June 30, 2006
Assailed and sought to be set aside in this petition for review under Rule 45 of the Rules of Court is the Decision1 dated February 23, 2001 of the Court of Appeals (CA) in CA-G.R. CV No. 55325, as reiterated in its Resolution2 of July 20, 2001, reversing an earlier decision of the 7th Municipal Circuit Trial Court (MCTC) of Atimonan-Plaridel, Quezon, acting as a special land registration court, which confirmed petitioners’ title to Lot No. 18009 in Cadastral Case No. 67, LRC GLRO Rec. No. 1026.
Sometime in 1931, the Director of Lands, acting for and in behalf of the Government, instituted with the then Court of First Instance of Gumaca, Quezon (now Branch 61, Regional Trial Court, Gumaca, Quezon) Cadastral Case No. 67, LRC GLRO Rec. No. 1026 pursuant to the government’s initiative to place all lands under the Cadastral System whereby titles for all lands within a stated area are adjudicated regardless of whether or not people living within the area desire to have titles.
More than six (6) decades later, or more specifically on October 14, 1996, herein petitioners ? the spouses Tan Sing Pan and Magdalena S. Veranga ? filed their Answer in Cadastral Case No. 67 over which jurisdiction was assumed by the 7th MCTC of Atimonan-Plaridel, Quezon, acting as a special land registration court by virtue of Supreme Court (SC) Administrative Circular No. 6-93-4 dated November 15, 1995 which was issued pursuant to Section 34 of Batas Pambansa Blg. 129 as amended, and SC en banc Resolution dated March 25, 1993 in Administrative Matter No. 93-3-488-0.
In their Answer, petitioners asserted ownership over Lot No. 18009 (formerly Lot No. 1027-A of the Subd. Plan Csd-04-015150 of the Atimonan Cadastre) with an area of 565 square meters, more or less, and located at Barangay Rizal, Atimonan, Quezon. Petitioners averred that they acquired the lot in question pursuant to a deed of sale executed in their favor on July 10, 1978 by the children of the late Juan Laude who, in turn, inherited the property from his own deceased father, Leon Laude, the original claimant thereof. Petitioners alleged that they have been in possession of the lot for about eighteen (18) years from the time they purchased it from their predecessors-in-interest, have paid the realty taxes due thereon, and that their possession thereof was public, peaceful, in the concept of an owner, continuous and against the world. Tacking their possession to that of their predecessors-in-interest, petitioners claimed that they have been in possession of the subject lot for almost 60 years now.
On October 14, 1996, the 7th MCTC of Atimonan-Plaridel issued an Order admitting petitioners’ aforementioned Answer, setting it for hearing and directing the posting of said Order in conspicuous places. It also directed the notification of all interested parties. Following the issuance by the branch clerk of court of a Certification to the effect that the Order had been posted, the trial court, noting that no opposition was filed, allowed petitioners to present their evidence ex parte in the course of which petitioner Magdalena Veranga testified having complied with all the jurisdictional requirements by sending notices to all interested parties thru registered mail.3
On November 25, 1996, the trial court rendered its decision4 confirming petitioners’ title over Lot No. 18009 and directing the issuance of a decree of registration in their favor, to wit:
WHEREFORE, this Court hereby approves Subdivision Plan Csd-04-015150 together with its technical description insofar as Lot No. 1027-A now equals to Lot No. 18009 of the Atimonan Cadastre is concerned, and confirming the order of general default previously entered in this case, all the requirements of the law having been complied with, this Court hereby adjudicates Lot No. 18009 before Lot No. 1027-A of Subdivision Plan Csd-04-015150 of the Atimonan Cadastre, together with the improvements existing thereon, in favor of movants-claimants spouses TAN SING PAN and MAGDALENA VERANGA, both of legal age, Filipino citizens, and residents of Atimonan, Quezon, as their conjugal partnership property, free from liens and encumbrances.
The road, highways, streets, alleys, water courses and other portions of land not specified as lot located within the border of the land covered by this case are declared property of the Republic of the Philippines.
Upon this decision becoming final, let a decree of confirmation and registration be entered and thereafter upon payment of the fees required by law, let the corresponding certificate of title be issued in the name of the movants-claimants.
In time, the Republic, represented by the Office of the Solicitor General, went on appeal to the CA on the sole jurisdictional issue of whether the trial court erred in proceeding with the hearing of the case despite petitioners’ failure to prove the publication of the Notice of Initial Hearing in the Office Gazette.
In the herein assailed Decision dated February 23, 2001, the CA granted the Republic’s appeal and accordingly reversed and set aside the appealed decision of the trial court, thus:
WHEREFORE, the instant appeal is GRANTED and the appealed decision of the court a quo dated November 25, 1996 is hereby REVERSED and SET ASIDE.
Their motion for reconsideration having been denied by the CA in its equally challenged Resolution of July 20, 2001, petitioners are now with this Court via the present recourse on their principal submission that the CA committed reversible error in ruling that the trial court did not acquire jurisdiction over the case on account of their failure to present proof of publication of the Notice of Initial Hearing.
To petitioners, the jurisdictional requirement of publication of the Notice of Initial Hearing has been complied with way back in 1931 when the Director of Lands, acting for and in behalf of the Government, instituted Cadastral Case No. 67 because the present case is merely a continuation thereof. Petitioners insist that Cadastral Case No. 67 has long been the subject of court proceedings even before the outbreak of the Second World War and, consequently, all lots covered therein have already been included in the required publication. They also contend that the Republic cannot raise, and is already estopped from raising, this jurisdictional issue at this point in time when thousands of lots have already been adjudicated by the cadastral court without the need of publication. Petitioners hasten to add that, since it was the Director of Lands who initiated the cadastral proceedings, it was incumbent upon him to show proof of publication of the Notice of Initial Hearing.
Petitioners’ arguments are specious.
To be sure, publication of the Notice of Initial Hearing in the Official Gazette is one of the essential requisites for a court to acquire jurisdiction in land registration and cadastral cases, and additional territory cannot be included by amendment of the plan without new publication.
Section 7 of the Cadastral Act (Act No. 2259) provides:
Sec. 7. Upon the receipt of the order of the court setting the time for initial hearing of the petition, the Commission on Land Registration shall cause notice thereof to be published twice, in successive issues of the O.G. in the English language. The notice shall be issued by order of the Court, attested by the Commissioner of the Land Registration Office, xxx.
In Director of Lands, et al. v. Benitez, et al.,5 the Court categorically stated that publication is essential to establish jurisdiction in land registration and cadastral cases, without which the court cannot acquire jurisdiction thereon or obtain any authority to proceed therewith.
Here, compliance with the publication requirement is rendered even more imperative by the fact that the lot involved was originally surveyed as Lot No. 1027 but what was adjudicated to petitioners is a portion designated as "Lot No. 1027-A now equal to Lot No. 18009 of the Atimonan Cadastre."6 So it is that in Philippine Manufacturing Company v. Imperial,7 the Court ruled:
Upon consideration of the facts above stated it is quite obvious that the respondent judge had no jurisdiction whatever over lot No. 40 in the cadastral case now pending before him and the adjudication of said lot to the Cabangis heirs by the decision of July 16, 1925, is a mere nullity. From the agreed statement it is obvious that no publication has ever been made except the initial publication, and this did not include lot No. 40. Publication of course is one of the essential bases of the jurisdiction of the court in land registration and cadastral cases, and the attempt that was here made to incorporate lot No. 40 into the cadastral was futile. Before a cadastral survey can be amended so as to include land in which no publication has been made, new publication is necessary, – a step essential to the protection of persons interested in the property which is intended to be included. But even if the order amending the cadastral plan had not been wholly void, the facts above revealed would justify the granting of a new trial by this court under section 513 of the Code of Civil Procedure. However, in view of want of publication, it is only necessary here to pronounce the order of July 16, 1925, void, and a new trial is not called for.8
Cadastral proceedings, like ordinary registration proceedings, are proceedings in rem, and are governed by the usual rules of practice, procedure and evidence. A cadastral decree and a certificate of title are issued only after the applicants prove all the requisite jurisdictional facts: that they are entitled to the claimed lot; that all parties are heard; and that evidence is considered.
Instructive are the following pronouncements of the Court in Government of the Philippine Islands v. Abural:9
Under the Cadastral System, pursuant to initiative on the part of the Government, titles for all the land within a stated area, are adjudicated whether or not the people living within this district desire to have titles issued. The purpose, as stated in section one of the Cadastral Act (No. 2259), is to serve the public interests, by requiring that the titles to any lands "be settled and adjudicated."
Admitting that such compulsory registration of land and such excessive interference with private property constitutes due process of law and that the Acts providing for the same are constitutional, a question not here raised, yet a study of the law indicates that many precautions are taken to guard against injustice. The proceedings are initiated by a notice of survey. When the lands have been surveyed and plotted, the Director of Lands, represented by the Attorney General, files a petition in court praying that the titles to the lands named be settled and adjudicated. Notice of the filing of the petition is then published twice in successive issues of the Official Gazette in both the English and Spanish languages. All persons interested are given the benefit of assistance by competent officials and are informed of their rights. A trial is had. "All conflicting interests shall be adjudicated by the court and decrees awarded in favor of the persons entitled to the lands or the various parts thereof, and such decrees, when final, shall be the bases of original certificates of title in favor of said persons." (Act No. 2259, Sec. 11.) Aside from this, the commotion caused by the survey and a trial affecting ordinarily many people, together with the presence of strangers in the community, should serve to put all those affected on their guard.
After trial in a cadastral case, three actions are taken. The first adjudicates ownership in favor of one of the claimants. This constitutes the decision ? the judgment ? the decree of the court, and speaks in a judicial manner. The second action is the declaration by the court that the decree is final and its order for the issuance of the certificates of title by the Chief of the Land Registration Office. Such order is made if within thirty days from the date of receipt of a copy of the decision no appeal is taken from the decision. This again is judicial action, although to a less degree than the first.
The third and last action devolves upon the General Land Registration Office. This office has been instituted "for the due effectuation and accomplishment of the laws relative to the registration of land." (Administrative Code of 1917, Sec. 174.) An official found in the office, known as the chief surveyor, has as one of his duties "to prepare final decrees in all adjudicated cases." (Administrative Code of 1917, Sec. 177.) This latter decree contains the technical description of the land and may not be issued until a considerable time after the promulgation of the judgment. The form of the decree used by the General Land Registration Office concludes with the words: "Witness, the Honorable (name of the judge), on this the (date)." The date that is used as authority for the issuance of the decree is the date when, after hearing the evidence, the trial court decreed the adjudication and registration of the land.
The judgment in a cadastral survey, including the rendition of the decree, is a judicial act. As the law says, the judicial decree when final is the base of the certificate of title. The issuance of the decree by the Land Registration Office is ministerial act. The date of the judgment, or more correctly stated, the date on which the defeated party receives a copy of the decision, begins the running of the time for the interposition of a motion for a new trial or for the perfection of an appeal to the Supreme Court. The date of the title prepared by the Chief Surveyor is unimportant, for the adjudication has taken place and all that is left to be performed is the mere formulation of the technical description. If an unknown individual could wait possibly years until the day before a surveyor gets around to transcribing a technical description of a piece of land, the defeated party could just as reasonably expect the same consideration for his appeal. As a matter of fact, the so-called unknown is a party just as much as the known oppositor for notice is to all the world, and the decree binds all the world.
As petitioners’ themselves concede,10 the filing of an answer or claim with the cadastral court is equivalent to an application for registration of title to real property. It is thus an action in rem11 and the land registration court acquires jurisdiction over the res by service of processes in the manner prescribed by the statute.
In this connection, Section 35 of the Land Registration Decree, PD 1529, provides:
A. ORDER FOR SPEEDY SETTLEMENT AND ADJUDICATION; SURVEY; NOTICES
SEC. 35. Cadastral Survey prepatory to filing of petition. ?
xxx       xxx       xxx
(b) Thereupon, the Director of Lands shall give notice to persons claiming any interest in the lands, as well as to the general public, of the day on which such survey will begin, giving as fully and accurately as possible the description of the lands to be surveyed. Such notice shall be published once in the O.G. and a copy of the notice in English or the national language shall be posted in a conspicuous place on the bulletin board of the municipal building of the municipality in which the lands or any portion thereof is situated. A copy of the notice shall also be sent to the mayor of such municipality as well as to the barangay captain and likewise to the Sangguniang Panlalawigan and the Sangguniang Bayan concerned. xxx
It is incumbent upon the petitioners to establish by positive proof that the publication requirement has been complied with, what with the fact that they are the ones who stood to be benefited by the adjudication of the subject lot. Regrettably, they failed to present proof of publication of the Notice of Initial Hearing. Their argument that the instant case is a mere continuation of the proceedings in Cadastral Case No. 67 whereat the Director of Lands must have caused the publication of the notice of initial hearing in the Official Gazette cannot hold water. For one, and as noted by the CA in the decision under review:
Unfortunately for the [petitioner], they have not even proven the initial publication they are claiming. It would have been too facile to obtain proof of such publication from the original records of Cadastral Case No. 67 at the Regional Trial Court in Gumaca, Quezon, Branch 61, (See Exhibit "J"; Original Record, p. 25; which inferentially shows the existence of the original records) and offer it as evidence in the court a quo, but they seemingly did not care to do so. They have, therefore, only themselves to blame for their present predicament.12 (Word in bracket added).
For another, by petitioners’ own admission, the filing of their Answer which they did only after more than six (6) decades from the time Cadastral Case No. 67 was initiated by the Director of Lands is equivalent to an application for registration of title, and hence publication in the Official Gazette of the notice of initial hearing thereof is imperative to vest jurisdiction on the 7th MCTC to proceed with petitioners’ application for registration in the form of their Answer.
All told, there being no indication at all from the records of the case that notice of the Order for Initial Hearing was published in the Official Gazette and in a newspaper of general circulation, without which the trial court did not acquire jurisdiction over the case, the decision rendered by the 7th MCTC of Atimonan-Plaridel, Quezon, confirming petitioners’ title over the subject lot is void ab initio for having been rendered without jurisdiction.
WHEREFORE, the petition is DENIED and the assailed Decision and Resolution of the CA are AFFIRMED.
Puno, Chairperson, Sandoval-Gutierrez, Corona, Azcuna, J.J., concur.
1 Penned by Associate Justice Salvador J. Valdez, Jr. (ret.), with Presiding Justice Salome A. Montoya (ret.) and Associate Justice Wenceslao I. Agnir, Jr. (ret.), concurring; Rollo, pp. 33-42.
2 Rollo, pp. 51-52.
3 Exhibits "B-1" to "B-12" and Exhibits "D" to "D-10."
4 Rollo, pp. 31-32.
5 G.R. No. L-21368, March 31, 1966, 16 SCRA 557.
6 Rollo, p. 31.
7 49 Phil. 122 (1926).
8 Rollo, p. 39.
9 39 Phil. 996 (1919).
10 Last paragraph, p. 11, Petition; Rollo, p. 18.
11 Director of Lands v. Aba, et al., 68 Phil. 85 (1939).
12 Rollo, p. 41.
June 30, 2006
By this petition for review on certiorari petitioners seek to nullify and set aside the Decision1  dated April 30, 2001 and Resolution2  dated July 27, 2001 of the Court of Appeals in CA-G.R. CV No. 60752.
The first assailed issuance reversed an earlier decision3  dated January 23, 1986 and Order4  dated August 9, 1996 of the Regional Trial Court at Manila, Branch 34 in Civil Case No. 95800, an action for Recovery of Ownership with Damages, filed by respondents Amparo J. Amorin and children (Amorins) against Lucena De Los Reyes (De Los Reyes) petitioners’ mother and predecessor-in-interest and respondent Pacific Banking Corporation (Bank). The second assailed issuance, on the other hand, denied reconsideration of the first.
Subject of controversy are two lots located at Maria Luisa Street, Sampaloc, Manila. These lots, Lot 19-A and Lot 19-C formed part of the Prieto Estate owned by the late Antonio Prieto, Sr. (Prieto). The Prieto Estate was subdivided into separate lots and sold to tenants on installment basis. De Los Reyes is among the tenants who purchased lots from Prieto. Under a Contract of Sale on Installment dated September 30, 1959, Delos Reyes purchased Lot 19-C. Again on December 13, 1960 the same parties entered into a similar contract over Lot 19-A. The two contracts did not contain a technical description of the lots but on each lot are existing structures with corresponding addresses, the house in Lot 19- C bears the address 933 Maria Luisa St., and the house in Lot 19-A is addressed 925 Maria Luisa St.
On January 30, 1968, De Los Reyes transferred her rights over Lot 19-C to Fortunato A. Amorin, the late husband of respondent Amparo J. Amorin. The following day―January 31, 1968, Prieto the subdivision owner, executed a deed of sale in favor of Fortunato and by virtue thereof, Transfer Certificate of Title No. 91454/T-732 was issued in the name of Fortunato. The Amorins took possession of the house located at 933 Maria Luisa St. and erected their residential house thereon. After the death of Fortunato, his wife, Amparo J. Amorin and their children, herein respondents executed an Extrajudicial Partition and on January 20, 1969, TCT No. 95422 was issued in their names.
Sometime in September 1973, a representative from respondent Bank went to the Amorins’ house at 933 Maria Luisa St., informing them that their property had been mortgaged to and foreclosed by respondent Bank. In 1974, respondent Bank sent a formal demand for the Amorins to vacate the premises insisting that the Amorins are occupying Lot 19-A and that it is now the owner of the lot.
As it turned out De Los Reyes was deceived by a certain Benjamin Valenzuela (Valenzuela) to whom she entrusted the documents evidencing her rights over Lot 19-A, Lots 11, and Lot 34-D, on Valenzuela’s representation that he would assist De Los Reyes in transferring the titles to said properties to her three (3) children. Unfortunately, Valenzuela fraudulently transferred the rights over the lots to his name. The subdivision owner, Prieto, unaware of the fraud and forged instrument, executed a deed of sale over the said properties in favor of Valenzuela who eventually secured transfer certificates of title in his name (TCT No. 73596 over Lot 34-D; TCT No. 73955 over Lot 19-A; and 74018 over Lot 11). Thereafter, Valenzuela mortgaged the aforesaid real estates to respondent Bank.
Upon discovery of the fraud perpetrated by Valenzuela, De Los Reyes filed two criminal complaints for estafa thru falsification of public documents against Valenzuela. The cases were docketed as Criminal Cases No. 15922 and 15923 at the Court of First Instance of Manila, Branch IV and Branch VII respectively. Valenzuela was convicted in both cases. His conviction in Criminal Case No. 15922 was affirmed by the Court of Appeals in CA-G.R. No. 19147-CR.5
On July 31, 1970, respondent Bank foreclosed on Valenzuela’s real estate mortgages. Lot 11, Lot 19-A and Lot 34-D were sold at public auction to respondent Bank as the highest bidder. In time the respondent Bank consolidated its ownership over the properties and was issued new transfer certificates of title (TCT No. 105544 for Lot 19-A; TCT No. 105545 for Lot 34-D; and TCT No. 105546 for Lot 11).
Meanwhile, respondent Amparo J. Amorin confronted De Los Reyes regarding the Bank’s eviction notices but the latter maintained that the Bank was just mistaken as Lot 19-A, and not Lot 19-C, was actually the one it foreclosed. Not satisfied with the explanation, Amparo checked the records at the office of the subdivision owner and with the Land Registration Commission LRC. The records of the LRC confirmed the mix-up in the designation of Lot 19-C and Lot 19-A. It turned out that Lot 19-C was in fact the one located at 925 Maria Luisa St., and Lot 19-A, was the one located at 933 Maria Luisa St.
Bewildered and desperate, Amparo Amorin demanded that De Los Reyes and the latter’s tenants surrender and vacate 925 Maria Luisa St. which is actually Lot 19-C, but De Los Reyes refused. De Los Reyes insisted that the lot being occupied by the Amorins at 933 Maria Luisa St. is Lot 19-C. In May 1974, the Bank reiterated its formal demand for the Amorins to surrender and vacate Lot 19-A, 933 Maria Luisa St. within thirty (30) days from receipt of the letter. The Amorins had earlier filed ejectment suits against De Los Reyes and her tenants at 925 Maria Luisa St., docketed as Civil Case Nos. 91794 and 91795 with the CFI of Manila, Branch XXII but the complaints were dismissed in a decision dated February 28, 1974.
Finally, the Amorins were compelled to file an action for Recovery of Ownership with Damages against De Los Reyes, the latter’s tenants Eladia R. Buhay, spouses Jose and Asuncion Mendoza, Alfredo Ramos and the respondent Bank at the former Court of First Instance of Manila, Branch 1, now, Manila Regional Trial Court, Branch 34. In the same proceedings De Los Reyes filed a cross-claim against the respondent Bank and a motion for third-party complaint against Prieto.
In her cross-claim,6 De Los Reyes asked the trial court to declare as null and void 1) the deed of real estate mortgage and deed of absolute sale covering Lot 11, 2) deed of transfer and/or assignment of Lots 19-A and 34-D, 3) the transfer certificate of titles issued to Valenzuela TCT No. 74049 over Lot 11, TCT No. 73955 over Lot 19-A, TCT No. 73956 over Lot 34-D, 4) the transfer certificate of title issued to respondent Bank TCT No. 105546 over Lot 11, TCT No. 105545 over Lot 34-D and TCT No. 105541 over Lot 19-A.
As third-party plaintiff, De Los Reyes prayed for a judgment ordering Prieto, the subdivision owner, to correct Subdivision Plan (LRC) Psd-8216 to conform to his representations and those of his employees that Lot 19-C is that on which house No. 933 stands and that Lot 19-A is that lot on which house No. 925 stands, and thereafter order the corresponding titles and deeds of absolute sale on the subject properties.
On January 23, 1986, the trial court rendered a Decision7 ordering the cancellation of the titles issued to respondent Bank, the correction of the titles of the Amorins by the Register of Deeds to correspond to the master plan of the LRC and the correction of the subdivision plan pertaining to the property of the Amorins to correspond to the master plan of the LRC. The decretal portion of the decision is hereunder quoted:
Premises considered, this Court hereby orders the cancellation of the title of defendant Pacific Bank No. TCT-105544 for being obtained from a fraudulent source. Ordering the Register of Deeds of Manila to correct the title of plaintiff TCT-95442 to correspond to the subdivision plan of the Land Registration Commission as Lot 19-A; ordering third-party Antonio Prieto to correct its plan to the lot in question in accordance with the master plan of the Land Registration; ordering third-party Antonio Prieto to pay plaintiffs the sum of P5,000.00 as attorney’s fees and costs. Let the case as against defendants Jose and Anunciacion Mendoza and Alfredo Ramos be dismissed. Claims and other counter-claims against each other by the parties are hereby dismissed.
De Los Reyes filed a Motion for Modification of Decision alleging that in order to conform with the findings of the trial court that the titles of the forger Valenzuela over Lots 11, 34-D and 19-A are null and void, the titles secured by the latter, namely TCT Nos. 74048, 73955 and 73956 should be ordered cancelled and as a consequence, TCT Nos. 105546, 105545 and 105544 in the name of respondent Bank must likewise be ordered cancelled. Additionally, De Los Reyes also prayed for the corresponding correction of the technical description of Lot 19-A to correspond to the technical description of Lot 19-C of the subdivision plan (LRC) Psd-8216 since in the dispositive part of the court’s decision, the correction of the title of the Amorins to Lot 19-C was ordered to correspond to the technical description of Lot 19-A,.
In the Order8 dated August 9, 1996 the trial court modified its earlier decision by 1) ordering the cancellation of respondent Bank’s TCT No. 105546 (Lot 11) TCT No. 105545 (Lot 34-B) and Benjamin Valenzuela’s TCT No. 74048 (Lot 11) TCT No. 73955 (Lot 19-A) and TCT No. 73956 for having been obtained from fraudulent source and 2) ordering the Register of Deeds to interchange the technical descriptions of the subject lots:
WHEREFORE, in order that the dispositive portion may conform to the findings of the Court, the dispositive portion of the decision dated January 23, 1986 is hereby modified as follows:
1. Ordering the cancellation of defendant Pacific Bank’s Title over TCT No. 105546 (Lot 11) TCT No. 105545 (Lot 34-B) and Benjamin Valenzuela’s title over TCT No. 74048 (Lot 11) TCT No. 73955 (Lot 19-A) and TCT No. 73956 all having been obtained from fraudulent source.
2. This Court further orders the Register of Deeds to intercharge [sic] the Technical Description of Lot 19-A and 19-C so that the technical description of Lot 19-C will become that of 19-A and that of 19-A should become 19-C all of the subdivision plan of the Land Registration Commission psd 8216.
Let copy of this Order be furnished all the parties for their guidance and compliance.
Respondent Bank and De Los Reyes interposed separate appeals to the Court of Appeals (CA) whereat the case was docketed as CA-G.R. CV No. 60752.
De Los Reyes lamented the trial court’s failure to order the cancellation of respondent Bank’s TCT No. 105544 (Lot 19-A) in its August 9, 1996 Order despite the fact that such was previously contained in the trial court’s January 23, 1986 decision.
For its part, respondent Bank argued that the trial court erred, in ordering the cancellation of its TCTs No. 105545 Lot 34-D and 105546 Lot 11 despite the fact that the forger Valenzuela, the previous registered owner from whom it acquired the properties was not impleaded as an indispensable party in the case; and in allowing De Los Reyes to collaterally attack the validity of said TCTs in the suit filed by the Amorins, notwithstanding that the said properties were not involved in the complaint.
During the pendency of the Appeal in the CA, De Los Reyes died and was substituted by her sons Aracleo, Jr., Gonzalo and Faustino, all surnamed Erasusta, herein petitioners.
On April 30, 2001, the CA rendered the herein challenged decision reversing the decision of the trial court, granting the respondent Bank’s appeal and dismissing that of De Los Reyes:
WHEREFORE, premises considered, the appeal by defendant Pacific Banking Corporation is hereby GRANTED and that of defendant Lucena De Los Reyes is hereby DISMISSED. The Decision dated January 23, 1986 as well as the Order dated August 9, 1996 of the trial court in Civil Case No. 95800 are both hereby REVERSED and SET ASIDE and a new judgment is hereby rendered as follows:
1) The complaint as against defendant-appellant Pacific Banking Corporation is hereby DISMISSED and TCT Nos. 105544 over Lot 19-A, 105546 over Lot 11 and 105545 over Lot 34-D in the name of Pacific Banking Corporation are hereby declared valid and subsisting;
2) Defendant-appellant Lucena De Los Reyes is hereby ordered to execute the necessary deed of transfer of rights over Lot No. 19-C located at No. 925 Maria Luisa St. and to surrender possession thereof to plaintiffs-appellees. Third-party defendant Antonio Prieto is hereby ordered to execute the Deed of Sale over said property in favor of plaintiffs-appellees;
3) Third-party defendant Antonio Prieto is hereby ordered to pay to plaintiffs-appellees and defendant-appellant Lucena De Los Reyes the sum of P10,000.00 each as and for attorney’s fees, and costs of suit; and
4) The cross-claim of defendant-appellant Lucena De Los Reyes against defendant-appellant Pacific Banking Corporation is hereby dismissed. The counterclaim of defendant-appellant Pacific Banking Corporation is likewise dismissed.
No pronouncement as to costs.
Aggrieved, petitioners come to this Court via the present recourse principally contending that the CA committed reversible error when it declared respondent Bank an innocent purchaser for value entitled to the protection of the law with a better right over lot 19-A located at 933 Maria Luisa st. than petitioners and the Amorins
We find merit in the petition.
Consistently, this Court has ruled that every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go beyond the certificate to determine the condition of the property. A person is charged with notice only of such burdens and claims as are annotated on the title. Thus, where there is nothing in the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore further than what the Torrens Title upon its face indicates in quest for any hidden defects or inchoate right that may subsequently defeat his right thereto.10 The CA anchored its decision on these precepts.
The CA disagreed with the RTC’s conclusion that the respondent Bank was not a bona fide purchaser or mortgagee for value, as the case may be, of the subject property, based on circumstances which we now proceed to review. It is settled that this Court has to inquire into questions of fact if the courts below have conflicting findings.11
Of course it is beyond cavil that the fraudulent registration of the property in the forger Valenzuela’s name using the forged deed of sale is not sufficient to vest title to the property in him. Settled is the rule that a certificate is not conclusive evidence of title;12 registration does not vest title, it is merely evidence of such title over a particular property.13 Certificates of title merely confirm or record title already existing and vested. They cannot be used to protect a usurper from the true owner, nor can they be used as a shield for the commission of fraud, nor to permit one to enrich himself at the expense of others.14 The Torrens system has never been recognized as a mode of acquiring ownership.15
While, it is a familiar doctrine that a forged or fraudulent document may become the root of a valid title,16 if the property has already been transferred from the name of the owner to that of the forger, the same is not true. This doctrine serves to emphasize that a person who deals with registered property in good faith will acquire good title from a forger and be absolutely protected by a Torrens title. In the final analysis, the resolution of this case depends on whether the respondent Bank is a purchaser in good faith.
It is a matter of judicial notice that a banking institution, before approving a loan, sends its representative to the premises of the land offered as collateral and investigates who are the true owners and possessors thereof.
Here, respondent Bank did not make any investigation of the premises at all. As established in the trial court an employee of respondent Bank by the name of Jesus Ortega was a close friend of Valenzuela17. In fact it was never disputed that no officer or employee of the respondent Bank inspected the premises before the mortgage of the subject realties were executed.
To be sure, neither the mortgagor nor seller was in possession of the lands mortgaged or sold to respondent Bank. This should have aroused suspicion on the part of respondent Bank. However, contrary to standard practice of banks, respondent Bank did not conduct any on-the-spot investigation, manifestly showing its gross negligence.
It cannot be overemphasized that respondent Bank, being in the business of extending loans secured by real estate mortgage, is familiar with rules on land registration. As such, it was, as here, expected to exercise more care and prudence than private individuals in their dealing with registered lands. Accordingly, given inter alia the suspicion-provoking presence of occupants other than the owner on the land to be mortgaged, it behooved respondent Bank to conduct a more exhaustive investigation on the history of the mortgagor’s title. That respondent Bank accepted in mortgage the property in question notwithstanding the existence of structures on the property and which were in actual, visible and public possession of a person other than the mortgagor, constitutes gross negligence amounting to bad faith.
Verily, in the two criminal cases filed against Valenzuela, and the trial court found that Valenzuela never took possession of the premises, and it was De Los Reyes, who has been in continuous possession of the subject lots. In Criminal Cases Nos. 15922 it was found:
That the assignment by complainant of whatever rights he may have over the two lots in question to the herein accused is fictitious emanating from a falsified signature, becomes more convincing form the very admission of the accused himself that he had never taken possession of said property, exercised any act of ownership and possession over the same, nor shouldered the corresponding liability and obligation as owner thereof, as in fact, he had not paid even a single centavo by way of taxes for the said property.18
While in Criminal Case No. 15923 the trial court held:
Although already technically deprived of their property, complainants, however, never parted with their possession thereof, thru their two tenants, until the present, and likewise, they continued to pay real estate taxes therefor.
That the real estate mortgage embodied in Exhibit "A", and the deed of sale in Exhibit "C", both in favor of Benjamin Valenzuela, are forgeries are well established not only by the declarations of complainants that they never executed nor signed them, nor received the purported considerations therefor, but also by the circumstances that Benjamin Valenzuela never took possession of the lot, never paid taxes thereon, nor exercised any act indicative of ownership thereof other than to mortgage the same successively to the three banks aforementioned.19
In Gatioan vs. Gaffud, 20 this Court held that it is a matter of judicial notice that before a bank grants a loan on the security of land, it first undertakes a careful examination of the title of the applicant as well as a physical and on-the-spot investigation of the land itself offered as security. Undoubtedly, had herein respondent Bank taken such a step which is demanded by the most ordinary prudence it would have easily discovered the flaw in the title of Valenzuela; and if it did not conduct such examination and investigation, it must be held to be guilty of gross negligence in granting him the loans secured by the lots in question. In either case, respondent Bank cannot be considered as a mortgagee in good faith within the contemplation of the law.
Significantly, there are matters of record that should have put the respondent Bank upon inquiry and investigation as to the possible defects of the title of Valenzuela. The Deed of Assignment over Lot Nos. 19-A and 34-D purportedly executed by De Los Reyes in favor of Valenzuela shows that only the second page of the two-page document was signed and only one attesting witness was present.21
These facts should have put respondent Bank upon inquiry and investigation. Regrettably no such investigation of the premises in question was done before the Bank granted the loans to Valenzuela with the lots in question as collaterals.
In the absence of such inquiry, the respondent Bank cannot and should not be regarded as a mortgagee/purchaser in good faith.
In Republic v. De Guzman,22 the Court declared that a buyer who fails to investigate or inquire concerning the rights of those in actual possession of the property being mortgaged or sold, can hardly be regarded as a buyer in good faith.
In the case of Cruz v. Bancom Finance Corporation,23 which is akin to this case the Court had this to say:
Respondents claims that, being an innocent mortgagee, it should not be required to conduct an exhaustive investigation on the history of the mortgagor’s title before it could extend a loan.
Respondent, however, is not an ordinary mortgagee; it is a mortgagee-bank. As such, unlike private individuals, it is expected to exercise greater care and prudence in its dealings, including those involving registered lands. A banking institution is expected to exercise due diligence before entering into a mortgage contract. The ascertainment of the status or condition of a property offered to it as security for a loan must be a standard and indispensable part of its operations.
Respondent Bank contends that its titles over Lot 11, Lot 19-A and Lot 34-D cannot be collaterally attacked. The concept of non-collateral attack of title is based on Sec. 48 P.D. 1529,24 which provides:
Certificate not Subject to Collateral attack. ? A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law.
What cannot be collaterally attacked is the certificate of title and not the title. The certificate referred to is that document issued by the Register of Deeds known as the Transfer Certificate of Title (TCT). By title, the law refers the ownership which is represented by that document. Petitioner apparently confuses certificate with title. Placing a parcel of land under the mantle of the Torrens system does not mean that ownership thereof can no longer be disputed. Ownership is different from a certificate of title.25
Moreover, we note that, respondent Bank did not raise the issue of non-collateral attack on its titles as a defense in the trial court. Hence, it cannot be raised for the first time on appeal. This defense, if at all, is deemed waived.26
Respondent Bank would argue that the forger, Valenzuela who committed the fraud against De Los Reyes and respondent bank is an indispensable party without whom no valid judgment can be rendered.
Respondent Bank contends that Benjamin Valenzuela is an indispensable party. An indispensable party is one without whom there can be no final determination of the action.
In Criminal Case No. 15922, the lower court in its decision dated November 28, 1975, declared as forged the Deed of Assignment of Rights over Lots 19-A and 34-D purportedly executed by De Los Reyes in favor of Valenzuela which enabled him to secure T.C.T. No. 73955 and T.C.T. No. 73956 which he mortgaged to secure the loans. Valenzuela appealed to the CA which affirmed Valenzuela’s conviction with modification only as to the penalty imposed.27 As for Criminal Case No. 15923 the trial court’s decision September 6, 1977 convicting Valenzuela was not appealed as Valenzuela withdrew his appeal hence the decision became final and executory.
The forgeries and falsifications of the Deed of Assignment of Lot 19-A, 34-D and Lot 11 of Valenzuela had been well established proven beyond reasonable doubt. Hence, there was no need to implead Valenzuela. The decisions in Criminal Cases Nos. 15922 and 15923 including the decision of the Court of Appeals in CA-G.R. No. 19147-CR were presented in evidence. To be sure, the trial court took cognizance of the case and took into consideration the findings of the courts in the two criminal cases finally, rendering the judgment on January 23, 1986 which was modified in the Order dated August 9, 1996 thereby making a final determination of the action.
All told, we agree with the RTC’s conclusion that for merely relying on the certificates of title and for its failure to ascertain the status of the mortgaged properties as is the standard procedure in its operations, respondent Bank is a mortgagee in bad faith28.
WHEREFORE, petition is granted. The assailed April 30, 2001 Decision and the July 27, 2001 Resolution of the Court of Appeals in CA-G.R. CV No. 60752 are hereby reversed and set aside. The Decision of the RTC in Civil Case No. 95800 dated January 23, 1986 as modified by the Order dated August 9, 1996 is reinstated as follows:
a) Benjamin Valenzuela’s Transfer Certificate of Title No. 74048 over Lot 11; Transfer Certificate of Title No. 73955 over Lot 19-A and Transfer Certificate of Title No. 73956 over Lot 34-D, are hereby ordered cancelled for being null and void.
b) Respondent Pacific Bank’s Transfer Certificate of Title No. 105546 over Lot 11, Transfer Certificate of Title No. 105545 over Lot 34-D and Transfer Certificate of Title No. 105544 over Lot 19-A are hereby ordered cancelled for being null and void.
c) The Register of Deeds is ordered to interchange the Technical Description of Lot 19-A and 19-C to conform with the subdivision plan of the Land Registration Commission Psd 8216.
Puno, Chairperson, Sandoval-Gutierrez, Corona, Azcuna, J.J., concur.
1 Penned by Associate Justice Martin S. Villarama, Jr. with Associate Justices Conrado M. Vasquez, Jr. and Eliezer R. De Los Santos concurring.
2 Rollo, p. 95.
3 Id. at 154-159.
4 Id. at 161-162.
5 Id. at 410-425.
6 Id. at 115-120.
7 See note 3.
8 See note 4.
9 Id. at 92.
10 State Investment House, Inc. v. Court of Appeals, 324 Phil. 642 (1996).
11 Sacay v. Sandiganbayan, 226 Phil. 496, 510 (1986).
12 Mathay v. Court of Appeals, 356 Phil. 869 (1998).
13 Vda. de Cabrera v. Court of Appeals, 335 Phil. 19 (1997).
14 Esquivias v. Court of Appeals, 339 Phil. 184 (1997).
15 Heirs of Teodoro dela Cruz v. Court of Appeals, 358 Phil. 652 (1998).
16 Fule v. Legare, 117 Phil. 367 (1963).
17 TSN, October 29, 1979, p. 39
18 Decision, Criminal Case No. 15922, p. 15.
19 Id. at 426- 437.
20 No. L-21953, March 28, 1969, 27 SCRA 706, 7-14, 716.
21 Exh. A, also Exh. 1.
22 G.R. No. 105630, 326 SCRA 267(2000).
23 G.R. No. 147788. 379 SCRA 490 (2002).
24 Property Registration Decree of June 11, 1978-AMENDING AND CODIFYING THE LAWS RELATIVE TO REGISTRATION OF PROPERTY AND FOR OTHER PURPOSES.
25 Lee Tek Sheng vs. Court of Appeals, 292 SCRA 544 (1998).
26 Sec. 1, Rule 9, 1997 Rules of Civil Procedure. Keng Hua Paper Products Co. Inc. vs. Court Of Appeals; Regional Trial Court Of Manila, Br. 21; and Sea-Land Service, Inc., G.R. No. 116863. 286 SCRA 257 (1998).
27 See footnote 5.
28 Consolidated Rural Bank (Cagayan Valley), Inc. v. The Honorable Court Of Appeals and Heirs of Teodoro Dela Cruz G.R. No. 132161. 448 SCRA 347 (2005).
June 30, 2006
On June 19 and 26, 1985, Dynetics, Inc. (Dynetics) and Elpidio O. Lim borrowed a total of P8,939,000 from petitioner China Banking Corporation. The loan was evidenced by six promissory notes.1
The borrowers failed to pay when the obligations became due. Petitioner consequently instituted a complaint for sum of money2 on June 25, 1987 against them. The complaint sought payment of the unpaid promissory notes plus interest and penalties.
Summons was not served on Dynetics, however, because it had already closed down. Lim, on the other hand, filed his answer on December 15, 1987 denying that "he promised to pay [the obligations] jointly and severally to [petitioner]."3
On January 7, 1988, the case was scheduled for pre-trial with respect to Lim. The case against Dynetics was archived.
On September 23, 1988, an amended complaint4 was filed by petitioner impleading respondent Dyne-Sem Electronics Corporation (Dyne-Sem) and its stockholders Vicente Chuidian, Antonio Garcia and Jacob Ratinoff. According to petitioner, respondent was formed and organized to be Dynetics? alter ego as established by the following circumstances:
? Dynetics, Inc. and respondent are both engaged in the same line of business of manufacturing, producing, assembling, processing, importing, exporting, buying, distributing, marketing and testing integrated circuits and semiconductor devices;
? [t]he principal office and factory site of Dynetics, Inc. located at Avocado Road, FTI Complex, Taguig, Metro Manila, were used by respondent as its principal office and factory site;
? [r]espondent acquired some of the machineries and equipment of Dynetics, Inc. from banks which acquired the same through foreclosure;
? [r]espondent retained some of the officers of Dynetics, Inc.5
xxx       xxx       xxx
On December 28, 1988, respondent filed its answer, alleging that:
5.1 [t]he incorporators as well as present stockholders of [respondent] are totally different from those of Dynetics, Inc., and not one of them has ever been a stockholder or officer of the latter;
5.2 [n]ot one of the directors of [respondent] is, or has ever been, a director, officer, or stockholder of Dynetics, Inc.;
5.3 [t]he various facilities, machineries and equipment being used by [respondent] in its business operations were legitimately and validly acquired, under arms-length transactions, from various corporations which had become absolute owners thereof at the time of said transactions; these were not just "taken over" nor "acquired from Dynetics" by [respondent], contrary to what plaintiff falsely and maliciously alleges;
5.4 [respondent] acquired most of its present machineries and equipment as second-hand items to keep costs down;
5.5 [t]he present plant site is under lease from Food Terminal, Inc., a government-controlled corporation, and is located inside the FTI Complex in Taguig, Metro Manila, where a number of other firms organized in 1986 and also engaged in the same or similar business have likewise established their factories; practical convenience, and nothing else, was behind [respondent?s] choice of plant site;
5.6 [respondent] operates its own bonded warehouse under authority from the Bureau of Customs which has the sole and absolute prerogative to authorize and assign customs bonded warehouses; again, practical convenience played its role here since the warehouse in question was virtually lying idle and unused when said Bureau decided to assign it to [respondent] in June 1986.6
On February 28, 1989, the trial court issued an order archiving the case as to Chuidian, Garcia and Ratinoff since summons had remained unserved.
After hearing, the court a quo rendered a decision on December 27, 1991 which read:
xxx [T]he Court rules that Dyne-Sem Electronics Corporation is not an alter ego of Dynetics, Inc. Thus, Dyne-Sem Electronics Corporation is not liable under the promissory notes.
xxx       xxx       xxx
WHEREFORE, judgment is hereby rendered ordering Dynetics, Inc. and Elpidio O. Lim, jointly and severally, to pay plaintiff.
xxx       xxx       xxx
Anent the complaint against Dyne-Sem and the latter?s counterclaim, both are hereby dismissed, without costs.
From this adverse decision, petitioner appealed to the Court of Appeals8 but the appellate court dismissed the appeal and affirmed the trial court?s decision.9 It found that respondent was indeed not an alter ego of Dynetics. The two corporations had different articles of incorporation. Contrary to petitioner?s claim, no merger or absorption took place between the two. What transpired was a mere sale of the assets of Dynetics to respondent. The appellate court denied petitioner?s motion for reconsideration.10
Hence, this petition for review11 with the following assigned errors:
What is the quantum of evidence needed for the trial court to determine if the veil of corporat[e] fiction should be pierced?
[W]hether or not the Regional Trial Court of Manila Branch 15 in its Decision dated December 27, 1991 and the Court of Appeals in its Decision dated February 28, 2001 and Resolution dated July 27, 2001, which affirmed en toto [Branch 15, Manila Regional Trial Court?s decision,] have ruled in accordance with law and/or applicable [jurisprudence] to the extent that the Doctrine of Piercing the Veil of Corporat[e] Fiction is not applicable in the case at bar?12
We find no merit in the petition.
The question of whether one corporation is merely an alter ego of another is purely one of fact. So is the question of whether a corporation is a paper company, a sham or subterfuge or whether petitioner adduced the requisite quantum of evidence warranting the piercing of the veil of respondent?s corporate entity. This Court is not a trier of facts. Findings of fact of the Court of Appeals, affirming those of the trial court, are final and conclusive. The jurisdiction of this Court in a petition for review on certiorari is limited to reviewing only errors of law, not of fact, unless it is shown, inter alia, that: (a) the conclusion is grounded entirely on speculations, surmises and conjectures; (b) the inference is manifestly mistaken, absurd and impossible; (c) there is grave abuse of discretion; (d) the judgment is based on a misapplication of facts; (e) the findings of fact of the trial court and the appellate court are contradicted by the evidence on record and (f) the Court of Appeals went beyond the issues of the case and its findings are contrary to the admissions of both parties.13
We have reviewed the records and found that the factual findings of the trial and appellate courts and consequently their conclusions were supported by the evidence on record.
The general rule is that a corporation has a personality separate and distinct from that of its stockholders and other corporations to which it may be connected.14 This is a fiction created by law for convenience and to prevent injustice.15
Nevertheless, being a mere fiction of law, peculiar situations or valid grounds may exist to warrant the disregard of its independent being and the piercing of the corporate veil.16 In Martinez v. Court of Appeals,17 we held:
The veil of separate corporate personality may be lifted when such personality is used to defeat public convenience, justify wrong, protect fraud or defend crime; or used as a shield to confuse the legitimate issues; or when the corporation is merely an adjunct, a business conduit or an alter ego of another corporation or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation; or when the corporation is used as a cloak or cover for fraud or illegality, or to work injustice, or where necessary to achieve equity or for the protection of the creditors. In such cases, the corporation will be considered as a mere association of persons. The liability will directly attach to the stockholders or to the other corporation.
To disregard the separate juridical personality of a corporation, the wrongdoing must be proven clearly and convincingly.18
In this case, petitioner failed to prove that Dyne-Sem was organized and controlled, and its affairs conducted, in a manner that made it merely an instrumentality, agency, conduit or adjunct of Dynetics, or that it was established to defraud Dynetics? creditors, including petitioner.
The similarity of business of the two corporations did not warrant a conclusion that respondent was but a conduit of Dynetics. As we held in Umali v. Court of Appeals,19 "the mere fact that the businesses of two or more corporations are interrelated is not a justification for disregarding their separate personalities, absent sufficient showing that the corporate entity was purposely used as a shield to defraud creditors and third persons of their rights."
Likewise, respondent?s acquisition of some of the machineries and equipment of Dynetics was not proof that respondent was formed to defraud petitioner. As the Court of Appeals found, no merger20 took place between Dynetics and respondent Dyne-Sem. What took place was a sale of the assets21 of the former to the latter. Merger is legally distinct from a sale of assets.22 Thus, where one corporation sells or otherwise transfers all its assets to another corporation for value, the latter is not, by that fact alone, liable for the debts and liabilities of the transferor.
Petitioner itself admits that respondent acquired the machineries and equipment not directly from Dynetics but from the various corporations which successfully bidded for them in an auction sale. The contracts of sale executed between the winning bidders and respondent showed that the assets were sold for considerable amounts.23 The Court of Appeals thus correctly ruled that the assets were not "diverted" to respondent as an alter ego of Dynetics.24 The machineries and equipment were transferred and disposed of by the winning bidders in their capacity as owners. The sales were therefore valid and the transfers of the properties to respondent legal and not in any way in contravention of petitioner?s rights as Dynetics? creditor.
Finally, it may be true that respondent later hired Dynetics? former Vice-President Luvinia Maglaya and Assistant Corporate Counsel Virgilio Gesmundo. From this, however, we cannot conclude that respondent was an alter ego of Dynetics. In fact, even the overlapping of incorporators and stockholders of two or more corporations will not necessarily lead to such inference and justify the piercing of the veil of corporate fiction.25 Much more has to be proven.
Premises considered, no factual and legal basis exists to hold respondent Dyne-Sem liable for the obligations of Dynetics to petitioner.
WHEREFORE, the petition is hereby DENIED.The assailed Court of Appeals? decision and resolution in CA-G.R. CV No. 40672 are hereby AFFIRMED.
Costs against petitioner.
Puno, Chairperson, Sandoval-Gutierrez, Azcuna, Garcia, J.J., concur.
1 The promissory notes and their corresponding amounts were as follows: (1) PN No. BD-77698 for P39,000; (2) PN No. T-77701 for P900,000; (3) PN No. T-77702 for P900,000; (4)PN No. T-77703 for P1,000,000; (5) PN No. T-77834 for P4,100,000 and (6) PN No. T-77835 for P2,000,000; rollo, pp. 72-77.
2 Id., pp. 64-71.
3 Id., pp. 78-85.
4 Id., pp. 86-95.
5 Id., pp. 19-20.
6 Id., pp. 104-109.
7 Penned by Judge Benjamin P. Martinez of Branch 15, Regional Trial Court, Manila; id., pp. 48-63.
8 Docketed as CA-G.R. CV No. 40672; id., pp. 110-111.
9 Penned by Associate Justice Andres B. Reyes, Jr. and concurred in by Associate Justices B.A. Adefuin-de la Cruz and Rebecca de Guia-Salvador of the 16th Division of the Court of Appeals; February 28, 2001; id., pp. 29-44.
10 July 27, 2001; id., p. 46.
11 Under Rule 45 of the Rules of Court; id., pp. 15-27.
12 Id., p. 20.
13 Ladanga v. Aseneta, G.R. No. 145874, 30 September 2005.
14 Corporation v. Court of Appeals, 368 Phil. 374 (1999).
15 Concept Builders, Inc. v. NLRC, G.R. No. 108734, 29 May 1996, 257 SCRA 149.
16 Santos v. NLRC, G.R. No. 101699, 13 March 1996, 254 SCRA 673.
17 G.R. No. 131673, 10 September 2004, 438 SCRA 130.
18 Complex Electronics Employees Association v. NLRC, G.R. Nos. 121315 and 122136, 19 July 1999, 310 SCRA 403.
19 G.R. No. 89561, 13 September 1990, 189 SCRA 529.
20 Merger is a union whereby one or more existing corporations are absorbed by another corporation which survives and continues the combined business. (Villanueva, Philippine Corporate Law, 1998 Edition, p. 464.)
21 In sale of assets, the purchaser is only interested in the raw assets of the selling corporation perhaps to be used to establish his own business enterprise or as an addition to his on-going business enterprise. (Id., at p. 444.)
22 The Court of Appeals differentiated merger from sale of assets in this wise: (1) In merger, a sale of assets is always involved, while in the latter, the former is not always involved; (2) In the former, there is automatic assumption by the surviving corporation of the liabilities of the constituent corporations, while in the latter, the purchasing corporation is not generally liable for the debts and liabilities of the selling corporation; (3) In the former, there is a continuance of the enterprise and of the stockholders therein though in the altered form, while in the latter, the selling corporation ordinarily contemplates liquidation of the enterprise; (4) In the former, the title to the assets of the constituent corporations is by operation of law transferred to the new corporation, while in the latter, the transfer of title is by virtue of contract; and (5) In the former, the constituent corporations are automatically dissolved, while in the latter, the selling corporation is not dissolved by the mere transfer of all its property. (citing de Leon, The Corporation Code of the Philippines Annotated, 1989 Edition, pp. 509-510.)
23 The total purchases made by respondent from Elders Pica Limited was for the amount of US$1,158,977.77; from Piso Development Bank, P19,950,000 plus the peso equivalent of US$280,000 and from Private Development Corporation of the Philippines, P11,956,134.44 plus the peso equivalent of US$1,616,324.17; rollo, p. 132.
24 Id., pp. 43-44.
25 Supra at note 19.
June 30, 2006
At bar is an appeal by certiorari under Rule 45 of the 1997 Rules of Civil Procedure assailing the decision of the Court of Appeals (CA) in CA-G.R. SP No. 60726, entitled Adelaida B. Aquino v. Social Security System, dismissing petitioner Adelaida Aquino’s claim under Presidential Decree (PD) No. 626 (the Employees Compensation Act).
Petitioner’s husband, Jaime Aquino, worked as grocery man for the US Navy Commissary, Subic Bay, Olongapo City from 1970 to 1977. He performed the following tasks: (1) checked the availability of stocks before they were turned over to the supervisor of the store; (2) piled items in shelves and display cases and assisted patrons in locating them; (3) processed retail price changes by conducting inventories of items and (4) operated the forklift.
On February 2, 2000 or about 23 years after his separation from employment, he died of congestive heart failure. Petitioner filed a claim for surviving spouse’s compensation benefits under PD 626 with respondent Social Security System (SSS). The latter denied the claim.
Petitioner then appealed the case to the Employees Compensation Commission (ECC) which affirmed SSS’s dismissal of the claim on the ground that the cause of death of petitioner’s husband was not attributable to the nature of his work as a grocery man in the Commissary. He was no longer connected with the store at that time.
Aggrieved, petitioner went to the CA seeking the reversal of the ECC’s decision. There, petitioner insisted that the cause of her husband’s death was traceable to the nature of his job at the commissary store. The CA dismissed her appeal.1 Petitioner sought reconsideration of the CA decision2 but it was denied, hence, this petition.
In this petition, petitioner essentially faults the CA for not finding that the ailment causing her husband’s death was compensable under PD 626.3
The petition will not prosper.
Under the law, the beneficiary of an employee is entitled to death benefits if the cause of death is (1) an illness accepted as an occupational disease by the ECC or (2) any other illness caused by employment, subject to proof that the risk of contracting the same was increased by the working conditions.4
Stated otherwise, a claimant must prove that the illness is listed as an occupational disease by the ECC; otherwise, he must present substantial evidence showing that the nature of the work increased the risk of contracting it.
In the case of Panangui v. Employees Compensation Commission,5 the Court explained congestive heart failure as:
…a clinical syndrome which develops eventually in 50-60% of all patients with organic cardiovascular disease. It is defined as the clinical state resulting from the inability of the heart to expel sufficient blood for the metabolic demands of the body. Heart failure may therefore be present when the cardiac output is high, normal or low, regardless of the absolute level, the cardiac output is reduced to metabolic demands…
Under the Rules on Employees Compensation, particularly "Annex A" thereof which contains the list of occupational diseases, congestive heart failure is not included. Hence, petitioner should have shown proof that the working conditions in the commissary store where her husband worked aggravated the risk of contracting the ailment.6 Petitioner should have adduced evidence of a reasonable connection between the work of her deceased husband and the cause of his death, or that the progression of the disease was brought about largely by the conditions in her husband’s job as grocery man at the commissary store.7 Failing in this aspect, we are constrained to rule that her husband’s illness which eventually caused his demise was not compensable.
Moreover, even if we were to construe the ailment of petitioner’s husband as cardiovascular disease compensable under ECC Resolution No. 432, the petition will still not prosper. To be compensable, the cardiovascular (or heart) disease of Jaime Aquino must have occurred under any of the following conditions:
(a) [i]f the heart disease was known to have been present during employment[,] there must be proof that an acute exacerbation clearly precipitated by the unusual strain by reason of the nature of his work;
(b) [t]he strain of work that [brought] about an acute attack must be of sufficient severity and must be followed within twenty-four (24) hours by clinical signs of a cardiac insult to constitute causal relationship;
(c) [i]f a person who was apparently symptomatic before subjecting himself to strain at work showed signs and symptoms of cardiac injury during the performance of his work and such symptoms and signs persisted, it [was] reasonable to claim a causal relationship.8
Clearly, the circumstances of the present case do not fall under any of the foregoing conditions.
In addition, granting petitioner’s claim will set a bad precedent considering that 23 years elapsed from the time her husband stopped working at the commissary store up to the time he died. If we were to grant it, we might unduly burden the funds of the ECC and jeopardize it with a flood of unsubstantiated claims. Besides, the Court cannot remain oblivious to the possibility that, within that 23-year period, other factors intervened to cause the death of petitioner’s husband. Petitioner was thus under an even greater compulsion to proffer evidence to negate this possibility and establish the causal connection between her husband’s work and his death. The 23-year gap between his separation from employment in 1977 and his death in 2000 was a gaping hole in petitioner’s claim.
Furthermore, well-entrenched is the rule that findings of fact of administrative officials who have acquired expertise on account of their specialized jurisdiction are accorded by the Courts not only respect but, most often, with finality.
Lastly, while it is true that PD 626 operates on the principle of social justice, sympathy for the workers should also be placed in a sensible equilibrium with the stability of the ECC trust fund.
WHEREFORE, the assailed decision of the Court of Appeals in CA-G.R. SP No. 60726 is hereby AFFIRMED. Accordingly, the petition is DENIED.
Puno, Chairperson, Sandoval-Gutierrez, Azcuna, Garcia, J.J., concur.
1 Decision penned by Justice Andres B. Reyes, with the concurrence of Justices B.A. Adefuin-de la Cruz (now retired) and Rebecca de Guia-Salvador, Sixteenth Division of the Court of Appeals; rollo, pp. 58-64.
2 CA Resolution, id., p. 74.
3 Id., pp. 10-25.
4 Amended Rules on Employees Compensation; see also Riño v. Employees Compensation Commission, 387 Phil. 612 (2000); Librea v. Employees Compensation Commission, G.R. No. 58879, 14 November 1991, 203 SCRA 545.
5 206 Phil. 61 (1983).
6 Gau Sheng Phils., Inc. v. Joaquin, G.R. No. 144665, 8 September 2004, 437 SCRA 608.
7 Supra at note 4.
8 ECC Resolution No. 432, supra.
June 30, 2006
Before the Court is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 52176. The CA decision affirmed that of the Regional Trial Court (RTC), Branch 69 of Iba, Zambales in Civil Case No. 1523-I,2 which in turn affirmed the ruling of the Municipal Trial Court (MTC) of San Felipe, Zambales in Civil Case No. 381.3
Angel Labrador, Leonardo Labrador, Fe Labrador Gamboa, Alex Labrador and Roger Labrador filed a complaint against the spouses Pelagio and Perlita Gulla in the RTC of Iba, Zambales for "Cancellation of Tax Declaration and Recovery of Possession with Damages" (accion publiciana). The complaint involved a 22,590-square-meter lot covered by Original Certificate of Title (OCT) No. P-13350, and the 562-square-meter lot abutting the titled property. The case was thereafter forwarded to the MTC of San Felipe, Zambales pursuant to Republic Act No. 7691.4
The titled property is located in San Felipe, Zambales and identified as Lot No. 520, Cad. 686-D. According to the Labradors, the property was declared for taxation purposes under their names (Tax Declaration No. 010-0469A) and the corresponding taxes were paid thereon. In 1996, the spouses Gulla occupied a portion of the property fronting the China Sea, as well as the 562-square-meter lot within the salvage area. The spouses Gulla then constructed a house in the occupied property and fenced its perimeter. The Labradors pointed out that whatever alleged claims the spouses Gulla had on the property was acquired through a Deed of Waiver of Rights dated July 23, 1996 executed in their favor by another "squatter" Alfonso Bactad. To verify the exact location of the portion occupied by the spouses Gulla, a verification survey of the land was conducted on August 17, 1990 in the presence of Pelagio Gulla. Geodetic Engineer Crisostomo A. Magarro prepared a sketch indicating portions occupied by the spouses Gulla, as well as the following report:
a. Lot A in Green color containing an area of 562 square meters is the claim of Pelagio Gulla, Sr. which is outside the titled property of the Hrs. of Alejandro Labrador and is within the Salvage Zone;
b. Lot B in Violet containing an area of 820 square meters is the claim of Pelagio Gulla, Sr. and within the titled property of the Hrs. of Alejandro Labrador and obviously within the Salvage Zone;
c. Lot C in Red color containing an area of 1,506 square meters is the claim of Pelagio Gulla, Sr. [and] is also within the titled property of the Hrs. of Alejandro Labrador, represented by Alex Labrador and covered by O.C.T. No. P-13350.
The Total area claimed by Pelagio Gulla, Sr. is 2,888 square meters (more or less). 5 (Underscoring supplied)
For their part, the spouses Gulla claimed that they had been in possession of the 2,888-square-meter property, Lot A in the sketch of Engr. Magarro, since 1984 and declared the property for taxation purposes under their names in Tax Declaration (T.D.) No. 010-0549. On October 8, 1994, they filed an application for miscellaneous sales patent which was certified as alienable and disposable land by the barangay captain, former Mayor Edilberto A. Abille, and Community Environment and Natural Resources Officer Jaime Centeno. The property was likewise declared for taxation purposes in their names under T.D. No. 010-0550-R in 1994.
On November 3, 1998, the MTC rendered judgment in favor of the Labradors, ordering the spouses Gulla to vacate that portion of the property covered by OCT No. P-13350 (Lots B and C in the sketch of Engr. Magarro), and the 562-square-meter lot within the salvage zone (Lot A). The fallo of the decision reads:
WHEREFORE, by preponderance of evidences, it is hereby ordered upon the defendants to VACATE the portion including the 565 salvage zone actually occupied by them immediately and to pay P1,000.00 as monthly rental from July 1996, until they vacate the premises and P10,000.00 as actual damages and attorney’s fee of P20,000.00.
According to the MTC, the Labradors were able to establish ownership over the subject property, as evidenced by the title under their name (OCT No. P-13350). For their part, the defendant-spouses failed to overcome the evidence of the plaintiffs, and not being the riparian owners of Lot A which is within the salvage zone, they have no right to possess the same.7
On appeal, the RTC rendered judgment on March 23, 1999 affirming the appealed decision. It ratiocinated that, as correctly observed by the court a quo, Lot A is beyond the perimeter of the property covered by OCT No. P-13350 and is within the salvage zone that abutted the property of plaintiffs. Applying Article 440 of the New Civil Code, the RTC declared that the Labradors had the right to possess the land, it being inseparably attached to the titled property as an accessory. It further held that "economic convenience is better attained in a state of single ownership than in co-ownership," and that "natural justice demands that the owner of the principal or more important thing should also own the accessory."8
This prompted the spouses Gulla to file a petition for review before the CA where they alleged the following:
x x x x
2. THE LOWER COURT ERRED IN RELYING ON THE SURVEY WHICH WAS UNILATERALLY CONDUCTED BY THE RESPONDENTS.
3. THE LOWER COURT ERRED IN HOLDING THAT THE LAND OCCUPIED BY PETITIONERS IS WITHIN THE LOT COVERED BY ORIGINAL CERTIFICATE OF TITLE NO. P-13350.
4. THE LOWER COURT ERRED IN EJECTING THE PETITIONERS EVEN FROM THE ALLEGED SALVAGE ZONE.
5. THE LOWER COURT ERRED IN AWARDING MONTHLY RENTAL, ACTUAL DAMAGES AND ATTORNEY’S FEES.9
The spouses Gulla insisted that the trial court erred in relying on the survey report of Engr. Magarro. In contrast, their evidence showed that Lot A, with an area of 562 square meters, is alienable and disposable, and is covered by a 1936 tax declaration under the name of Alfonso Bactad. Since the property is located within the salvage zone, it is res nullius, hence, could not have been acquired by the Labradors through accession under Article 440 of the New Civil Code. They also insisted that the trial court had no jurisdiction to declare them entitled to the possession of Lot A since the Republic of the Philippines was not a party to the case. The spouses Gulla concluded that they cannot be held liable for monthly rentals, actual damages and attorney’s fees, since the claimed title over the subject property is fraudulent.
On December 11, 2000, the CA rendered judgment affirming the assailed decision. Applying Article 440 of the New Civil Code, the appellate court declared that although Lot A is outside the titled property of the Labradors, by analogy, as the owners of the adjoining property, the latter have the "priority to use it." Stated differently, the Labradors, although not the owners of the property within the salvage zone, have the right to use it more than the spouses Gulla.
This prompted the aggrieved spouses to file a motion for reconsideration, which the appellate court denied, hence, the present petition.
The sole issue in this case is whether or not petitioners are entitled to the possession of Lot A which is located at the foreshore of San Felipe, Zambales as indicated in the report10 of Engr. Magarro.
Petitioners point out that Lot A is not covered by any certificate of title. The free patent issued to respondents, as well as the tax declaration covering the property, refers only to "Lot 520," a totally different lot from what they are occupying, or Lot A. Moreover, the lower courts erred in ruling that the salvage zone is incorporated in the title of respondents, since the zone is res nullius and cannot be the subject of the commerce of man, part of the public domain and intended for public use; so long as this is so, it cannot be appropriated by any person except through express authorization granted in due form by a competent authority.11 Petitioners insist that the adjudication of the salvage zone is best determined at an appropriate forum. Petitioners further allege that respondents are claiming possession over Lot A by virtue of a fraudulently acquired patent, the validity of which is still the subject of a pending civil case between Alfonso Bactad and herein respondents.
Petitioners reiterate that they occupied the subject land openly, notoriously, and in the concept of owners for many years since 1986. Respondents’ contention, that they occupied the land clandestinely, is negated by the very location/nature of the property, i.e., that it is situated in the coastal area which is very much exposed. Considering the size of the alleged property of respondents, about 2.2 hectares, it is impossible to "secretly" occupy the said area. It is thus more credible to state that respondents were not actually working on or were never in possession of the contested property. According to respondents, the lower courts should have taken judicial notice of the alarming number of "smart individuals" who, after having obtained title by means of connections, would suddenly file cases in courts knowing that rulings will be issued in their favor on the basis of alleged titles.12
The petition is meritorious.
In ruling for respondents, the CA ratiocinated, thus:
The ownership of property gives the right by accession to everything which is produced thereby, or which is incorporated or attached thereto, either naturally or artificially (Article 440, Civil Code). Accession is the right of an owner of a thing to the products of said thing as well as to whatever is inseparably attached thereto as an accessory (Sanchez Roman, Vol. II, p. 89).
In the case at bar, it is undisputed that the area of 562 square meters is outside the titled property of the respondents and is within the salvage zone adjacent to respondents’ property. However, while it is true that the salvage zone cannot be the subject of commerce, the adjoining owner thereof, the respondents in this case, has the priority to use it. Otherwise stated, herein respondents [do] not own the salvage zone but as an adjacent owner, he has the right to use it more than the petitioners applying the basic rule as stated above.
Moreover, the law provides the different modes of acquiring ownership, namely: (a) occupation; (b) intellectual creation; (c) law; (d) donation; (e) succession; (f) tradition, as a consequence of certain contracts; and (g) prescription. It will be noted that accession is not one of those listed therein. It is therefore safe to conclude that accession is not a mode of acquiring ownership. The reason is simple: accession presupposes a previously existing ownership by the owner over the principal. This is not necessarily so in the other modes of acquiring ownership. Therefore, fundamentally and in the last analysis, accession is a right implicitly included in ownership, without which it will have no basis or existence. (p. 179, Paras, Vol. II, Thirteenth Edition (1994), Civil Code). In general, the right to accession is automatic (ipso jure), requiring no prior act on the part of the owner of the principal (Villanueva v. Claustro, 23 Phil. 54).
In the light of the foregoing, the lower court therefore is correct in ejecting the petitioners even if the portion occupied by them is in the salvage zone.13
The trial court, the RTC and the CA were one in ruling that the 562-square-meter property, Lot A, is part of the public domain, hence, beyond the commerce of men and not capable of registration. In fact, the land is within the salvage zone fronting the China Sea as well as the property covered by OCT No. P-13350 in the name of respondents. The provision relied upon is Article 440 of the New Civil Code, which states that "[t]he ownership of property gives the right by accession to everything which is produced thereby, or which is incorporated or attached thereto, either naturally or artificially." The provision, however, does not apply in this case, considering that Lot A is a foreshore land adjacent to the sea which is alternately covered and left dry by the ordinary flow of the tides. Such property belongs to the public domain and is not available for private ownership until formally declared by the government to be no longer needed for public use.14 Respondents thus have no possessory right over the property unless upon application, the government, through the then Bureau of Lands, had granted them a permit.15
There is no question that no such permit was issued or granted in favor of respondents. This being the case, respondents have no cause of action to cause petitioners’ eviction from the subject property. The real party-in-interest to file a complaint against petitioners for recovery of possession of the subject property and cause petitioner’s eviction therefrom is the Republic of the Philippines, through the Office of the Solicitor General. Consequently, petitioners cannot be required to pay any rentals to respondents for their possession of the property.
IN LIGHT OF ALL THE FOREGOING, the petition is partially GRANTED. The Decision of the Court of Appeals CA-G.R. SP No. 52176 is AFFIRMED WITH THE MODIFICATION that the complaint of respondents is DISMISSED insofar as Lot A with an area of 562 square meters is concerned. The Municipal Trial Court of San Felipe, Zambales, is ORDERED to dismiss the complaint of the plaintiffs in Civil Case No. 381 insofar as Lot A with an area of 562 square meters is concerned without prejudice to the right of the Republic of the Philippines to take such appropriate action for the recovery of said lot from petitioners.
Let a copy of this decision be served on the Office of the Solicitor General for appropriate action.
Panganiban, C.J., Ynares-Santiago, Chico-Nazario, J.J., concur.
Austria-Martinez, J., no part
* Transferred to the Present First Division on June 6, 2006.
1 Penned by Associate Justice Mercedes Gozo-Dadole (retired), with Associate Justices Ma. Alicia Austria-Martinez (now an Associate Justice of the Supreme Court) and Hilarion L. Aquino (retired), concurring; rollo, pp. 82-95.
2 Penned by Rodolfo V. Toledano; id. at 77-80.
3 Penned by Judge Lavezares C. Leomo; id. at 58-76.
4 Rollo, p. 61.
5 Id. at 102-103.
6 Id. at 75-76.
7 Id. at 58-76.
8 Id. at 80.
9 Id. at 49.
10 Id. at 15.
11 Navarro v. Intermediate Appellate Court, 335 Phil. 537, 555 (1997).
12 Rollo, pp. 16-17.
13 Id. at 93-94.
14 Republic v. Vda. De Castillo, No. L-69002, June 30, 1988, 163 SCRA 286.
15 De Buyser v. Director of Lands, 206 Phil. 13, 17 (1983).
June 30, 2006
Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure assailing the Decision1 dated August 22, 2001 of the Court of Appeals (CA) in CA-G.R. CV No. 57719 which set aside the Decision dated July 22, 1997 of the Regional Trial Court, Branch 1, Balanga, Bataan (RTC) in Civil Case No. 6223 and ordered Alberto Herbon, Margarito Herbon and Gabino Herbon (petitioners) to vacate the subject premises in favor of Leopoldo T. Palad and Helen P. Cayetano (respondents).
The factual background of the case is as follows:
In his lifetime, Gonzalo Palad (Gonzalo) was a co-owner of a parcel of agricultural land located in Poblacion, Bagac, Bataan, otherwise known as Lot 421, with an area of 32,944 square meters and covered by Transfer Certificate of Title (TCT) No. 4408 of the Register of Deeds of Bataan.2 The extent of his co-ownership in Lot 421 is ? and 1/14. The other co-owners of Lot 421 and their respective shares were: Jacinto Palad (Jacinto), ? and 1/14; Spouses Juan Banzon and Elena Gutierrez, 1/14; Francisco Palad, 1/14; Lorenzo Palad, 1/14; Ramon Nojadera, 1/28; Ana Nojadera, 1/28; Modesta Nojadera (Modesta), 1/28; and, Concordia Nojadera (Concordia), 1/28.3 Gonzalo’s share in Lot 421 was conjugal property, having been acquired during his marriage with one Alejandra Nava (Alejandra).4 Adelaida,5 Benjamin,6 and Ignacio, respondents’ father, were their children.
Sometime during the Japanese Occupation, Alejandra died. On September 14, 1949, Gonzalo contracted a second marriage with Remedios Torres (Remedios).7 Remedios, a widow, had three children from her previous marriage, herein petitioners. The union of Gonzalo and Remedios bore no children. On November 16, 1983, Gonzalo died. About a decade later, or on November 9, 1992, Remedios died. Thereafter, petitioners took possession of a portion of Lot 421 and despite respondents’ demands to vacate and turn over possession of the property, petitioners refused to do so. When respondents brought the matter to conciliation before the Office of the Barangay Captain of Ibaba, Bagac, Bataan, the matter was not amicably settled.8 Hence, on January 4, 1994, respondents filed a complaint against petitioners for recovery of possession of real property with damages.9
On March 2, 1994, petitioners filed their Answer with Counterclaim claiming that they have a right to possess and occupy a portion of Lot 421 as heirs of Remedios.10
During the trial, respondents presented oral evidence to show that Gonzalo expressed his intentions regarding the disposition of his properties, which included his share in Lot 421 and a 173-square meter lot in Pag-asa, Bagac, Bataan (Pag-asa property); that Gonzalo intended that the Pag-asa property would be given to Remedios and the same would be left to her granddaughter, Merlita Herbon Espiritu (Merlita),11 eldest daughter of petitioner Gabino Herbon; that Gonzalo’s share in Lot 421 should be left to Ignacio; that the Pag-asa property has already been transferred to Merlita in accordance with the wishes of Gonzalo; that it was the Palad tradition that land inherited by members of the clan shall be disposed only to the clan and to no other person.
On the other hand, petitioners presented a Deed of Absolute Sale dated December 9, 1957 executed by Jacinto selling his shares in Lot 421 to Gonzalo, Adelaida and Ignacio,12 as well as a Deed of Absolute Sale dated December 16, 1957 executed by sisters Modesta and Concordia selling their separate shares in Lot 421 in favor of Gonzalo, Adelaida and Ignacio.13 They submit that since the shares were acquired during the marriage of Gonzalo and Remedios, said shares form part of the conjugal property and Remedios was entitled to a part thereof as her conjugal share. Moreover, as surviving heir of Gonzalo, Remedios inherited Gonzalo’s shares in Lot 421.
As rebuttal witnesses, Bayani M. Palad (Bayani) and Maria A. Gallego (Maria) testified that Benjamin, Gonzalo’s son, paid for Jacinto’s shares in the Deed of Absolute Sale dated December 9, 1957. Concordia Jornal, also a rebuttal witness, testified that she is the Concordia Nojedera mentioned in the TCT but disowned the Deed of Absolute Sale dated December 16, 1957 and her purported signature therein.
On July 22, 1997, the RTC rendered its Decision dismissing the complaint and ordering respondents to pay petitioners P3,000.00 as attorney’s fees and the cost of suit.14 The RTC held that the action for recovery of possession cannot prosper since petitioners proved that they are co-owners of the subject property based on the two deeds of absolute sale; that Remedios inherited a portion of Gonzalo’s share in Lot 421; that when Remedios died in 1992, her shares in Lot 421 were inherited by her three sons, herein petitioners; that being co-owners, petitioners cannot be ejected since no definite portion of Lot 421 was allotted to petitioners and respondents.
Dissatisfied, respondents filed an appeal with the CA, docketed as CA-G.R. CV No. 57719. On August 22, 2001, the CA set aside the Decision of the RTC and ordered petitioners to vacate the subject premises in favor of the respondents.15 The CA held that an implied trust was created in favor of Benjamin when he paid the price for Jacinto’s shares in Lot 421 in the Deed of Absolute Sale dated December 9, 1957; that the Deed of Absolute Sale dated December 16, 1957 executed by Modesta and Concordia is void since Concordia vehemently denied that she signed said document and the striking similarity of the signatures of Modesta and Concordia points to forgery; that respondents have a better title than petitioners, considering the absence of any relationship between petitioners and the registered owners of the lot, as against respondents who are the grandchildren and successors-in-interest of Gonzalo, a registered owner.
No motion for reconsideration was filed by the petitioners. Instead, they filed the present petition anchored on the following grounds:
1. THE SALE BY JACINTO PALAD OF ONE-THIRD OF HIS SHARES IN THE LOT TRANSFERRED OWNERSHIP THEREOF TO SPOUSES GONZALO PALAD AND REMEDIOS TORRES.16
2. THE DEED OF ABSOLUTE SALE (EXH. "B") WITH SIGNATURES OVER THE NAME CONCORDIA NOJADERA AND MODESTA NOJADERA VALIDLY TRANSFERRED PORTIONS OF THE LOT TO SPOUSES GONZALO PALAD AND REMEDIOS TORRES, AND THE NOJADERAS ARE NOT PARTIES TO THIS CASE.17
3. EVEN WITHOUT THE BENEFIT OF THE TWO DEEDS OF ABSOLUTE SALE (EXH. "A" AND "B"), THE PETITIONERS CANNOT LAWFULLY BE OUSTED FROM THE LOT BECAUSE THEY ARE PART-OWNERS THEREOF BY INHERITANCE FROM THEIR MOTHER REMEDIOS TORRES.18
As to the first ground, petitioners take exception from the CA’s finding of implied trust. They contend that Maria’s testimony regarding Benjamin’s alleged payment of Jacinto’s shares should not be given credence since she did not give details of the transaction which she witnessed.
Anent the second ground, petitioners argue that Concordia failed to convincingly deny the genuineness of her signature on a public instrument; that, even if the sale by Concordia is void, the sale by Modesta is valid since Concordia merely declared in court that she did not sign the deed, without saying that her sister did not sign the same.
With respect to the third ground, petitioners aver that, even without the benefit of the two deeds of sale, they cannot be ousted from Lot 421 since Remedios, as a compulsory heir of Gonzalo, inherited a portion of his estate and petitioners, as compulsory heirs of Remedios, inherited that share of the estate Remedios inherited from Gonzalo.
Respondents counter that the CA correctly held that an implied trust was created when Benjamin paid for Jacinto’s share in Lot 421 in the Deed of Absolute Sale dated December 9, 1957 and petitioners failed to controvert Maria’s testimony on this matter; that the Deed of Absolute Sale dated December 16, 1957 is void because Concordia disowned having sold her share and that of her sister to any person and the signatures of sisters Modesta and Concordia are forgeries.
The Court rules in favor of the petitioners.
As a general rule, in petitions for review, the jurisdiction of this Court in cases brought before it from the CA is limited to reviewing questions of law which involves no examination of the probative value of the evidence presented by the litigants or any of them.19 The Supreme Court is not a trier of facts; it is not its function to analyze or weigh evidence all over again.20 Accordingly, findings of fact of the appellate court are generally conclusive on the Supreme Court.21
Nevertheless, jurisprudence has recognized several exceptions in which factual issues may be resolved by this Court, such as: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the CA went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; (11) when the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion.22 The Court finds that exceptions (2), (4), (5), and (7) apply to the present petition.
On the matter of implied trust, Article 1448 of the Civil Code provides:
Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child. (Emphasis supplied)
The trust created under the first sentence of Article 1448 is sometimes referred to as a purchase money resulting trust, the elements of which are: (a) an actual payment of money, property or services, or an equivalent, constituting valuable consideration; and (b) such consideration must be furnished by the alleged beneficiary of a resulting trust.23
As a rule, the burden of proving the existence of a trust is on the party asserting its existence, and such proof must be clear and satisfactorily show the existence of the trust and its elements.24 While implied trusts may be proved by oral evidence,25 the evidence must be trustworthy and received by the courts with extreme caution, and should not be made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required because oral evidence can easily be fabricated.26 Thus, in order to establish an implied trust in real property by parol evidence, the proof should be as fully convincing as if the acts giving rise to the trust obligation are proven by an authentic document.27 An implied trust, in fine, cannot be established upon vague and inconclusive proof.28
In the present case, the parol evidence offered to prove the existence of an implied trust is lean, frail and far from convincing. The testimonies of Bayani and Maria that Benjamin, instead of Gonzalo, paid for Jacinto’s shares in Lot 421 are vague and contain no specificities.29 Their testimonies do not show that the payment was intended to establish a trust relationship. Said witnesses are complete strangers in so far as the intent of the parties to the contract is concerned.
The hornbook rule on interpretation of contracts gives primacy to the intention of the parties, which is the law among them. Ultimately, their intention is to be deciphered from the language used in the contract, not from the unilateral post facto assertions of one of the parties, or even third parties who are strangers to the contract. And when the terms of the agreement, as expressed in such language, are clear, they are to be understood literally, just as they appear on the face of the contract.30
In this case, the Deed of Absolute Sale dated December 9, 1957 executed by Jacinto is clear and unequivocal as to who are the vendees, namely: Gonzalo, Adelaida and Ignacio. No amount of extrinsic aids are required and no further extraneous sources are necessary in order to ascertain the parties’ intent, determinable as it is, from the document itself.31 The Court is thus convinced that the deed expresses truly the parties’ intent as against the oral testimony that Benjamin paid the consideration of the sale.
Without any doubt, oral testimony as to a certain fact, depending as it does exclusively on human memory, is not as reliable as written or documentary evidence.32 As Judge Limpkin of Georgia once said, “I would sooner trust the smallest slip of paper for truth than the strongest and most retentive memory ever bestowed on mortal man.”33 Indeed, spoken words could be notoriously unreliable as against a written document that speaks a uniform language.34
As to the Deed of Absolute Sale dated December 16, 1957, executed by Modesta and Concordia, the rule is settled that the notarization of a document carries considerable legal effect. Notarization of a private document converts such document into a public one, and renders it admissible in court without further proof of its authenticity35 and is entitled to full faith and credit upon its face.36 A notarized document carries the evidentiary weight conferred upon it with respect to its due execution,37 and documents acknowledged before a notary public have in their favor the presumption of regularity.38 It must be sustained in full force and effect so long as he who impugns it does not present strong, complete, and conclusive proof of its falsity or nullity on account of some flaws or defects provided by law.39 In this case, respondents failed to present such required proof.
Mere denial by Concordia that she signed the deed40 cannot prevail over the positive presumption enjoyed by a notarial document. Negative and self-serving, denial deserves no weight in law when unsubstantiated by clear and convincing evidence. No other witness or evidence was presented to corroborate Concordia’s testimony. Settled is the rule that forgery cannot be presumed; it must be proved by clear, positive and convincing evidence.41
Moreover, the similarity of signatures of Modesta and Concordia in the deed is not proof of forgery. The fact of forgery can only be established by a comparison between the alleged forged signature and the authentic and genuine signature of the person whose signature is theorized to have been forged.42 No standard or specimen signatures of Concordia and Modesta were offered to compare with the signatures appearing in the questioned deed of sale. Comparison of signatures cannot be made from two signatures appearing on the same document.
Having failed to present strong, complete, and conclusive proof that the notarized deed of sale was false, the presumption of regularity, the evidentiary weight conferred upon such public document with respect to its execution, as well as the statements and the authenticity of the signatures thereon, stand.
All the foregoing considered, respondents’ claim for recovery of possession of real property must fail. In the absence of Gonzalo’s written last will and testament, the law on intestate succession applies in the disposition of his estate.43 The so-called Palad tradition that the property in question should belong only to the Palad clan cannot supersede the law on intestate succession.
The ? and 1/14 shares in Lot 421 Gonzalo acquired during his marriage to his first wife, Alejandra, are conjugal shares,44 such that upon the death of Alejandra, one-half of the subject shares were automatically reserved to the surviving spouse, Gonzalo, as his share in the conjugal partnership.45 Alejandra’s rights to the other half, in turn, were transmitted upon her death to her legitimate children and surviving spouse Gonzalo.46 Under the Old Civil Code which was then in force, Gonzalo was entitled only to the usufruct of the land equal to that corresponding by way of legitime to each of the legitimate children47 who has not received any betterment.48 Gonzalo’s share in the conjugal partnership and his usufructory right were brought into his second marriage with Remedios.
As to the shares in Lot 421 subject of the two deeds acquired during the marriage of Gonzalo and Remedios, they are also conjugal shares,49 such that upon the death of Gonzalo, one-half of the subject shares were automatically reserved to the surviving spouse, Remedios, as her share in the conjugal partnership.50 Gonzalo’s rights to the other half, including his conjugal share from his first marriage, were transmitted upon his death to his widow Remedios and his children with his first wife Alejandra.51 Upon the death of Remedios, the shares in Lot 421 which she inherited from Gonzalo, are inherited in turn by her three sons, herein petitioners, being her compulsory heirs.52
Thus, petitioners, as co-owners, have the right to posses and occupy Lot 421. Until there is partition, the New Civil Code provisions on co-ownership shall govern the rights of the parties. The specific shares of the parties cannot be resolved in this case since it is not clear from the records whether all of Gonzalo’s children from his first marriage were alive at the time of his death. An action for partition is the proper forum to determine the particular portions properly pertaining to petitioners and respondents, as well as the accounting of the profits or income received by petitioners from the use of the land.
WHEREFORE, the petition is GRANTED. The assailed Decision dated August 22, 2001 of the Court of Appeals in CA-G.R. CV No. 57719 is REVERSED and SET ASIDE. The Decision dated July 22, 1997 of the Regional Trial Court, Branch 1, Balanga, Bataan in Civil Case No. 6223 is REINSTATED.
Panganiban, C.J., Ynares-Santiago, Callejo, Sr., Chico-Nazario, J.J., concur.
1 Penned by Associate Justice B. A. Adefuin-De la Cruz (now retired) and concurred in by Associate Justices Andres B. Reyes, Jr. and Josefina Guevara-Salonga.
2 Exhibit "B", records, p. 156.
5 TSN, Testimony of Severino Herbon, May 4, 1995, p. 5.
6 TSN, Testimony of Bayani Palad, March 28, 1996, pp. 5 and 7.
7 Exhibit "1", records, p. 247.
8 Exhibit "C", id. at 157.
9 Id. at 1.
10 Id. at 20.
11 Also known as "Merly".
12 Exhibit "2", records, p. 248.
13 Exhibit "3", id. at 249.
14 Id. at 384.
15 CA rollo, p. 132.
16 Rollo, p. 11.
17 Id. at 12-13.
18 Id. at 14-15.
19 Spouses Hanopol v. Shoemart, Incorporated, 439 Phil. 266, 277 (2002); St. Michael’s Institute v. Santos, 422 Phil. 723, 737 (2001).
20 Go v. Court of Appeals, G.R. No. 158922, May 28, 2004, 430 SCRA 358, 364; Spouses Hanopol v. Shoemart, Incorporated, supra.
21 Custodio v. Corrado, G.R. No. 146082, July 30, 2004, 435 SCRA 500, 511; Spouses Hanopol v. Shoemart, Incorporated, supra.
22 The Insular Life Assurance Company, Ltd. v. Court of Appeals, G.R. No. 126850, April 28, 2004, 428 SCRA 79, 86; Aguirre v. Court of Appeals, G.R. No. 122249, January 29, 2004, 421 SCRA 310, 319.
23 Tigno v. Court of Appeals, 345 Phil. 486, 499 (1997); Morales v. Court of Appeals, 340 Phil. 397 (1997).
24 76 Am Jur. 2d Trusts ?688.
25 Civil Code, Art. 1457.
26 Tigno v. Court of Appeals, supra; Morales v. Court of Appeals, supra.
27 Heirs of Yap v. Court of Appeals, 371 Phil. 523, 531 (1999); O’Laco v. Co Cho Chit, G.R. No. 58010, March 31, 1993, 220 SCRA 656, 664-665.
28 Heirs of Yap v. Court of Appeals, supra; Suarez v. Tirambulo, 59 Phil. 303, 306 (1933).
29 TSN, March 28, 1996, pp. 3, 5 and 8; TSN, July 18, 1996, pp. 5-6.
30 Berman Memorial Park, Inc. v. Cheng, G.R. No. 154630, May 6, 2005, 458 SCRA 112, 127; Cruz v. Court of Appeals, 354 Phil. 1036, 1050 (1998).
31 Light Rail Transit Authority v. Court of Appeals, G.R. Nos. 139275-76 and 140949, November 25, 2004, 444 SCRA 125, 138; Berman Memorial Park, Inc. v. Cheng, supra.
32 Gener v. De Leon, 419 Phil. 920, 935 (2001); Abapo v. Court of Appeals, 383 Phil. 933, 942-943 (2000).
33 Gener v. De Leon, supra; Abella v. Court of Appeals, 327 Phil. 272, 276 (1996).
34 Mendezona v. Ozamiz, 426 Phil. 888, 905 (2002).
35 Tigno v. Aquino, G.R. No. 129416, November 25, 2004, 444 SCRA 61, 75; Cabanilla v. Cristal-Tenorio, A.C. No. 6139, November 11, 2003, 415 SCRA 353, 361.
36 Mendezona v. Ozamiz, supra Note 33 at 903-904; Lao v. Villones-Lao, 366 Phil. 49, 58 (1999).
37 Loyola v. Court of Appeals, 383 Phil. 171, 181 (2000); Garrido v. Court of Appeals, G.R. No. 101262, September 14, 1994, 236 SCRA 450, 457.
38 Loyola v. Court of Appeals, supra; Ramirez v. Ner, 128 Phil. 221, 224 (1967).
39 Yason v. Arciaga, G.R. No. 145017, January 28, 2005, 449 SCRA 459, 471-472; Chilianchin v. Coquinco, 84 Phil. 714, 718 (1949).
40 TSN, March 7, 1996, pp. 5-6.
41 Domingo v. Robles, G.R. No. 153743, March 18, 2005; Ladignon v. Court of Appeals, 390 Phil. 1161 (2000).
42 Ulep v. Court of Appeals, G.R. No. 125254, October 11, 2005, 472 SCRA 241, 255; Heirs of Severa P. Gregorio v. Court of Appeals, 360 Phil. 753, 763 (1998).
43 Article 960 of the Civil Code provides:
Art. 960. Legal or intestate succession takes place:
(1) If a person dies without a will, or with a void will, or one which has subsequently lost its validity; x x x
44 Articles 1401 and 1407 of the Old Civil Code (Spanish Civil Code of 1889) provide:
Art. 1401. To the conjugal partnership belong:
1. Property acquired for a valuable consideration during the marriage at the expense of the common fund, whether the acquisition is made for the partnership or for one of the spouses only; x x x
Art. 1407. All the property of the spouses shall be deemed partnership property in the absence of proof that it belongs exclusively to the husband or to the wife.
45 Article 1392 of the Old Civil Code. By virtue of the conjugal partnership the earnings or profits obtained by either of the spouses during the marriage belong to the husband and the wife, share and share alike, upon its dissolution.
46 Article 807 of the Old Civil Code. The following are forced heirs:
1. Legitimate children and descendants, with respect to their legitimate parents and ascendants.
2. In default of the foregoing, legitimate parents and ascendants, with respect to their legitimate children and descendants.
3. The widower or widow, natural children legally acknowledged, and the father or the mother of the latter, in the manner, and to the extent established by Articles 834, 835, 836, 837, 841, 842 and 846.
47 Article 808 of the Old Civil Code. The legitime of legitimate children and descendants consists of two-thirds of the hereditary estate of the father and of the mother. ?
48 Article 834 of the Old Civil Code. A widower or widow who, on the death of his or her spouse, is not divorced, or should be so by the fault of the deceased, shall be entitled to a portion in usufruct equal to that corresponding by way of legitime to each of the legitimate children or descendants who has not received any betterment.
If only one legitimate child or descendant survives, the widower or widow shall have the usufruct of the third available for betterment, such child or descendant to have the naked ownership until, on the death of the surviving spouse, the whole title is merged in him. ?
49 Articles 143, 153 and 160 of the New Civil Code state:
Art. 143. All property of the conjugal partnership of gains is owned in common by the husband and wife.
Art. 153. The following are conjugal partnership property:
(1) That which is acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership, or for only one of the spouses; ?
Art. 160. All property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife.
50 Article 142 of the New Civil Code. By means of the conjugal partnership of gains the husband and wife place in a common fund the fruits of their separate property and the income from their work or industry, and divide equally, upon the dissolution of the marriage or of the partnership, the net gains or benefits obtained indiscriminately by either spouse during the marriage.
51 Article 996 of the New Civil Code. If a widow or widower and legitimate children or descendants are left, the surviving spouse has in the succession the same share as that of each of the children.
52 Article 887 of the New Civil Code. The following are compulsory heirs:
(1) Legitimate children and descendants, with respect to their legitimate parents and ascendants.
x x x x
June 30, 2006
Business enterprises registered with the Philippine Export Zone Authority (PEZA) may choose between two fiscal incentive schemes: (1) to pay a five percent preferential tax rate on its gross income and thus be exempt from all other taxes; or (b) to enjoy an income tax holiday, in which case it is not exempt from applicable national revenue taxes including the value-added tax (VAT). The present respondent, which availed itself of the second tax incentive scheme, has proven that all its transactions were export sales. Hence, they should be VAT zero-rated.
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, challenging the August 16, 2001 Decision2 of the Court of Appeals (CA) in CA-GR SP No. 64679. The assailed Decision upheld the April 26, 2001 Decision3 of the Court of Tax Appeals (CTA) in CTA Case No. 5751. The CA Decision disposed as follows:
"WHEREFORE, premises considered, the present petition for review is hereby DENIED DUE COURSE and accordingly DISMISSED for lack of merit. The Decision dated April 26, 2001 of the Court of Tax Appeals in CTA Case No. 5751 is hereby AFFIRMED and UPHELD."4
On the other hand, the dispositive portion of the CTA Decision reads:
"WHEREFORE, the instant Petition for Review is PARTIALLY GRANTED. [Petitioner] is hereby ordered to refund or to issue a Tax Credit Certificate in favor of the [Respondent] in the amount of P4,377,102.26 representing excess input taxes paid for the period covering January 1 to June 30, 1997."5
The uncontested6 facts are narrated by the CA as follows:
"Respondent is a domestic corporation duly organized and existing under and by virtue of the laws of the Philippines with principal office located at the Special Export Processing Zone, Laguna Technopark, Biñan, Laguna. It is principally engaged in the business of manufacturing, importing, exporting, buying, selling, or otherwise dealing in, at wholesale such goods as strapping bands and other packaging materials and goods of similar nature, and any and all equipment, materials, supplies used or employed in or related to the manufacture of such finished products.
"Having registered with the Bureau of Internal Revenue (BIR) as a value-added tax (VAT) taxpayer, respondent filed its quarterly returns with the BIR, for the period January 1 to June 30, 1997, reflecting therein input taxes in the amount of P4,631,132.70 paid by it in connection with its domestic purchase of capital goods and services. Said input taxes remained unutilized since respondent has not engaged in any business activity or transaction for which it may be liable for output tax and for which said input taxes may be credited.
"On November 11, 1998, respondent filed with the One-Stop-Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance (CENTER-DOF) two (2) separate applications for tax credit/refund of VAT input taxes paid for the period January 1 to March 31, 1997 and April 1 to June 30, 1997, respectively. There being no action on its application for tax credit/refund under Section 112 (B) of the 1997 National Internal Revenue Code (Tax Code), as amended, private respondent filed, within the two (2)-year prescriptive period under Section 229 of said Code, a petition for review with the Court of Tax Appeals on March 26, 1999.
"Petitioner filed its Answer to the petition asseverating that: (1) said claim for tax credit/refund is subject to administrative routinary investigation by the BIR; (2) respondent miserably failed to show that the amount claimed as VAT input taxes were erroneously collected or that the same were properly documented; (3) taxes due and collected are presumed to have been made in accordance with law, hence, not refundable; (4) the burden of proof is on the taxpayer to establish his right to a refund in an action for tax refund. Failure to discharge such duty is fatal to his action; (5) respondent should show that it complied with the provisions of Section 204 in relation to Section 229 of the 1997 Tax Code; and (6) claims for refund are strictly construed against the taxpayer as it partakes of the nature of a tax exemption. Hence, petitioner prayed for the denial of respondent?s petition."7
Ruling of the Court of Tax Appeals
The CTA ruled that respondent was entitled to the refund. While the company was registered with the PEZA as an ecozone and was, as such, exempt from income tax, it availed itself of the fiscal incentive under Executive Order No. 226. It thereby subjected itself to other internal revenue taxes like the VAT.8 The CTA then found that only input taxes amounting to P4,377,102.26 were duly substantiated by invoices and Official Receipts,9 while those amounting to P254,313.43 had not been sufficiently proven and were thus disallowed.10
Ruling of the Court of Appeals
The Court of Appeals upheld the Decision of the CTA. According to the CA, respondent had complied with the procedural and substantive requirements for a claim by 1) submitting receipts, invoices, and supporting papers as evidence; 2) paying the subject input taxes on capital goods; 3) not applying the input taxes against any output tax liability; and 4) filing the claim within the two-year prescriptive period under Section 229 of the 1997 Tax Code.11
Hence, this Petition.12
Petitioner raises this sole issue for our consideration:
"Whether or not respondent is entitled to the refund or issuance of tax credit certificate in the amount of P4,377,102.26 as alleged unutilized input taxes paid on domestic purchase of capital goods and services for the period covering January 1 to June 30, 1997."13
The Court?s Ruling
The Petition has no merit.
Entitlement to Refund
To support the issue raised, petitioner advances the following arguments:
"I. The Court of Appeals erred in not holding that respondent being registered with the Philippine Economic Zone Authority (PEZA) as an [e]cozone [e]xport [e]nterprise, its business is not subject to VAT pursuant to Section 24 of Republic Act No. 7916 in relation to Section 103 (now Sec. 109) of the Tax Code, as amended by R.A. 7716.
"II. The Court of Appeals erred in not holding that since respondent is EXEMPT from Value-Added Tax (VAT), the capital goods and services it purchased are considered not used in VAT taxable business, hence, is not allowed any tax credit/refund on VAT input tax previously paid on such capital goods pursuant to Section 4.106-1 of Revenue Regulations No. 7-95, and of input taxes paid on services pursuant to Section 4.103-1 of the same regulations.
"III. The Court of Appeals erred in not holding that tax refunds being in the nature of tax exemptions are construed strictissimi juris against claimants."14
These issues have previously been addressed by this Court in Commissioner of Internal Revenue v. Toshiba Information Equipment (Phils.),15 Commissioner of Internal Revenue v. Cebu Toyo Corporation,16 and Commissioner of Internal Revenue v. Seagate Technology (Philippines).17
An entity registered with the PEZA as an ecozone18 may be covered by the VAT system. Section 23 of Republic Act 7916, as amended, gives a PEZA-registered enterprise the option to choose between two fiscal incentives: a) a five percent preferential tax rate on its gross income under the said law; or b) an income tax holiday provided under Executive Order No. 226 or the Omnibus Investment Code of 1987, as amended. If the entity avails itself of the five percent preferential tax rate under the first scheme, it is exempt from all taxes, including the VAT;19 under the second, it is exempt from income taxes for a number of years,20 but not from other national internal revenue taxes like the VAT.21
The CA and CTA found that respondent had availed itself of the fiscal incentive of an income tax holiday under Executive Order No. 226. This Court respects that factual finding. Absent a sufficient showing of error, findings of the CTA as affirmed by the CA are deemed conclusive.22 Moreover, a perusal of the pleadings and supporting documents before us indicates that when it registered as a VAT-entity — a fact admitted by the parties — respondent intended to avail itself of the income tax holiday.23 Verily, being a question of fact, the type of fiscal incentive chosen cannot be a subject of this Petition, which should raise only questions of law.
By availing itself of the income tax holiday, respondent became subject to the VAT. It correctly registered as a VAT taxpayer, because its transactions were not VAT-exempt.
Notably, while an ecozone is geographically within the Philippines, it is deemed a separate customs territory24 and is regarded in law as foreign soil.25 Sales by suppliers from outside the borders of the ecozone to this separate customs territory are deemed as exports26 and treated as export sales.27 These sales are zero-rated or subject to a tax rate of zero percent.28
Notwithstanding the fact that its purchases should have been zero-rated, respondent was able to prove that it had paid input taxes in the amount of P4,377,102.26. The CTA found, and the CA affirmed, that this amount was substantially supported by invoices and Official Receipts;29 and petitioner has not challenged the computation. Accordingly, this Court upholds the findings of the CTA and the CA.
On the other hand, since 100 percent of the products of respondent are exported,30 all its transactions are deemed export sales and are thus VAT zero-rated. It has been shown that respondent has no output tax with which it could offset its paid input tax.31 Since the subject input tax it paid for its domestic purchases of capital goods and services remained unutilized, it can claim a refund for the input VAT previously charged by its suppliers.32 The amount of P4,377,102.26 is excess input taxes that justify a refund.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. No costs, as petitioner is a government agency.
Panganiban, C.J., Ynares-Santiago, Austria-Martinez, Callejo, Sr., Chico-Nazario, J.J., concur.
1 Rollo, pp. 8-18.
2 Id. at 22-27. Special Twelfth Division. Penned by Justice Martin S. Villarama, Jr., with the concurrence of Justices Conrado M. Vasquez, Jr. (Division chair) and Eliezer R. de los Santos (member).
3 Id. at 28-39. Penned by Judge Amancio Q. Saga and concurred in by Presiding Judge Ernesto D. Acosta (now CTA Presiding Justice).
4 Assailed CA Decision, p. 6; rollo, p. 27.
5 CTA Decision, p. 11; rollo, p. 38.
6 The Petition quoted them in full.
7 Assailed CA Decision, pp. 1-2; rollo, pp. 22-23.
8 CTA Decision, p. 10; id. at 37.
9 Id. at 11; id. at 38.
10 Id. at 10-11; id. at 37-38.
11 Assailed CA Decision, p. 5; rollo, p. 26.
12 To resolve old cases, the Court created the Committee on Zero Backlog of Cases on January 26, 2006. Consequently, the Court resolved to prioritize the adjudication of long-pending cases by redistributing them among all the justices. This case was recently re-raffled and assigned to the undersigned ponente for study and report.
13 Petition, p. 4; rollo, p. 11.
14 Id. at 4-5; id. at 11-12.
15 466 SCRA 211, August 9, 2005.
16 451 SCRA 447, February 16, 2005.
17 451 SCRA 132, February 11, 2005.
18 An ecozone refers to a selected area that is or has a potential to be developed as agro-industrial, industrial, tourist/recreational, commercial, banking, investment and financial centers. See Republic Act No. 7916, otherwise known as "The Special Economic Zone Act of 1995," Chapter I, Sec. 4(a).
19 Commissioner of Internal Revenue v. Toshiba Information Equipment (Phils.), Inc., supra note 15; Commissioner of Internal Revenue v. Cebu Toyo Corporation, supra note 16.
20 The income tax holiday is for a period of 6 years for pioneer enterprises and 4 years for non-pioneer enterprises. (Executive Order No. 226, as amended, Art. 39).
21 Supra note 19.
22 Commissioner of Internal Revenue v. Toshiba Information Equipment (Phils.), Inc., supra note 15.
While Republic Act No. 9282, elevated the CTA to the level of the CA, the rule stands, because findings of trial courts — for which specialization is conferred — are accorded respect and finality when supported by substantial evidence.
23 CTA Decision, p. 6; rollo, p. 33.
24 Republic Act No. 7916, as amended, Sec. 8.
25 Commissioner of Internal Revenue v. Seagate Technology (Philippines), supra note 17.
26 Commissioner of Internal Revenue v. Toshiba Information Equipment (Phils.), supra note 15.
28 Tax Code, Sec. 106(A)(2)(a)(5).
29 CTA Decision, pp. 6 and 11; rollo, pp. 33 and 38.
30 Id. at 7; id. at 34.
31 Assailed CA Decision, p. 5; id. at 26.
32 Commissioner of Internal Revenue v. Seagate Technology (Philippines), supra note 17.
June 30, 2006
This resolves the petition for review on certiorari seeking the reversal of the Decision1 of the Court of Appeals (CA) dated March 13, 2001 and the CA Resolution dated August 27, 2001 denying petitioner’s Motion for Reconsideration thereof.
The antecedent facts, as accurately narrated by the CA in its Decision, are as follows:
Imelda Nicdao was employed as Secretary/Cashier, while Rodrigo Sicat and Romeo Bautista were truck drivers of respondent firm. The aforenamed petitioners [herein respondents] claim that they were hired respectively in June 1985, February 1981 and March 1988.
Sometime in January 1993, petitioners inquired from private respondents about the delay of their salaries, non-payment of holiday pay, rest day allowances, service incentive leave, 13th month pay and the like. Private respondents [herein petitioners] allegedly were infuriated and uttered invectives at petitioners, especially to Nicdao, and threatened them with termination of their employment. To avoid a confrontation, petitioner Nicdao filed a leave of absence for six (6) working days on January 28, 1993. When petitioners reported for work on February 1, 1993, private respondents told them that their services were no longer needed and their employment was already terminated. From then on, petitioners were barred from entering the company premises of private respondents. As a consequence, petitioners filed a complaint for illegal dismissal on February 5, 1993.
In their position paper, private respondents did not deny petitioners’ employment. They argued, however, that Imelda Nicdao was employed only in May 1989, while Romeo Bautista started working in June 1991. Private respondents further argued that Rodrigo Sicat and Romeo Bautista are drivers on a per trip basis and had not become regular employees; that Imelda Nicdao abandoned her work when she was confronted with the reported misappropriation of cash collection from sales of sand and filing (sic) materials; that Rodrigo Sicat and Romeo Bautista simply failed to report for work despite receipt of "show cause letter" why their services should not be terminated.
After the parties had submitted their respective position papers and other responsive pleadings with documentary and testimonial evidence, the case was submitted for resolution.
The Regional Arbitration Branch No. III, San Fernando, Pampanga, presided by Labor Arbiter Quintin C. Mendoza, promulgated its Decision dated June 21, 1994, holding that petitioners were illegally dismissed, to wit:
WHEREFORE, premises considered, a decision is hereby issued declaring the dismissal of the remaining complainants illegal, and dismissing the complaint of the other (11) for having desisted on their complaints, and for lack of interest as regards Antonio Sicat. As a consequence, respondents A.C. Ordonez Construction, L.C. Ordonez Construction and L.C. Ordonez Gravel and Sand and Trucking and individual respondent Lamberto Ordonez are hereby ordered to pay complainants jointly and severally, including their separation the following amounts to which each of them are entitled, to wit:
1) Imelda Nicdao
2) Rodrigo Sicat
3) Romeo Bautista
All in the aggregate of two hundred seventy two thousand two hundred thirty nine pesos and 43/100 centavos (P272,293.43), plus attorney’s fee representing ten (10%) percent of the total award, the rest being dismissed for lack of merit.
(pp. 43-44, Rollo)
On appeal to the NLRC, private respondents assailed the Labor Arbiter’s decision on the following grounds:
a) There are serious errors in the findings of facts which, if not corrected, would cause grave or irreparable damage or injury to the applicants.
b) Serious reversible errors constituting evidence of abuse of discretion were committed by the Labor Arbiter."
(p. 26, ibid)
The National Labor Relations Commission, Third Division, in its Decision of June 15, 1995, reversed and set aside the Labor Arbiter’s decision, the dispositive portion of which is hereto quoted as follows:
WHEREFORE, premises considered, the Decision dated 21 June 1994 is Set Aside and a new one entered ordering respondents, jointly and severally, to pay complainants the following:
1) Imelda Nicdao:
13th month pay
Service incentive leave pay
2) Rodrigo Sicat:
13th month pay
Service incentive leave pay
3) Romeo Bautista:
13th month pay
Service incentive leave pay
(p. 30, ibid)
On July 5, 1995, petitioners filed a Motion for Reconsideration; however, the same was denied by the NLRC in its Resolution dated November 7, 1995 for lack of compelling or valid reason (pp. 33-34, ibid).2
Herein respondents then filed a petition for certiorari with the CA. On March 13, 2001, the CA promulgated its Decision, the dispositive portion of which reads as follows:
WHEREFORE, premises considered, the Decision of the National Labor Relations Commission dated June 15, 1995 and its Resolution dated November 7, 1995 are hereby SET ASIDE. The Decision of the Labor Arbiter dated June 21, 1994 is REINSTATED, with the modification that private respondents should pay only the difference between the allowable 13th month pay and Christmas bonus already given to the petitioners; that private respondents also give service incentive leave pay and pay attorney’s fees equivalent to ten percent (10%) of the total award. No pronouncement as to costs.
The CA granted the petition and ruled that respondents are not guilty of abandonment since it was only after the management informed them that their services were no longer needed that they failed to report for work, and the fact that they immediately filed a complaint for illegal dismissal is a clear indication that they had no intention of abandoning their employment. The CA also ruled that with regard to respondents Sicat and Bautista, petitioners failed to give them the required two notices, thus, tainting their termination with illegality. As for petitioners’ averment that the dismissal of respondent Nicdao was due to her misappropriation of cash collections amounting to P327,006.37, the CA found this claim not worthy of belief because petitioners only filed a complaint for estafa against Nicdao five months after the latter had filed the complaint for illegal dismissal against petitioners. Thus, the CA concluded that the filing of the estafa case against Nicdao was merely an attempt by petitioners to create a leverage against the former.
Petitioners moved for reconsideration of the CA Decision but in its Resolution dated August 27, 2001 the CA denied reconsideration.
Hence, this petition for review on certiorari on the following grounds:
1. THE COURT OF APPEALS ABUSED ITS DISCRETION IN REVIEWING AND RE-EXAMINING THE FINDINGS OF FACTS OF THE NLRC DESPITE THE FACT THAT SAID FINDINGS OF THE NLRC ARE SUPPORTED BY SUBSTANTIAL EVIDENCE ON RECORD;
2. THE COURT OF APPEALS DECIDED THE QUESTION OF RESPONDENTS’ DISMISSAL IN A WAY NOT IN ACCORD WITH THE LAW AND CLEARLY SETTLED JURISPRUDENCE ON THE MATTER WHEN IT ?
2.1 DID NOT CONSIDER RESPONDENT IMELDA NICDAO AS HAVING ABANDONED HER JOB;
2.2 TREATED THE DISMISSAL OF RESPONDENTS ROMEO BAUTISTA AND RODRIGO SICAT AS LEGAL [sic].4
It is emphasized at the outset that the CA committed no error in reviewing the findings of fact of the National Labor Relations Commission (NLRC). In Mayon Hotel & Restaurant v. Adana,5 the Court held thus:
x x x [W]hen the factual findings of the Labor Arbiter and the NLRC are diametrically opposed and this disparity of findings is called into question, there is, necessarily, a re-examination of the factual findings to ascertain which opinion should be sustained. As ruled in Asuncion v. NLRC.
Although, it is a legal tenet that factual findings of administrative bodies are entitled to great weight and respect, we are constrained to take a second look at the facts before us because of the diversity of the opinions of the Labor Arbiter and the NLRC. A dis-harmony between the factual findings of the Labor Arbiter and those of the NLRC opens the door to a review thereof by this Court.
The CA, therefore, did not err in reviewing the records to determine which opinion was supported by substantial evidence.6 (Emphasis supplied)
The next question then is, was the CA correct in sustaining the findings of the Labor Arbiter?
Petitioners first argue that with regard to respondent Nicdao, the CA should have given more credence to the statement of petitioners that Nicdao was employed only in the year 1989 and not in 1985. To support their argument, petitioners point out that Nicdao’s claim as to the date of her employment should not be believed as she has lost her credibility when she made inconsistent statements regarding the date of her employment as stated in her Affidavit7 dated January 21, 1994 stating that she was employed in August 1991, as opposed to the date of employment stated as June 1985 in her complaint and position paper.
On this point, the Court rules in favor of petitioner. Indeed, even if petitioners were not able to present any employment records, respondent Nicdao’s Affidavit8 dated January 21, 1994 submitted to the Labor Arbiter in support of her complaint for illegal dismissal militates against her for it stated that "I am a regular employee of respondent Ordonez, having been employed on [sic] August 1991, x x x." In Rufina Patis Factory v. Alusitain,9 the Court held that:
It is a basic rule in evidence, however, that the burden of proof is on the part of the party who makes the allegations ? ei incumbit probatio, qui dicit, non qui negat. If he claims a right granted by law, he must prove his claim by competent evidence, relying on the strength of his own evidence and not upon the weakness of that of his opponent.10 (Emphasis ours)
In said case, respondent Alusitain was claiming retirement benefits from his employer, alleging that he was employed until 1995. The employer countered that Alusitain was employed only until February 20, 1991, presenting as proof Alusitain’s resignation letter dated February 19, 1991, and his Affidavit of Separation from Employment submitted to the Social Security System, stating that he was separated from his last employer on February 20, 1991. The Court held therein that the resignation letter and affidavit are admissions against Alusitain’s own interest that belie his claim of retiring on January 31, 1995. Moreover, the Court pointed out that since the Affidavit is a notarial document, it has in its favor the presumption of regularity and to contradict the facts stated therein, there must be evidence that is clear, convincing and more than merely preponderant.11
Applying the foregoing ruling in Rufina to the case at bar, it was incumbent upon Nicdao to present competent evidence that she was indeed employed beginning 1985. The burden of proof rests upon respondent Nicdao since she is the party claiming entitlement to separation pay and other employee benefits computed from 1985. However, Nicdao herself made an admission against her own interest by stating in her affidavit that she was employed only in August 1991. Nicdao did not even present any explanation for the variance between the date of employment stated in her affidavit as against the date stated in her complaint and position paper. Nor has she presented any other evidence to overturn the statement in her own affidavit that she was employed only in August 1991. Having made such an admission against her interest, Nicdao’s statement in her affidavit freed petitioners from the burden of presenting evidence, i.e., the employment records, to prove their assertion in their position paper that they only employed Nicdao in May 1989.
Since the Court cannot rely on Nicdao’s inconsistent statements as to the date of her employment, the only persuasive evidence on record regarding Nicdao’s date of employment is petitioners’ admission that they employed her in May 1989. Based on the evidence on record, Nicdao must then be deemed to have been employed by petitioners only in May 1989.
Next, petitioners insist that there is no illegal dismissal in this case because respondents abandoned their employment.
Our guiding principle in resolving the issue of whether or not respondents were illegally dismissed is stated in Litonjua Group of Companies v. Vigan,12 as follows:
For emphasis, We shall quote with seeming triteness the dictum laid down in Mendoza v. NLRC (supra) regarding the unflinching rule in illegal dismissal cases:
"that the employer bears the burden of proof. To establish a case of abandonment, the employer must prove the employees’ deliberate and unjustified refusal to resume employment without any intention of returning. . .
mere absence from work, especially where the employee has been verbally told not to report, cannot by itself constitute abandonment. To repeat, the employer has the burden of proving overt acts on the employee’s part which demonstrate a desire or intention to abandon her work?" 13 (Emphasis ours)
The foregoing was further elucidated in Hodieng Concrete Products v. Emilia,14 where the Court held:
The rule is that before abandonment can be considered a valid cause for dismissal, there must be a concurrence of the intention to abandon and some overt acts from which an employee may be deduced as having no more intention to work.
In Samarca v. Arc-Men Industries, Inc., we held:
"x x x. Absence must be accompanied by overt acts unerringly pointing to the fact that the employee simply does not want to work anymore. And the burden of proof to show that there was unjustified refusal to go back to work rests on the employer.
x x x
Abandonment is a matter of intention and cannot lightly be presumed from certain equivocal acts. To constitute abandonment, there must be clear proof of deliberate and unjustified intent to sever the employer-employee relationship. Clearly, the operative act is still the employee’s ultimate act of putting an end to his employment.
Settled is the rule that mere absence or failure to report for work is not tantamount to abandonment of work. x x x." 15 (Emphasis ours)
Were petitioners able to discharge their burden of proof? The answer is a categorical no.
First, with regard to the case of Nicdao, the Court finds difficulty believing petitioners’ allegation that when they confronted Nicdao with discrepancies in the payrolls of employees, she filed a leave of absence and never returned to work. Petitioners reason out that it would have been illogical for them to dismiss Nicdao in February of 1993 because, she being their Secretary-Cashier, petitioners badly needed her services to shed light on the audit being conducted at that time. Petitioners further insist that as a result of the audit, Nicdao was found to have misappropriated the amount of P327,006.37 and they filed a criminal case for estafa against her. In petitioners’ view, such charge against Nicdao constituted just cause for her dismissal but by then, Nicdao had allegedly abandoned her employment.
The glaring lack of convincing evidence on record to support petitioners’ allegations, however, makes it impossible for the Court to give any weight to petitioners’ version of what supposedly transpired.
If, indeed, the true reason for Nicdao’s filing a leave of absence on January 28, 1993 was because she was confronted by Mrs. Ordoñez regarding a report of one Gregorio Lito, a truck driver, that she pocketed some cash sales remitted to her, then why is there no statement on record from said Gregorio Lito? The only truck drivers who submitted a Joint Affidavit16 are Alfredo Angeles, Jr. and Renato Bucud, but they only stated that they received their salaries and money for spare parts from Nicdao and in turn, they also remit their cash collections from customers to Nicdao. Said truck drivers never alluded to any misconduct being committed by Nicdao. Although petitioners presented the Affidavit17 dated July 5, 1993 and the Audit Report18 dated May 19, 1993, both executed by Accountant Gloria De Leon, said documents merely show that the audit was completed in March 1993 and it was in the audit report where the accountant placed on record the supposed anomalies in cash collections.19 Said documents do not show when the audit began or when the supposed anomalies were first discovered. There is, therefore, no evidence on record, except petitioners’ bare allegation, to prove that as early as January 28, 1993, petitioners had already received information that Nicdao had misappropriated their funds, and such discovery led them to confront Nicdao. Verily, Nicdao’s narration of facts that petitioners became infuriated with her when she questioned petitioners regarding their delayed salaries and non-payment of some benefits and eventually refused to allow her to return to work, is the more credible version of what actually happened.
The Court agrees with the observation of the CA, to wit:
The truth is, the charge of estafa through misappropriation of funds imputed against petitioner Nicdao was filed before the Investigating Judge of the Municipal Trial Court of Guagua Pampanga (p. 120, Rollo) five (5) months after the filing of the illegal dismissal case or on July 5, 1993. If indeed petitioner Nicdao really committed the acts imputed against her, private respondents should have taken action as early as possible before dismissing her on that ground, or they should have filed the criminal case in court before effecting the dismissal of petitioner Nicdao. Hence, the filing of the estafa case some five (5) months after she filed the complaint for illegal dismissal is an obvious attempt to create a leverage against petitioner Nicdao.20 (Emphasis ours)
The foregoing circumstances clearly show that petitioners’ imputation of anomalous handling of funds against respondent Nicdao is merely a desperate attempt to create some semblance of a just cause for Nicdao’s dismissal.
In the case of respondents Bautista and Sicat, petitioners allege that the two merely stopped reporting for work and failed to answer the "show cause letters" sent to them by petitioners. Again, documentary evidence on record shows otherwise. The "show cause" letter21 sent to one of the original complainants, requiring him to explain why he had not been reporting for work since March 4, 1993, was dated April 14, 1993. Note, however, that the complaint for illegal dismissal was filed by respondents way back in February 5, 1993. Moreover, as shown by the Registry Return Receipt22 on record, petitioners had received Summons for the complaint filed against them by respondents as early as February 15, 1993. Why, then, would petitioners still send such a "show cause" letter in April 1993 when they were already aware that respondents are accusing them of illegal termination? Thus, it is quite apparent that the sending of such "show cause" letter was only a belated attempt by petitioners to make it appear that they had complied with the notice requirement for the dismissal of employees.
Once more, petitioners fail to present credible proof of any overt acts on the part of respondents to abandon their employment. Petitioners have not presented any evidence, other than the bare allegations in their pleadings, to support their defense that respondents Sicat and Bautista had abandoned their employment.
In fact, respondents’ immediate filing of a complaint for illegal dismissal unambiguously shows that respondents had no intention whatsoever to abandon their employment. Human experience tells us that no employee in his right mind would go through the trouble of filing a case unless the employer had indeed terminated the services of the employee. In Hodieng Concrete Products v. Emilia,23 the Court reiterated the long-standing rule that the filing of the complaint for illegal dismissal negates the allegation of abandonment.
Petitioners’ argument that the lack of a prayer for reinstatement in respondents’ complaint is a sign that respondents really intended to abandon their employment is tenuous. Respondents sufficiently explained in their complaint that they are no longer seeking reinstatement because of the strained relationship with their employer.
In Mayon Hotel and Restaurant v. Adana,24 the Court emphasized that:
[I]n termination disputes, the burden of proof is always on the employer to prove that the dismissal was for a just or authorized cause. Where there is no showing of a clear, valid and legal cause for termination of employment, the law considers the case a matter of illegal dismissal.25
Petitioners having utterly failed to discharge their burden of proving that there was any just cause for dismissing respondents and that they complied with due process requirements, they are clearly liable for illegally dismissing respondents.
IN LIGHT OF THE FOREGOING, the petition is PARTLY GRANTED. The Decision of the Court of Appeals dated March 13, 2001 is AFFIRMED with the MODIFICATION that separation pay and other benefits to which respondent Imelda Nicdao is entitled should be computed only from May 1989, the date of her employment.
Panganiban, C.J., Ynares-Santiago, Callejo, Sr., Chico-Nazario, J.J., concur.
1 Penned by Associate Justice Fermin A. Martin, Jr. (now retired) and concurred in by Associate Justices Wenceslao I. Agnir, Jr. (now retired) and Mercedes Gozo-Dadole.
2 Rollo, pp. 30-33.
3 CA rollo, pp. 187-188.
4 Rollo, p. 8.
5 G.R. No. 157634, May 16, 2005, 458 SCRA 609.
6 Id. at 623-624.
7 NLRC records, p. 103.
9 G.R. No. 146202, July 14, 2004, 434 SCRA 418.
10 Id. at 428.
11 Id. at 428-430.
12 412 Phil. 627 (2001).
13 Id. at 641.
14 G.R. No. 149180, February 14, 2005, 451 SCRA 249.
15 Id. at 253-254.
16 NLRC records, between pp. 127 and 128.
17 Id. at 118.
18 Id. at 119.
19 Note that Accountant Gloria De Leon stated in her Affidavit dated July 5, 1993 that the first audit report wherein she revealed the supposed anomalies was dated March 23, 1993.
20 CA Decision, rollo, pp. 37-38.
21 NLRC records, p. 68.
22 Id. at 8.
23 Supra note 14, at 254.
24 Supra note 5.
25 Id. at 639.
June 30, 2006
For our resolution is the instant Petition for Review on Certiorari1 assailing the Decision2 dated August 31, 2001 of the Court of Appeals in CA-G.R. SP No. 53216, entitled "ASSET RECOVERY & MANAGEMENT CORPORATION, petitioner, versus HON. ANTONIO I. DE CASTRO, as Pairing Judge of the Regional Trial Court, Branch 4, Manila, and CARDINAL BUILDING OWNERS ASSOCIATION, INC., respondents."
The facts of this case are:
Cardinal Building Owners Association, Inc., petitioner, is a corporation organized and existing under Republic Act (R.A.) No. 4726 (The Condominium Act) with office located at 999 Stanisco Towers, Pedro Gil corner Agoncillo Streets, Malate, Manila.
Benjamin Marual is a member of petitioner association being the owner of two condominium units at the Cardinal Office Condominium, covered by Condominium Certificates of Title No. 14335 (1st floor) and No. 17730 (2nd floor). Due to his failure to pay assessment dues in the amount of P530,554.00, petitioner association filed with the Regional Trial Court (RTC), Branch 4, Manila, a complaint for sum of money against him, docketed as Civil Case No. 95-74919.
During the course of the proceedings, or on September 13, 1996, petitioner and Marual filed with the RTC a Compromise Agreement,3 declaring that they have amicably settled their controversy under the following terms and conditions:
1. Defendant (Benjamin Marual) binds himself to settle all his outstanding dues and/or assessments to plaintiff (Cardinal Building Owners Association, Inc.) totaling, as of July 1, 1996, the sum of P381,152.52 in the following manner:
a) P75,000.00 ? upon signing of this agreement as and by way of initial settlement of dues and/or assessments in the amount of P25,000.00, and attorney’s fees in the amount of P50,000.00;
b) P21,739.52 ? every fifth day of each and every succeeding month until his account is fully paid.
To this end, defendant agrees to issue two (2) checks in payment of the amount mentioned in par. 1(a), and one (1) check in the amount of P21,739.52 dated August 5, 1996, and one (1) check in the same amount every month thereafter;
2. The parties hereby waive their respective claims and counterclaims with respect to the case at bar;
3. Should defendant fail to make good any of the postdated checks given to the plaintiff in payment of his obligation, the plaintiff shall be entitled to execute the judgment of this court, for the full amount of plaintiff’s claim of P381,152.52, plus accruing amounts due in months subsequent to July 1, 1996 and interest and charges. Should the foregoing be not complied with, the parties further agree that plaintiff may, at his option, proceed with the extrajudicial enforcement of its lien under the provisions of the Condominium Act and the condominium’s master deed, and pertinent provisions of documents covering defendant’s condominium units at Stanisco Towers (formerly Cardinal Bldg. Condominium).
x x x
On October 9, 1996, the RTC rendered a Decision4 approving the Compromise Agreement and enjoining the parties to strictly comply with its terms.
However, Marual failed to comply with his obligation, prompting petitioner to file with the RTC a motion for the execution of the compromise judgment. Accordingly, on February 25, 1997, the RTC issued a writ of execution.5 On March 7, 1997, the court sheriff served a "Notice of Levy/Attachment upon Realty"6 on the Registry of Deeds of Manila. It was only at this time when petitioner learned7 that there were prior annotations on the same titles, thus:
(a) On October 7, 1993, Marual mortgaged his two condominium units to Planters Development Bank. The mortgage was foreclosed and the said units were sold to the bank at a public auction. On March 27, 1996, the certificate of sale was annotated on the two Condominium Certificates of Title.
(b) On November 11, 1996, before the expiration of the period for redemption of the foreclosed realties, Marual sold the same units to Asset Recovery and Management Corporation,8 herein respondent. On February 26, 1997, the deed of sale was registered in the Registry of Deeds of Manila.9
(c) On March 4, 1997, respondent filed with the RTC, Branch 55, Manila, an action for mandamus to redeem the condominium units against the bank, docketed as Civil Case No. 97-82366. On April 1, 1997, the RTC issued a writ of preliminary injunction10 enjoining the bank from consolidating in its name the titles or taking possession of the units, or otherwise disposing of them until further orders from the court.
After learning of the above circumstances, petitioner filed with the RTC, Branch 4, in the same Civil Case No. 95-74919 for sum of money, a Motion for Possession11 of the units. On June 8, 1999, the RTC, Branch 4 issued an Order12 granting the motion and directing the issuance of the writ of possession, as prayed for by petitioner, thus:
x x x. Accordingly:
(a) plaintiff (now petitioner Cardinal Building Owners Association, Inc.) is allowed to repossess subject condo units for four (4) years to enable it to recover the aforesaid account of defendant (Benjamin Marual) plus reasonable interest thereon, under proper accounting procedure and periodic reports thereon to the Court;
(b) plaintiff is allowed to lease, as it may deem necessary, but not to mortgage or sell, said condo units to achieve the foregoing objective; and
(c) defendant and/or his agents or assigns are enjoined from interfering in any manner the aforesaid possession by plaintiff until the foregoing objective is achieved.
Further, upon the filing of an indemnity bond of P2 million, let a writ of possession issue directing a sheriff of the Regional Trial Court of Manila or his authorized representative to place plaintiff herein in actual, physical possession of the two condominium units located in the Cardinal Office Condominium at 999 Pedro Gil St., Malate, Manila and covered by CCTs No. 14335 (1st floor) and No. 17730 (2nd floor) and to eject therefrom defendant Benjamin Marual and all other persons claiming rights under him.
On July 30, 1999, upon petitioner’s filing of the required bond, a writ of possession13 was issued.
Aggrieved, respondent filed with the Court of Appeals a Petition for Certiorari, docketed as CA-G.R. SP No. 53216. Respondent alleged mainly that the RTC Judge acted with grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the Order dated June 8, 1999 and the writ of possession which are in variance with the compromise judgment and the corresponding writ of execution in Civil Case No. 95-74919.
On August 31, 2001, the Court of Appeals rendered a Decision14 granting respondent’s petition and nullifying the assailed RTC Order of June 8, 1999, thus:
There are four instances when a writ of possession may be issued, to wit:
1) in a land registration proceeding, which is a proceeding in rem (Sec. 17, Act No. 496; Estipona v. Navarro, L-41825, Jan. 30, 1976, 69 SCRA 285, 291);
2) in an extra-judicial foreclosure of a realty mortgage (Sec. 7, Act No. 3135);
3) in a judicial foreclosure of mortgage, a quasi in rem proceeding, provided that the mortgagor is in possession of the mortgaged realty and no third person, not a party to the foreclosure suit, had intervened (Rivera v. Court of First Instance of Nueva Ecija and Rupac, 61 Phi. 201; Ramos v. Manalac and Lopez, 89 Phil. 270, 275); and
4) in execution sales (last par. Of Sec. 35, Rule 39, Rules of Court).15
Since the case at bar does not fall under any of these four instances and, in any event, since it is not claimed that the judgment based on a compromise contemplated the issuance of a writ of possession to private respondent of the condominium units in case Marual, from whom petitioner claims to have purchased the same, failed to comply with his obligation under said judgment based on a compromise, then public respondent’s assailed Order directing the issuance of a writ of possession was issued with grave abuse of discretion.
Hence, the instant Petition for Review on Certiorari. Petitioner contends that the Court of Appeals Decision "is not based upon, and militates against, the applicable law, R.A. No. 4726."
In its Comment,16 respondent avers that the petition should be denied for being unmeritorious.
The petition must fail.
Section 20 of R.A. No. 4726, otherwise known as the Condominium Act, provides:
Sec. 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. The amount of any such assessment plus any other charges thereon, such as interest, costs (including attorney’s fees) and penalties, as such may be provided for in the declaration of restrictions, shall be and become a lien upon the condominium assessed when the management body causes a notice of assessment to be registered with the Register of Deeds of the city or province where such condominium project is located. The notice shall state the amount of such assessment and such other charges thereon as may be authorized by the declaration of restrictions, a description of the condominium unit against which the same has been assessed, and the name of the registered owner thereof. Such notice shall be signed by an authorized representative of the management body or as otherwise provided in the declaration of restrictions. Upon payment of said assessment and charges or other satisfaction thereof, the management body shall cause to be registered a release of the lien.
Such lien shall be superior to all other liens registered subsequent to the registration of said notice of assessment except real property tax liens and except that the declaration of restrictions may provide for the subordination thereof to any other liens and encumbrances. Such liens may be enforced in the same manner provided for by law for the judicial or extra-judicial foreclosure of mortgage or real property. Unless otherwise provided for in the declaration of restrictions, the management body shall have power to bid at foreclosure sale. The condominium owner shall have the right of redemption as in cases of judicial or extra-judicial foreclosure of mortgages. (Underscoring supplied)
Records do not show that petitioner had its notice of assessment registered with the Registry of Deeds of Manila in order that the amount of such assessment could be considered a lien upon Marual’s two condominium units. Clearly, pursuant to the above provisions, petitioner’s claim can not be considered superior to that of respondent. As mentioned earlier, the deed of sale wherein Marual conveyed to respondent his two condominium units, was registered in the Registry of Deeds of Manila.
Moreover, the Decision rendered by the RTC based on the compromise agreement by the parties is a money judgment, the enforcement of which is provided in Section 9, Rule 39 of the 1997 Rules of Civil Procedure, as amended, thus:
Section 9. Execution of judgments for money, how enforced.? (a) Immediate payment on demand. ? The officer shall enforce an execution of a judgment for money by demanding from the judgment obligor the immediate payment of the full amount stated in the writ of execution and all lawful fees. The judgment obligor shall pay in cash, certified bank check payable to the judgment obligee, or any other form of payment acceptable to the latter, the amount of the judgment debt under proper receipt directly to the judgment obligee or his authorized representative if present at the time of payment. The lawful fees shall be handed under proper receipt to the executing sheriff who shall turn over the same amount within the same day to the clerk of court that issued the writ.
If the judgment obligee or his authorized representative is not present to receive payment, the judgment obligor shall deliver the aforesaid payment to the executing sheriff. The latter shall turn over all the amount coming into his possession within the same day to the clerk of court of the court that issued the writ, or if the same is not practicable, deposit said amounts to a fiduciary account in the nearest government depository bank of the Regional Trial Court of the locality.
The clerk of said court shall thereafter arrange for the remittance of the deposit to the account of the court that issued the writ whose clerk of court shall then deliver said payment to the judgment obligee in satisfaction of the judgment. The excess, if any, shall be delivered to the judgment obligor while the lawful fees shall be retained by the clerk of court for disposition as provided by law. In no case shall the executing sheriff demand that any payment by check be made payable to him.
(b) Satisfaction by levy.? If the judgment obligor cannot pay all or part of the obligation in cash, certified bank check or other mode of payment acceptable to the judgment obligee, the officer shall levy upon the properties of the judgment obligor of every kind and nature whatsoever which may be disposed of for value and not otherwise exempt from execution giving the latter the option to immediately choose which property or part thereof may be levied upon, sufficient to satisfy the judgment. If the judgment obligor does not exercise the option, the officer shall first levy on the personal properties, if any, and then on the real properties if the personal properties are insufficient to answer for the judgment.
The sheriff shall sell only a sufficient portion of the personal or real property of the judgment obligor which has been levied upon.
When there is more property of the judgment obligor than is sufficient to satisfy the judgment and lawful fees, he must sell only so much of the personal or real property as is sufficient to satisfy the judgment and lawful fees.
Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or personal property, may be levied upon in like manner and with like effect as under a writ of attachment.
(c) Garnishment of debts and credits.? The officer may levy on debts due the judgment obligor and other credits, including bank deposits, financial interests, royalties, commissions and other personal property not capable of manual delivery in the possession or control of third parties. Levy shall be made by serving notice upon the person owing such debts or having in his possession or control such credits to which the judgment obligor is entitled. The garnishment shall cover only such amount as will satisfy the judgment and all lawful fees.
The garnishee shall make a written report to the court within five (5) days from service of the notice of garnishment stating whether or not the judgment obligor has sufficient funds or credits to satisfy the amount of the judgment. If not, the report shall state how much funds or credits the garnishee holds for the judgment obligor. The garnished amount in cash, or certified bank check issued in the name of the judgment obligee, shall be delivered directly to the judgment obligee within ten (10) working days from service of notice on said garnishee requiring such delivery, except the lawful fees which shall be paid directly to the court.
In the event there are two or more garnishees holding deposits or credits sufficient to satisfy the judgment, the judgment obligor, if available, shall have the right to indicate the garnishee or garnishees who shall be required to deliver the amount due; otherwise, the choice shall be made by the judgment obligee.
The executing sheriff shall observe the same procedure under paragraph (a) with respect to delivery of payment to the judgment obligee. (8a, 15a)
There is nothing in the above provisions which authorizes the RTC, Branch 4, Manila to issue a writ of possession over the two condominium units in favor of petitioner. As we held in Abinujar v. Court of Appeals:17
A judgment is the foundation of a writ of execution which draws its vitality therefrom (Monaghon v. Monaghon, 25 Ohio St. 325). An officer issuing a writ of execution is required to look to the judgment for his immediate authority (Sydnor v. Roberts, 12 Tex. 598).
An execution must conform to and be warranted by the judgment on which it was issued (Francisco, The Revised Rules of Court, 641 ; Kramer v. Montgomery, 206 Okla. 190 242 P. 2d 414 ). There should not be a substantial variance between the judgment and the writ of execution (Avery v. Lewis, 10 Vt. 332). Thus, an execution is fatally defective if the judgment was for sum of money and the writ of execution was for the sale of the mortgaged property (Bank of the Philippine Islands v. Green, 48 Phil. 284 ).
As petitioners’ obligation under the compromise agreement as approved by the court was monetary in nature, private respondents can avail only of the writ of execution provided in Section 15 (now Section 9), Rule 39 of the Revised Rules of Court, and not that provided in Section 13 (now Section 10 [c] 18). (Underscoring supplied)
In sum, we find no reversible error committed by the Court of Appeals in its assailed Decision.
WHEREFORE, we DENY the instant petition. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 53216 is AFFIRMED. Costs against petitioner.
Puno, Chairperson, Corona, Azcuna, Garcia, J.J., concur.
1 Filed under Rule 45 of the 1997 Rules of Civil Procedure, as amended.
2 Penned by Associate Justice Conchita Carpio-Morales (now Associate Justice of this Court), with Associate Justices Rebecca De Guia-Salvador and Juan Q. Enriquez, concurring; rollo, pp. 30-34.
3 See Annex "A" (Decision dated October 9, 1996 of RTC, Branch 4, Manila in Civil Case No. 95-74919), Respondent’s Comment, id., pp. 73-74.
4 Id., pp. 73-75.
5 See Annex "E" (Notice of Levy/Attachment Upon Realty), Respondent’s Comment, id., p. 82.
7 See Annex "F" (petitioner’s Motion for Possession), id., p. 84.
8 Annex "B" (Deed of Sale), Respondent’s Comment, id., pp. 76-78.
9 Annexes "C" and "C-1," id., pp. 79-80.
10 Annex "D," id., p. 81.
11 Annex "F," id., pp. 83-86.
12 Annex "D," Petition, id., pp. 43-46.
13 Annex "H," Respondent’s Comment, id., pp. 91-92.
14 Annex "B," Petition, id., pp. 29-34.
15 Citing Mabale v. Apalisok, No. L-46942, February 6, 1979, 88 SCRA 234, 247-248, reiterated in Philippine National Bank v. Sanao Marketing Corporation, G.R. No. 153951, July 29, 2005, 465 SCRA 287.
16 Rollo, pp. 59-92.
17 G.R. No. 104133, April 18, 1995, 243 SCRA 531, 536-537.
18 Section 10 [c] Delivery or restitution or real property.? The officer shall demand of the person against whom the judgment for the delivery or restitution of real property is rendered and all persons claiming rights under him to peaceably vacate the property within three (3) working days, and restore possession thereof to the judgment oblige; otherwise, the officer shall oust all such persons therefrom with the assistance, if necessary, of appropriate peace officers, and employing such means as may be reasonably necessary to retake possession of such property. Any costs, damages, rents or profits awarded by the judgment shall be satisfied in the same manner as a judgment for money.
June 30, 2006
MAMERTA C. MONEÑO, JASPHIN M. VILLAMIL, WHELHELMIA M. DECARO, EDDIE MONEÑO, GININA M. DAQUIPIL, FERNAN C. MONEÑO, ARLENE C. MONEÑO, RICHARD C. MONEÑO and NIKKI C. MONEÑO, represented by EDDIE C. MONEÑO; TEODORO LANTORIA and ROGELIO FRANCISCO, respondents.
R E S O L U T I O N
In this petition for certiorari under Rule 65 of the Rules of Court, petitioner imputes grave abuse of discretion to the Court of Appeals vis-a-vis its May 30, 2001 decision2 in CA-G.R. CV No. 67017, the dispositive portion of which read:
WHEREFORE, premises considered, the present appeal is hereby DISMISSED for lack of merit. The Decision (Judgment) dated October 29, 1999 of the Regional Trial Court of Malaybalay City, Bukidnon, Branch 10 in Civil Case No. 2586-95 is hereby AFFIRMED and REITERATED.3
The facts follow.
Petitioner Agapita Diaz operated a common carrier, a Tamaraw FX taxi plying the route of Cagayan de Oro City to any point in Region 10. On July 20, 1996, petitioner?s taxi, driven by one Arman Retes, was moving at an excessive speed when it rammed into the rear portion of a Hino cargo truck owned by private respondent Teodoro Lantoria and driven by private respondent Rogelio Francisco. As a result, nine passengers of the taxi died including Sherly Moneño.
On August 13, 1996, the heirs of Sherly Moneño4 filed with the Regional Trial Court of Malaybalay City, Branch 10,5 an action for breach of contract of carriage and damages6 against petitioner and her driver, Arman Retes.
On motion,7 petitioner filed a third-party complaint against private respondents Teodorio Lantoria and Rogelio Francisco.8
The pre-trial conference was initially set on July 11, 1998 but was reset to July 30, 1998 for petitioner and her counsel?s failure to appear9 despite due notice. Registry receipt number 0436410 showed that notice had been sent to petitioner?s counsel, Atty. Cipriano Lupeba.11 On scheduled date, petitioner and her counsel again failed to appear, prompting the court to allow private respondents to present evidence ex parte.
More than seven months after the conclusion12 of private respondents? ex parte presentation of evidence, petitioner filed a motion for leave to present evidence on her defense and third-party complaint.13 The trial court denied this.14
On October 29, 1999, the trial court rendered a decision holding petitioner and Arman Retes jointly and severally liable to pay private respondent heirs of Sherly Moneño P50,000 for her death, P50,000 as moral damages, P20,000 as exemplary damages and P20,000 as attorney?s fees.15
On appeal, the trial court?s decision was affirmed by the Court of Appeals in the assailed May 30, 2001 decision.16 The motion for reconsideration was denied.17 Hence, this recourse.
The issues raised by petitioner are:
1) whether or not the Court of Appeals committed grave abuse of discretion in affirming the trial court?s decision denying petitioner?s motion for leave to present evidence on her defense and third-party complaint, and
2) whether or not the Court of Appeals committed grave abuse of discretion in affirming the trial court?s decision holding petitioner liable for breach of contract.
The petition lacks merit.
First, Section 3, Rule 18 of the Rules of Court states that:
The notice of pre-trial shall be served on counsel, or on the party who has no counsel. The counsel served with such notice is charged with the duty of notifying the party represented by him.
Petitioner was represented by Atty. Cipriano Lupeba to whom the notice was sent.18 It was incumbent on the latter to advise petitioner accordingly. His failure to do so constituted negligence which bound petitioner.
Further, Sections 4 and 5 of Rule 18 read:
Sec. 4. Appearance of Parties. ? It shall be the duty of the parties and their counsel to appear at the pre-trial. The non-appearance of the party may be excused only if a valid cause is shown therefore or if a representative shall appear in his behalf fully authorized in writing to enter into an amicable settlement, to submit to alternative modes of dispute resolution, and to enter into stipulations or admissions of facts and of documents.
Sec. 5. Effect of failure to appear. ? The failure of the plaintiff to appear when so required pursuant to the next preceding section shall be cause for the dismissal of the action. The dismissal shall be with prejudice, unless otherwise ordered by the court. A similar failure on the defendant shall be cause to allow the plaintiff to present his evidence ex parte and the court to render judgment on the basis thereof.
Consequently, it was no error for the trial court to allow private respondents to present their evidence ex parte when petitioner and her counsel failed to appear for the scheduled pre-trial conference.
Second, "a common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances."19
In a contract of carriage, it is presumed that the common carrier is at fault or is negligent when a passenger dies or is injured. In fact, there is even no need for the court to make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence.20
In the case at bar, petitioner, as common carrier, failed to establish sufficient evidence to rebut the presumption of negligence. The findings of the trial court, as affirmed by the Court of Appeals, showed that the accident which led to the death of Sherly Moneño was caused by the reckless speed and gross negligence of petitioner?s driver who demonstrated no regard for the safety of his passengers.21 It was thus correct to hold petitioner guilty of breach of the contract of carriage.
WHEREFORE, this petition is hereby DISMISSED.
Costs against petitioner.
Puno, Chairperson, Sandoval-Gutierrez, Azcuna, Garcia, J.J., concur.
1 In some pleadings, Moneño was spelled as "Moñeno" or "Moneno."
2 Penned by Associate Justice Martin S. Villarama, Jr. and concurred in by Associate Justices Conrado M. Vasquez, Jr. and Eliezer R. de los Santos of the Thirteenth Division of the Court of Appeals; rollo, pp. 32-39.
3 Id., p. 39.
4 Some of herein private respondents.
5 Presided by Judge Jesus Barroso, Jr.
6 Civil Case No. 2586-96 entitled, Heirs of Sherly Moneno v. Agapita Diaz and Arman Retes.
7 Motion for leave to file third party complaint, dated November 6, 1996.
8 Rollo, pp. 13-14.
9 RTC Order dated June 11, 1998, id., p. 15.
10 Dated June 16, 1998.
11 Per RTC resolution dated July 13, 1999, rollo, pp. 25-27.
12 The presentation of private respondents? evidence was concluded in November 1998, as stated in the RTC decision, id., p. 30.
13 Motion to allow defendants and third party plaintiff to present evidence to support her defense and third party complaint dated June 11, 1999, rollo, pp. 18-19.
14 Id., pp. 25-27.
15 Penned by Judge Jesus M. Barroso, Jr., id., pp. 28-31.
16 Id., pp. 32-39.
17 Id., p. 46.
18 Registry Number 04364 dated June 16, 1998, as stated in the RTC resolution dated July 13, 1999, id., pp. 25-27.
19 Article 1755 of the Civil Code.
20 Tiu v. Arriesgado, G.R. No. 138060, 1 September 2004, 437 SCRA 426.
21 RTC Decision, rollo, p. 28.