G.R. No. 141707, May 2, 2002; Alcasero vs. NLRC, 288 SCRA
129) Where the persons making the waiver has done so voluntarily, with a full
understanding thereof, and the consideration for the quitclaim is credible and reasonable,
the transaction must be recognized as valid and binding undertaking (Periquet vs. NLRC,
186 SCRA 724 1990;Magsalin vs. Coca Cola Bottlers Phils., Inc. vs. National Organization of
Working Men (N.O.W.M.], G.R. No. 148492, May 2, 2003). 24

Petitioners contend that the Philcea case decided by this Court and relied upon by the
CA in the assailed decision was based on erroneous factual "ndings, inapplicable "nancial
statement, as well as erroneous analysis of such "nancial statements. 25 They, thus, implore
the Court to revisit the cited case in order to dispense with substantial justice. 26 They
explain that the Court made conclusions based on erroneous information. Petitioners also
insist that the doctrines of res judicata and law of the case are not applicable, considering
that this case does not involve the same parties as the Philcea case. 27 They likewise point
out that not all respondents were involuntarily separated on the ground of redundancy as
some of them voluntarily availed of the company's Voluntary Separation Program. 28 They
further contend that respondents are guilty not only of laches but also of estoppel in view of
their inaction for an unreasonable length of time to assail the alleged illegal dismissal and in
voluntarily executing a release, quitclaim and waiver. 29

The Court's Ruling

Laches

Laches has been de"ned as the failure or neglect for an unreasonable and
unexplained length of time to do that which by exercising due diligence, could or should
have been done earlier, thus, giving rise to a presumption that the party entitled to assert it
either has abandoned or declined to assert it. 30 It has been repeatedly 31 held by the Court
that:

. . . Laches is a doctrine in equity while prescription is based on law. Our courts are basically
courts of law not courts of equity. Thus, laches cannot be invoked to resist the enforcement
of an existing legal right. . . . Courts exercising equity jurisdiction are bound by rules of law
and have no arbitrary discretion to disregard them. In Zabat Jr. v. Court of Appeals . . ., this
Court was more emphatic in upholding the rules of procedure. We said therein: ADTCaI

As for equity which has been aptly described as a "justice outside legality," this is
applied only in the absence of, and never against, statutory law or, as in this case, judicial
rules of procedure. Aequetas nunguam contravenit legis. The pertinent positive rules being
present here, they should preempt and prevail over all abstract arguments based only on
equity.

Thus, where the claim was "led within the four-year statutory period, recovery
therefore cannot be barred by laches. Courts should never apply the doctrine of laches
earlier than the expiration of time limited for the commencement of actions at law." 32

An action for reinstatement by reason of illegal dismissal is one based on an injury to

the complainants' rights which should be brought within four years from the time of their
dismissal pursuant to Article 1146 33 of the Civil Code.Respondents' complaint "led almost 3
years after their alleged illegal dismissal was still well within the prescriptive period. Laches
cannot, therefore, be invoked yet. 34 To be sure, laches may be applied only upon the most
convincing evidence of deliberate inaction, for the rights of laborers are protected under the
social justice provisions of the Constitution and under the Civil Code. 35

Stare Decisis

The main issue sought to be determined in this case is the validity of respondents'
dismissal from employment. Petitioners contend that they either voluntarily retired from
the service or terminated from employment based on an authorized cause. The LA and the
NLRC are one in saying that the dismissal was legal. The CA, however, no longer discussed
the validity of the ground of termination. Rather, it applied the Court's decision in the
Philcea case where the same ground was thoroughly discussed. In other words, the
appellate court applied the doctrine of stare decisis and reached the same conclusion as the
earlier case.

Under the doctrine of stare decisis, when a court has laid down a principle of law as
applicable to a certain state of facts, it will adhere to that principle and apply it to all future
cases in which the facts are substantially the same, even though the parties may be di#erent.
36 Where the facts are essentially di#erent, however, stare decisis does not apply, for a
perfectly sound principle as applied to one set of facts might be entirely inappropriate when
a factual variant is introduced. 37 aHIDAE

The question, therefore, is whether the factual circumstances of this present case are
substantially the same as the Philcea case.

We answer in the a!rmative.

This case and the Philcea case involve the same period which is March to April 2004;
the issuance of Memorandum to employees informing them of the implementation of the
cost reduction program; the implementation of the voluntary retirement program and
retrenchment program, except that this case involves di#erent employees; the execution of
deeds of release, waiver, and quitclaim, and the acceptance of separation pay by the a#ected
employees.

The illegality of the basis of the implementation of both voluntary retirement and
retrenchment programs of petitioners had been thoroughly ruled upon by the Court in the
Philcea case. It discussed the requisites of both retrenchment and redundancy as authorized
causes of termination and that petitioners failed to substantiate them. In ascertaining the
bases of the termination of employees, it took into consideration petitioners' claim of
business losses; the purchase of machinery and equipment after the termination, the
declaration of cash dividends to stockholders, the hiring of 100 new employees after the
retrenchment, and the authorization of full blast overtime work for six hours daily. These,
said the Court, are inconsistent with petitioners' claim that there was a slump in the demand
for its products which compelled them to implement the termination programs. In arriving
at its conclusions, the Court took note of petitioners' net sales, gross and net pro"ts, as well
as net income. The Court, thus, reached the conclusion that the retrenchment e#ected by
PCMC is invalid due to a substantive defect. We quote hereunder the Court's pronouncement
in the Philcea case, to wit:

Respondents failed to adduce clear and convincing evidence to prove the con$uence
of the essential requisites for a valid retrenchment of its employees. We believe that
respondents acted in bad faith in terminating the employment of the members of petitioner
Union.

Contrary to the claim of respondents that the Corporation was experiencing business
losses, respondent Corporation, in fact, amassed substantial earnings from 1999 to 2003. It
found no need to appropriate its retained earnings except on March 23, 2001, when it
appropriated P60,000,000.00 to increase production capacity. . . .

...

The evidence on record belies the P22,820,151.00 net income loss in 2004 as
projected by the SOLE. On March 29, 2004, the Board of Directors approved the
appropriation of P20,000,000.00 to purchase machinery to improve its facilities, and
declared cash dividends to stockholders at P30.00 per share. . . .

...

It bears stressing that the appropriation of P20,000,000.00 by the respondent

Corporation on September 16, 2004 was made barely "ve months after the 77 Union
members were dismissed on the ground that respondent Corporation was su#ering from
"chronic depression." Cash dividends were likewise declared on March 29, 2004, barely two
weeks after it implemented its "retrenchment program."

If respondent Corporation were to be believed that it had to retrench employees due

to the debilitating slump in demand for its products resulting in severe losses, how could it
justify the purchase of P20,000,000.00 worth of machinery and equipment? There is
likewise no justi"cation for the hiring of more than 100 new employees, more than the
number of those who were retrenched, as well as the order authorizing full blast overtime
work for six hours daily. All these are inconsistent with the intransigent claim that
respondent Corporation was impelled to retrench its employees precisely because of low
demand for its products and other external causes. HTDcCE

...

That respondents acted in bad faith in retrenching the 77 members of petitioner is

buttressed by the fact that Diaz issued his Memorandum announcing the cost-reduction
program on March 9, 2004, after receipt of the February 10, 2004 letter of the Union
president which included the proposal for additional bene"ts and wage increases to be
incorporated in the CBA for the ensuing year. Petitioner and its members had no inkling,
before February 10, 2004, that respondent Corporation would terminate their employment.
Moreover, respondent Corporation failed to exhaust all other means to avoid further losses
without retrenching its employees, such as utilizing the latter's respective forced vacation
leaves. Respondents also failed to use fair and reasonable criteria in implementing the
retrenchment program, and instead chose to retrench 77 of the members of petitioner out of
the dismissed 88 employees. Worse, respondent Corporation hired new employees and even
rehired the others who had been "retrenched."

As shown by the SGV & Co. Audit Report, as of year end December 31, 2003,
respondent Corporation increased its net sales by more than P8,000,000.00. Respondents
failed to prove that there was a drastic or severe decrease in the product sales or that it
su#ered severe business losses within an interval of three (3) months from January 2004 to
March 9, 2004 when Diaz issued said Memorandum. Such claim of a depressed market as of
March 9, 2004 was only a pretext to retaliate against petitioner Union and thereby frustrate
its demands for more monetary bene"ts and, at the same time, justify the dismissal of the 77
Union members.

...

In contrast, in this case, the retrenchment e#ected by respondent Corporation is

invalid due to a substantive defect, non-compliance with the substantial requirements to
e#ect a valid retrenchment; it necessarily follows that the termination of the employment of
petitioner Union's members on such ground is, likewise, illegal. As such, they (petitioner
Union's members) are entitled to reinstatement with full backwages. 38 HAEDCT
 We "nd no reason to depart from the above conclusions which are based on the
Court's examination of the evidence presented by the parties therein. As the respondents
here were similarly situated as the union members in the Philcea case, and considering that
the questioned dismissal from the service was based on the same grounds under the same
circumstances, there is no need to relitigate the issues presented herein. In short, we adopt
the Court's earlier "ndings that there was no valid ground to terminate the employees.

A closer look at petitioners' arguments would show that they want the Court to re-
examine our decision in the Philcea case allegedly on the ground that the conclusions
therein were based on erroneous interpretation of the evidence presented.

Indeed, in Abaria v. National Labor Relations Commission, 39 although the Court was
confronted with the same issue of the legality of a strike that has already been determined in
a previous case, the Court refused to apply the doctrine of stare decisis insofar as the award
of backwages was concerned because of the clear erroneous application of the law. We held
therein that the Court abandons or overrules precedents whenever it realizes that it erred in
the prior decision. 40 The Court's pronouncement in that case is instructive:

The doctrine though is not cast in stone for upon a showing that circumstances
attendant in a particular case override the great bene"ts derived by our judicial system from
the doctrine of stare decisis, the Court is justi"ed in setting it aside. For the Court, as the
highest court of the land, may be guided but is not controlled by precedent. Thus, the Court,
especially with a new membership, is not obliged to follow blindly a particular decision that
it determines, after re-examination, to call for a recti"cation. 41 HcSDIE

The Abaria case, however, is not applicable in this case. There is no reason to abandon the
Court's ruling in the Philcea case.

Do we apply the aforesaid decision to all the respondents herein? Again, we answer
in the a!rmative.

Just like the union members in the Philcea case, respondents Tagyamon, Luna,
Badayos, Dela Cruz, and Comandao received similarly worded memorandum of dismissal
e#ective April 15, 2004 based on the same ground of slump in the market demand for the
company's products. As such, they are similarly situated in all aspects as the union
members. With respect to respondents Marcos, Nemis and Ilao, although they applied for
voluntary retirement, the same was not accepted by petitioner. Instead, it issued notice of
termination dated March 6, 2004 to these same employees. 42 And while it is true that
petitioner paid them separation pay, the payment was in the nature of separation and not
retirement pay. In other words, payment was made because of the implementation of the
retrenchment program and not because of retirement. 43 As their application for availing of
the company's voluntary retirement program was based on the wrong premise, the intent to
retire was not clearly established, or rather that the retirement is involuntary. Thus, they
shall be considered discharged from employment. 44 Consequently, they shall be treated as
if they are in the same footing as the other respondents herein and the union members in
the Philcea case.

Waivers, Releases and Quitclaims

"As a rule, deeds of release and quitclaim cannot bar employees from demanding
bene"ts to which they are legally entitled or from contesting the legality of their dismissal.
The acceptance of those bene"ts would not amount to estoppel." 45 To excuse respondents
from complying with the terms of their waivers, they must locate their case within any of
three narrow grounds: (1) the employer used fraud or deceit in obtaining the waivers; (2) the
consideration the employer paid is incredible and unreasonable; or (3) the terms of the
waiver are contrary to law, public order, public policy, morals, or good customs or
prejudicial to a third person with a right recognized by law. 46 The instant case falls under
the "rst situation.

As the ground for termination of employment was illegal, the quitclaims are deemed
illegal as the employees' consent had been vitiated by mistake or fraud. The law looks with
disfavor upon quitclaims and releases by employees pressured into signing by
unscrupulous employers minded to evade legal responsibilities. 47 The circumstances show
that petitioner's misrepresentation led its employees, speci"cally respondents herein, to
believe that the company was su#ering losses which necessitated the implementation of the
voluntary retirement and retrenchment programs, and eventually the execution of the deeds
of release, waiver and quitclaim. 48

It can safely be concluded that economic necessity constrained respondents to

accept petitioners' monetary o#er and sign the deeds of release, waiver and quitclaim. That
respondents are supervisors and not rank-and-"le employees does not make them less
susceptible to "nancial o#ers, faced as they were with the prospect of unemployment. The
Court has allowed supervisory employees to seek payment of bene"ts and a manager to sue
for illegal dismissal even though, for a consideration, they executed deeds of quitclaims
releasing their employers from liability. 49 DAaIEc

. . . There is no nexus between intelligence, or even the position which the employee held in
the company when it concerns the pressure which the employer may exert upon the free
will of the employee who is asked to sign a release and quitclaim. A lowly employee or a
sales manager, as in the present case, who is confronted with the same dilemma of whether
to sign a release and quitclaim and accept what the company o#ers them, or to refuse to sign
and walk out without receiving anything, may do succumb to the same pressure, being very
well aware that it is going to take quite a while before he can recover whatever he is entitled
to, because it is only after a protracted legal battle starting from the labor arbiter level, all the
way to this Court, can he receive anything at all. The Court understands that such a risk of
not receiving anything whatsoever, coupled with the probability of not immediately getting
any gainful employment or means of livelihood in the meantime, constitutes enough
pressure upon anyone who is asked to sign a release and quitclaim in exchange of some
amount of money which may be way below what he may be entitled to based on company
practice and policy or by law. 50

The amounts already received by respondents as consideration for signing the

releases and quitclaims should be deducted from their respective monetary awards. 51

WHEREFORE, premises considered, the petition is hereby DENIED. The Court of

Appeals Decision dated July 7, 2009 and Resolution dated February 26, 2010 in CA-G.R. SP
No. 105236 are AFFIRMED.

SO ORDERED.

Velasco, Jr., Leonardo-de Castro, * Abad and Leonen, JJ., concur.

 Title
Catholic Bishop of Balanga vs. Court of Appeals

Case Ponente Decision Date

G.R. No. 112519 HERMOSISIMA, Nov 14, 1996
JR., J

A Catholic bishop !les a complaint to recover possession of a donated

property, but the Court of Appeals rules that their 49-year delay in asserting
their rights constitutes laches and bars them from recovering the property.

Case Digest (G.R. No. 112519)

Comprehensive

Facts:

The case involves the Catholic Bishop of Balanga, represented by Crispulo Torrico, as
the petitioner, and the Court of Appeals and Amando de Leon as the respondents. On
August 23, 1936, Rev. Fr. Mariano Sarili, the parish priest and administrator of the
church properties in Balanga, Bataan, executed a deed of donation over a 265-square
meter church lot (Lot No. 1272, Balanga Cadastre) in favor of Ana de los Reyes, in
recognition of her long service to the church. Despite the donation, the Register of
Deeds refused to register the deed. Ana de los Reyes accepted the donation, took
possession of the property, and exercised acts of ownership. She died in 1945
without issue, but had given the property to her nephew, Amando de Leon, who
continued to possess the property, built a house on it, and paid taxes. The Catholic
Bishop of Balanga !led a complaint on November 5, 1985, to recover possession of
the property, alleging that de Leon occupied the property without consent during the
Japanese occupation. The Regional Trial Court (RTC) ruled in favor of the petitioner,
ordering de Leon to vacate the property. However, the Court of Appeals reversed this
decision, citing laches due to the petitioner’s 49-year delay in asserting their rights.

Issue:

1. Can the Catholic Bishop of Balanga recover the donated property despite a 49-
year delay in asserting their rights?

2. Was the Court of Appeals correct in applying the doctrine of laches even though
it was not assigned as an error on appeal?
Ruling:

1. No, the Catholic Bishop of Balanga cannot recover the donated property due to
the doctrine of laches.

2. Yes, the Court of Appeals was correct in applying the doctrine of laches despite it
not being assigned as an error on appeal.

Ratio:

The Supreme Court upheld the Court of Appeals' decision, emphasizing the principle
of laches, which is the failure to assert a right within a reasonable time, resulting in
prejudice to the adverse party. The Court explained that laches is an equitable
defense that prevents the recognition of a right when it would be inequitable to do so
due to the plainti"'s long inaction or neglect. The Court noted that the Catholic
Bishop of Balanga had allowed 49 years to pass without asserting their rights, during
which time Amando de Leon and his predecessor had openly and continuously
possessed the property. This long delay, without any explanation, constituted laches
and barred the petitioner from recovering the property. The Court further stated that
the appellate court has broad discretionary power to consider errors not assigned if
it is necessary for a just and complete resolution of the case. The doctrine of laches
was applicable in this case to prevent an inequitable situation where the petitioner
would bene!t from their own inaction at the expense of the respondent who had
invested time, e"ort, and resources into the property.
 Title
Catholic Bishop of Balanga vs. Court of Appeals

Case Ponente Decision Date

G.R. No. 112519 HERMOSISIMA, Nov 14, 1996
JR., J

A Catholic bishop !les a complaint to recover possession of a donated

property, but the Court of Appeals rules that their 49-year delay in asserting
their rights constitutes laches and bars them from recovering the property.

FIRST DIVISION

G.R. No. 112519. November 14, 1996.

CATHOLIC BISHOP OF BALANGA, represented by CRISPULO TORRICO, petitioner,vs.THE

HON. COURT OF APPEALS and AMANDO DE LEON, respondents.

Navarro Ortiguera Zuniga Law O"ces for petitioner.

Ricardo M. Sagmit, Jr. for private respondent.

SYLLABUS

1. REMEDIAL LAW; ACTIONS; APPEALS. AS A GENERAL RULE ONLY THOSE

ASSIGNED AS ERRORS SHALL BE CONSIDERED. The appealing party is legally required to
indicate in his brief an assignment of errors, and only those assigned shall be considered by
the appellate court in deciding the case.

2. ID.;ID.;ID.;APPELLATE COURTS ACCORDED BROAD DISCRETIONARY POWER TO

WAIVE LACK OF PROPER ASSIGNMENT OF ERRORS AND TO CONSIDER ERRORS NOT
ASSIGNED We have ruled in a number of cases that the appellate court is accorded a broad
discretionary power to waive the lack of proper assignment of errors and to consider errors
not assigned. It is clothed with ample authority to review rulings even if they are not
assigned as errors in the appeal. Inasmuch as the Court of Appeals may consider grounds
other than those touched upon in the decision of the trial court and uphold the same on the
basis of such other grounds, the Court of Appeals may, with no less authority, reverse the
decision of the trial court on the basis of grounds other than those raised as errors on
appeal. We have applied this rule, as a matter of exception, in the following instances: (1)
Grounds not assigned as errors but a#ecting jurisdiction over the subject matter; (2) Matters
not assigned as errors on appeal but are evidently plain or clerical errors within
contemplation of law; (3) Matters not assigned as errors on appeal but consideration of
which is necessary in arriving at a just decision and complete resolution of the case or to
serve the interests of justice or to avoid dispensing piecemeal justice; (4) Matters not
speci!cally assigned as errors on appeal but raised in the trial court and are matters of
record having some bearing on the issue submitted which the parties failed to raise or
which the lower court ignored; (5) Matters not assigned as errors on appeal but closely
related to an error assigned; and (6) Matters not assigned as errors on appeal but upon
which the determination of a question properly assigned, is dependent.

3. CIVIL LAW; LACHES; CONSTRUED. Laches means the failure or neglect for an
unreasonable and unexplained length of time to do that which, by exercising due diligence,
could or should have been done earlier; it is negligence or omission to assert a right within a
reasonable time, warranting the presumption that the party entitled to assert it either has
abandoned or declined to assert it. It has also been de!ned as such neglect or omission to
assert a right taken in conjunction with the lapse of time and other circumstances causing
prejudice to an adverse party, as will operate as a bar in equity. The principle of laches is a
creation of equity which, as such, is applied not really to penalize neglect or 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 defendant's title, but only with whether or not by reason of the plainti#'s
long inaction or inexcusable neglect, he should be barred from asserting this claim at all,
because to allow him to do so would be inequitable and unjust to the defendant. "The
doctrine of laches or of stale demands is based upon grounds of public policy which
requires, for the peace of society, the discouragement of stale claims and ...is principally a
question of the inequity or unfairness of permitting a right or claim to be enforced or
asserted." TDcEaH

4. ID.;ID.;ID. The time-honored rule anchored on public policy is that relief will be
denied to a litigant whose claim or demand has become "stale," or who has acquiesced for an
unreasonable length of time, or who has not been vigilant or who has slept on his rights
either by negligence, folly or inattention. In other words, public policy requires, for the peace
of society, the discouragement of claims grown stale for non-assertion; thus laches is an
impediment to the assertion or enforcement of a right which has become, under the
circumstances, inequitable or unfair to permit.

5. ID.;ID.;ELEMENTS. The following are the essential elements of laches: (1) Conduct
on the part of the defendant, or of one under whom he claims, giving rise to the situation
complained of; (2) Delay in asserting complainant's right after he had knowledge of the
defendant's conduct and after he has an opportunity to sue; (3) Lack of knowledge or notice
on the part of the defendant that the complainant would assert the right on which he bases
his suit; and (4) Injury or prejudice to the defendant in the event relief is accorded to the
complainant. AcHaTE

6. ID.;ID.;INACTION FOR 49 YEARS TO RECOVER POSSESSION. In this case,

petitioner !led its complaint in court only after forty nine (49) years had lapsed since the
donation in its behalf of the subject property to private respondent's predecessor-in-interest.
There is nary an explanation for the long delay in the !ling by petitioner of the complaint in
the case at bench, and that inaction for an unreasonable and unexplained length of time
constitutes laches. As such, petitioner cannot claim nullity of the donation as an excuse to
avoid the consequences of its own unjusti!ed inaction and as a basis for the assertion of a
right on which they had slept for so long. Courts cannot look with favor at parties who, by
their silence, delay and inaction, knowingly induce another to spend time, e#ort, and
expense in cultivating the land, paying taxes and making improvements thereon for an
unreasonable period only to spring an ambush and claim title when the possessor's e#orts
and the rise of land values o#er an opportunity to make easy pro!t at their own expense.
Considerable delay in asserting one's right before a court of justice is strongly persuasive of
the lack of merit of his claim, since it is human nature for a person to enforce his right when
same is threatened or invaded; thus, it can also be said that petitioner is estopped by laches
from questioning private respondent's ownership of the subject property. At any rate,
petitioner's right to recover the possession of the subject property from private respondent
has, by the latter's long period of possession and by petitioner's inaction and neglect, been
converted into a stale demand. Such passivity in the face of what might have given rise to an
action in court is visited with the loss of such right, and ignorance resulting from
inexcusable negligence does not su"ce to explain such failure to !le seasonably the
necessary suit.

7. ID.;ID.;A GROUND WHERE A REGISTERED OWNER MAY LOSE RIGHT TO

RECOVER POSSESSION OF REGISTERED PROPERTY. We agree with the respondent Court
of Appeals that, while petitioner is admittedly still the registered owner of the donated
property, and jurisprudence is settled as to the imprescriptibility and indefeasibility of a
Torrens Title, there is equally an abundance of cases in the annals of our jurisprudence
where we categorically ruled that a registered landowner may lose his right to recover the
possession for his registered property by reason of laches. acEHSI

DECISION

HERMOSISIMA, JR., J p:

It is the cardinal principle in Land Registration that a torrens title is indefeasible and
imprescriptible. Considering that private respondent in this case, by himself and through
his predecessor-in-interest, had been in uninterrupted, open and adverse possession of a
portion of the land covered by said title for 49 years, by virtue of a duly accepted donation,
although unregistered, will private respondent, under this circumstance, prevail over the
titled owner?

Thus, we have before us this petition for review of a decision 1 of the Court of Appeals
2 reversing the Regional Trial Court (RTC) 3 which rendered judgment 4 in favor of
petitioner and ordered private respondent to vacate the subject property and surrender
possession thereof to petitioner and to pay rent from the !nality of the RTC judgment until
the said property is actually vacated.

We quote, as the herein parties have done so in their pleadings, the following
narration of facts rendered by the respondent appellate court:

"The parties do not dispute that the Roman Catholic Archbishop sic of Manila was the
owner of a parcel of land (Lot No. 1272, Balanga Cadastre) situated in the Barrio of Puerto
Rivas, Municipality of Balanga, Bataan, having an area of 3,368 sq. m. more or less covered
by OCT No. 14379 of the Registry of Deeds for the province of Bataan. With respect to its
rights over its properties in Bataan (inclusive of Lot No. 1272),the said church was succeeded
by the Roman Catholic Bishop of San Fernando, Pampanga which was, likewise, succeeded
by ...Catholic Bishop of Balanga registered as a corporation on 15 December 1975.

Prior thereto, or on 23 August 1936, by virtue of the authority given him by the Roman
Catholic Archbishop of Manila to donate a portion of Lot No. 1272, the then parish priest and
administrator of all the properties of the said church in the Municipality of Balanga, Bataan,
Rev. Fr. Mariano Sarili, executed an Escritura De Donacion donating an area of 12.40 meters
by 21.40 meters or 265.36 sq. m (the subject property) of Lot No. 1272 to Ana de los Reyes and
her heirs, as a reward for her long and satisfactory service to the church Her acceptance of
the donation, as well as her possession of the subject property, is indicated in the deed of
donation, which deed, for unknown reasons, was refused registration by the Register of
Deed Six (6) years later, or in 1939, Ana de los Reyes died without issue.

Nevertheless, before her death, she had given the subject property to her nephew
who had been living with her, the herein defendant-appellant private respondent.The latter
immediately took possession of the property in the concept of owner, built his house
thereon and, through the years, declared the land for taxation purposes as well as paid the
taxes due thereon.

His possession of the subject property was never disturbed by anybody until plainti#-
appellee petitioner !led the instant complaint against him on 5 November 1985, or more
than 49 years after the deed of donation was executed, alleging, among others, that: (1)
during the Japanese occupation of the country, dependant-appellant private
respondent,without the knowledge and prior consent of the plainti#-appellee petitioner,and
its predecessors-in-interest, entered and occupied the subject property, and (2) despite
requests by plainti#-appellee petitioner,defendant-appellant private respondent refused to
vacate the property in question. In support of the above contention, Crispulo Torrico, the
sole witness and authorized representative of plainti#-appellee petitioner testi!ed, among
others, that: the subject property is situated at the corner of Lot No. 1272, and defendant-
appellant private respondent has, on the strength of the deed of donation, publicly claimed
ownership and occupied the same as early as before the 2nd World War and has built his
store thereon.
 As his defense, defendant-appellant private respondent maintains that by virtue of
the deed of donation of 23 August 1936 executed in favor of his predecessor-in-interest, he is
the lawful owner of the subject property and the complaint states no cause of action as it
was !led only to harass him.

...

On 27 and 30 October 1986, 10 months after he !led his answer on 10 December 1985
and almost 3 months after plainti#-appellee petitioner rested its case ...defendant-appellant
private respondent !led his motions sic to dismiss the complaint on the ground that ...the
instant action is barred by the statute of limitations. Plainti#-appellee petitioner !led on 3
November 1986 its opposition to the motion alleging that the defense of prescription was not
raised in a timely !led motion to dismiss, and as an a"rmative defense in the answer. ..

On 13 November 1989 the lower court rendered the judgment ...It opined that, since:
(1) defendant-appellant private respondent failed to present the necessary power of attorney
executed by the Roman Catholic Archbishop of Manila giving Rev. Fr. Mariano Sarili the
authority to execute the deed of donation; (2) the !rst 2 paragraphs of the Excritura de
Donacion indicates that the parish priest . . . was only the administrator of all, hence, had no
authority to dispose in whatever manner any of the properties of the Roman Catholic
Church of Balanga, Bataan; (3) the parish priest was not a corporation sole and registered
owner of Lot No. 1272; and, (4) he did not, in his own behalf or that of the Roman Catholic
Archbishop of Manila, secure any prior leave of court to donate a portion of Lot No. 1272 in
consonance with Sec. 159 of the old Corporation Code . . . Rev. Fr. Mariano Sarili was not
authorized to, and could not validly, donate the subject lot. Thus, the deed of donation he
executed is unenforceable under Art. 1403 of the New Civil Code and defendant-appellant
private respondent, as well as his predecessor-in-interest, never acquired ownership of the
subject property. " 5

The court a quo having rendered judgment against private respondent, the latter lost
no time in bringing the case to the respondent Court of Appeals for review

"In his appeal, defendant-appellant private respondent contended that the lower
court erred in not ruling on the issue of prescription which he raised in his amended
answer and motion to dismiss. The thrust of his argument was that, since the instant case
was basically and fundamentally a suit for the recovery of possession of a real property and
the complaint was !led ...more than 49 years after the deed of donation was executed ...the
instant action should have been dismissed on the ground of prescription ... " 6

Respondent court is in agreement with private respondent's insistence that the

defense of prescription is not deemed waived when prescription is apparent from the
allegations in the complaint, citing this court's ruling in the cases of Gicano vs. Gegato, 7
Garcia vs. Mathis, 8 and PNB vs. Paci!c Commission House. 9 But respondent court also
stated that private respondent could not have acquired ownership over the subject property
through acquisitive prescription because the same having been duly registered under the
Torrens system, title thereto was indefeasible.

Nonetheless, respondent Court of Appeals ultimately ruled that under the doctrine of
laches, the consequence of petitioner's inaction for 49 years since the execution of the deed
of donation, despite its apparently undeniable knowledge of private respondent's adverse,
peaceful and continuous possession of the subject property in the concept of an owner from
1936 to the institution of the recovery suit in 1985, is that it has lost its rights to the subject
property and can no longer recover the same due to its own inexcusable negligence and
grave lack of vigilance in protecting its rights over a tremendously long period of time. In
the words of the respondent court:

"... He private respondent and his predecessor-in-interest have been in adverse,

peaceful and continuous possession of the subject property in the concept of owners since
the execution of the deed of donation on 23 August 1936 and were never ousted therefrom
by plainti#-appellee's petitioner's predecessors-in-interest. It was not until almost 5 decades
later or on 5 November 1985 that plainti#-appellee petitioner instituted the instant action.
The inaction for almost half a century now bars plainti#-appellee petitioner from recovering
the land in question on the equitable principles of laches, which is de!ned as 'such neglect
or omission to assert a right taken in conjunction with the lapse of time and other
circumstances causing prejudice to the adverse party as will operate as a bar in equity.'
Registered lands may not be acquired by prescription but the same can be lost or acquired
by Laches. [citing Lola vs. CA,145 SCRA 439] Plainti#-appellee petitioner has lost, while
defendant-appellant private respondent has acquired, the subject property by laches. " 10
 Now aggrieved by the aforecited decision of the respondent Court of Appeals,
petitioner comes before us mainly claiming that it was contrary to the law and settled
jurisprudence for the respondent court to have applied the doctrine of laches in the instant
case and to have considered a mere administrator as authorized to donate one of the
properties under administration.

Petitioner's asseverations are devoid of merit.

First, petitioner postulates that the respondent Court of Appeals should not have, in
the !rst place, applied the doctrine of laches in the instant controversy because private
respondent did not assign the same as an error on appeal.

True, the appealing party is legally required to indicate in his brief an assignment of
errors, 11 and only those assigned shall be considered by the appellate court in deciding the
case. 12 However, equally settled in jurisprudence is the exception to this general rule.

"... Roscoe Pound states that 'according to Ulpian in Justinian's Digest, appeals are
necessary to correct the unfairness or unskillfulness of whose who judge." Pound
comments that 'the purpose of review is prevention quite as much as correction of mistakes.
The possibility of review by another tribunal, especially a bench of judges ... is an important
check upon tribunals of !rst instance. It is a preventive of unfairness. It is also a stimulus to
care and thoroughness as not to make mistakes. " Pound adds that 'review involves matters
of concern both to the parties to the case and to the public ....It is of public concern that full
justice be done to every one. " This judicial injunction would best be ful!lled and the interest
of full justice would best be served if it should be maintained that ... appeal brings before the
reviewing court the totality of the controversy resolved in the questioned judgment and
order apart from the fact that such full-scale review by appeal is expressly granted as a
matter of right and therefore of due process by the Rules of Court. " 13

Guided by the foregoing precepts, we have ruled in a number of cases that the appellate
court is accorded a broad discretionary power to waive the lack of proper assignment of
errors and to consider errors not assigned. 14 It is clothed with ample authority to review
rulings even if they are not assigned as errors in the appeal. 15 Inasmuch as the Court of
Appeals may consider grounds other than those touched upon in the decision of the trial
court and uphold the same on the basis of such other grounds, 16 the Court of Appeals may,
with no less authority, reverse the decision of the trial court on the basis of grounds other
than those raised as errors on appeal. We have applied this rule, as a matter of exception, in
the following instances:

(1) Grounds not assigned as errors but a#ecting jurisdiction over the subject matter;
17

(2) Matters not assigned as errors on appeal but are evidently plain or clerical errors
within contemplation of law; 18

(3) Matters not assigned as errors on appeal but consideration of which is necessary
in arriving at a just decision and complete resolution of the case 19 or to serve the interest of
justice 20 or to avoid dispensing piecemeal justice; 21

(4) Matters not speci!cally assigned as errors on appeal but raised in the trial court
and are matters of record having some bearing on the issue submitted which the parties
failed to raise or which the lower court ignored; 22

(5) Matters not assigned as errors on appeal but closely related to an error assigned;
23 and

(6) Matters not assigned as errors on appeal but upon which the determination of a
question properly assigned, is dependent. 24

The instant controversy falls squarely under the exception to the general rule that
only assigned errors may be passed upon by the appellate court. A just, fair and complete
resolution of the present case necessitates the consideration and the application of the
doctrine of laches which is not the same as but is undoubtedly closely related to, the issue of
prescription which was properly raised by private respondent before the respondent Court
of Appeals.

Laches means the failure or neglect for an unreasonable and unexplained length of
time, to do that which, by exercising due diligence, could or should have been done earlier;
it is negligence or omission to assert a right within a reasonable time, warranting the
presumption that the party entitled to assert it either has abandoned or declined to assert it.
25 It has also been de!ned as such neglect or omission to assert a right taken in conjunction
with the lapse of time and other circumstances causing prejudice to an adverse party, as will
operate as a bar in equity. 26

The principle of laches is a creation of equity which, as such, is applied not really to
penalize neglect or sleeping upon one's right, but rather to avoid recognizing a right when to
do so would result in a clearly inequitable situation. 27 As an equitable defense, laches does
not concern itself with the character of the defendant's title, but only with whether or not by
reason of the plainti#'s long inaction or inexcusable neglect, he should be barred from
asserting this claim at all, because to allow him to do so would be inequitable and unjust to
the defendant. 28

"The doctrine of laches or of stale demands is based upon grounds of public policy
which requires, for the peace of society, the discouragement of stale claims and ...is
principally a question of the inequity or unfairness of permitting a right or claim to be
enforced or asserted. " 29

The time-honored rule anchored on public policy is that relief will be denied to a litigant
whose claim or demand has become "stale", or who has acquiesced for an unreasonable
length of time, or who has not been vigilant or who has slept on his rights either by
negligence, folly or inattention. 30 In other words, public policy requires, for the peace of
society, the discouragement of claims grown stale for non-assertion; thus laches is an
impediment to the assertion or enforcement of a right which has become, under the
circumstances, inequitable or unfair to permit. 31

The following are the essential elements of laches:

(1) Conduct on the part of the defendant, or of one under whom he claims, giving rise
to the situation complained of;

(2) Delay in asserting complainant's right after he had knowledge of the defendant's
conduct and after he has an opportunity to sue;

(3) Lack of knowledge or notice on the part of the defendant that the complainant
would assert the right on which he bases his suit; and

(4) Injury or prejudice to the defendant in the event relief is accorded to the
complainant. 32

Under the present circumstances, all of the aforegoing elements are attendant in this
case.

On or some time before August 23, 1936, Rev. Fr. Mariano Sarili, the parish priest and
administrator of the church property in the Municipality of Balanga, Bataan, executed a deed
of donation over a 265-square meter church lot in favor of Ana de los Reyes and her heirs in
recognition of her long and satisfactory service to the church of Balanga, Bataan. For some
reason or another, the said deed was refused registration by the Register of Deeds. However,
she accepted the donation, indicated such acceptance in the said deed, occupied the donated
property, and exercised acts of ownership thereupon.

In 1945, the donee, Ana de los Reyes, died without issue. She had, however, given the
subject property to her nephew who is the private respondent in the instant case. Upon
acceptance of the gift, private respondent immediately took possession of the subject
property in the concept of owner, built his house thereon, and thenceforth paid land taxes
therefor after declaring the subject property for that purpose.

The act of petitioner-defendant that culminated in the !ling of the present action is
thus clearly his occupation since 1945 of the subject property in the concept of owner in
continuation of the occupation of the same nature regarding the same property by the donee
Ana de los Reyes starting in 1936. Undoubtedly, the !rst element of laches exists.

The second element also exists in this case. The second element is three-tiered: (a)
knowledge of defendant's action; (b) opportunity to sue defendant after obtaining such
knowledge; and (c) delay in the !ling of such suit. Petitioner, in his complaint !led in the
trial court, alleged that without its consent, private respondent entered and occupied the
subject property during the Second World War. By its own admission, therefore, petitioner
was clearly aware of private respondent's possession of the subject property in the concept
of owner. Petitioner did not also rebut the testimony of its own authorized representative
and sole witness, one Crispulo Torrico, that the subject property was so proximately located
to the rest of petitioner's church property as to foreclose assertion of ignorance of private
respondent's possession of the subject property, on the part of petitioner.
 From that time during the Second World War to 1985 when petitioner actually
commenced suit against private respondent, there was doubtlessly all the opportunity to !le
the appropriate action to have the donation of the subject property to Ana de los Reyes and
her heirs, declared null and void and to demand reconveyance of said property from its
present occupants.

Notwithstanding such opportunity available to petitioner, however, forty (40) years

had to !rst pass by for petitioner to !nally institute the appropriate court proceedings. As
such, the second element of knowledge, opportunity to !le suit, and delay in !ling such suit,
is undoubtedly present in the instant controversy.

The third element of laches is likewise present. There is nothing on the record that
impresses us as clear evidence of at least an inkling on the part of private respondent as to
petitioner's serious intention to revoke the donated property. There was neither a demand
letter nor positive testimony of any person who actually informed private respondent of
petitioner's intentions. In other words, private respondent manifestly had every reason to
believe that, with the passing of almost half a century since his predecessor-in-interest
accepted the donated property and without unambiguous intimation of petitioner's non-
recognition of such donation, he was secure in his possession of the subject property in the
concept of owner.

In the light of all the above, it goes without saying that private respondent will su#er
irreparable injury under the most unfair circumstances, were we to disregard petitioner's
inaction for more than forty (40) years in asserting its rights.

In applying the doctrine of laches, we had ruled that where a party allows the
following number of years to lapse from the emergence of his cause of action, before
instituting court action to enforce his claim, such action would be barred by the equitable
defense of laches: 36 years; 33 12 years; 34 50 years; 35 34 years; 36 37 years; 37 32 years; 38
20 years; 39 47 years; 40 11 years; 41 25 years; 42 40 years; 43 19 years; 44 27 years; 45 7
years; 46 44 years; 47 4 years 48 and 67 years 49 .

In this case, petitioner !led its complaint in court only after forty nine (49) years had
lapsed since the donation in its behalf of the subject property to private respondent's
predecessor-in-interest. There is nary an explanation for the long delay in the !ling by
petitioner of the complaint in the case at bench, and that inaction for an unreasonable and
unexplained length of time constitutes laches. As such, petitioner cannot claim nullity of the
donation as an excuse to avoid the consequences of its own unjusti!ed inaction and as a
basis for the assertion of a right on which they had slept for so long. 50 Courts cannot look
with favor at parties who, by their silence, delay and inaction, knowingly induce another to
spend time, e#ort, and expense in cultivating the land, paying taxes and making
improvements thereon for an unreasonable period only to spring an ambush and claim title
which the possessor's e#orts and the rise of land values o#er an opportunity to make easy
pro!t at their own expense. 51 Considerable delay in asserting one's right before a court of
justice is strongly persuasive of the lack of merit of his claim, since it is human nature for a
person to enforce his right when same is threatened or invaded; thus, it can also be said that
petitioner is estopped by laches from questioning private respondent's ownership of the
subject property. 52 At any rate, petitioner's right to recover the possession of the subject
property from private respondent has, by the latter's long period of possession and by
petitioner's inaction and neglect, been converted into a stale demand. Such passivity in the
face of what might have given rise to an action in court is visited with the loss of such right,
and ignorance resulting from inexcusable negligence does not su"ce to explain such failure
to !le seasonably the necessary suit. 53

Finally, we agree with the respondent Court of Appeals that, while petitioner is
admittedly still the registered owner of the donated property, and jurisprudence is settled as
to the impresciptibility and indefeasibility of a Torrens Title, there is equally an abundance
of cases in the annals of our jurisprudence where we categorically ruled that a registered
landowner may lose his right to recover the possession of his registered property by reason
of laches. 54

WHEREFORE, the instant petition is DISMISSED with costs against petitioner.

SO ORDERED.

Bellosillo, Vitug, and Kapunan, JJ ., concur.

Padilla, J .,took no part, former counsel for petitioner.