ERNESTO MARTIN:he who alleges must prove his allegation.

G.R. No. 82248 January 30, 1992
ERNESTO MARTIN, petitioner,
vs.
HON. COURT OF APPEALS and MANILA ELECTRIC COMPANY, respondents.
Roberto M. Cabangis for petitioner.
Benjamin R. Reonal for private respondent.

CRUZ, J.:

This case turns on the proper application of the familiar rule that he who alleges must prove his allegation.

Ernesto Martin was the owner of a private car bearing license plate No. NPA-930. At around 2 o'clock in the morning of May 11, 1982, while being driven by Nestor Martin, it crashed into a Meralco electric post on Valley Golf Road, in Antipolo, Rizal. The car was wrecked and the pole severely damaged. Meralco subsequently demanded reparation from Ernesto Martin, but the demand was rejected. It thereupon sued him for damages in the Regional Trial Court of Pasig, alleging inter alia that he was liable to it in the sum of P17,352.00 plus attorney's fees and litigation costs as the employer of Nestor Martin. The petitioner's main defense was that Nestor Martin was not his employee.

After the plaintiff had rested, the defendant moved to dismiss the complaint on the ground that no evidence had been adduced to show that Nestor Martin was his employee. The motion was denied. The case was considered submitted for decision with the express waiver by the defendant of his right to present his own evidence. The defendant thus did not rebut the plaintiff's allegation that he was Nestor Martin's employer.

In the decision dated August 27, 1985, Judge Eutropio Migriño held in favor of the plaintiff, awarding him the amount claimed, with 12% interest, and P4,000.00 attorney's fees, plus costs. ¹ The decision was seasonably elevated to the Court of Appeals, which affirmed it in toto on February 22, 1988, ² prompting this petition for review.

The petition has merit.

It is important to stress that the complaint for damages was filed by the private respondent against only Ernesto Martin as alleged employer of Nestor Martin, the driver of the car at the time of the accident. Nestor Martin was not impleaded. The action was based on tort under Article 2180 of the Civil Code, providing in part that:

Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry.

The above rule is applicable only if there is an employer-employee relationship although it is not necessary that the employer be engaged in any business or industry. It differs in this sense from Article 103 of the Revised Penal Code, which requires that the employer be engaged in an industry to be subsidiarily liable for the felony committed by his employee in the course of his employment.

Whether or not engaged in any business or industry, the employer under Article 2180 is liable for the torts committed by his employees within the scope of their assigned task. But it is necessary first to establish the employment relationship. Once this is done, the plaintiff must show, to hold the employer liable, that the employee was acting within the scope of his assigned task when the tort complained of was committed. It is only then that the defendant, as employer, may find it necessary to interpose the defense of due diligence in the selection and supervision of the employee as allowed in that article. ³

In the case at bar, no evidence whatsoever was adduced by the plaintiff to show that the defendant was the employer of Nestor Martin at the time of the accident. The trial court merely presumed the existence of the employer-employee relationship and held that the petitioner had not refuted that presumption. It noted that although the defendant alleged that he was not Nestor Martin's employer, "he did not present any proof to substantiate his allegation."

As the trial court put it:

There is no need to stretch one's imagination to realize that a car owner entrusts his vehicle only to his driver or to anyone whom he allows to drive it. Since neither plaintiff nor defendant has presented any evidence on the status of Nestor Martin, the Court presumes that he was at the time of the incident, an employee of the defendant. It is elementary that he who makes an allegation is required to prove the same. Defendant alleges that Nestor Martin was not his employee but he did not present any proof to substantiate his allegation. While it is true plaintiff did not present evidence on its allegation that Nestor Martin was defendant's employee, the Court believes and so holds, that there was no need for such evidence. As above adverted to, the Court can proceed on the presumption that one who drives the motor vehicle is an employee of the owner thereof.

A presumption is defined as an inference as to the existence of a fact not actually known, arising from its usual connection with another which is known, ⁴ or a conjecture based on past experience as to what course human affairs ordinarily take. ⁵ It is either a presumption juris, or of law, or a presumption hominis, or of fact. ⁶

There is no law directing the deduction made by the courts below from the particular facts presented to them by the parties. Such deduction is not among the conclusive presumptions under Section 2 or the disputable presumptions under Section 3 of Rule 131 of the Rules of Court. In other words, it is not a presumption juris.

Neither is it a presumption hominis, which is a reasonable deduction from the facts proved without an express direction of law to that effect. ⁷ The facts proved, or not denied, viz., the ownership of the car and the circumstances of the accident, are not enough bases for the inference that the petitioner is the employer of Nestor Martin.

In the modern urban society, most male persons know how to drive and do not have to employ others to drive for them unless this is needed for business reasons. Many cannot afford this luxury, and even if they could, may consider it an unnecessary expense and inconvenience. In the present case, the more plausible assumption is that Nestor Martin is a close relative of Ernesto Martin and on the date in question borrowed the car for some private purpose. Nestor would probably not have been accommodated if he were a mere employee for employees do not usually enjoy the use of their employer's car at two o'clock in the morning.

As the employment relationship between Ernesto Martin and Nestor Martin could not be presumed, it was necessary for the plaintiff to establish it by evidence. Meralco had the burden of proof, or the duty "to present evidence on the fact in issue necessary to establish his claim" as required by Rule 131, Section 1 of the Revised Rules of Court. Failure to do this was fatal to its action.

It was enough for the defendant to deny the alleged employment relationship, without more, for he was not under obligation to prove this negative averment. Ei incumbit probatio qui dicit, non qui negat. 8 This Court has consistently applied the ancient rule that "if the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a satisfactory manner the facts upon which he bases his claim, the defendant is under no obligation to prove his exception or defense." ⁹

The case of Amor v. Soberano, ¹⁰ a Court of Appeals decision not elevated to this Court, was misapplied by the respondent court in support of the petitioner's position. The vehicle involved in that case was a six-by-six truck, which reasonably raised the factual presumption that it was engaged in business and that its driver was employed by the owner of the vehicle. The case at bar involves a private vehicle as its license plate indicates. No evidence was ever offered that it was being used for business purposes or that, in any case, its driver at the time of the accident was an employee of the petitioner.

It is worth mentioning in this connection that in Filamer Christian Institute v. Court of Appeals, ¹¹ the owner of the jeep involved in the accident was absolved from liability when it was shown that the driver of the vehicle was not employed as such by the latter but was a "working scholar" as that term is defined by the Omnibus Rules Implementing the Labor Code. ¹² He was assigned to janitorial duties. Evidence was introduced to establish the employment relationship but it failed nonetheless to hold the owner responsible. Significantly, no similar evidence was even presented in the case at bar, the private respondent merely relying on its mere allegation that Nestor Martin was the petitioner's employee. Allegation is not synonymous with proof.

The above observations make it unnecessary to examine the question of the driver's alleged negligence or the lack of diligence on the part of the petitioner in the selection and supervision of his employee. These questions have not arisen because the employment relationship contemplated in Article 1860 of the Civil Code has not been established.

WHEREFORE, the petition is GRANTED. The decision of the respondent court is REVERSED, and Civil Case No. 48045 in the Regional Trial Court of Pasig, Branch 151, is DISMISSED, with costs against the respondent. It is so ordered.

Narvasa, C.J., Griño-Aquino and Medidialdea, JJ., concur.

Footnotes 1 Original Records, p. 103.
2 Penned by Herrera, O., J., with Ejercito and Torres, JJ., concurring.
3 Cerf v. Medel, 33 Phil. 37.
4 Moran, Comments on the Rules of Court, Vol. 6, 1980 ed., p. 12.
5 Perez v. Ysip, 81 Phil. 218.
6 Moran, supra.
7 Ibid.
8 "He who asserts, not he who denies, must prove."
9 Belen v. Belen, 13 Phil. 202.
10 63 O.G. No. 32. 6850.
11 190 SCRA 485.
12 Sec. 14, Rule X of Book III of the Omnibus Rules Implementing the Labor Code.

FORTUNATO BORRE: CONCLUSIVE PRESUMPTION

G.R. No. L-57204 March 14, 1988
FORTUNATO BORRE, ARTURO SANTOS, ALEJANDRO MANALANG, JOSE MANALANG, VIRGINIA SANTOS, VIRGILIO GALLARDO, FRANCISCO FERNANDEZ, GLORIA DE LA FUENTE, DIONISIO CASTANEDA, SR., YOLY ANG ESPINA, JACINTO MOLINA, BENIGNO MONDERO, SALUD VIRAY, DEMETRIO CHICA, CRISANTA BRILLANTES, MILAGROS GALLARDO, FERNANDO ABES, MODESTA GABEON, AMPARO GARA, RAMON GARA, RAMESES TAMOAN, FELIMON DORADO, FLORENTINA PERALTA, ADELAIDA ABAYGAR, MARINO ABAYGAR, FIDEL CAYANAN, ABDON SARMIENTO, ROSARIO SISON, LAURA LUMABI, and RUPERTO TORREFIEL, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, THE HONORABLE ARTEMON D. LUNA, and THE MANOTOK SERVICES, INCORPORATED, respondents.
The Solicitor General for respondents.
Leven S. Puno for petitioners.

CORTES, J.:

This petition for review on certiorari seeks to set aside the Decision of respondent Court of appeals, dated April 22, 1981 in CA-G.R. No. SP-12248 which affirmed the Orders dated February 9 and 23, 1981 of the Court of First Instance of Manila dismissing petitioner's appeal in Civil Case No. 126163, and its Resolution dated June 17, 1981, denying the petitioners' motion for reconsideration.

On August 29, 1979, petitioner filed a complaint against private respondent Manotok Services, Inc. to recover rentals paid by them. They alleged that the land leased to them by the company was actually public land, forming part of the Estero de Sunog-Apo and Estero de Maypajo and did not belong to the company.

On motion of the respondent company, the trial court dismissed the complaint on November 11, 1980 on the ground that the company's ownership of the property was recognized by the State with the passage of Pres. Dec. No. 1670, providing that:

Section 1. The real property along the Estero de Sunog-Apo in Tondo, Manila, formerly consisting of Lots Nos. 55-A, 55-B and 55-C, Block 2918 of the subdivision plan Psd-11746, covered by TCT Nos. 49286, 49287 and 49288, respectively, of the Registry of Deeds of Manila, and formerly owned by the Manotok Realty, Inc., with an area of 72,428.6 square meters, more or less, is hereby declared expropriated. ...(Emphasis supplied).

The order of dismissal was received by petitioners on November 14,1980.

On December 13,1980, petitioners moved for reconsideration arguing that respondent company's titles covered lots which were portions of the Estero de Sunog-Apo and Estero de Maypajo and therefore should not have been included in those titles because these portions are public property which cannot be appropriated and titled by private persons like the respondent company. the trial court denied the motion in its order dated December 22, 1980 which was received by petitioners on January 12, 1981.

A second motion for reconsideration was filed on January 14, 1981 on the ground that a subsequent survey showed that the lots occupied by petitioners are not covered by respondent company's titles, and hence, are neither covered by Pres. Dec. No. 1670. In its order dated January 20, 1981, the trial court denied the second motion. Petitioners received the court order on January 30, 1981.

The next day, January 31, 1981, the last day for perfecting their appeal from the dismissal of their complaint, petitioners filed by registered mail a notice of appeal and a motion for extension of time to file the record on appeal. However, they did not file their appeal bond until February 2, 1981 for which reason the court dismissed their appeal, the thirty-day period for perfecting appeal having expired.

Petitioners went to the Court of appeals on certiorari but their petition was dismissed. Hence, this petition for review.

Petitioners contend that the late filing of their appeal bond was due to "excusable negligence" owing to their "honest belief" that the Office of the Clerk of Court of the then Court of First Instance of Manila was closed on January 31, 1981, the last day of the period within which they were to perfect their appeal, said date being a Saturday. They claim "that some courts are opened during Saturdays in the morning only for a few hours, and only for purposes of receiving pleadings." [Rollo, p. 74]. Invoking the policy on liberal application of remedial rules, petitioners insist that their appeal should be allowed.

This is not the first time that this Court is faced with a question on the timeliness of filing the appeal bond, a requirement for perfecting an appeal which had been dispensed with by Section ,18 of the Interim Rules of Court [Sarmiento v. Gatmaitan, G.R. No. L-38173, November 12,1987]. Although this new procedural rule may be given retroactive effect, the extent of its retroactive application is, however, limited to actions pending and undetermined at the time of its approval and does not extend to actions which had already become final and executory. [The Municipal Government of Coron, Palawan v. Carino, et al., G.R. No. 65894, September 24,1987, citing, Alday v. Camilon G.R. No. 60316, January 31, 1983, 120 SCRA 521].

Before the Interim Rules of Court took effect, the 1964 Rules of Court required the filing with the trial court within thirty (30) days from notice of order or judgment, a notice of appeal, an appeal bond, and a record on appeal. In the case at bar, although the notice of appeal and the motion for extension of time to file the record on appeal were filed within the reglementary period, the appeal bond was filed two days late, or after the period for perfecting an appeal had lapsed. Inasmuch as the appeal was not perfected on time, the decision of the trial court became final and executory on January 31, 1981. The trial judge committed no error in dismissing the appeal. This is clearly set forth in Section 13, Rule 41 of the Rules of Court:

SEC. 13. Effect of failure to file notice, bond, or record on appeal.-Where the notice of appeal, appeal bond or record on appeal is not filed within the period of time herein provided, the appeal shall be dismissed.

There is, therefore, no cogent reason to reverse the findings of the Court of Appeals. This Court has repeatedly held that perfection of an appeal in the manner and within the period laid down by law is not only mandatory but jurisdictional. [Reyes v. Carrasco, G.R. No. L-28783, March 31, 1971, 38 SCRA 296; Republic v. Reyes, G.R. No. L-36610, June 18, 1976, 71 SCRA 450]. As Justice J.B.L. Reyes has pointed out, "The right to appeal is not a natural right nor part of due process; it is merely a statutory privilege, and may be exercised only in the manner and in accordance with the provisions of the law." [Bello v. Fernando, G.R. No. L-16970, January 30, 1962, 4 SCRA 135, citing Santiago v. Valenzuela, 78 Phil. 397 (1947)].

Unless there is a showing of excusable negligence justifying the failure to file the appeal bond on time, the period within which to perfect an appeal cannot be extended to accomodate the appellant. [Crisostomo v. Bustos, G. R. Nos. L-57511-13, April 27, 1982, 113 SCRA 785]. Petitioners' mistake in believing that the Office of the Clerk of Court would be closed on Saturdays does not constitute "excusable negligence" which would justify a liberal application of the pertinent rules on the perfection of an appeal. Petitioners' counsel, a practitioner in the Metro Manila area, should have known or exerted effort to inquire about office hours in courts on Saturdays instead of assuming that Saturdays are not working days. No abuse of discretion, much less a grave one at that, as alleged, was committed by respondent Judge in dismissing petitioners' appeal in Civil Case No. 126163.

Moreover, the Court upholds the dismissal of petitioners' complaint, not on the basis of Pres. Dec. No. 1670 which was declared null and void ab initio in the recently decided case of Manotok et al. v. National Housing Authority and Republic of the Philippines [G.R. Nos. L-55166-67, May 21, 1987], but on the basis of failure to state a cause of action.

Note that petitioners' complaint is based on the theory that the lands they occupy do not belong to the private respondent, but to the State. They themselves, however, admitted in their complaint that they were leasing the property from Manotok Services, Inc. In fact, their action was for recovery of the rentals they paid.

A "tenant is not permitted to deny the title of his landlord at the time of the commencement of the relation of landlord and tenant between them." This is a conclusive presumption. [Rules of Court, Rule 131, Sec. 3 par. (b)].

A review of the cases applying this rule shows that the tenant is estopped from asserting a better title not only in himself but also in some third person including the State. In the case of Zobel v. Mercado [108 Phil. 240 (1960)], Mercado interposed the defense that the fishpond he was leasing from Zobel was not really Zobel's, but that it formed part of the public domain. The Court held that Mercado, as tenant, was estopped from questioning the title of Zobel. [See also Reyes v. Villaflor, 112 Phil. 181 (1961), 2 SCRA 247; Ora-a v. Hon. Augustia, 119 Phil. 9 (1963), 9 SCRA 703.]

The rule on estoppel against tenants is subject to a qualification. It does not apply if the landlord's title has expired, or has been conveyed to another, or has been defeated by a title paramount, subsequent to the commencement of lessor-lessee relationship [VII Francisco, The Revised Rules of Court in the Philippines 87 (1973)]. In other words, if there was a change in the nature of the title of the landlord during the subsistence of the lease, then the presumption does not apply. Otherwise, if the nature of the landlord's title remains as it was during the commencement of the relation of landlord and tenant, then estoppel lies against the tenant.

Not one of the circumstances referred to above exists in this case. Petitioners do not claim that from the time they entered into a lease agreement with Manotok to the time the complaint was filed, the latter's title was transferred or conveyed or had expired. Petitioners' claim is that the property they have been occupying and which they leased from Manotok has all along been part of the public domain. In other words, in asserting that the land they leased from Manotok belongs to the State, the petitioners as lessees now deny the title of the lessor from the commencement of their tenancy relationship. This the Rules of Court does not permit [Rule 131, sec. 3, par. (b)].

In view of their express admission that they leased the property from Manotok, petitioners are now estopped from asserting that there is a title better than their landlord's outstanding in another person.

WHEREFORE, the petition is DENIED. The Decision and the Resolution of the Court of appeals dated April 22, 1981 and June 17, 1981, respectively, are hereby AFFIRMED.

SO ORDERED.

Fernan (Chairman), Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

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

FIRST DIVISION

G.R. No. 162090             January 31, 2007
SPOUSES HOWARD T. CO CHIEN and SUSAN Y. CO CHIEN, Petitioners,
vs.
STA. LUCIA REALTY & DEVELOPMENT, INC., and ALSONS LAND CORPORATION, Respondents.

D E C I S I O N

PUNO, CJ.:

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

The facts are undisputed.

Sometime in December 1995, private respondents Sta. Lucia Realty & Development, Inc. (Sta. Lucia) and Alsons Land Corporation (Alsons) offered for sale to the general public parcels of land and golf shares to the Eagle Ridge Golf and Residential Estates (Eagle Ridge) in General Trias, Cavite.¹ Sta. Lucia, as the developer, owns 60% of Eagle Ridge while Alsons, the owner of the land, owns the remaining 40% by virtue of a joint venture agreement. Fil-Estate Realty Corporation (Fil-Estate) was commissioned to sell the subdivision lots and/or golf shares under an Exclusive Marketing Agreement executed on December 5, 1995.²

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

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

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

On June 16, 1999, Spouses Co Chien sent a written demand to Sta. Lucia for the refund of their down payment on the ground that the Contract to Sell was void for the reason that at the time of its execution, December 20, 1995, the private respondents had no Certificate of Registration and License to Sell as required by Sections 4 and 5 of P.D. 957.⁶ On July 6, 1999, failing to receive a favorable response from the private respondents, Spouses Co Chien filed a complaint with the HLURB.⁷

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

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

Spouses Co Chien then appealed to the Office of the President. In a decision dated June 10, 2003, the Office of the President affirmed the decision of the HLURB Board in toto. Not satisfied with the aforementioned ruling, Spouses Co Chien filed a Petition for Review with the Court of Appeals.¹⁰

On February 10, 2004, the Court of Appeals denied the petition and affirmed the decision of the Office of the President.¹¹

Hence, this petition.

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

We will discuss the issues seriatim.

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

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

Sec. 4. Registration of Projects

. . . .

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

. . . .

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

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

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

The same decree further states:

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

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

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

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

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

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

The second issue in the instant petition is whether or not estoppel bars the claim of Spouses Co Chien. There are generally 

three kinds of estoppel: 

(1) estoppel in pais; 

(2) estoppel by deed; and 

(3) estoppel by laches.

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

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

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

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

Costs against petitioners.

SO ORDERED.

REYNATO S. PUNO
Chief Justice
WE CONCUR:

ANGELINA SANDOVAL-GUTIERREZ
Associate Justice

RENATO C. CORONA Associate Justice

ADOLFO S. AZCUNA Asscociate Justice

CANCIO C. GARCIA
Associate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

Footnotes
¹ Rollo, p. 9.

² Id. at pp. 241-242.

³ Id.

⁴ Id. at p. 6.

⁵ Id. at pp. 242-243.

⁶ Id. at p. 11.

⁷ Id. at p. 12.

⁸ Id. at pp. 12-13.

⁹ Id. at pp. 79-92.

¹⁰ Id. at pp. 93-115.

¹¹ Id. at pp. 38-44.

¹² Rollo, p. 224.

¹³ Id. at p. 163.

¹⁴ Id. at p. 244.

¹⁵ Presidential Decree No. 957, July 12, 1976; emphasis supplied.

¹⁶ Id.

¹⁷ Id.

¹⁸ Id.

¹⁹ Id. at Secs. 4 and 11.

²⁰ Id. at Sec. 5.

²¹ Id. at Secs. 8, 9, 12-16.

²² Id. at Secs. 38-40.

²³ Id. at supra note 15.

²⁴ Government Service Insurance System v. Commission on Audit, G.R. Nos. 138381 and G.R. No. 141625, November 10, 2004.

²⁵ Presidential Decree No. 957, Sec. 5.

²⁶ Rollo, pp. 43-44.

²⁷ Id.

²⁸ Id. at Preamble par. 4.

²⁹ Id.

³⁰ Rollo, p. 255.

³¹ 31 Corpus Juris Secundum 237.

³² 31 Corpus Juris Secundum 155.

³³ Placewell International Services Corporation v. Ireneo B. Camote, G.R. No. 169973, June 26, 2006; Heirs of Eulalio Ragua v. Court of Appeals, G.R. Nos. 88521-22 and 89366-67, January 31, 2000.

³⁴ Spouses Ponciano Almeda and Eufemia P. Almeda v. The Court of Appeals and Philippine National Bank, G.R. No. 113412, April 17, 1996.

PHILIPPINE BANK OF COMMUNICATIONS, petitioner, vs. COURT OF APPEALS and GAW LE JA CHUA, respondents.

G.R. No. 106858 September 5, 1997
PHILIPPINE BANK OF COMMUNICATIONS, petitioner,
vs.
COURT OF APPEALS and GAW LE JA CHUA, respondents.


KAPUNAN, J.:

Before us is a petition for review on certiorari assailing the decision of the Court of Appeals dated August 3 1, 1992.

The factual background of the instant petition is as follows:

In 1984, Philippine Bank of Communications (PBCom) filed two (2) collection suits against, among others, Joseph L.G. Chua, husband of herein private respondent, who acted as one of the sureties for the financial obligations of Fortune Motors (Phils.), Inc. and the Forte Merchant Finance, Inc., with the petitioner. After the filing of the complaint, the co-defendants of Joseph L.G. Chua had no more properties left to answer for their obligations to the bank. Since Joseph L.G. Chua bound himself solidarily with the two principal debtors, the bank chose to run after Joseph L.G. Chua who was found to own a property situated in Dasmarinas, Makati. Said property was, however, discovered to have been earlier transferred to Jaleco Development Corporation by virtue of a Deed of Exchange dated October 24, 1983 executed by Joseph L.G Chua with the conformity of private respondent. The bank considered such transfer as in fraud of creditors and thereby sought its annulment before the Regional Trial Court of Makati, docketed as Civil Case No. 7889. A notice of Lis Pendens was thereafter registered on July 17, 1984.

Meanwhile, the collection suits filed by petitioners (Civil Case No. 84-25159 and Civil Case No. 84-25260) which reached this Court and the Court of Appeals, respectively, became final in favor of PBCom.

Said decisions could not be executed since petitioner was still awaiting the finality of the decision in Civil Case No. 7889 which was pending with this Court (docketed as G.R. No. 92067). Finally, on March 22, 1991, this Court declared the Deed of Exchange null and void after finding that the transfer of the property to Jaleco Development Corporation was indeed in fraud of PBCom as creditor.

When said decision became final, the subject property was immediately levied, and the auction sale was set on July 30, 1991.

On July 24, 1991, private respondent Gaw Le Ja Chua, wife of Joseph L. G. Chua, filed a Third Party Claim with the Sheriffs of Branches 8 and 9 of RTC, Manila. At the same time, she initiated two separate reinvindicatory actions on the subject property in the lower court.

Petitioner, on the other hand, filed an Urgent Motion to Direct the Sheriff to Enforce the Writ of Execution/Auction Sale.

On August 15, 1991, the RTC denied petitioner's motion. The Motion for Reconsideration with a motion to quash the third party claim was, likewise, denied in an Order dated October 21, 1991.

Dissatisfied, the petitioner came to this Court assailing the RTC's Orders. The matter was, however, referred to the Court of Appeals for proper disposition.

On August 31, 1992, the respondent court dismissed the petition in this wise:

Petitioner's allegation that private respondent is not the third-party or "stranger" referred to under the aforequoted rule is an issue which will properly be resolved by the Regional Trial Court of Makati where the separate reinvindicatory actions are pending. It will be premature for Us to pass upon such issue while the same is still pending before the lower court.

WHEREFORE, there being no abuse of discretion on the part of the public respondent and there being a plain, speedy and adequate remedy available to petitioner in the ordinary course of law, this petition is dismissed with costs.

SO ORDERED. ¹

The motion for reconsideration was likewise denied. Hence, the instant petition with the following assignment of errors:

I.

THE COURT OF APPEALS GRAVELY ERRED IN NOT DECLARING THAT BRANCH 8, REGIONAL TRIAL COURT OF MANILA, GRAVELY ABUSED ITS DISCRETION IN NOT QUASHING THE PATENT AND DUBIOUS THIRD-PARTY CLAIM OF THE HEREIN PRIVATE RESPONDENT.

II.

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT PBCOM'S PETITION IS PREMATURE, THUS, CONVENIENTLY BRUSHING ASIDE THE FOLLOWING QUESTIONS OF LAW:

II.1 WHETHER OR NOT PRIVATE RESPONDENT CAN BE CONSIDERED A STRANGER WITHIN THE MEANING OF THE LAW THAT WOULD ENTITLE HER TO THE RELIEFS PROVIDED IN SECTION 17, RULE 39 OF THE RULES OF COURT.

II.2 WHETHER OR NOT PRIVATE RESPONDENT IS NOW ESTOPPED FROM FILING A THIRD-PARTY CLAIM AS WELL AS AN INDEPENDENT ACTION INVOLVING THE PROPERTY IN QUESTION. ²

The real issue in this case is whether or not private respondent is considered a stranger within the meaning of Section 17, Rule 39 of the Rules of Court, as to entitle her to the remedy of a third-party claim or reinvidicatory actions over the subject property.

We rule in the negative.

A stranger is a third-party who is any person other than the judgment debtor or his agent. In several cases, ³ we have recognized the right of a third-party claimant to file an independent action to vindicate his claim of ownership over the properties seized. This is provided by Section 17, Rule 39 which states:

Sec. 17. Proceedings where property claimed by third person. — If property levied on be claimed by any other person than the judgment debtor or his agent, and such person make an affidavit of his title thereto or right to the possession thereof, stating the grounds of such right or title, and serve the same upon the officer making the levy, and a copy thereof upon the judgment creditor, the officer shall not be bound to keep the property, unless such judgment creditor or his agent, on demand of the officer, indemnify the officer against such claim by a bond in a sum not greater than the value of the property levied on. In case of disagreement as to such value, the same shall be determined by the court issuing the writ of execution.

The officer is not liable for damages, for the taking or keeping of the property, to any third-party claimant unless a claim is made by the latter and unless an action for damages is brought by him against the officer within one hundred twenty (120) days from the date of the filing of the bond. But nothing herein contained shall prevent such claimant or any third person from vindicating his claim to the property by any proper action.

xxx xxx xxx

While we are aware of the legal maxim that no man shall be affected by proceedings to which he is a stranger, ⁴ the attendant circumstances, however, in the case at bar constrain us to rule that private respondent cannot be considered a stranger within the purview of the law.

It must be noted that the sheriffs levied on the subject property on the basis of the annulment of the Deed of Exchange executed by Chua in favor of Jaleco Development Inc. as ruled by this Court on March 22, 1991 in Philippine Bank of Communications v. Court of Appeals, et al., G.R. No. 92067. In said case, we categorically stated that:

. . . . [T]he evidence clearly shows that Chua and his immediate family control JALECO. The Deed of Exchange executed by Chua and JALECO had for its subject matter the sale of the only property of Chua at the time when Chua's financial obligations became due and demandable. The records also show that despite the "sale", respondent Chua continued to stay in the property, subject matter of the Deed of Exchange.

These circumstances tend to show that the Deed of Exchange was not what it purports to be. Instead, they tend to show that the Deed of Exchange was executed with the sole intention to defraud Chua's creditor — the petitioner. It was not a bona fide transaction between JALECO and Chua. Chua entered a sham or simulated transaction with JALECO for the sole purpose of transferring the title of the property to JALECO without really divesting himself of the title and control of the said property.

Considering that this Court has ruled that the transaction leading to the execution of the Deed of Exchange between Chua and Jaleco was actually a transaction between Chua and himself and not between Chua and Jaleco, such transaction was a sham. As observed by this Court in G.R. No. 92067, the stockholders of Jaleco were mostly members of the immediate family of Joseph L.G. Chua, private respondent's husband and the couple continued to stay in the property despite its "sale" to Jaleco.

For her part, private respondent gave her marital consent or conformity to the Deed of Exchange and that by that act she became necessarily a party to the instrument. She cannot, therefore, feign ignorance to the simulated transaction where the intention was really to defraud her husband's creditors.

It should be noted that Civil Case No. 7889 which sought the annulment of the Deed of Exchange was primarily instituted by petitioner to recover the property in question from Jaleco and the couple. It was an offshoot of the two collection cases filed against the husband.

In Vda. de Nabong v. Sadang, ⁵ which is analogous to the case at bar, we ruled that:

. . . . If properly levied on be claimed by any other person that the judgment debtor or his agent, and such person make an affidavit of his title thereto or right to the possession thereof, stating the grounds of such right or title, and serve the same upon the officer making the levy, and a copy thereof upon the judgment creditor, the officer shall not be bound to keep the property, unless such judgment creditor or his agent, on demand of the officer, indemnify the officer against such claim by a bond in a sum not greater that the value of the property levied on. In case of disagreement, as to such value, the same shall be determined by the court issuing the writ of execution. . . . From the foregoing provision, it is clear that a third party claim must be filed by a person other than the judgment debtor (defendant) or his agent. In the present case, although Ignacio was not named as defendant there is no doubt that as wife of defendant Sunga she shares a common interest with him in the litigation. Indeed she represented herself to be the agent of Sunga by signing the answer in their behalf. She is therefore as much a judgment debtor and agent of the defendant and not a third party to the litigation.

In a last ditch effort to retain the property, private respondent now contends that it belongs to the conjugal partnership which should not answer for the obligations of the husband. Invoking Luzon Surety v. De Garcia, ⁶ and Ting v. Villarin, ⁷ private respondent argues that the property can not be held liable for her husband's obligations because such obligations never redounded to the benefit of the property regime of the spouses. In said cases, the Court stated that:

This particular codal provision in question rightfully emphasizes the responsibility of the husband as administrator. He is supposed to conserve and, if possible, augment the funds of the conjugal partnership, not dissipate them. If out of friendship or misplaced generosity on his part the conjugal partnership would be saddled with financial burden, then the family stands to suffer. No objection need arise if the obligation thus contracted by him could be shown to be for the benefit of the wife and the progeny if any there be. That is but fair and just. Certainly, however, to make a conjugal partnership respond for a liability that should appertain to the husband alone is to defeat and frustrate the avowed objective of the new Civil Code to show the utmost concern for the solidarity and well-being of the family as a unit. The husband, therefore, as is wisely thus made certain, is denied the power to assume unnecessary and unwarranted risks to the financial stability of the conjugal partnership. ⁸

That the ATTACHMENT ordered by the respondent Judge . . . likewise gives cause for this Court to strike it down for being NULL AND VOID. The ATTACHED PROPERTY of the spouses Ting are CONJUGAL, the same CANNOT BE VALIDLY BROUGHT UNDER the painful process of ATTACHMENT because:

xxx xxx xxx

(b) Secondly, the conjugal partnership cannot possibly be benefitted (again, here, Consolidated Bank's allegation that the act of the husband redounded to the benefit of the conjugal partnership is mere "book form") when the husband binds himself as guarantor, because this act does not conserve or augment conjugal funds but instead threatens to dissipate them by unnecessary and unwarranted risks to the partnership's financial stability. When the husband assumes the obligation of a guarantor, the presumption that he acts, as administrator, for the benefit of the conjugal partnership, is lost." (emphasis supplied.) ⁹

The aforecited cases are not applicable. While previously in the Deed of Exchange, private respondent conceded that the property was solely owned by her husband and that it was ceded to Jaleco Development Corp., after this Court ruled against the husband, she changed task by claiming that the property is conjugal and, as an afterthought, she filed a third party claim. Notably, she never intervened in said case where the validity of the Deed of Exchange was being questioned to protect her rights and interests if indeed she truly believed that the property belonged to the conjugal partnership. At the very least, private respondent is now estopped from claiming that property in question belongs to the conjugal partnership. She cannot now take an inconsistent stance after an adverse decision in G.R. No. 92067. In Santiago Syjuco, Inc. v. Castro ¹⁰, we had the occasion to reiterate that:

The principles of equitable estoppel, sometimes called estoppel in pais, are made part of our law by Art. 1432 of the Civil Code. Coming under this class is estoppel by silence, which obtains here and as to which it has been held that:

. . . an estoppel may arise from silence as well as from words. "Estoppel by silence" arises where a person, who by force of circumstances is under a duty to another to speak, refrains from doing so and thereby leads the other to believe in the existence of a state of facts in reliance on which he acts to his prejudice. Silence may support an estoppel whether the failure to speak is intentional or negligent.

Inaction or silence may under some circumstances amount to a misrepresentation and concealment of facts, so as to raise an equitable estoppel. When the silence is of such a character and under such circumstances that it would become a fraud on the other party to permit the party who has kept silent to deny what his silence has induced the other to believe and act on, it will operate as an estoppel. This doctrine rests on the principle that if one maintains silence, when in conscience he ought to speak, equity will debar him from speaking when in conscience he ought to remain silent. He who remains silent when he ought to speak cannot be heard to speak when he should be silent.

Finally, we take special note of the fact that this case has been going on for several years. Because of a dubious third party claim filed by private respondent, petitioner has been deprived of the fruits of the judgment in its favor which has become final and executory since 1991. In Pelayo v. Court of Appeals, ¹¹ we emphasized that:

. . . Litigation must end and terminate sometime and somewhere, and it is essential to an effective administration of justice that once a judgment has become final, the winning party be not, through a mere subterfuge, deprived of the fruits of the verdict. Courts must therefore guard against any scheme calculated to bring about that result. Constituted as they are to put an end to controversies, courts should frown upon any attempt to prolong them.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals is SET ASIDE. This case is REMANDED to the Regional Trial Court, Manila, Branch 8, for execution.

SO ORDERED.

Bellosillo, Vitug and Hermosisima, Jr., JJ., concur.
Footnotes 1 Rollo, p. 29.
2 Id., at 13.
3 Ong v. Tating, 149 SCRA 265 (1987); Bayer Phil. Inc. v. Agana, 63 SCRA 355 (1975); Lorenzana v. Cayetano, 78 SCRA 485 (1977); Roque v. CA, 93 SCRA 540 (1979); Sy v. Discaya, 181 SCRA 378 (1990).
4 Polaris v. Plan, 69 SCRA 93 (1976).
5 167 SCRA 232 (1988).
6 30 SCRA 111 (1969).
7 176 SCRA 532 (1989).
8 See note 6.
9 See note 7.
10 175 SCRA 171 (1989).
11 230 SCRA 606 (1994).

SHOPPER’S PARADISE REALTY & DEVELOPMENT CORPORATION, petitioner, vs. EFREN P. ROQUE, respondent.

THIRD DIVISION

G.R. No. 148775             January 13, 2004
SHOPPER’S PARADISE REALTY & DEVELOPMENT CORPORATION, petitioner,
vs.
EFREN P. ROQUE, respondent.

D E C I S I O N

VITUG, J.:

On 23 December 1993, petitioner Shopper’s Paradise Realty & Development Corporation, represented by its president, Veredigno Atienza, entered into a twenty-five year lease with Dr. Felipe C. Roque, now deceased, over a parcel of land, with an area of two thousand and thirty six (2,036) square meters, situated at Plaza Novaliches, Quezon City, covered by Transfer of Certificate of Title (TCT) No. 30591 of the Register of Deeds of Quezon City in the name of Dr. Roque. Petitioner issued to Dr. Roque a check for P250,000.00 by way of "reservation payment." Simultaneously, petitioner and Dr. Roque likewise entered into a memorandum of agreement for the construction, development and operation of a commercial building complex on the property. Conformably with the agreement, petitioner issued a check for another P250,000.00 "downpayment" to Dr. Roque.

The contract of lease and the memorandum of agreement, both notarized, were to be annotated on TCT No. 30591 within sixty (60) days from 23 December 1993 or until 23 February 1994. The annotations, however, were never made because of the untimely demise of Dr. Felipe C. Roque. The death of Dr. Roque on 10 February 1994 constrained petitioner to deal with respondent Efren P. Roque, one of the surviving children of the late Dr. Roque, but the negotiations broke down due to some disagreements. In a letter, dated 3 November 1994, respondent advised petitioner "to desist from any attempt to enforce the aforementioned contract of lease and memorandum of agreement". On 15 February 1995, respondent filed a case for annulment of the contract of lease and the memorandum of agreement, with a prayer for the issuance of a preliminary injunction, before Branch 222 of the Regional Trial Court of Quezon City. Efren P. Roque alleged that he had long been the absolute owner of the subject property by virtue of a deed of donation inter vivos executed in his favor by his parents, Dr. Felipe Roque and Elisa Roque, on 26 December 1978, and that the late Dr. Felipe Roque had no authority to enter into the assailed agreements with petitioner. The donation was made in a public instrument duly acknowledged by the donor-spouses before a notary public and duly accepted on the same day by respondent before the notary public in the same instrument of donation. The title to the property, however, remained in the name of Dr. Felipe C. Roque, and it was only transferred to and in the name of respondent sixteen years later, or on 11 May 1994, under TCT No. 109754 of the Register of Deeds of Quezon City. Respondent, while he resided in the United States of America, delegated to his father the mere administration of the property. Respondent came to know of the assailed contracts with petitioner only after retiring to the Philippines upon the death of his father.

On 9 August 1996, the trial court dismissed the complaint of respondent; it explained:

"Ordinarily, a deed of donation need not be registered in order to be valid between the parties. Registration, however, is important in binding third persons. Thus, when Felipe Roque entered into a leased contract with defendant corporation, plaintiff Efren Roque (could) no longer assert the unregistered deed of donation and say that his father, Felipe, was no longer the owner of the subject property at the time the lease on the subject property was agreed upon.

"The registration of the Deed of Donation after the execution of the lease contract did not affect the latter unless he had knowledge thereof at the time of the registration which plaintiff had not been able to establish. Plaintiff knew very well of the existence of the lease. He, in fact, met with the officers of the defendant corporation at least once before he caused the registration of the deed of donation in his favor and although the lease itself was not registered, it remains valid considering that no third person is involved. Plaintiff cannot be the third person because he is the successor-in-interest of his father, Felipe Roque, the lessor, and it is a rule that contracts take effect not only between the parties themselves but also between their assigns and heirs (Article 1311, Civil Code) and therefore, the lease contract together with the memorandum of agreement would be conclusive on plaintiff Efren Roque. He is bound by the contract even if he did not participate therein. Moreover, the agreements have been perfected and partially executed by the receipt of his father of the downpayment and deposit totaling to P500,000.00."¹

The Trial court ordered respondent to surrender TCT No. 109754 to the Register of Deeds of Quezon City for the annotation of the questioned Contract of Lease and Memorandum of Agreement.

On appeal, the Court of Appeals reversed the decision of the trial court and held to be invalid the Contract of Lease and Memorandum of Agreement. While it shared the view expressed by the trial court that a deed of donation would have to be registered in order to bind third persons, the appellate court, however, concluded that petitioner was not a lessee in good faith having had prior knowledge of the donation in favor of respondent, and that such actual knowledge had the effect of registration insofar as petitioner was concerned. The appellate court based its findings largely on the testimony of Veredigno Atienza during cross-examination, viz;

"Q. Aside from these two lots, the first in the name of Ruben Roque and the second, the subject of the construction involved in this case, you said there is another lot which was part of development project?

"A. Yes, this was the main concept of Dr. Roque so that the adjoining properties of his two sons, Ruben and Cesar, will comprise one whole. The other whole property belongs to Cesar.

"Q. You were informed by Dr. Roque that this property was given to his three (3) sons; one to Ruben Roque, the other to Efren, and the other to Cesar Roque?

"A. Yes.
"Q. You did the inquiry from him, how was this property given to them?
"A. By inheritance.
"Q. Inheritance in the form of donation?
"A. I mean inheritance.

"Q. What I am only asking you is, were you told by Dr. Felipe C. Roque at the time of your transaction with him that all these three properties were given to his children by way of donation?

"A. What Architect Biglang-awa told us in his exact word: "Yang mga yan pupunta sa mga anak. Yong kay Ruben pupunta kay Ruben. Yong kay Efren palibhasa nasa America sya, nasa pangalan pa ni Dr. Felipe C. Roque."

"x x x           x x x           x x x

"Q. When was the information supplied to you by Biglang-awa? Before the execution of the Contract of Lease and Memorandum of Agreement?

"A. Yes.

"Q. That being the case, at the time of the execution of the agreement or soon before, did you have such information confirmed by Dr. Felipe C. Roque himself?

"A. Biglang-awa did it for us.
"Q. But you yourself did not?
"A. No, because I was doing certain things. We were a team and so Biglang-awa did it for us.

"Q. So in effect, any information gathered by Biglang-awa was of the same effect as if received by you because you were members of the same team?

"A. Yes."²

In the instant petition for review, petitioner seeks a reversal of the decision of the Court of Appeals and the reinstatement of the ruling of the Regional Trial Court; it argues that the presumption of good faith it so enjoys as a party dealing in registered land has not been overturned by the aforequoted testimonial evidence, and that, in any event, respondent is barred by laches and estoppel from denying the contracts.

The existence, albeit unregistered, of the donation in favor of respondent is undisputed. The trial court and the appellate court have not erred in holding that the non-registration of a deed of donation does not affect its validity. As being itself a mode of acquiring ownership, donation results in an effective transfer of title over the property from the donor to the donee.³ In donations of immovable property, the law requires for its validity that it should be contained in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy.⁴ The Civil Code provides, however, that "titles of ownership, or other rights over immovable property, which are not duly inscribed or annotated in the Registry of Property (now Registry of Land Titles and Deeds) shall not prejudice third persons."⁵ It is enough, between the parties to a donation of an immovable property, that the donation be made in a public document but, in order to bind third persons, the donation must be registered in the registry of Property (Registry of Land Titles and Deeds).⁶ Consistently, Section 50 of Act No. 496 (Land Registration Act), as so amended by Section 51 of P.D. No. 1529 (Property Registration Decree), states:

"SECTION 51. Conveyance and other dealings by registered owner.- An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or other voluntary instrument, except a will purporting to convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Register of Deeds to make registration.

"The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province or city where the land lies." (emphasis supplied)

A person dealing with registered land may thus safely rely on the correctness of the certificate of title issued therefore, and he is not required to go beyond the certificate to determine the condition of the property⁷ but, where such party has knowledge of a prior existing interest which is unregistered at the time he acquired a right thereto, his knowledge of that prior unregistered interest would have the effect of registration as regards to him.⁸

The appellate court was not without substantial basis when it found petitioner to have had knowledge of the donation at the time it entered into the two agreements with Dr. Roque. During their negotiation, petitioner, through its representatives, was apprised of the fact that the subject property actually belonged to respondent.

It was not shown that Dr. Felipe C. Roque had been an authorized agent of respondent.

In a contract of agency, the agent acts in representation or in behalf of another with the consent of the latter.⁹ Article 1878 of the Civil Code expresses that a special power of attorney is necessary to lease any real property to another person for more than one year. The lease of real property for more than one year is considered not merely an act of administration but an act of strict dominion or of ownership. A special power of attorney is thus necessary for its execution through an agent.1awphil.ne+

The Court cannot accept petitioner’s argument that respondent is guilty of laches. Laches, in its real sense, is the failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned or declined to assert it.¹⁰

Respondent learned of the contracts only in February 1994 after the death of his father, and in the same year, during November, he assailed the validity of the agreements. Hardly, could respondent then be said to have neglected to assert his case for unreasonable length of time.

Neither is respondent estopped from repudiating the contracts. The essential elements of estoppel in pais, in relation to the party sought to be estopped, are:

 1) a clear conduct amounting to false representation or concealment of material facts or, at least, calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; 

2) an intent or, at least, an expectation, that this conduct shall influence, or be acted upon by, the other party; and 3) the knowledge, actual or constructive, by him of the real facts.¹¹ 

 With respect to the party claiming the estoppel, the conditions he must satisfy are:

 1) lack of knowledge or of the means of knowledge of the truth as to the facts in question; 

2) reliance, in good faith, upon the conduct or statements of the party to be estopped; and

 3) action or inaction based thereon of such character as to change his position or status calculated to cause him injury or prejudice.¹² 

It has not been shown that respondent intended to conceal the actual facts concerning the property; more importantly, petitioner has been shown not to be totally unaware of the real ownership of the subject property.

Altogether, there is no cogent reason to reverse the Court of Appeals in its assailed decision.

WHEREFORE, the petition is DENIED, and the decision of the Court of Appeals declaring the contract of lease and memorandum of agreement entered into between Dr. Felipe C. Roque and Shopper’s Paradise Realty & Development Corporation not to be binding on respondent is AFFIRMED. No costs.

SO ORDERED.
Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.

Footnotes

¹ Rollo, p. 37.
² Rollo, pp. 40-41.
³ Article 712, New Civil Code.
⁴ Article 749, New Civil Code.
⁵ Article 709, New Civil Code.
⁶ See Gonzales v. Court of Appeals, G.R. No. 110335, 18 June 2001, 358 SCRA 598.
⁷ Santos v. Court of Appeals, G.R. No. 90380, 13 September 1990, 189 SCRA 550.

⁸ Lagandaon v. Court of Appeals, G.R. No. 102526-31, 21 May 1998, 290 SCRA 330; Fernandez v. Court of Appeals, G.R. No. 83141, 21 September 1990, 189 SCRA 780.

⁹ Article 1868, New Civil Code.
¹⁰ Tolentino, Civil Code of the Philippines, vol. IV, 1990-1991, p. 661.
¹¹ Kalalo v. Luz, G.R. No. L-27782, 31 July 1970, 34 SCRA 337.
¹² Id.