Under the Dead Man’s Statute Rule, “[i]f one party to the alleged transaction is precluded from testifying by death, insanity, or other mental disabilities, the other party is not entitled to the undue advantage of giving his own uncontradicted and unexplained account of the transaction.”[1] Thus, the alleged admission of the deceased Pedro Caparas (Pedro) that he entered into a sharing of leasehold rights with the petitioners cannot be used as evidence against the herein respondent as the latter would be unable to contradict or disprove the same.

SECOND DIVISION

[ G.R. No. 180843, April 17, 2013 ]

APOLONIO GARCIA, IN SUBSTITUTION OF HIS DECEASED MOTHER, MODESTA GARCIA, AND CRISTINA SALAMAT, PETITIONERS, VS. DOMINGA ROBLES VDA. DE CAPARAS, RESPONDENT.

D E C I S I O N

DEL CASTILLO, J.:

Under the Dead Man’s Statute Rule, “[i]f one party to the alleged transaction is precluded from testifying by death, insanity, or other mental disabilities, the other party is not entitled to the undue advantage of giving his own uncontradicted and unexplained account of the transaction.”^[1]  Thus, the alleged admission of the deceased Pedro Caparas (Pedro) that he entered into a sharing of leasehold rights with the petitioners cannot be used as evidence against the herein respondent as the latter would be unable to contradict or disprove the same.

This Petition for Review on Certiorari^[2] seeks to reverse and set aside the August 31, 2007 Decision^[3] of the Court of Appeals (CA) in CA-G.R. SP No. 90403,^[4] as well as its December 13, 2007 Resolution^[5] denying petitioners’ Motion for Reconsideration.

Factual Antecedents

Flora Makapugay (Makapugay) is the owner of a 2.5-hectare farm in Barangay Lugam, Malolos, Bulacan (the land) covered by Transfer Certificate of Title No. (TCT) RT-65932 (T-25198)^[6] and being tilled by Eugenio Caparas (Eugenio) as agricultural lessee under a leasehold agreement.  Makapugay passed away and was succeeded by her nephews and niece, namely Amanda dela Paz-Perlas (Amanda), Justo dela Paz (Justo) and Augusto dela Paz (Augusto).  On the other hand, Eugenio’s children – Modesta Garcia (Garcia), Cristina Salamat (Salamat) and Pedro – succeeded him.

Before she passed away, Makapugay appointed Amanda as her attorney-in-fact.  After Eugenio died, or in 1974, Amanda and Pedro entered into an agreement entitled “Kasunduan sa Buwisan”,^[7] followed by an April 19, 1979 Agricultural Leasehold Contract,^[8] covering the land.  In said agreements, Pedro was installed and recognized as the lone agricultural lessee and cultivator of the land.

Pedro passed away in 1984, and his wife, herein respondent Dominga Robles Vda. de Caparas (Dominga), took over as agricultural lessee.

On July 10, 1996, the landowners Amanda, Justo and Augusto, on the one hand, and Pedro’s sisters Garcia and Salamat on the other, entered into a “Kasunduan sa Buwisan ng Lupa”^[9] whereby Garcia and Salamat were acknowledged as Pedro’s co-lessees.

On October 24, 1996, herein petitioners Garcia and Salamat filed a Complaint^[10] for nullification of leasehold and restoration of rights as agricultural lessees against Pedro’s heirs, represented by his surviving spouse and herein respondent Dominga.  Before the office of the Provincial Agrarian Reform Adjudicator (PARAD) of Bulacan, the case was docketed as Department of Agrarian Reform Adjudication Board (DARAB) Case No. R-03-02-3520-96.

In their Complaint, Garcia and Salamat claimed that when their father Eugenio died, they entered into an agreement with their brother Pedro that they would alternately farm the land on a “per-season basis”; that the landowner Makapugay knew of this agreement; that when Makapugay passed away, Pedro reneged on their agreement and cultivated the land all by himself, deliberately excluding them and misrepresenting to Amanda that he is Eugenio’s sole heir; that as a result, Amanda was deceived into installing him as sole agricultural lessee in their 1979 Agricultural Leasehold Contract; that when Amanda learned of Pedro’s misrepresentations, she executed on July 10, 1996 an Affidavit^[11] stating among others that Pedro assured her that he would not deprive Garcia and Salamat of their “cultivatory rights”; that in order to correct matters, Amanda, Justo and Augusto executed in their favor the 1996 “Kasunduan sa Buwisan ng Lupa”, recognizing them as Pedro’s co-lessees; that when Pedro passed away, Dominga took over the land and, despite demands, continued to deprive them of their rights as co-lessees; that efforts to settle their controversy proved futile, prompting the Barangay Agrarian Reform Committee to issue the proper certification authorizing the filing of a case; and that they suffered damages as a consequence.  Petitioners prayed that the 1979 Agricultural Leasehold Contract between Pedro and Amanda be nullified; that they be recognized as co-lessees and allowed to cultivate the land on an alternate basis as originally agreed; and that they be awarded P50,000.00 attorney’s fees and costs of litigation.

In her Answer,^[12] herein respondent Dominga claimed that when her father-in-law Eugenio died, only her husband Pedro succeeded and cultivated the land, and that petitioners never assisted him in farming the land; that Pedro is the sole agricultural lessee of the land; that Amanda’s July 10, 1996 Affidavit and “Kasunduan sa Buwisan ng Lupa” of even date between her and the petitioners are self-serving and violate the existing 1979 Agricultural Leasehold Contract; that under Section 38^[13] of Republic Act No. 3844^[14] (RA 3844), petitioners’ cause of action has prescribed.  Dominga further claimed that Pedro has been in possession of the land even while Eugenio lived; that petitioners have never cultivated nor possessed the land even for a single cropping; that Pedro has been the one paying the lease rentals as evidenced by receipts; that when Pedro died in 1984, she succeeded in his rights as lessee by operation of law, and that she had been remitting lease rentals to the landowners since 1985; and that petitioners had no right to institute themselves as her co-lessees.  She prayed that the Complaint be dismissed; that the July 10, 1996 “Kasunduan sa Buwisan ng Lupa” be nullified; that the execution of a new leasehold agreement between her and the landowners be ordered; and by way of counterclaim, that moral damages^[15] and litigation costs be awarded her.

Ruling of the PARAD

After hearing and consideration of the parties’ respective position papers and other submissions, the PARAD issued on May 4, 1998 a Decision,^[16] which decreed as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the defendant and against the plaintiffs and Order is hereby issued:

1. ORDERING the dismissal of the case;
   
2. DECLARING defendant Dominga Robles Vda. de Caparas as lawful successor-tenant;
   
3. ORDERING plaintiffs to maintain defendant in her peaceful possession and cultivation of the subject landholding;
   
4. ORDERING the MARO of Malolos, Bulacan to execute a new leasehold contract between the landowner and defendant Dominga Robles Vda. de Caparas;
   
5. No pronouncement as to costs.

SO ORDERED.^[17]

The PARAD held that Amanda’s act of executing the July 10, 1996 Affidavit and “Kasunduan sa Buwisan ng Lupa” amounted to dispossession of Pedro’s landholding and rights without cause; that Amanda’s 1996 disclaimer, after having installed Pedro as tenant in 1979, was belated and unjustified; that petitioners have not shown by evidence that they actually cultivated the land, or that they paid rentals to the landowners; that petitioners’ cause of action has prescribed in accordance with Section 38 of RA 3844; that for failure to timely question Pedro’s leasehold, his rights were transferred, by operation of law, to Dominga upon his death.  Finally, the PARAD held that petitioners’ July 10, 1996 “Kasunduan sa Buwisan ng Lupa” is null and void for being issued against Pedro’s existing 1979 Agricultural Leasehold Contract, which has not been cancelled by competent authority.

DARAB Case No. 03-03-10307-99

It appears that sometime after the execution of the July 10, 1996 “Kasunduan sa Buwisan ng Lupa” and during the pendency of DARAB Case No. R-03-02-3520-96, petitioners entered the land and began tilling the same.  For this reason, Dominga filed DARAB Case No. 03-03-10307-99, for maintenance of peaceful possession with injunctive relief, against the landowners and petitioners. On petitioners’ motion, the case was dismissed.^[18]

Ruling of the DARAB

Petitioners appealed the May 4, 1998 PARAD Decision in DARAB Case No. R-03-02-3520-96 to the DARAB, where the case was docketed as DARAB Case No. 9722^[19] (DCN 9722).  Dominga likewise appealed the dismissal of DARAB Case No. 03-03-10307-99, which appeal was docketed as DARAB Case No. 11155 (DCN 11155).  On motion, both appeals were consolidated.

On June 15, 2005, the DARAB issued its Decision,^[20] the dispositive portion of which reads, as follows:

WHEREFORE, premises considered, a new judgment is hereby rendered:

1. DECLARING Dominga Robles Vda. de Caparas as the lawful successor-tenant of Pedro Caparas over the subject landholding;
   
2. ORDERING the plaintiffs in DCN 9722 and the respondents in DCN 11155 or any person acting in their behalves [sic], to maintain Dominga Robles Vda. de Caparas in peaceful possession and cultivation of the subject landholding;
   
3. ORDERING the MARO of Malolos, Bulacan, to execute a new leasehold contract between the landowner and Dominga Robles Vda. de Caparas; and
   
4. ORDERING for the dismissal of DCN 11155 for being moot and academic.

SO ORDERED.^[21]

In upholding the PARAD Decision, the DARAB held that contrary to petitioners’ claim, there was no alternate farming agreement between the parties, and thus petitioners may not claim that they were co-lessees; that Pedro merely shared his harvest with petitioners as an act of generosity, and Dominga’s act of stopping this practice after succeeding Pedro prompted petitioners to file DARAB Case No. R-03-02-3520-96 and claim the status of co-lessees; that Amanda’s Affidavit and the 1996 “Kasunduan sa Buwisan ng Lupa” between the landowners and petitioners cannot defeat Pedro’s 1979 Agricultural Leasehold Contract and his rights as the sole tenant over the land; that for sleeping on their rights, petitioners are now barred by laches from claiming that they are co-lessees; and that petitioners’ 1996 “Kasunduan sa Buwisan ng Lupa” is null and void for being contrary to law, morals, public policy, and Pedro’s 1979 Agricultural Leasehold Contract, which was subsisting and which has not been cancelled by competent authority.

Ruling of the Court of Appeals

Petitioners filed before the CA a Petition for Certiorari, which was docketed as CA-G.R. SP No. 90403, seeking to set aside the DARAB Decision.  The sole basis of their Petition rests on the argument that as a result of a May 9, 2005 Order issued by the Regional Technical Director (Region III) of the Department of Environment and Natural Resources, the survey returns and plans covering TCT RT-65932 have been cancelled, which thus rendered the June 15, 2005 DARAB Decision null and void and a proper subject of certiorari.

On August 31, 2007, the CA issued the assailed Decision which decreed as follows:

IN LIGHT OF ALL THE FOREGOING, the instant petition is DENIED.  The assailed decision is AFFIRMED in toto.

SO ORDERED.^[22]

The CA held that the issue raised by petitioners – the cancellation of the survey returns and plans covering TCT RT-65932 – was not part of their causes of action in the PARAD or DARAB, and this new issue changed the theory of their case against Dominga, which is not allowed.  The CA added that it could not decide the case on the basis of a question which was not placed in issue during the proceedings below.

The CA held further that even granting that the issues are resolved on the merits, the petition would fail; the cancellation of the survey returns and plans covering TCT RT-65932 reverts the property to its original classification as agricultural land which thus vindicates the leasehold agreements of the parties.  And speaking of leasehold agreements, the CA held that petitioners may not be considered as Pedro’s co-lessees, for lack of proof that they actually tilled the land and with  petitioners’ own admission in their pleadings that they merely received a share from Pedro’s harvests; that the original 1974 and 1979 leasehold agreements between Makapugay, Amanda and Pedro categorically show that Pedro is the sole designated agricultural lessee; and that without proper legal termination of Pedro’s lease in accordance with RA 3844, the landowners cannot designate other tenants to the same land in violation of the existing lessee’s rights.

Petitioners moved for reconsideration, arguing that the land has been re-classified as residential land, and has been actually used as such.  Petitioners cited a 1997 ordinance, Malolos Municipal Resolution No. 41-97,^[23] which adopted and approved the zoning ordinance and the Malolos Development Plan prepared jointly by the Housing and Land Use Regulatory Board and the Malolos Sangguniang Bayan.  In the assailed December 13, 2007 Resolution,^[24] the CA denied the Motion for Reconsideration.

Issues
In this petition, the following errors are assigned:

1.  x x x RESPONDENT’S ACT OF HAVING BUILT THREE (3) HOUSES (FOR HERSELF AND TWO OF HER CHILDREN), WAS “CONVERSION OF THE FARMHOLD INTO A HOUSING-RESIDENTIAL SUBDIVISION” AND THEREFORE, SHE IS NOT BEING PUT IN SURPRISE NOR IN UNFAIR SITUATION. CONSEQUENTLY, SHE IS THE PARTY IN ESTOPPEL.

AND FROM THE TIME BY HER ACTS OF SELF-CONVERSION OF THE LAND, IN THE EARLY ‘90S OR EARLIER, SHE “LOST HER SECURITY OF TENURE” AS AGRICULTURAL LESSEE.

2.  THE DECISIONS OF THE DARAB PROVINCIAL ADJUDICATOR, DARAB CENTRAL OFFICE, AND THE HONORABLE COURT OF APPEALS, SPEAK OF NO HOMELOT HAVING BEEN AWARDED BY THE DEPARTMENT OF AGRARIAN REFORM TO PRIVATE RESPONDENT.

3.  ACTUAL PHYSICAL CHANGE IN THE USE OF THE LAND FROM AGRICULTURAL TO “RESIDENTIAL” MAY OCCUR AFTER TRIAL, BUT DURING THE APPEAL, WHICH THE HON. COURT OF APPEALS MAY CONSIDER.

4. “CONVERSION” (WHICH REQUIRES PRIOR APPROVAL BY THE DAR) HAVING BECOME A “FAIT ACCOMPLI”, SECTION 220 OF THE REAL ESTATE TAX CODE AND ARTICLE 217 OF THE LOCAL GOVERNMENT CODE OF 1991 AFFIRM THE TRUSTWORTHINESS OF THE TAX DECLARATION THAT IS, THE PREVIOUS FARMHOLD HAS BEEN CONVERTED INTO “RESIDENTIAL” LAND, AND CONFIRMED BY THE CITY ZONING DIRECTOR.

5.  IN NOT HAVING CONSIDERED THE TAX DECLARATION AND THE ZONING CERTIFICATION x x x, THE HON. COURT OF APPEALS COMMITTED A VERY FUNDAMENTAL ERROR.^[25]

Petitioners’ Arguments

In their Petition and Reply,^[26] petitioners this time argue that in building houses upon the land for herself and her children without a homelot award from the Department of Agrarian Reform, Dominga converted the same to residential use; and by this act of conversion, Dominga violated her own security of tenure and the land was removed from coverage of the land reform laws.  They add that the Malolos zoning ordinance and the tax declaration covering the land effectively converted the property into residential land.

Petitioners justify their change of theory, the addition of new issues, and the raising of factual issues, stating that the resolution of these issues are necessary in order to arrive at a just decision and resolution of the case in its totality.  They add that the new issues were raised as a necessary consequence of supervening events which took place after the Decisions of the PARAD and DARAB were issued.

Respondent’s Arguments

In her Comment,^[27] Dominga argues that the Petition raises questions of fact which are not the proper subject of a Petition under Rule 45 of the Rules.  She adds that petitioners raised anew issues which further changed the theory of their case, and which issues may not be raised for the first time at this stage of the proceedings.

Our Ruling
The Petition is denied.

DARAB Case No. R-03-02-3520-96, which was filed in 1996 or long after Pedro’s death in 1984, has no leg to stand on other than Amanda’s declaration in her July 10, 1996 Affidavit that Pedro falsely represented to Makapugay and to her that he is the actual cultivator of the land, and that when she confronted him about this and the alleged alternate farming scheme between him and petitioners, Pedro allegedly told her that “he and his two sisters had an understanding about it and he did not have the intention of depriving them of their cultivatory rights.”^[28]  Petitioners have no other evidence, other than such verbal declaration, which proves the existence of such arrangement.  No written memorandum of such agreement exists, nor have they shown that they actually cultivated the land even if only for one cropping.  No receipt evidencing payment to the landowners of the latter’s share, or any other documentary evidence, has been put forward.

What the PARAD, DARAB and CA failed to consider and realize is that Amanda’s declaration in her Affidavit covering Pedro’s alleged admission and recognition of the alternate farming scheme is inadmissible for being a violation of the Dead Man’s Statute,^[29] which provides that “[i]f one party to the alleged transaction is precluded from testifying by death, insanity, or other mental disabilities, the other party is not entitled to the undue advantage of giving his own uncontradicted and unexplained account of the transaction.”^[30]  Thus, since Pedro is deceased, and Amanda’s declaration which pertains to the leasehold agreement affects the 1996 “Kasunduan sa Buwisan ng Lupa” which she as assignor entered into with petitioners, and which is now the subject matter of the present case and claim against Pedro’s surviving spouse and lawful successor-in-interest Dominga, such declaration cannot be admitted and used against the latter, who is placed in an unfair situation by reason of her being unable to contradict or disprove such declaration as a result of her husband-declarant Pedro’s prior death.

If petitioners earnestly believed that they had a right, under their supposed mutual agreement with Pedro, to cultivate the land under an alternate farming scheme, then they should have confronted Pedro or sought an audience with Amanda to discuss the possibility of their institution as co-lessees of the land; and they should have done so soon after the passing away of their father Eugenio.  However, it was only in 1996, or 17 years after Pedro was installed as tenant in 1979 and long after his death in 1984, that they came forward to question Pedro’s succession to the leasehold.  As correctly held by the PARAD, petitioners slept on their rights, and are thus precluded from questioning Pedro’s 1979 agricultural leasehold contract.

Amanda, on the other hand, cannot claim that Pedro deceived her into believing that he is the sole successor to the leasehold.  Part of her duties as the landowner’s representative or administrator was to know the personal circumstances of the lessee Eugenio; more especially so, when Eugenio died.  She was duty-bound to make an inquiry as to who survived Eugenio, in order that the landowner – or she as representative – could choose from among them who would succeed to the leasehold.  Under Section 9 of RA 3844, Makapugay, or Amanda – as Makapugay’s duly appointed representative or administrator – was required to make a choice, within one month from Eugenio’s death, who would succeed as agricultural lessee.  Thus:

Section 9. Agricultural Leasehold Relation Not Extinguished by Death or Incapacity of the Parties - In case of death or permanent incapacity of the agricultural lessee to work his landholding, the leasehold shall continue between the agricultural lessor and the person who can cultivate the landholding personally, chosen by the agricultural lessor within one month from such death or permanent incapacity, from among the following: (a) the surviving spouse; (b) the eldest direct descendant by consanguinity; or (c) the next eldest descendant or descendants in the order of their age: Provided, That in case the death or permanent incapacity of the agricultural lessee occurs during the agricultural year, such choice shall be exercised at the end of that agricultural year: Provided, further, That in the event the agricultural lessor fails to exercise his choice within the periods herein provided, the priority shall be in accordance with the order herein established.

In case of death or permanent incapacity of the agricultural lessor, the leasehold shall bind his legal heirs.  (Emphasis supplied)

Amanda may not claim ignorance of the above provision, as ignorance of the law excuses no one from compliance therewith.^[31]  Thus, when she executed the 1979 Agricultural Leasehold Contract with Pedro, she is deemed to have chosen the latter as Eugenio’s successor, and is presumed to have diligently performed her duties, as Makapugay’s representative, in conducting an inquiry prior to making the choice.

The same holds true for petitioners.  They should be held to a faithful compliance with Section 9.  If it is true that they entered into a unique arrangement with Pedro to alternately till the land, they were thus obliged to inform Makapugay or Amanda of their arrangement, so that in the process of choosing Eugenio’s successor, they would not be left out.  But evidently, they did not; they slept on their rights, and true enough, they were excluded, if there was any such alternate farming agreement between them.  And after Pedro was chosen and installed as Eugenio’s successor, they allowed 17 years to pass before coming out to reveal this claimed alternate farming agreement and insist on the same.

With the above pronouncements, there is no other logical conclusion than that the 1996 “Kasunduan sa Buwisan ng Lupa” between Amanda and petitioners, which is grounded on Pedro’s inadmissible verbal admission, and which agreement was entered into without obtaining Dominga’s consent, constitutes an undue infringement of Dominga’s rights as Pedro’s successor-in-interest under Section 9, and operates to deprive her of such rights and dispossess her of the leasehold against her will.  Under Section 7^[32] of RA 3844, Dominga is entitled to security of tenure; and under Section 16,^[33] any modification of the lease agreement must be done with the consent of both parties and without prejudicing Dominga’s security of tenure.

This Court shall not delve into the issue of re-classification or conversion of the land.  Re-classification/conversion changes nothing as between the landowners and Dominga in regard to their agreement, rights and obligations.  On the contrary, re-classification/conversion can only have deleterious effects upon petitioners’ cause.  Not being agricultural lessees of the land, petitioners may not benefit at all, for under the law, only the duly designated lessee – herein respondent – is entitled to disturbance compensation in case of re-classification/conversion of the landholding into residential, commercial, industrial or some other urban purposes.^[34]  Besides, a valid re-classification of the land not only erases petitioners’ supposed leasehold rights; it renders them illegal occupants and sowers in bad faith thereof, since from the position they have taken as alleged lessees, they are not the owners of the land.

WHEREFORE, the Petition is DENIED.  The assailed August 31, 2007 Decision and December 13, 2007 Resolution of the Court of Appeals are AFFIRMED.

SO ORDERED.

Carpio, (Chairperson), Brion, Perez, and Perlas-Bernabe, JJ., concur.

---

^[1] Tan v. Court of Appeals, G.R. No. 125861, September 9, 1998, 295 SCRA 247, 258.

^[2] Rollo, pp. 9-25.

^[3] Id. at 99-115; penned by Associate Justice Marlene Gonzales-Sison and concurred in by Associate Justices Juan Q. Enriquez, Jr. and Vicente S. E. Veloso.

^[4] Entitled “Modesto Garcia and Cristina Salamat, petitioners, versus The Department of Agrarian Reform Adjudication Board and Dominga Robles Vda. de Caparas, respondents.”

^[5] Rollo, pp. 164-165.

^[6] Or TCT RT-65932.

^[7] Rollo, p. 67.

^[8] Id. at 32-33.

^[9] Id. at 35-36, 125-126.

^[10] Id. at 27-31.

^[11] Id. at 34.

^[12] Id. at 38-43.

^[13] Section 38. Statute of Limitations - An action to enforce any cause of action under this Code shall be barred if not commenced within three years after such cause of action accrued.

^[14] The Code of Agrarian Reforms of the Philippines, as amended.

^[15] Without specifying the amount.

^[16] Rollo, pp. 44-50; penned by Provincial Adjudicator Gregorio D. Sapera.

^[17] Id. at 49-50. Emphases in the original.

^[18] Id. at 56-59; Order dated March 27, 2001 penned by Regional Adjudicator Fe Arche Manalang.

^[19] Alternately referred to as “DCN 9772” by the DARAB.

^[20] Rollo, pp. 60-74; penned by Assistant Secretary Edgar A. Igano and concurred in by Assistant Secretaries Lorenzo R. Reyes, Augusto P. Quijano and Delfin B. Samson.

^[21] Id. at 72-73.  Emphases in the original.

^[22] Id. at 114-115.  Emphases in the original.

^[23] Id. at 127-129.

^[24] Id. at 164-165.

^[25] Id. at 16-17.  Capitalization supplied.

^[26] Id. at 177-188.

^[27] Id. at 172-175.

^[28] Id. at 34.

^[29] RULES OF COURT, Rule 130, Section 23 provides that:

SEC. 23.  Disqualification by reason of death or insanity of adverse party. – Parties or assignors of parties to a case, or persons in whose behalf a case is prosecuted, against an executor or administrator or other representative of a deceased person, or against a person of unsound mind, upon a claim or demand against the estate of such deceased person or against such person of unsound mind, cannot testify as to any matter of fact occurring before the death of such deceased person or before such person became of unsound mind. (Emphasis supplied)

^[30] Tan v. Court of Appeals, supra note 1.

^[31] CIVIL CODE OF THE PHILIPPINES, Article 3.

^[32] Sec. 7.  Tenure of Agricultural Leasehold Relation. – The agricultural leasehold relation once established shall confer upon the agricultural lessee the right to continue working on the landholding until such leasehold relation is extinguished. The agricultural lessee shall be entitled to security of tenure on his landholding and cannot be ejected therefrom unless authorized by the Court for causes herein provided.

^[33] Sec. 16. Nature and Continuity of Conditions of Leasehold Contract. – In the absence of any agreement as to the period, the terms and conditions of a leasehold contract shall continue until modified by the parties: Provided, That in no case shall any modification of its terms and conditions prejudice the right of the agricultural lessee to the security of his tenure on the landholding: Provided, further, That in case of a contract with a period an agricultural lessor may not, upon the expiration of the period increase the rental except in accordance with the provisions of Section thirty-four.

^[34] REPUBLIC ACT No. 3844, Section 36(1).

Registration of a piece of land under the Torrens System does not create or vest title, because it is not a mode of acquiring ownership. A certificate of title is merely an evidence of ownership or title over the particular property described therein. It cannot be used to protect a usurper from the true owner; nor can it be used as a shield for the commission of fraud; neither does it permit one to enrich himself at the expense of others. Its issuance in favor of a particular person does not foreclose the possibility that the real property may be co-owned with persons not named in the certificate, or that it may be held in trust for another person by the registered owner

THIRD DIVISION

[ G.R. Nos. 185857-58, June 29, 2016 ]

TRIFONIA D. GABUTAN, DECEASED, HEREIN REPRESENTED BY HER HEIRS, NAMELY: ERLINDA LLAMES, ELISA ASOK, PRIMITIVO GABUTAN, VALENTINA YANE; BUNA D. ACTUB, FELISIA TROCIO, CRISANTA D. UBAUB, AND TIRSO DALONDONAN, DECEASED, HEREIN REPRESENTED BY HIS HEIRS, NAMELY: MADELYN D. REPOSAR AND JERRY DALONDONAN, MARY JANE GILIG, ALLAN UBAUB, AND SPOUSES NICOLAS & EVELYN DAILO, PETITIONERS, VS. DANTE D. NACALABAN, HELEN N. MAANDIG, SUSAN N. SIAO, AND CAGAYAN CAPITOL COLLEGE, RESPONDENTS.

[G.R. NOS. 194314-15]

DANTE D. NACALABAN, HELEN N. MAANDIG, AND SUSAN N. SIAO, AS HEIRS OF BALDOMERA D. VDA. DE NACALABAN, PETITIONERS, VS. TRIFONIA D. GABUTAN, BUNA D. ACTUB, FELISIA D. TROCIO, CRISANTA D. UBAUB, AND TIRSO DALONDONAN, DECEASED, HEREIN REPRESENTED BY HIS HEIRS, NAMELY: MADELYN D. REPOSAR AND JERRY DALONDONAN, MARY JANE GILIG, ALLAN UBAUB, AND SPOUSES NICOLAS & EVELYN DAILO, CAGAYAN CAPITOL COLLEGE, REPRESENTED BY ITS PRESIDENT, ATTY. CASIMIRO B. SUAREZ, JR., PRIVATE RESPONDENT;

HON. LEONCIA R. DIMAGIBA (ASSOCIATE JUSTICE), HON. PAUL L. HERNANDO (ASSOCIATE JUSTICE), HON. NINA G. ANTONIO-VALENZUELA (ASSOCIATE JUSTICE), HON. EDGARDO T. LLOREN (ASSOCIATE JUSTICE), HON. MICHAEL P. ELBINIAS (ASSOCIATE JUSTICE), AND HON. JANE AURORA C. LANTION (ASSOCIATE JUSTICE, ACTING CHAIRMAN), COURT OF APPEALS, CAGAYAN DE ORO CITY (FORMER SPECIAL TWENTY-SECOND DIVISION), PUBLIC RESPONDENTS.

D E C I S I O N

JARDELEZA, J.:

Before us are consolidated petitions questioning the Court of Appeals' (CA) Decision^[1] dated December 11, 2008 and Resolution^[2] dated August 17, 2010 in CA-G.R. CV No. 68960-MIN and CA-G.R. SP No. 53598-MIN.^[3] In G.R. Nos. 185857-58, the heirs of Trifonia D. Gabutan and Tirso Dalondonan, Buna D. Actub, Felisia Trocio and Crisanta D. Ubaub (Gabutan, et al.) filed a partial appeal by way of a petition for review on certiorari,^[4] seeking to reverse the portion of the CA Decision declaring Cagayan Capital College (the College) as a buyer in good faith. The other petition, G.R. Nos. 194314-15, is one for certiorari^[5] filed by Dante D. Nacalaban, Helen N. Maandig, and Susan N. Siao as heirs of Baldomera D. Vda. De Nacalaban (Nacalaban, et al.). It seeks to annul the CA Decision and Resolution which sustained the action for reconveyance filed by Gabutan, et al.

The Antecedents
On January 25, 1957, Godofredo Nacalaban (Godofredo) purchased an 800-square meter parcel of prime land (property) in Poblacion, Cagayan de Oro City from Petra, Fortunata, Francisco and Dolores, all surnamed Daamo.^[6] Pursuant to the sale, Transfer Certificate of Title (TCT) No. T-2259^[7] covering the property was issued in the name of Godofredo. He thereafter built a house on it.^[8]

Godofredo died on January 7, 1974.^[9] ITe was survived by his wife, Baldomera, and their children, Dante, Helen, and Susan. On March 19, 1979, Baldomera issued a Certification^[10] in favor of her mother, Melecia. It provided, in effect, that Baldomera was allowing her mother to build and occupy a house on the portion of the property.^[11] Accordingly, the house was declared for taxation purposes. The tax declaration^[12] presented in evidence showed that Melecia owned the building on the land owned by Godofredo.^[13]

Baldomera died on September 11, 1994.^[14] On July 3, 1996, her children executed an Extrajudicial Settlement of Estate of Deceased Person with Sale^[15] (Extrajudicial Settlement with Sale) where they adjudicated unto themselves the property and sold it to the College. On August 22, 1996, TCT No. T-2259 was cancelled and TCT No. T-111846^[16] covering the property was issued in the name of the College.^[17]

Melecia died on April 20, 1997^[18] and was survived by her children, Trifonia, Buna, Felisia, Crisanta, and Tirso.

In a letter^[19] dated May 5, 1997, the College demanded Trifonia D. Gabutan, Mary Jane Gilig, Allan Ubaub, and Evelyn Dailo, the heirs of Melecia who were occupying the house on the property, to vacate the premises.^[20]

On July 7, 1997, Gabutan, et al. filed a Complaint for Reconveyance of Real Property, Declaration of Nullity of Contracts, Partition and Damages with Writ of Preliminary Attachment and Injunction^[21] against Nacalaban, et al. and the College. They alleged that: (1) Melecia bought the property using her own money but Godofredo had the Deed of Absolute Sale executed in his name instead of his mother-in-law;^[22] (2) Godofredo and Baldomera were only trustees of the property in favor of the real owner and beneficiary, Melecia;^[23] (3) they only knew about the Extrajudicial Settlement with Sale upon verification with the Registry of Deeds;^[24] and (4) the College was a buyer in bad faith, being aware they were co-owners of the property.^[25]

In its Answer with Affirmative Defenses,^[26] the College claimed that it is a buyer in good faith and for value, having "made exhaustive investigations and verifications from all reliable sources" that Melecia and her heirs were staying in the property by mere tolerance.^[27] It alleged that: (1) in the tax declaration^[28] of the residential house, Melecia admitted that the lot owner is Godofredo;^[29] (2) the occupancy permit of Melecia was issued only after Godofredo issued a certification^[30] to the effect that Melecia was allowed to occupy a portion of the property;^[31] and (3) the Extrajudicial Settlement with Sale was published in three consecutive issues of Mindanao Post, a newspaper of general circulation.^[32]

In their Answer with Counterclaim,^[33] Nacalaban, et al. denied the allegations of Gabutan, et al. They claimed to have acquired the property by intestate succession from their parents, who in their lifetime, exercised unequivocal and absolute ownership over the property.^[34] Nacalaban, et al. also set up the defenses of laches and prescription, and asserted that the action for reconveyance was improper because the property had already been sold to an innocent purchaser for value.^[35]

On September 10, 1997, the College filed a separate Complaint for Unlawful Detainer and Damages^[36] with the Municipal Trial Court in Cities (MTCC) against Trifonia, Mary Jane, Allan, Evelyn and Nicolas Dailo (Heirs of Melecia). In their Answer with Affirmative and/or Negative Defenses with Compulsory Counterclaim,^[37] the Heirs of Melecia claimed that they own and possess the property in co-ownership with Nacalaban, et al. and Gabutan, et al. because it was purchased by Melecia, their common predecessor.^[38] They also claimed that the house in which they reside was constructed at her expense.^[39] The College had prior knowledge of this co-ownership, and hence, was a purchaser in bad faith.^[40] The Heirs of Melecia also raised the defense of forum-shopping in view of the pendency of the action for reconveyance.^[41] They then concluded that in view of the issues and the value of the property, as well, the MTCC had no jurisdiction over the case.^[42]

The MTCC found it had jurisdiction to hear the case and ruled in favor of the College:^[43]

WHEREFORE, JUDGMENT is hereby rendered ordering each of the defendants to:

a.) Immediately vacate the property of the plaintiff;
b.) Pay the plaintiff the monthly use compensation for the continued use of the property at the rate of P500.00 per month from MAY 5, 1997 until the property is actually vacated;
c.) Pay the plaintiff Attorney's fees amounting to P5,000.00 per defendant;
d.) Pay for litigation expenses at the rate of P1,000.00 per defendant.

SO ORDERED.^[44]

On appeal, the Regional Trial Court (RTC) affirmed the MTCC's Decision^[46] in all respects, except that the Heirs of Melecia were given 30 days from notice to vacate the property.^[47] They filed a motion for reconsideration, but it was denied.^[49] Thus, the Heirs of Melecia filed a petition for review^[50] before the CA, docketed as CA-G.R. SP No. 53598.^[51]

Meanwhile, in the reconveyance case, the RTC rendered a Decision^[52] in favor of Gabutan, et al. The RTC found the testimonies of their witnesses credible, in that the money of Melecia was used in buying the property but the name of Godofredo was used when the title was obtained because Godofredo lived in Cagayan de Oro City while Melecia lived in Bornay, Gitagum, Misamis Oriental.^[53] Thus, the RTC held that a trust was established by operation of law pursuant to Article 1448 of the Civil Code.^[54] The dispositive portion of the RTC's Decision reads:

WHEREFORE, judgment is hereby rendered, and this Court hereby:

1. Declares that the Spouses Godofredo and Baldomera Nacalaban held the land covered by Transfer Certificate of Title No. T-2259 issued in the name of Godofredo Nacalaban married to Baldomera Dalondonan issued on January 13, 1959 in trust for Melecia Vda. de Dalondonan with the Spouses as the trustees and Melecia Vda. de Dalondonan as the cestui que trust;
   
2. Declares that upon the death of Melecia Vda. de Dalondonan on August 20, 1997, the ownership and beneficial interest of the foregoing Land passed to the plaintiffs and individual defendants by operation of law as legal heirs of Melecia Vda. de Dalondonan;
   
3. Nullifies the Extrajudicial Settlement of Estate of Deceased Person with Sale executed by the individual defendants on July 30, 1996 and known as Doc. No. 326; Page No. 67; Book No. XX; Series of 1996 in the Notarial Register of Notary Public Victoriano M. Jacot with respect to the Extrajudicial settlement by the individual defendants of the land referred to above;
   
4. Declares that defendant Cagayan Capitol College was a buyer in good faith and for value of the land referred to above, and, accordingly, declares that said defendant now owns the land;
   
5. Orders defendant Cagayan Capitol College to inform this Court in writing within thirty (30) days from receipt of this decision the amount of the purchase price of the land referred to above bought by it from the individual defendants the amount of which should approximate the prevailing market value of the land at the time of the purchase;
   
6. Orders the individual defendants namely, Dante D. Nacalaban, Helen N. Maandig, and Susan N. Siao, jointly and severally, to deliver and turn over to the plaintiffs, within thirty (30) days from receipt of this decision, plaintiffs' shares of the proceeds of the sale of the land referred to above the amount of which is equivalent to live-sixth (5/6) of said proceeds with the remaining one-sixth (1/6) to be retained by the individual defendants as their share by virtue of their being the legal heirs of Baldomera D. Nacalaban;

SO ORDERED.^[55]

Both parties filed separate appeals from this Decision before the CA.^[57] In a Resolution^[58] dated October 7, 2004, the CA consolidated both appeals.

The C A rendered its Decision^[59] on December 11, 2008 dismissing the consolidated appeals and affirming in toto the RTC Decisions in the unlawful detainer case and the action for reconveyance. The CA held that: (1) the defense of co-ownership based on an implied trust by a defendant in an unlawful detainer case shall not divest the MTCC of jurisdiction over the case;^[60] (2) the dead man's statute does not apply because Gabutan, et al.'s counsel did not interpose any objection when the testimony of Crisanta Ubaub was offered and Gabutan, et al.'s counsel even examined her;^[61] (3) Nacalaban, et al.'s claim that Gabutan, et al.'s witnesses are not competent to testify on matters which took place before the death of Godofredo and Melecia is without merit because Gabutan, et al. have not specified these witnesses and such hearsay evidence alluded to;^[62] (4) the parole evidence rule does not apply because Melecia and Nacalaban, et al. were not parties to the Deed of Conditional Sale;^[63] (5) the action for reconveyance has not yet prescribed because Gabutan, et al. are in possession of the property;^[64] and (6) the College is a buyer in good faith.^[65]

Nacalaban, et al. filed their motion for reconsideration of the CA Decision, but it was denied in a Resolution^[66] dated August 17, 2010. Hence, they filed the present petition for certiorari^[67] under Rule 65, where they allege that: (1) the action for reconveyance already expired;^[68] (2) for an action for reconveyance to prosper, the property should not have passed into the hands of another who bought the property in good faith and for value;^[69] and (3) the title of Godofredo under TCT No. T-2259 which was issued on January 13, 1959 could not be attacked collaterally.^[70]

On the other hand, Gabutan, et al. filed the present petition for review on certiorari^[71] under Rule 45, seeking a partial appeal of the CA Decision. In their petition, Gabutan, et al. allege that the College is not a buyer in good faith because it did not buy the property from the registered owner.^[72] Since Godofredo was the registered owner of the property and not Nacalaban, et al., the College should have exercised a higher degree of prudence in establishing their capacity to sell it.^[73] Further, despite knowing that other persons possessed the property, the College did not inquire with Gabutan, et al. the nature of their stay on the property.^[74] Under Section 1, paragraph 2, Rule 74 of the Rules of Court, the publication of the Extrajudicial Settlement with Sale was also without prejudice to claims of other persons who had no notice or participation thereof.^[75] Finally, Gabutan, et al. argue that they cannot be ejected from the property because there is no evidence to show that their stay was by mere tolerance, and that Melecia was a builder in good faith.^[76]

Considering that the petitions assail the same CA Decision and involve the same parties, we issued a Resolution^[77] dated December 13, 2010 consolidating them.

The Issues

The issues for resolution are:

1. Whether the petition for certiorari of Nacalaban, et al. shall prosper;
2. Whether the action for reconveyance was proper; and
3. Whether the College is a buyer in good faith.

Our Ruling

I. The petition for certiorari of
Nacalaban, et al. is a wrong
remedy

Pursuant to Section 1, Rule 45 of the Rules of Court,^[78] the proper remedy to obtain a reversal of judgment on the merits, final order or resolution is an appeal. The Resolution dated August 17, 2010 of the CA, which affirmed its Decision dated December 11, 2008, was a final resolution that disposed of the appeal by Nacalaban, et al. and left nothing more to be done by the CA in respect to the said case. Thus, Nacalaban, et al. should have filed an appeal in the form of a petition for review on certiorari and not a petition for certiorari under Rule 65, which is a special civil action.

Rule 65 is a limited form of review and is a remedy of last recourse. This extraordinary action lies only where there is no appeal nor plain, speedy and adequate remedy in the ordinary course of law.^[79] In Malayang Manggagawa ng Stayfast Phils., Inc. v. National Labor Relations Comission,^[80] we held that appeal would still be the proper remedy from a judgment on the merits, final order or resolution even if the error ascribed to the court rendering the judgment is its lack of jurisdiction over the subject matter, or the exercise of power in excess thereof, or grave abuse of discretion in the findings of fact or of law set out in the decision, order or resolution. The existence and availability of the right of appeal prohibits the resort to certiorari because one of the requirements for the latter remedy is that there should be no appeal.^[81] We have always declared that a petition for certiorari is not a substitute for an appeal where the latter remedy is available but was lost through fault or negligence.^[82]

Here, Nacalaban, et al. received the assailed Resolution dated August 17, 2010 on September 7, 2010.^[83] Under the Rules of Court, they had 15 days or until September 22, 2010 to file an appeal before us. Nacalaban, et al. allowed this period to lapse without doing so and, instead, filed a petition for certiorari on November 5, 2010.^[84] Being the wrong remedy, the petition of Nacalaban, et al. is, therefore, dismissible. Although there are exceptions^[85] to this general rule, none applies in this case.

In spite of the consolidation we have ordered, we cannot treat the petition of Nacalaban, et al. as one under Rule 45. We have the discretion to treat a Rule 65 petition for certiorari as a Rule 45 petition for review on certiorari if (1) the petition is filed within the reglementary period for filing a petition for review; (2) when errors of judgment are averred; and (3) when there is sufficient reason to justify the relaxation of the rules.^[86] The first and third requisites are absent in this case. To reiterate, the petition was filed beyond the 15-day reglementary period of filing a petition for review on certiorari. As will be discussed, we also find no compelling reason to relax the rules.

II. The action for reconveyance
filed by Gabutan, et al.
is proper

1. An implied resulting trust was
   created between Melecia and
   Godofredo

We stress at the outset that the question of existence of an implied trust is factual, hence, ordinarily outside the purview of Rule 45.^[87] The resolution of factual issues is the function of the lower courts whose findings, when aptly supported by evidence, bind us. This is especially true when the CA affirms the lower court's findings, as in this case. While we, under established exceptional circumstances, had deviated from this rule, we do not find this case to be under any of the exceptions.^[88] Even if we were to disregard these established doctrinal rules, we would still affirm the assailed CA rulings.

Article 1448 of the Civil Code provides in part that 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. The trust created here, which is also referred to as a purchase money resulting trust,^[89] occurs when there is (1) an actual payment of money, property or services, or an equivalent, constituting valuable consideration; (2) and such consideration must be furnished by the alleged beneficiary of a resulting trust.^[90] These two elements are present here.

Gabutan, et al., through the testimonies of Felisia, Crisanta, and Trifonia, established that Melecia's money was used in buying the property, but its title was placed in Godofredo's name. She purchased the property because Felisia wanted to build a pharmacy on it.^[91] On one occasion in Melecia's house, and when the entire family was present, Melecia gave Godofredo the money to purchase the property.^[92] Melecia entrusted the money to Godofredo because he was in Cagayan de Oro, and per Melecia's instruction, the deed of sale covering the property was placed in his name.^[93] It was allegedly her practice to buy properties and place them in her children's name, but it was understood that she and her children co-own the properties.^[94]

Melecia built a residential building on the property, where her daughter Crisanta and some of her grandchildren resided.^[95] Godofredo also thereafter built a house on the property. Twice, he also mortgaged the property to secure loans. Melecia allowed him to do so because she trusted him.^[96] After Godofredo's death, and when Baldomera fell ill, there were family discussions to transfer the title in Melecia's name so Melecia's children can divide it together with the rest of Melecia's properties. The plans, however, always fell through.^[97]

Both the RTC and CA found credence on these pieces of testimonial evidence that an implied resulting trust exists. Reliance on these testimonies will not violate the parol evidence rule, as Nacalaban, et al. once raised. In Tong v. Go Tiat Kun,^[98] we ruled that since an implied trust is neither dependent upon an express agreement nor required to be evidenced by writing, Article 1457 of our Civil Code authorizes the admission of parol evidence to prove their existence. What is crucial is the intention to create a trust.^[99] We cautioned, however, that the parol evidence that is required to establish the existence of an implied trust necessarily has to be trustworthy and it cannot rest on loose, equivocal or indefinite declarations.^[100] The testimonies of Felisia, Crisanta, and Trifonia satisfy these requirements. They are consistent and agree in all material points in reference to the circumstances behind the arrangement between Melecia and Godofredo. We agree with the RTC when it said that this arrangement among family members is not unusual, especially in the 1950s.^[101]

Nacalaban, et al., on the other hand, denied the arrangement between Melecia and Godofredo, and maintained that it was really the latter who purchased the property from its original owners, as evidenced by their possession of the Deed of Conditional Sale and the title being in Godofredo's name.^[102] It is telling, however, that Nacalaban, et al. failed to provide the details of the sale, specifically with regard to how Godofredo could have been able to afford the purchase price himself, which would have directly refuted the allegation that Melecia's money was used in the purchase. As the RTC aptly observed, if Godofredo really bought the property with his own money, it was surprising that Baldomera did not transfer the title of the property to her name when Godofredo died in 1974. Baldomera did not do so until her death in 1994 despite being pressed by her siblings to partition the property. The RTC correctly deduced that this only meant that Baldomera acknowledged that the property belongs to Melecia.^[103]

Having established the creation of an implied resulting trust, the action for reconveyance filed by Gabutan, et al., the heirs of Melecia in whose benefit the trust was created, is proper. An action for reconveyance is a legal and equitable remedy granted to the rightful landowner, whose land was wrongfully or erroneously registered in the name of another, to compel the registered owner to transfer or reconvey the land to him.^[104] It will not amount to a collateral attack on the title, contrary to the allegation of Nacalaban, et al.^[105] We explained in Hortiznela v. Tagufa:^[106]

x x x As a matter of fact, an action for reconveyance is a recognized remedy, an action in personam, available to a person whose property has been wrongfully registered under the Torrens system in another's name. In an action for reconveyance, the decree is not sought to be set aside. It does not seek to set aside the decree but, respecting it as incontrovertible and no longer open to review, seeks to transfer or reconvey the land from the registered owner to the rightful owner. Reconveyance is always available as long as the property has not passed to an innocent third person for value.

There is no quibble that a certificate of title, like in the case at bench, can only be questioned through a direct proceeding. The MCTC and the CA, however, failed to take into account that in a complaint for reconveyance, the decree of registration is respected as incontrovertible and is not being questioned. What is being sought is the transfer of the property wrongfully or erroneously registered in another's name to its rightful owner or to the one with a better right. If the registration of the land is fraudulent, the person in whose name the land is registered holds it as a mere trustee, and the real owner is entitled to file an action for reconveyance of the property.^[107]

The fact that the property was already titled in Godofredo's name, and later transferred to the College, is not a hindrance to an action for reconveyance based on an implied trust. The title did not operate to vest ownership upon the property in favor of the College. As held in Naval v. Court of Appeals:^[108]

xxx Registration of a piece of land under the Torrens System does not create or vest title, because it is not a mode of acquiring ownership. A certificate of title is merely an evidence of ownership or title over the particular property described therein. It cannot be used to protect a usurper from the true owner; nor can it be used as a shield for the commission of fraud; neither does it permit one to enrich himself at the expense of others. Its issuance in favor of a particular person does not foreclose the possibility that the real property may be co-owned with persons not named in the certificate, or that it may be held in trust for another person by the registered owner.^[109]

Moreover, the body of the Complaint filed by Gabutan, et al. shows that it is not only for the reconveyance of the property but also for the annulment of TCT No. T-111846 issued in the name of the College.^[110] Gabutan, et al. questioned the validity of the sale to the College and claimed co-ownership over the property. Thus, we can rule on the validity of TCT No. T-111846 since the Complaint is a direct attack on the title of the College.

2. The action for reconveyance is imprescriptible
   because the plaintiffs are in possession of
   the property

An action for reconveyance based on an implied or a constructive trust prescribes 10 years from the alleged fraudulent registration or date of issuance of the certificate of title over the property. However, an action for reconveyance based on implied or constructive trust is imprescriptible if the plaintiff or the person enforcing the trust is in possession of the property. In effect, the action for reconveyance is an action to quiet the property title, which does not prescribe.^[111] The reason is that the one who is in actual possession of the land claiming to be its owner may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right. His undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession.^[112]

The fact of actual possession of Gabutan, et al. of the property, during the lifetime of Melecia and even after her death, is an undisputed and established fact. The College has even filed an ejectment case against the Heirs of Melecia for this reason.^[113] Thus, their complaint for reconveyance is imprescriptible. It follows, with more reason, that Gabutan, et al. cannot be held guilty of laches as the said doctrine, which is one in equity, cannot be set up to resist the enforcement of an imprescriptible legal right.^[114]

III.The property shall be reconveyed to the estate of Melecia

1. The Extrajudicial Settlement with Sale executed
   between Nacalaban, et al. and the College is void

Having established the creation of an implied resulting trust between Melecia and Godofredo, the law thereby creates the obligation of the trustee to reconvey the property and its title in favor of the true owner.^[115] The true owner, Melecia, died in 1997 and was succeeded by her children and grandchildren. The property, therefore, must be reconveyed to her estate.

The execution of the Extrajudicial Settlement with Sale between Godofredo's heirs and the College will not defeat the legal obligation to reconvey the property because at the time of its execution in 1996, Melecia was still alive. Hence, Nacalaban, et al. did not have the right or authority to sell the property. Nemo dat quod non habet. One can sell only what one owns or is authorized to sell, and the buyer can acquire no more right than what the seller can transfer legally.^[116] Nacalaban, et al. cannot find refuge in their argument that the property was registered in their father's name and that after his death, his rights passed to them as his legal heirs. To repeat, title to property does not vest ownership but is a mere proof that such property has been registered.^[117]

2. The College is a buyer in bad faith

Despite the finding that the property was owned by Melecia and upon her death, by her heirs, the lower courts still sustained the ownership of the College of the property on the ground that it is an innocent purchaser for value.^[118] The lower courts' findings are grounded on the following: (i) Gabutan, et al.'s claim was never annotated on Godofredo's title; (ii) the Extrajudicial Settlement with Sale was duly published and the College was able to effect the transfer of the title in its name; (iii) Baldomera issued a certification in favor of Melecia allowing her to occupy a portion of the lot; and (iv) the tax declaration showed that Melecia owned only the building on the land owned by Godofredo.^[119]

The RTC reiterated the rule that the buyer of a land registered under the Torrens System may rely upon the face of the certificate of title and does not have to look beyond it.^[120] The CA, on the other hand, held that when taken together, these facts would reasonably constitute enough reason for the College or any buyer to conclude that the property is free from any adverse claim, thereby making any further investigation unnecessary. Absent any showing that the College knew of the actual arrangement between Godofredo and Melecia, it must be deemed a buyer in good faith.^[121]

Gabutan, et al. alleged that the lower courts erred in ruling that the College is a buyer in good faith, raising the following: (1) Nacalaban, et al. are not the registered owners of the property; Godofredo is the registered owner who died on January 7, 1974;^[122] (2) not being the registered owners, the College, as buyer, is expected to examine not only the certificate of title but all factual circumstances necessary for him to determine if there are any flaws in the title of the transferor, or in his capacity to transfer the property;^[123] and (3) the College knew that other persons possessed the property so it should have first established the capacity of the Nacalaban children to sell the property.^[124]

Whether one is a buyer in good faith and whether due diligence and prudence were exercised are questions of fact.^[125] As we have already mentioned, only questions of law may be raised in a petition for review on certiorari under Rule 45 of the Rules of Court. We see an exception, however, to this general rule relative to the finding that the College is a buyer in good faith. We hold that the RTC's finding that the College is a buyer in good faith, which finding was upheld by the CA, was based on an obvious misapprehension of facts and was clearly not supported by law and jurisprudence.

In Bautista v. Silva,^[126] we reiterated the requisites for one to be considered a purchaser in good faith:

A buyer for value in good Faith is one who buys property of another, without notice that some other person has a right to, or interest in, such property and pays full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other persons in the property. He buys the property with the welt-founded belief that the person from whom he receives the thing had title to the property and capacity to convey it.

To prove good faith, a buyer of registered and titled land need only show that he relied on the face of the title to the property. He need not prove that he made further inquiry for he is not obliged to explore beyond the four corners of the title. Such degree of proof of good faith, however, is sufficient only when the following
conditions concur: first, the seller is the registered owner of the land; second, the latter is in possession thereof; and third, at the time of the sale, the buyer was not aware of any claim or interest of some other person in the property, or of any defect or restriction in the title of the seller or in his capacity to convey title to the property.

Absent one or two of the foregoing conditions, then the law itself puts the buyer on notice and obliges the latter to exercise a higher degree of diligence by scrutinizing the certificate of title and examining all factual circumstances in order to determine the seller's title and capacity to transfer any interest in the property. Under such circumstance, it is no longer sufficient for said buyer to merely show that he relied on the face of the title; he must now also show that he exercised reasonable precaution by inquiring beyond the title. Failure to exercise such degree of precaution makes him a buyer in bad faith.^[127] (Emphasis supplied.)

Thus, the College, which has the burden to prove the status of being a purchaser in good faith, is required to prove the concurrence of the above conditions. This onus probandi cannot be discharged by mere invocation of the legal presumption of good faith.^[128] We find that the College failed to discharge this burden.

Firstly, as correctly pointed out by Gabutan, et al., Nacalaban, et al. are not the registered owners of the property, but Godofredo. In Bautista v. Court of Appeals,^[129] we held:

However, it is important to note that petitioners did not buy the land from the registered owner, Dionisio Santiago. They bought it from his heirs, Maria dcla Cruz and Jose Santiago.

Where a purchaser buys from one who is not the registered owner himself, the law requires a higher degree of prudence even if the land object of the transaction is registered. One who buys from one who is not the registered owner is expected to examine not only the certificate of title but all factual circumstances necessary for him to determine if there are any flaws in the title of the transferor, or in his capacity to transfer the land.^[130]

Secondly, the College was aware that aside from Nacalaban, et al., the Heirs of Melecia, were also in possession of the property. The College cited the tax declaration which bore an annotation that Melecia owned a residential building and Godofredo owned the lot.^[131] Also, apart from filing an ejectment case against the Heirs of Melecia, the College retained part of the purchase price for the demolition of Melecia's building as well.^[132]

In Occeña v. Esponilla,^[133] we held that petitioner-spouses were not purchasers in good faith when they merely relied on the representation of the seller regarding the nature of possession of the occupants of the land:

In the case at bar, we find that petitioner-spouses failed to prove good faith in their purchase and registration of the land, x x x At the trial, Tomas Occena admitted that he found houses built on the land during its ocular inspection prior to his purchase. He relied on the representation of vendor Arnold that these houses were owned by squatters and that he was merely tolerating their presence on the land. Tomas should have verified from the occupants of the land the nature and authority of their possession instead of merely relying on the representation of the vendor that they were squatters, having seen for himself that the land was occupied by persons other than the vendor who was not in possession of the land at that time, x x x^[134] (Emphasis supplied.)

Although the College in its Answer alleged that it made an exhaustive investigation and verification from all reliable sources and found that the possession of Melecia and her heirs was merely tolerated,^[135] it failed to specify who or what these sources were. There is no evidence that the College did inquire from Melecia or her heirs themselves, who were occupying the property, the nature and authority of their possession. It is not far-fetched to conclude, therefore, that the College merely relied on the representations of the sellers and the documents they presented. In this regard, the College is not a buyer in good faith.

The "honesty of intention" which constitutes good faith implies a freedom from knowledge of circumstances which ought to put a person on inquiry.^[136] If the land purchased is in the possession of a person other than the vendor, the purchaser must be wary and must investigate the rights of the actual possessor.^[137] Without such inquiry, the purchaser cannot be said to be in good faith and cannot have any right over the property.^[138]

We are aware that in the ejectment case, the MTCC and RTC ruled in favor of the College. We emphasize, though, that the ruling on the College's better right of possession was without prejudice to the eventual outcome of the reconveyance case where the issue of ownership was fully threshed out. We have held that the sole issue for resolution in an unlawful detainer case is physical or material possession of the property involved, independent of any claim of ownership by any of the parties. When the defendant, however, raises the defense of ownership in his pleadings and the question of possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be resolved only to determine the issue of possession.^[139] Thus, the ruling on the ejectment case is not conclusive as to the issue of ownership. ^[140]

WHEREFORE, in view of the foregoing, the petition for certiorari in G.R. Nos. 194314-14 is DENIED and the petition for review on certiorari in G.R. Nos. 185857-58 is GRANTED. The Decision of the Court of Appeals dated December 11, 2008 and its Resolution dated August 17, 2010 are AFFIRMED with the following MODIFICATIONS:

1. Cagayan Capitol College is hereby declared a buyer in bad faith, who has no right to possession and ownership of the property;
   
2. Nacalaban, et al. are ordered to return the purchase price paid on the property to the College, plus interest at the rate of six percent (6%) per annum computed from July 23, 1997141 until the date of finality of this judgment. The total amount shall thereafter earn interest at the rate of six percent (6%) per annum from the finality of judgment until its satisfaction;142 and
   
3. The Register of Deeds is ordered to cancel TCT No. T-l 11846 in the name of the College.
   
4. The property should be reconveyed to the Estate of the late Melecia Dalondonan with the institution of the proper proceedings for its partition and titling.

SO ORDERED.

Velasco, Jr., (Chairperson) Peralta, Perez, and Reyes, JJ., concur.

---

August 3, 2016

N O T I C E OF J U D G M E N T

Sirs/Mesdames:

Please take notice that on ___June 29, 2016___ a Decision, copy attached hereto, was rendered by the Supreme Court in the above-entitled case, the original of which was received by this Office on August 3, 2016 at 3:33 p.m.


Very truly yours,
(SGD)
WILFREDO V. LAPITAN
Division Clerk of Court

---

^[1] Rollo (G.R. Nos. 185857-58), pp. 78-96. Penned by Associate Justice Edgardo T. Lloren with Associate Justices Jane Aurora C. Lantion and Michael P. Elbinias concurring.

^[2] Rollo (G.R. Nos. 194314-14), pp. 40-42. Penned by Associate Justice Leoncia R. Dimagiba with Associate Justices Ramon Paul L. Hernando and Nina G. Antonio-Valenzuela concurring.

^[3] Consolidated via CA Resolution dated October 7, 2004, rollo (G.R. No. 185857-58), p. 84.

^[4] Rollo (G.R. Nos. 185857-58), pp. 33-75.

^[5] Rollo (G.R. Nos. 194314-15), pp. 3-17.

^[6] Evidenced by a Deed of Conditional Sale, rollo (G.R. Nos. 185857-58), pp. 79-80, 215.

^[7] Id. at 209.

^[8] Id. at 80.

^[9] Id.

^[10] Rollo (G.R. Nos. 185857-58), p. 541.

^[11] Id at 80.

^[12] Id. at 542.

^[13] Id. at 80.

^[14] Id.

^[15] Rollo (G.R. Nos. 185857-58), pp. 110-111.

^[16] Id. at 205.

^[17] Id. at 80-81.

^[18] Id. at 97, 191.

^[19] Id at 112.

^[20] Id. at 81.

^[21] Id. at 97-107

^[22] Id. at 98.

^[23] Id. at 99.

^[24] Id. at 101.

^[25] Id. at 100.

^[26] Id. at 132-138.

^[27] Id. at 133.

^[28] Id. at 139.

^[29] Id. at 134.

^[30] Id. at 140.

^[31] Id. at 133-134.

^[32] Id. at 134, 141.

^[33] Id. at 123-131.

^[34] Id. at 127.

^[35] Id. at 128.

^[36] Id. at 175-178.

^[37] Id. at 184-188.

^[38] Id. at 184-185.

^[39] Id. at 185.

^[40] Id.

^[41] Id.

^[42] Rollo (G.R. Nos. 185857-58), pp. 185-186.

^[43] Id. at 231-237.

^[44] Id. at 237.

^[46] Id. at 293-302.

^[47] Id. at 301-302.

^[49] Id. at 321-322.

^[50] Id. at 326-346.

^[51] Id. at 82.

^[52] Id. at 557-568.

^[53] Id. at 558.

^[54] Id. at 561-565.

^[55] Id. at 567-568.

^[57] Id. at 79.

^[58] Id. at 614-615.

^[50] Id. at 78-96.

^[60] Id. at 88.

^[61] Id. at 90.

^[62] Id. at 90-91.

^[63] Id. at 91.

^[64] Id. at 93-94.

^[65] Id. at 95.

^[66] Rollo (G.R. Nos. 1943 14-15), pp. 40-42.

^[67] Id. at 3-17.

^[68] Id. at 7-8.

^[69] Id.

^[70] Rollo (G.R. Nos. 304314-15), pp. 10-11

^[71] Rollo (G.R. Nos. 185857-58), pp. 33-75.

^[72] Id. at 56-57.

^[73] Id. at 57-58.

^[74] Id. at 58.

^[75] Id. at 62-63.

^[76] Id. at 65, 68-69.

^[77] Id. at 816-817.

^[78] Section 1. Filing of petition with Supreme Court.—A party desiring to appeal by certiorari from a judgment, final order or resolution of the Court of Appeals, the Sandiganbayan, the Court of Tax Appeals, the Regional Trial Court or other courts, whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition may include an application for a writ of preliminary injunction or other provisional remedies and shall raise only questions of law, which must be distinctly set forth. The petitioner may seek the same provisional Remedies by verified motion filed in the same action or proceeding at any time during its pendency.

^[79] Malayang Manggagawa ng Stayfast Phils., Inc. v. National Labor Relations Commission, G.R. No. 155306, August 28, 2013, 704 SCRA 24, 36, citing Balayan v. Acorda, G.R. No. 153537, May 5, 2006, 489 SCRA 637, 641-642.

^[80] G.R. No. 155306, August 28, 2013, 704 SCRA 24.

^[81] Id. at 35-36, citing Bugarin v. Palisoc, G.R. No. 157985, December 2, 2005, 476 SCRA 587 595-596.

^[82] Id. at 36.

^[83] Rollo (G.R. Nos. 1943 14-15) p. 4

^[84] Id. at 3.

The exceptions are the following:

(a) when public welfare and the advancement of public policy dictates;
(b) when the broader interest of justice so requires;
(c) when the writs issued are null and void; or
(d) when the questioned order amounts to an oppressive exercise of judicial authority.

Hanjin Engineering and Construction Co., Ltd. v. Court of Appeals, G.R. No. 165910, April 10, 2006, 487 SCRA 78, 100.

^[86] Tankeh v. Development Bank of the Philippines, G.R. No. 171428, November 11, 2013, 709 SCRA 19, 44, citing China Banking Corporation v. Cebu Printing and Packaging Corporation, G.R. No. 172880, August 11, 2010, 628 SCRA 154, 168, citing Tagle v. Equitable PCI Bank, G.R. No. 172299 April 22 2008, 552 SCRA 424.

^[87] Tong v. Go Tiat Kim, G.R. No. 196023, April 21, 2014, 722 SCRA 623, 633.

^[88] Chu, Jr. v. Caparas, G.R. No. 175428, April 15, 2013, 696 SCRA 324, 333.

^[89] Tong v. Co Tiat Kim, supra at 635-636, citing Comilang v. Burcena, G.R. No. 146853, February 13, 2006, 482 SCRA 342, 350.

^[90] Pigao v. Rabanillo, G.R. No. 150712, May 2, 2006, 488 SCRA 546, 561, citing Morales v. Court of Appeals, G.R. No. 117228, June 19, 1997, 274 SCRA 282.

^[91] Rollo (G.R. Nos. 85867-58), p. 560.

^[92] Id. at 559.

^[93] Id. at 558.

^[94] Id. at 560.

^[95] Id.

^[96] Id.

^[97] Rollo (G.R. Nos. 185867-58), p. 559.

^[98] G.R. No. 196023, April 21, 2014, 722 SCRA 623.

^[99] Id. at 636-637.

^[100] Id. at 637, citing Estate of Margarita D. Cabacungan v. Laigo, G.R. No. 175073 August 15, 2011, 655 SCRA 366, 380.

^[101] Rollo (G.R. Nos. 185867-58), pp. 561-562.

^[102] Id at 123-124.

^[103] Id. at 561-562.

^[104] Hortizuela v. Tagufa, G.R. No. 205867, February 23, 2015, 751 SCRA 371, 386-387 citing Leoveras v. Valdez, G.R. No. 169985, June 15, 2011, 652 SCRA 61, 71.

^[105] Rollo (G.R. Nos. 194314-15), pp. 10-11.

^[106] G.R. No. 205867, February 23, 2015, 751 SCRA 371.

^[107] Id at 381-382, citing Campos v. Ortega, Sr., G.R. No. 171286, June 2, 2014, 724 SCRA 240, 257; emphasis omitted.

^[108] G.R. No. 167412, February 22, 2006, 483 SCRA 102.

^[109] Id. at 113.

^[110] Rollo (G.R. Nos. 185857-58), pp. 378-380.

^[111] Francisco v. Rojas, G.R. No. 167120, April 23, 2014, 723 SCRA 423, 455, citing Vda. de Cabrera v. Court of Appeals, G.R. No. 108547, February 3, 1997, 267 SCRA 339.

^[112] Ney v. Quijano, G.R. No. 178609, August 4, 2010, 626 SCRA 800, 808, citing Mendizabel v. Apao, G.R. No. 143185, February 20, 2006, 482 SCRA 587, 609.

^[113] Rollo (G.R. Nos. 185857-58), pp. 175-178.

^[114] See Brito, Sr. v. Dianala, G.R. No. 171717, December 15, 2010, 638 SCRA 529, 539.

^[115] Brito, Sr. v. Dianala, supra at 537.

^[116] Midway Maritime and Technological Foundation v. Castro, G.R. No. 189061, August 6, 2014, 732  SCRA 193, 200, citing Rufloe v. Burgos, G.R. No. 143573, January 30, 2009, 577 SCRA 264, 272. Tung v. Go Tiat Kim, supra note 98 at 637.

^[118] Rollo (G.R. Nos/185857-58) p 567

^[119] Id. at 95.

^[120] Id. at 567.

^[121] Id. at 95.

^[122] Id. at 57.

^[123] Id.

^[124] Rollo (G.R. Nos. 185857-58), p. 58.

^[125] Philippine National Bank v. Heirs of Estanislao Militar, G.R. Nos. 164801 & 165 165, June 30, 2006, 494 SCRA 308, 319.

^[126] G.R. No. 157434, September 19, 2006, 502 SCRA 334.

^[127] Id. at 346-348; cited in Uy v. Fule, G.R. No. 164961, June 30, 2014, 727 SCRA 456, 473-474.

^[128] See Siguya v. Mayuga, G.R. No. 143254, August 18, 2005, 467 SCRA 341, 354, citing Potenciano v. Reynoso, G.R. No. 140707, April 22, 2003, 401 SCRA 391, 401.

^[129] G.R. No. 106042, February 28, 1994, 230 SCRA 446.

^[130] Id. at 456, citing Revilla and Fajar do v. Galindez, 107 Phil. 480, 484 (1960).

^[131] Rollo (G.R. Nos. 185857-58), p. 192; 722-723.

^[132] TSN, September 16, 1998, pp. 12-15.

^[133] G.R. No. 156973, June 4, 2004, 431 SCRA 116.

^[134] Id. at 124.

^[135] Rollo (G.R. Nos. 185857-58), p. 133.

^[136] Occena v. Esponilla, supra.

^[137] Santiago v. Villamor, G.R. No. 168499, November 26, 2012, 686 SCRA 313, 321.

^[138] Id, citing Tio v. Abayata, G.R. No. 160898, June 27, 2008, 556 SCRA 175, 188-189 and Philippine National Bank v. Heirs of Estaislao Militar, G.R. Nos. 164801 & 165165, 494 SCRA 308, 315.

^[139] Go v. Looyuko, G.R. No. 196529,July 1, 2013, 700 SCRA 313, 319.

^[140] Rodriguez v. Rodriguez, G.R. No. 175720, September 11, 2007, 532 SCRA 642, 653.

^[141] Date of filing of the College's Answer with Affirmative Defenses, rollo (G.R. Nos. 185857-58), p. 43.

^[142] Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, 703 SCRA 439, 457-458.

It has been held that in cases where one, in good faith, "takes another's property under claim of title in himself, he is exempt from the charge of larceny, however puerile or mistaken the claim may in fact be. And the same is true where the taking is on behalf of another, believed to be the true owner.

SECOND DIVISION

[ G.R. No. 220685, November 29, 2017 ]

PEOPLE OF THE PHILIPPINES, PETITIONER, VS. ERNESTO L. DELOS SANTOS, RESPONDENT.

D E C I S I O N

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari^[1] are the Amended Decision^[2] dated November 21, 2014 and the Resolution^[3] dated August 28, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 128625, which (a) dismissed for lack of probable cause the complaint charging respondent Ernesto L. Delos Santos (respondent) with qualified theft, and (b) quashed the arrest warrant against him.

The Facts

In May 2007, respondent undertook the construction of the CTTL Building in Baguio City, adjacent to the Benguet Pines Tourist Inn (BPTI) which is a business establishment owned and operated by the University of Manila (UM). At that time, respondent's father, Virgilio Delos Santos (Virgilio), who was the President and Chairman of the Board of Trustees (BOT) of UM, allegedly ordered the employees of BPTI to assist respondent in all his needs in the construction. Specifically, respondent was permitted to tap into BPTI's electricity and water supply.^[4]

Respondent's father died on January 21, 2008, and was succeeded by Emily Dodson De Leon (De Leon) as President of UM. On July 8, 2011, UM, represented by De Leon, filed a criminal complaint^[5] against respondent for the qualified theft of the electricity and water supply of BPTI for the period 2007 to 2011, with a total value of P3,000,000.00 more or less, before the Office of the City Prosecutor of Baguio City.^[6] In his defense,^[7] respondent argued that his family aggregately owns 98.79% of UM; that he was explicitly allowed by his father to use the electricity and water supply of BPTI for the construction of the CTTL Building for which no opposition was aired by anyone; and that the complaint was filed as a result of his own opposition to the probate of his father's alleged holographic will, which was initiated by his sister, Maria Corazon Ramona Llamas De Los Santos, whom respondent claims is the live-in partner of De Leon.^[8]

In a Resolution^[9] dated July 29, 2011, the investigating prosecutor dismissed the complaint in view of the absence of the element of "lack of consent or knowledge of the owner," considering that Virgilio, while being the President and Chairman of the BOT of UM, explicitly allowed respondent to use the electricity and water supply of BPTI. It was likewise noted that Virgilio was a very generous father to his children; and that, while Virgilio was still alive, no complaint was filed against the respondent for his use of the electricity and water supply of BPTI.^[10]

However, the aforestated Resolution was subsequently reversed upon the UM's motion for reconsideration.^[11] In a Resolution on Review^[12] dated September 23, 2011, Assistant City Prosecutor Rolando T. Vergara (ACP Vergara) found sufficient evidence to establish probable cause for qualified theft (attended by the qualifying circumstance of grave abuse of confidence),^[13] pointing out that respondent's defense of being expressly allowed by his father is barred under the Dead Man's Statute. Nonetheless, ACP Vergara held that the express consent of Virgilio, if there was any, was only limited to the period of the construction of the CTTL Building. However, even after the completion thereof, respondent did not disconnect the electrical and water connections to the damage and prejudice of UM. Moreover, considering that respondent was, at the time in question, not only the manager and operator of BPTI, but a stockholder and trustee of UM which owns BPTI, he was said to have had access to the BPTI premises and, thus, gravely abused the confidence reposed upon him by UM.^[14]

The September 23, 2011 Resolution on Review was affirmed in the Second Resolution on Review^[15] dated November 23, 2011, which denied respondent's motion for reconsideration for lack of merit.^[16] Meanwhile, an Information^[17] dated September 23, 2011 charging respondent with qualified theft was filed before the Regional Trial Court of Baguio City, Branch 7 (RTC). Consequently, respondent was arrested on September 27, 2011.^[18]

Respondent challenged via a petition for review^[19] before the Department of Justice (DOJ) the (a) September 23, 2011 Resolution on Review, and (b) November 23, 2011 Second Resolution on Review. Said petition was, however, dismissed in a Resolution^[20] dated June 8, 2015.

Eventually, respondent filed before the RTC an Urgent Omnibus Motion: (1) For Judicial Determination of Probable Cause; (2) To Lift/Quash Warrant of Arrest; and (3) To Suspend/Defer Arraignment and/or any Proceeding,^[21] alleging that the Information filed against him and the documents appended thereto failed to show proof sufficient to warrant the finding of probable cause for the crime of qualified theft.^[22]

The RTC Ruling

In an Order^[23] dated February 1, 2012, the RTC denied the Urgent Omnibus Motion upon a finding that probable cause indeed exists for the indictment of respondent, considering his admission that he caused the tapping of the electricity and water supply of BPTI.^[24]

Aggrieved, respondent elevated said ruling to the CA on certiorari,^[25] arguing, among others, that the testimonies attesting to the fact of Virgilio's consent to the tapping and diversion of the electrical and water connections are not barred under the Dead Man's Statute;^[26] and that the RTC erred in declaring that proof of absence of the elements of the crime may be passed upon only in a full blown trial.^[27]

The Proceedings Before the CA

In a Decision^[28] dated July 30, 2013, the CA Special Tenth Division affirmed in toto the questioned Orders of the RTC, and remanded the case to the trial court for further proceedings.^[29] Consequently, respondent moved for reconsideration^[30] of the foregoing Decision. He likewise filed a motion for inhibition^[31] attributing irregularities on the part of the members of the Special Tenth Division, which was granted amidst strong denial of respondent's accusations.^[32]

The case was re-raffled to the CA Fourth Division (Division of Five), which issued on November 21, 2014, an Amended Decision^[33] setting aside the Orders of the RTC, and thereby, dismissing the complaint for qualified theft and quashing the warrant of arrest against respondent.^[34]

The CA Fourth Division categorically held that Virgilio, as majority stockholder, President, and Chairman of the BOT of the UM, had apparent authority to give consent to respondent's use of the electricity and water supply of BPTI. Hence, the element of lack of owner's consent was absent. Even if Virgilio was not, in fact, duly authorized by the BOT to give his consent to respondent's acts, the latter nonetheless acted in good faith on the basis of the permission given to him by his father, which negated another element of the crime, i.e., the intent to gain.^[35] In view of the "clear absence" of said elements, the CA Fourth Division declared that subjecting respondent to the rigors of trial would just be a futile exercise and a waste of the trial court's precious time and resources.^[36]

Undaunted, UM filed a motion for reconsideration^[37] of the Amended Decision dated November 21, 2014, which was, however, denied in a Resolution^[38] dated August 28, 2015 for lack of merit. Hence, the instant petition for review on certiorari filed by the People of the Philippines (petitioner) insisting on the existence of probable cause against respondent for the crime of qualified theft.

The Issue Before the Court

The primordial issue for the Court's resolution is whether or not the CA erred in finding that the RTC gravely abused its discretion in holding that probable cause exists against respondent for qualified theft.

The Court's Ruling

The petition is not impressed with merit.

"A public prosecutor's determination of probable cause – that is, one made for the purpose of filing an [I]nformation in court – is essentially an executive function and, therefore, generally lies beyond the pale of judicial scrutiny."^[39]

However, Section 5 (a), Rule 112 of the Revised Rules of Criminal Procedure explicitly states that a judge may immediately dismiss a case if the evidence on record clearly fails to establish probable cause, viz.:

Section 5. When warrant of arrest may issue. – (a) By the Regional Trial Court. – Within ten (10) days from the filing of the complaint or information, the judge shall personally evaluate the resolution of the prosecutor and its supporting evidence. He may immediately dismiss the case if the evidence on record clearly fails to establish probable cause. If he finds probable cause, he shall issue a warrant of arrest, or a commitment order if the accused had already been arrested, pursuant to a warrant issued by the judge who conducted preliminary investigation or when the complaint or information was filed pursuant to section 6 of this Rule. In case of doubt on the existence of probable cause, the judge may order the prosecutor to present additional evidence within five (5) days from notice and the issue must be resolved by the court within thirty (30) days from the filing of the complaint or information.

x x x x (Emphasis and underscoring supplied)

In De Los Santos-Dio v. CA,^[40] the Court explained that "the judge's dismissal of a case [under the authority of the aforesaid provision] must be done only in clear-cut cases when the evidence on record plainly fails to establish probable cause – that is when the records readily show uncontroverted, and thus, established facts which unmistakably negate the existence of the elements of the crime charged. On the contrary, if the evidence on record [show] that, more likely than not, the crime charged has been committed and that respondent is probably guilty of the same, the judge should not dismiss the case and thereon, order the parties to proceed to trial. In doubtful cases, however, the appropriate course of action would be to order the presentation of additional evidence."^[41]

In this case, the Court concurs with the CA Fourth Division's finding that there was no probable cause against herein respondent for the crime of qualified theft, considering the glaring absence of certain key elements thereof. Notably, "for the public prosecutor to determine if there exists a well-founded belief that a crime has been committed, and that the suspect is probably guilty of the same, the elements of the crime charged should, in all reasonable likelihood, be present. This is based on the principle that every crime is defined by its elements, without which there should be, at the most, no criminal offense."^[42]

The elements of qualified theft, punishable under Article 310, in relation to Articles 308 and 309, of the Revised Penal Code (RPC), are as follows: (a) the taking of personal property; (b) the said property belongs to another; (c) the said taking be done with intent to gain; (d) it be done without the owner's consent; (e) it be accomplished without the use of violence or intimidation against persons, nor of force upon things; and (f) it be done under any of the circumstances enumerated in Article 310 of the RPC, i.e., with grave abuse of confidence.^[43]

As correctly ruled by the CA, the elements of lack of owner's consent and intent to gain are evidently absent in this case.

To recount, UM, which owns BPTI, is an educational institution established and owned by respondent's family. His father, Virgilio, owned 70.79%^[44] of the entire shares of stock of the UM, and respondent himself claims 9.85%^[45] share thereof. Virgilio was the President and Chairman of the BOT of UM at the time material to this case, and respondent himself was a board member and stockholder. Records disclose that respondent was permitted by Virgilio to tap into BPTI's electricity and water supply. As such, respondent had no criminal intent – as he, in fact, acted on the faith of his father's authority, on behalf of UM – to appropriate said personal property.

It has been held that in cases where one, in good faith, "takes another's property under claim of title in himself, he is exempt from the charge of larceny, however puerile or mistaken the claim may in fact be. And the same is true where the taking is on behalf of another, believed to be the true owner. The gist of the offense is the intent to deprive another of his property in a chattel, either for gain or out of wantonness or malice to deprive another of his right in the thing taken. This cannot be where the taker honestly believes the property is his own or that of another, and that he has a right to take possession of it for himself or for another,"^[46] as in this case.

The fact that respondent's shares of stock in UM represents only a proportionate or aliquot interest in the property of the corporation, or that his interest was only equitable or beneficial in nature^[47] does not negate respondent's belief that he and his family own UM, and that the consent of his father was sufficient for the use of BPTI's electricity and water supply. As correctly reasoned by the CA, "(e)ven assuming arguendo that Virgilio was not duly authorized by the Board of Trustees of UM to give its consent to [respondent] and the latter erred when he solely relied on his father's consent without further securing the authority of the [BOT] of UM, his bona fide belief that he had authority from the real owner of the electricity and water supply will not make him culpable of the crime of qualified theft because he was acting with a color of authority or a semblance of right to do such act."^[48]

Respondent's bona fide reliance on the consent of his father was bolstered by the material fact – which was likewise disregarded by the RTC – that Virgilio had utilized the resources of UM to shoulder the expenses of respondent's children. On this point, the Court quotes with approval the following disquisition of the CA:

Indeed, the records show that UM's Board of Trustees clothed Virgilio with such apparent authority to act on behalf of UM. Private respondent admitted this when it adduced the affidavit (used during the preliminary investigation stage of the complaint a quo) of petitioner's sister, Ramona, who is the current Chairman of the Board of Trustees of the UM, to wit:

"They failed to appreciate the fact that it was even my father who shouldered his grandchildren's expenses. This was evidenced by a certification issued by the President and Chief of Academic Officer, x x x attesting that my brother's second mistress has been receiving monthly allowance from the University in the amount of Nine Thousand Eight Hundred Twenty Five Pesos, x x x"

By giving Virgilio an apparent authority, UM's Board of Trustees cannot now deny and repudiate the legal effect of Virgilio's consent given to the petitioner to use the electricity and water supply of BPTI. The element of lack of owner's consent is thus glaringly absent in this case.^[49]

In addition to the clear absence of the elements of intent to gain and lack of owner's consent, the RTC failed to take into consideration that the instant case stems from a bitter feud between siblings. The CA, on the other hand, found that it was only when respondent and his other sister, Cynthia, opposed the probate proceedings of the estate of their father, which was initiated by their youngest sister, Ramona, that the BOT of UM filed the complaint a quo.^[50] In fact, respondent alleged in his Counter-Affidavit submitted before the investigating prosecutor that Ramona had filed "a number of malicious, revengeful and unfounded criminal complaints which were all dismissed."^[51] Thus, the possibility that Ramona may have only dragged the BOT of UM into her personal vendetta against respondent is not farfetched.

The Court reiterates that "[w]hile probable cause should be determined in a summary manner, there is a need to examine the evidence with care to prevent material damage to a potential accused's constitutional right to liberty and the guarantees of freedom and fair play, and to protect the State from the burden of unnecessary expenses in prosecuting alleged offenses and holding trials arising from false, fraudulent or groundless charges."^[52] This, the RTC failed to do. Hence, the CA correctly reversed the finding of probable cause against respondent.

All told, the RTC gravely erred when it denied respondent's motion for judicial determination of probable cause. Instead, it should have granted the same and, accordingly, dismissed the case pursuant to Section 5 (a), Rule 112 as cited above. In this light, the assailed CA rulings are affirmed.

WHEREFORE, the petition is DENIED. The Amended Decision dated November 21, 2014 and the Resolution dated August 28, 2015 of the Court of Appeals in CA-G.R. SP No. 128625 are hereby AFFIRMED.

SO ORDERED.

Carpio, (Chairperson), Jardeleza,^* Caguioa, and Reyes, Jr., JJ., concur.

---

^* Designated Additional Member per Raffle dated November 29, 2017.

^[1] Rollo, Vol. I, pp. 83-149.

^[2] Id. at 36-49. Penned by Associate Justice Rosmari D. Carandang with Associate Justices Ramon M. Bato, Jr. and Edwin D. Sorongon concurring, and Associate Justices Marlene Gonzales-Sison and Manuel M. Barrios dissenting.

^[3] Id. at 67-75.

^[4] See id. at 37.

^[5] Id. at 198.

^[6] See id. at 37 and 198.

^[7] See Counter-Affidavit dated July 28, 2011; id. at 206-213.

^[8] See id. at 38 and 207-209.

^[9] Not attached to the rollos.

^[10] See rollo, Vol. I, p. 38.

^[11] See Amended Motion for Reconsideration dated August 22, 2011; id. at pp. 254-263.

^[12] Id. at 283-286.

^[13] Id. at 286.

^[14] See id. at 285-286.

^[15] Id. at 311-326. Signed by Deputy City Prosecutor- In Charge Gloria Caranto-Agunos

^[16] Id. at 326.

^[17] Id. at 287.

^[18] See id. at 39 and 91.

^[19] Not attached to the rollos.

^[20] Rollo, Vol. I, p. 362. Signed Prosecutor General Claro A. Arellano.

^[21] Not attached to the rollos.

^[22] See rollo. Vol. I, p. 363.

^[23] Id. at 363-365. Penned by Presiding Judge Mona Lisa V. Tiongson-Tabora.

^[24] See id. at 364-365.

^[25] See Petition for Certiorari dated February 15, 2013; id at 399-456

^[26] See id. at 412-427.

^[27] See id. at 427-435.

^[28] Id. at 16-34. Penned by Associate Justice Francisco P. Acosta with Associate Justice Fernanda Lampas Peralta and Nina G. Antonio-Valenzuela concurring.

^[29] Id. at 33.

^[30] See motion for reconsideration dated August 19, 2013; id. at 566-649.

^[31] Not attached to the rollos.

^[32] See rollo, Vol. I, p. 41.

^[33] Id. at 36-49.

^[34] Id. at 48.

^[35] See id. at 43-45.

^[36] See id. at 47-48.

^[37] See Motion for Reconsideration (Re: Amended Decision dated 21 November 2014); id at 702-760.

^[38] Id. at 68-75.

^[39] Aguilar v. DOJ, 717 Phil. 789, 798 (2013).

^[40] 712 Phil. 288 (2013).

^[41] Id. at 307-308.

^[42] Aguilar v. DOJ, supra note 39, at 800.

^[43] Matrido v. People, 610 Phil. 203, 211-212 (2009).

^[44] Rollo, 415.

^[45] Id.

^[46] Gaviola v. People, 516 Phil. 228, 238 (2006); citation omitted.

^[47] See Asia's Emerging Dragon Corporation v. Department of Transportation and Communication, 572 Phil. 523, 528 (2008); citation omitted.

^[48] Rollo, Vol. I, p. 45.

^[49] Id. at 44.

^[50] See id. at 43-44.

^[51] Id. at 209.

^[52] Tan, Jr. v. Matsuura, 701 Phil. 236, 251 (2013).

RESULT OF THE PRELIMINARY EXAMINATION

acopiado 25/25
andrino 22
bato 24
denura --18 special exam
eguia 23
estoque 9
fernandez 20
granada cherrie 25
granada emmanuel 20
lomosad 25
nataa 20
paco 16
santiago --25 - special exam

DEAD MAN RULE

A dead man's statute, also known as a dead man act or dead man's rule, is a statute designed to prevent perjury in a civil case by prohibiting a witness who is an interested party from testifying about communications or transactions with a deceased person (a "decedent") against the decedent unless there is a waiver.

This prohibition applies only against a witness who has an interest in the outcome of the case and applies only where that witness is testifying for his own interests and against the interests of the decedent. Furthermore, the restriction only exists in civil cases, never in criminal cases.

The restriction can be waived. A waiver can occur in a number of ways:

1. The decedent's representative fails to object to the testimony;
2. The decedent's own representative testifies to the communication;
3. The decedent's testimony is brought before the jury in the form of a deposition or in another form.

With respect to U.S. federal courts, Rule 601 of the Federal Rules of Evidence defers to state law the determination of whether a witness is competent to testify. ^[1]

About half of the U.S. States have enacted a dead man statute, more commonly referred to as the "dead man's rule." Some states have enacted compromise variations to the rule. For example, in Virginia, an interested witness may testify only as to the statements of the deceased if this testimony is corroborated by a disinterested witness. In other states, such as Illinois, the rule has been expanded to prevent an interested party from testifying about communications with a minor or a legally incompetent person.

The Texas dead man's rule, found at Texas Rules of Evidence, 601(b)reads: (b) "Dead Man Rule" in Civil Actions. In civil actions by or against executors, administrators, or guardians, in which judgment may be rendered for or against them as such, neither party shall be allowed to testify against the others as to any oral statement by the testator, intestate or ward, unless that testimony to the oral statement is corroborated or unless the witness is called at the trial to testify thereto by the opposite party; and, the provisions of this article shall extend to and include all actions by or against the heirs or legal representatives of a decedent based in whole or in part on such oral statement. Except for the foregoing, a witness is not precluded from giving evidence of or concerning any transaction with, any conversations with, any admissions of, or statement by, a deceased or insane party or person merely because the witness is a party to the action or a person interested in the event thereof. The trial court shall, in a proper case, where this rule prohibits an interested party or witness from testifying, instruct the jury that such person is not permitted by the law to give evidence relating to any oral statement by the deceased or ward unless the oral statement is corroborated or unless the party or witness is called at the trial by the opposite party.

notice: PRELIMINARY EXAMINATION IS SET ON JANUARY 11 AT 5:30 PM

guide questions

1. Explain the principle of RES INTER ALIOS ACTA. Give at least three examples to demonstrate it.

2.What is the best evidence rule? Explain the exceptions of the rule.

3. What are the three essential requisites for the application of "declaration against interest"?

4.Define self-serving interest? What makes a "self-serving" interest affidavit "inadmissible"? When does it become admissible?

5. Explain the res gestae rule. Contrast it with the "dying declaration".

6.Explain the "dEAD Man Statute". What are the exceptions to the rule.

7.Explain Parole Evidence Rule. Illustrate using a case.

8.State the types of disqualification by reason of  "privilege" as outlined under the rules of evidence. There are some other disqualifications "outside" the rules of evidence. Mention some of these.Read: AIR PHILIPPINES CORPORATION, Petitioner,vs.PENNSWELL, INC

9. When is an evidence  (a) irrelevant  (b) immaterial (c) incompetent? Explain.

10. In what situations or instances will the "rules of evidence" be not strictly applied? Cite at least two examples.