Cancellation of Title Cases

FIRST DIVISION[G.R. No. 126777. April 29, 1999]DOMINGO LAO and ERNESTO T. LAO, petitioners, vs. ESTRELLA

VILLONES-LAO, SPS. MANUEL and ANGELITA MALAN, SPS. CARLOS and SOCORRO VILLENA, respondents.

D E C I S I O NPARDO, J.:

The case is a petition for review on certiorari of the decision of the Court of Appeals,[1] and its Resolution[2] reversing the decision of the trial court, and finding herein respondents Spouses Villenas as mortgagees in good faith making their title to the property[3], subject of this petition valid.

The facts of the case are as follows:The spouses Domingo and Estrella Lao, during their marriage, acquired

a real estate property located at 6 Arayat St., Cubao, Quezon City, covered by TCT No.T-268732 of the Register of Deeds of Quezon City. It has a total land area of 808 sq.m., and an estimated value of P1,500,000.00, including the improvements. In 1974, the spouses separated. The property was at that time still mortgaged with MetroBank and Trust Company.

However, after full payment of the loan obtained by Domingo Lao from MetroBank, Estrella Lao was able to secure release of the title of the property and had the mortgage therein cancelled unknown to Domingo.

Domingo Lao was leasing the subject property to Filmart at a monthly rental of P7,000.00. Sometime in August 1982, Domingo Lao learned that the title had been cancelled and a new one issued in the name of the respondents spouses Carlos and Socorro Patenia-Villena. Domingo Lao came to know this when Carlos Villena, Jr. visited the premises and informed the tenants that he (Villena) was the new owner of the property. Domingo Lao then went to the Office of the Register of Deeds of Quezon City and inquired into the record of the property. True enough, he was informed that his title has been cancelled and a new one issued in favor of the Villena spouses.

Estrella, the estranged wife of Domingo Lao, was in dire financial straits and was seeking a financial accommodation. The spouses Manuel and Angelita Malana, whom Estrella met at one time, came to her house and represented themselves as agents of Carlos Villena. The Malanas introduced Estrella Lao to Villena on May 22, 1980.

Upon meeting Estrella Lao, Carlos Villena Jr. indicated his willingness to grant her a loan, but noted that the title was in the name of the spouses Estrella and Domingo and their son Ernesto Lao. Estrella Lao must obtain a Special Power of Attorney from Domingo and Ernesto Lao. Estrella Lao

admitted this would be difficult as she and her husband had been estranged for many years, and were not even on speaking terms. However, the Malana spouses assured her they would help her secure the Special Power of Attorney.

After three days Estrella Lao returned to the Villenas together with the Malanas with the Special Power of Attorney (SPA) signed by Domingo and Ernesto Lao, and duly notarized. The spouses Villena relied on the said notarized SPA, and found nothing suspicious that it was so easily obtained by Estrella Lao only after three days, when they were in fact aware that Estrella and Domingo Lao were estranged from each other. Villena therefore entered into a contract of mortgage with Estrella Lao with the 808 sq.m. land as collateral.

After Estrella Lao failed to make payments on the loan, Carlos Villena Jr. effected an extra-judicial foreclosure and sale at public auction of the property on July 27,1981[4] and the Register of Deeds issued a new Certificate of Title in the name of the spouses Carlos and Socorro Villena.

Domingo Lao, after being appraised of what happened to the property, filed on April 27, 1983, with the Regional Trial Court Quezon City, Branch 76, a complaint for the annulment of the special power of attorney, mortgage, extra-judicial foreclosure, and the cancellation TCT No. 290029 and reconveyance of title.[5]

On September 28,1992, the Regional trial Court, Branch 76, Quezon City rendered decision the dispositive portion of which reads as follows:WHEREFORE, in view of the foregoing, the court hereby declares null and void the following:

1. The special power of attorney;2. Deed of real estate mortgage;3. The foreclosure proceedings;4. Transfer Certificate of Title No. 290029 in the name of the Villena

spouses, and orders the Register of Deeds of Quezon City to cancel the said title and issue a new one in favor of Domingo Lao, Ernesto Lao, and Estrella Villones-Lao with the same participation as appearing in TCT No. T-268732 of the Registry of Deeds of Quyezon City, namely: Estrella Villones-Lao, 50%; Domingo Lao, 30%; and Ernesto Lao, 20%.

The Court further orders the defendants Estrella Villones-Lao, spouses Manuel and Angelita Malana and the spouses Carlos and Socorro Patenia Villena to pay the plaintiff, jointly and severally, the sum of P15,000.00 as moral damages, P10,000.00 as attorneys fees, P10,000.00 as reasonable litigation expenses and to pay the costs. Defendant Villenas are ordered to

pay the sum of P840,000.00 as unearned rentals computed at P7,000.00 a month from September 1982 to September 1992 plus interest at 12% per annum until fully paid.Considering that a special characteristic of a real estate mortgage is its indivisibility (Art 2089 of the Civil Code) even through the debt secured may be divided among the debtors or creditors or other successors in interest, the deed of real estate mortgage executed by Estrella Villones-Lao with respect to her undivided not share in property. The nullity notwithstanding, Villena can recover the indebtedness of Estrella Villones-Lao through an ordinary suit.[6]

A motion to modify the judgment was filed by petitioners Domingo and Ernesto Lao, on October 12, 1992[7], which was granted by the lower court and a modified judgement was issued on February 11, 1993.[8] The modified judgment further orders the spouses Carlos and Socorro Villena and their representatives and assigns to immediately vacate the premises located at Cubao, Quezon City and that a new Certificate of Title be issued in favor of spouses Domingo and Estrella Lao with the 20% share of Ernesto Lao annotated at the back..[9]

On February 23, 1993 respondent spouses Villena filed their notice of appeal. On February 19, 1993 the spouses Malana filed their notice of appeal.

After due proceedings, on July 11, 1996, the Court of Appeals rendered decision on July 11, 1996, reversing the lower courts decision, the dispositive portion of which reads as follows:WHEREFORE, the trial courts decision is REVERSED and SET ASIDE, and in lieu thereof, a new decision is hereby rendered declaring the Deed of Real Estate Mortgage dated June 17, 1980 and the foreclosure sale valid, upholding the validity of the villenas title to TCT No. 290029, and ordering that the property be transferred in Villenas name.[10]

On August 14, 1996 petitioner filed a motion for reconsideration. However the Court of Appeals denied the motion.

Hence, this petition.In this appeal, petitioner imputes the following errors to the Court of

Appeals:1. The respondents were mortgagees in good faith, not being privy

to the forgery of the special power of attorney; and2. Petitioners were negligent in entrusting the original owners

certificate of title to respondent Estrella Villones-Lao.The petitioners argue that the Villenas can not be considered as

mortgagees in good faith since at the first instance they knew that Estrella

Lao and her husband Domingo Lao had been estranged from each other. When Estrella Lao together with the Malana spouses came to him with the Special Power of Attorney (SPA) after only three days, this should have put Villena in doubt as to the authenticity of the SPA, after all the rule of commerce is caveat emptor.[11]

Petitioners further stress the fact that a reasonably prudent man would have been surprised at the very least when Estrella Lao and the Malanas showed up three days later with a special power of attorney signed by the co-owners Domingo and Ernesto Lao. While Estrella Lao was a co-owner of the property, she was nevertheless a stranger with regard to the sale or disposition of the shares of the other co-owners. Yet, respondent Villena never even called or inform the co-owners of the mortgage, even if he knew their addresses. He went to the subject property once and made no other efforts to contact or confirm the identities of Domingo and Ernesto Lao.

According to petitioners, the Court of Appeals disregarded the requirement of ordinary prudence and diligence in the case simply because of the notarized special power of attorney. And as such the court binds petitioners to an unauthorized transaction entered into by his wife with regard to conjugal properties.

The ruling of the Court of Appeals that petitioners were given by the Villenas several opportunities to redeem the property finds no support in the factual records of the case. According to the petitioners they only met the Villenas after title was already consolidated in the name of the Villenas. Further, it would be utterly absurd for petitioners to ratify the illegal and unauthorized acts of Estrella Lao by redeeming the property foreclosed on the strength of their forged signatures.

The petitioners argue that the findings of the Court of Appeals on their negligence in giving Estrella Lao a copy of the title of the property is without basis. As a registered co-owner, Estrella Lao was entitled to the possession of an owners copy. In fact under the provisions of P.D. 1529, a separate duplicate may be issued to each co-owner. Hence, there was no responsibility upon anyone to deny Estrella Lao possession of said title.

Petitioners raise in issue the fact that during the proceedings at the lower court it was proved that the signatures of the petitioners, Domingo and Ermesto Lao were forged. Emmanuel de Guzman, of the National Bureau of Investigation testified that upon examination and verification of the questioned signatures of Domingo and Ernesto Lao, by comparing the sample signatures and the signatures appearing on the special power of attorney, he concluded that the signatures do not match.Therefore, the signatures of Domingo and Ernesto Lao were forgeries.[12]

Herein respondent Villena spouses, Malana spouses and Estrella Lao filed their separate comment to the petition.

Respondent spouses Villena were steadfast in their claim that since they were not privy to the forgery of the special power of attorney they can not be part of the fraud imputed by the petitioners.

According to the spouses Villena, they have exhibited the required diligence to ascertain the veracity of the representation made by Estrella by employing several precautionary measures.

They demanded for and was given the original of the owners copy of TCT No. 268732, the location plan and Real Estate Tax Declaration of the mortgage property.They conducted an ocular inspection of the subject property and inquired who owns the property. They went to the Quezon City Register of Deeds to verify the authenticity of TCT No. 266732 and found the same to be genuine and free from liens and encumbrances. Carlos Villena even asked Estrella Lao why she preferred mortgaging the property to him rather than to Metrobank. They inquired as to the whereabouts of the other co-owners.[13]

To evidence their good faith and intention to help Estrella Lao, the foreclosure was done only after six months from the last demand to give Estrella Lao an opportunity to pay her debt. The foreclosure was published, and after consolidation of the title to their name, the Villenas reminded Estrella Lao of her right to repurchase the property.The Villenas even offered petitioners the option to sell the property, and whatever be the proceeds from the sale, be given as payment for the debt and interest of Estrellas loan and whatever remains be given to the co-owners Domingo and Ernesto Lao.

Contrary to the claims of petitioners, the spouses Villena alleged that they should not be faulted for relying on the notarized document. Precisely, a notarized document is executed to lend truth to the statements contained therein and to the authenticity of the signatures. Moreover a notarized document enjoys the presumption of regularity which can be overturned only by clear and convincing evidence. Armed with this presumption, a prudent man exercising due diligence need only require the presentation of a duly notarized special power of attorney. He is not expected to enlist the opinions of experts and summon all signatories before he can rely on the notarized document.

Respondents claim that the petitioners, Domingo and Ernesto Lao should file a case for damages against the perpetrators of the fraud, and not against them. Further the present action for reconveyance is a

collateral attack on the Villenas title, which is prohibited under Sec. 48 of Presidential Decree 1529 of the property registration decree.

Estrella Lao on the other hand filed her separate comment to the petition. She alleges that she never defrauded nor deceived her estranged husband, Domingo Lao.She vehemently denies any intervention in the preparation and execution of the disputed special power of attorney except by affixing her signature on the blank form presented to her by the other private respondents, spouses Malana.

According to Estrella it was the Malanas who made her sign a blank special power of attorney. She only affixed her signature at the portion of the blank document, which states, with my marital consent, she never read the document and did not know what it contained.[14]

After three months from obtaining the loan from the Villenas she went to see them about the payment of the loan and the redemption of the property by her friend Mr. Go. The Villenas refused and told her that only she and her husband can redeem the property. After this encounter whenever Estrella Lao went to see the Villenas or call them over the phone she is always told that the couple were out and that they refused to see or talk to her.[15] In fact Estrella Lao filed a suit against the respondent Villena spouses for violation of the Usury law and damages suffered by Estrella Lao when the Villenas cancelled the lease contract of her lessee Mr. Ranola during the pendency of the mortgage.

Further, according to Estrella Lao, the Malanas were agents of the spouses Villena. This was also the conclusion of the trial court. In fact in the decision of the trial court there is a mention that the Villenas were aware of the forgery. They were not simply witnesses to the document but were aware of how the Malanas were able to obtain the special power of attorney.

According to Estrella Lao the respondent spouses Villena took advantage of her urgent need for money and took the opportunity to get the property worth P1.5 M for only P167,000.00, the amount that was actually given to her as loan.

The spouses Manuel and Angelita Mallana on the other hand claims that the only participation they had in the transaction was to introduce respondent Estrella Lao to respondent Carlos Villena in connection with her desire to secure a loan from the latter. They acted as witnesses to the real estate mortgage executed between spouses Carlos and Soccorro Villena and Estrella Villones-Lao. The undisputed fact remains that it was Estrella Lao who secured the loan from the Villenas. She secured the loan by means of a forged special power of attorney from her husband Domingo

Lao and her son Ernesto Lao. The case filed by Estrella Lao against spouses Mannuel and Angelita Malana, Carlos Villena, and Atty. Rodolfo G. Palatao (notary public who notarized the special power of attorney, now Associate Justice, Sandiganbayan) was dismissed for lack of merit.

We find the petition impressed with merit.While this Court has held in several cases that a notarized instrument is

admissible in evidence without further proof of its due execution and is conclusive as to the truthfulness of its contents, this rule is nonetheless not absolute but may be rebutted by clear and convincing evidence to the contrary.[16] Such evidence, as the Court sees it, has been sufficiently established in this case.

The respondents do not deny the sequence of events established on record that:

1. Estrella Lao was in extreme need of money and was looking in the neighborhood of Nepa Q Mart for a quick loan;

2. It was the spouses Malana who went to her house to inquire if she was still interested in a loan. In fact , they had with them the folder given by Estrella Lao to one Cora, containing important documents pertaining to the property in question;

3. The Malanas informed her they knew of a financier (referring to Mr. Villena) who could provide her with the loan, clearly implying that they had previous dealings with Mr. Villena. This is borne out by the fact that prior to the actual meeting of Estrella Lao and Mr. Villena, the Malanas already went to see Mr. Villena about the prospective transaction. Villena admitted that he knew the Malanas and that the Malanas approached him to be a lender;[17]

4. The Malanas were not agents of Estrella Lao. They represented themselves to be official agents of Mr. Villena;[18] Mr. Villena upon introduction to Estrella Kao learned important facts like: (a) the separation between her and her husband Domingo Lao;[19] (b) the property was in the name of the spouses Lao and Ernesto Lao, Domingos son by his first marriage; (c) that they were residing in Metro Manila;

5. Villena informed Estrella Lao of the necessity of a power of attorney;[20] to which she answered that it may not be possible for her to get one as she and her husband were not on speaking terms;

6. The Malanas assured her that they would do it for her;7. Their participation in the transaction extended far beyond being

mere witnesses;

8. Villena was aware of this and was fully forewarned of what was happening;

9. The signature on the special power of attorney were poor imitations of the real signatures of the petitioners, proof of an attempt to make them appear as genuine;

10. Estrella Lao could not be expected to be involved in the mechanics of executing the forged power of attorney. However, she could have furnished the other respondents with sample signatures of petitioners and the Malanas, causing the execution of the documents in her possession;

11. It was proved that the signatures were forgeries[21]

The events show a pattern that leads this Court to conclude that the spouses Villena and Malana were business partners in credit financing. The Villenas were the financier while the Malanas served as their brokers or agents, who look for clients, in this case, Estrella Lao.

We agree with the trial court that Villenas feigned innocence of the flawed character of the power of attorney is exposed not only by the above circumstances, but bolstered even by the fact that as a legitimate businessman he is expected to be well-informed of matters dealing with estranged wife involving a conjugal property. Why should a husband and his son execute a power of attorney in favor of the separated wife and stepmother when they were all residing in Metro Manila.[22]

It is therefore without doubt that the special power of attorney is a forgery. It can not be a basis of a valid mortgage contract, its subsequent foreclosure and the consolidation of title in favor of the spouses Villena.

A holder in bad faith of a certificate of title is not entitled to the protection of the law, for the law can not be used as a shield for fraud.[23]

IN VIEW OF THE FOREGOING, the decision of the Court of Appeals in CA G. R. CV No. 42174 is hereby REVERSED, and that of the trial court is REVIVED and AFFIRMED.

No costs.SO ORDERED.Davide, Jr., C.J., Melo, Kapunan, and Ynares-Santiago, JJ., concur.

[1] Court of Appeals Rollo, CA-G.R. CV No. 42174, Decision prom. July 11, 1996, penned by Justice Maximiano G. Asuncion, concurred in by Associate Justices Salome A. Montoya and Godardo A. Jacinto, pp. 379-387.

[2] Ibid., Resolution, October 7, 1996, p. 118.[3] Original Record, Decision, C. A.-G. R. No. 42174, at p. 386.[4] Original record,, Complaint, Civil Case No. Q-38023, p.9.[5] Ibid., pp. 6-12.[6] Ibid., Decision, Civil Case No. Q-38023, pp. 357-358.[7] Original Record (RTC), Motion to Modify Judgment, pp. 366-371.[8] Ibid., Order, pp. 397-400.[9] Ibid., p. 399.[10] Court of Appeals Records, Decision, C.A. G.R. C.V. No. 42174, p. 386.[11] Ibid., p.16.[12] Original Record (RTC), Decision, p. 348.[13] Ibid., Comment (by respondent Villenas), p. 52.[14] Ibid., Comment (Estrella Villones-Lao), pp. 72-73.[15] Ibid., p. 74.[16] Baranda vs. Baranda, 150 SCRA 59-75, 66-67; citing Antillon vs. Barcelona, 37 PHIL 148; and Mendezona vs. Phil. Sugar Estate Dev. Co., 41 PHIL 475; Embrado vs. Court of Appeals 233 SCRA 335-348, 343.[17] TSN, July 12, 1990, pp. 19-20.[18] Ibid., October 17, 1991, p. 24, November 4, 1991, pp. 8, 16, and 36.[19] Ibid., November 4, 1991, p. 9.[20] October 20, 1990, p. 3.[21] Original Record (RTC), Decision, p. 348.[22] Original Record (RTC), DECISION, p. 356.[23] Ignacio vs. Chua Hong, 52 PHIL 940; Gustilo vs. Maravilla, 48 PHIL 442.

SECOND DIVISION[G.R. No. 102737. August 21, 1996]FRANCISCO A. VELOSO, petitioner, vs. COURT OF APPEALS,

AGLALOMA B. ESCARIO, assisted by her husband GREGORIO L. ESCARIO, the REGISTER OF DEEDS FOR THE CITY OF MANILA, respondents.

D E C I S I O NTORRES, JR., J.:

This petition for review assails the decision of the Court of Appeals, dated July 29, 1991, the dispositive portion of which reads:WHEREFORE, the decision appealed from is hereby AFFIRMED IN TOTO. Costs against appellant.[1]

The following are the antecedent facts:Petitioner Francisco Veloso was the owner of a parcel of land situated in the district of Tondo, Manila, with an area of one hundred seventy seven (177) square meters and covered by Transfer Certificate of Title No. 49138 issued by the Registry of Deeds of Manila.[2] The title was registered in the name of Francisco A. Veloso, single,[3]on October 4, 1957.[4] The said title was subsequently canceled and a new one, Transfer Certificate of Title No. 180685, was issued in the name of Aglaloma B. Escario, married to Gregorio L. Escario, on May 24, 1988.[5]

On August 24, 1988, petitioner Veloso filed an action for annulment of documents, reconveyance of property with damages and preliminary injunction and/or restraining order. The complaint, docketed as Civil Case No. 88-45926, was raffled to the Regional Trial Court, Branch 45, Manila. Petitioner alleged therein that he was the absolute owner of the subject property and he never authorized anybody, not even his wife, to sell it. He alleged that he was in possession of the title but when his wife, Irma, left for abroad, he found out that his copy was missing. He then verified with the Registry of Deeds of Manila and there he discovered that his title was already canceled in favor of defendant Aglaloma Escario. The transfer of property was supported by a General Power of Attorney[6] dated November 29, 1985 and Deed of Absolute Sale, dated November 2, 1987, executed by Irma Veloso, wife of the petitioner and appearing as his attorney-in-fact, and defendant Aglaloma Escario.[7] Petitioner Veloso, however, denied having executed the power of attorney and alleged that his signature was falsified. He also denied having seen or even known Rosemarie Reyes and Imelda Santos, the supposed witnesses in the execution of the power of attorney. He vehemently denied having met or transacted with the defendant. Thus, he contended that the sale of the

property, and the subsequent transfer thereof, were null and void. Petitioner Veloso, therefore, prayed that a temporary restraining order be issued to prevent the transfer of the subject property; that the General Power of Attorney, the Deed of Absolute Sale and the Transfer Certificate of Title No. 180685 be annulled; and the subject property be reconveyed to him.

Defendant Aglaloma Escario in her answer alleged that she was a buyer in good faith and denied any knowledge of the alleged irregularity. She allegedly relied on the general power of attorney of Irma Veloso which was sufficient in form and substance and was duly notarized. She contended that plaintiff (herein petitioner), had no cause of action against her. In seeking for the declaration of nullity of the documents, the real party in interest was Irma Veloso, the wife of the plaintiff. She should have been impleaded in the case. In fact, Plaintiffs cause of action should have been against his wife, Irma. Consequently, defendant Escario prayed for the dismissal of the complaint and the payment to her of damages.[8]

Pre-trial was conducted. The sole issue to be resolved by the trial court was whether or not there was a valid sale of the subject property.[9]

During the trial, plaintiff (herein petitioner) Francisco Veloso testified that he acquired the subject property from the Philippine Building Corporation, as evidenced by a Deed of Sale dated October 1, 1957. [10] He married Irma Lazatin on January 20, 1962.[11] Hence, the property did not belong to their conjugal partnership. Plaintiff further asserted that he did not sign the power of attorney and as proof that his signature was falsified, he presented Allied Bank Checks Nos. 16634640, 16634641 and 16634643, which allegedly bore his genuine signature.

Witness for the plaintiff Atty. Julian G. Tubig denied any participation in the execution of the general power of attorney. He attested that he did not sign thereon, and the same was never entered in his Notarial Register on November 29, 1985.

In the decision of the trial court dated March 9, 1990,[12] defendant Aglaloma Escaro was adjudged the lawful owner of the property as she was deemed an innocent purchaser for value. The assailed general power of attorney was held to be valid and sufficient for the purpose. The trial court ruled that there was no need for a special power of attorney when the special power was already mentioned in the general one. It also declared that plaintiff failed to substantiate his allegation of fraud. The court also stressed that plaintiff was not entirely blameless for although he admitted to be the only person who had access to the title and other important

documents, his wife was still able to possess the copy. Citing Section 55 of Act 496, the court held that Irmas possession and production of the certificate of title was deemed a conclusive authority from the plaintiff to the Register of Deeds to enter a new certificate. Then applying the principle of equitable estoppel, plaintiff was held to bear the loss for it was he who made the wrong possible. Thus:WHEREFORE, the Court finds for the defendants and against plaintiff-a. declaring that there was a valid sale of the subject property in favor of the defendant;b. denying all other claims of the parties for want of legal and factual basis.Without pronouncement as to costs.SO ORDERED.

Not satisfied with the decision, petitioner Veloso filed his appeal with the Court of Appeals. The respondent court affirmed in toto the findings of the trial court.

Hence, this petition for review before us.This petition for review was initially dismissed for failure to submit an

affidavit of service of a copy of the petition on the counsel for private respondent.[13] A motion for reconsideration of the resolution was filed but it was denied in a resolution dated March 30, 1992.[14] A second motion for reconsideration was filed and in a resolution dated Aug. 3, 1992, the motion was granted and the petition for review was reinstated.[15]

A supplemental petition was filed on October 9, 1992 with the following assignment of errors:IThe Court of Appeals committed a grave error in not finding that the forgery of the power of attorney (Exh. C) had been adequately proven, despite the preponderant evidence, and in doing so, it has so far departed from the applicable provisions of law and the decisions of this Honorable Court, as to warrant the grant of this petition for review on certiorari.IIThere are principles of justice and equity that warrant a review of the decision.IIIThe Court of Appeals erred in affirming the decision of the trial court which misapplied the principle of equitable estoppel since the petitioner did not fail in his duty of observing due diligence in the safekeeping of the title to the property.

We find petitioners contentions not meritorious.

An examination of the records showed that the assailed power of attorney was valid and regular on its face. It was notarized and as such, it carries the evidentiary weight conferred upon it with respect to its due execution. While it is true that it was denominated as a general power of attorney, a perusal thereof revealed that it stated an authority to sell, to wit:2. To buy or sell, hire or lease, mortgage or otherwise hypothecate lands, tenements and hereditaments or other forms of real property, more specifically TCT No. 49138, upon such terms and conditions and under such covenants as my said attorney shall deem fit and proper.[16]

Thus, there was no need to execute a separate and special power of attorney since the general power of attorney had expressly authorized the agent or attorney in fact the power to sell the subject property. The special power of attorney can be included in the general power when it is specified therein the act or transaction for which the special power is required.

The general power of attorney was accepted by the Register of Deeds when the title to the subject property was canceled and transferred in the name of private respondent. In LRC Consulta No. 123, Register of Deeds of Albay, Nov. 10, 1956, it stated that:Whether the instrument be denominated as general power of attorney or special power of attorney, what matters is the extent of the power or powers contemplated upon the agent or attorney in fact. If the power is couched in general terms, then such power cannot go beyond acts of administration. However, where the power to sell is specific, it not being merely implied, much less couched in general terms, there can not be any doubt that the attorney in fact may execute a valid sale. An instrument may be captioned as special power of attorney but if the powers granted are couched in general terms without mentioning any specific power to sell or mortgage or to do other specific acts of strict dominion, then in that case only acts of administration may be deemed conferred.

Petitioner contends that his signature on the power of attorney was falsified. He also alleges that the same was not duly notarized for as testified by Atty. Tubig himself, he did not sign thereon nor was it ever recorded in his notarial register. To bolster his argument, petitioner had presented checks, marriage certificate and his residence certificate to prove his alleged genuine signature which when compared to the signature in the power of attorney, showed some difference.

We found, however, that the basis presented by the petitioner was inadequate to sustain his allegation of forgery. Mere variance of the signatures cannot be considered as conclusive proof that the same were forged. Forgery cannot be presumed.[17] Petitioner, however, failed to prove

his allegation and simply relied on the apparent difference of the signatures. His denial had not established that the signature on the power of attorney was not his.

We agree with the conclusion of the lower court that private respondent was an innocent purchaser for value. Respondent Aglaloma relied on the power of attorney presented by petitioners wife, Irma. Being the wife of the owner and having with her the title of the property, there was no reason for the private respondent not to believe in her authority. Moreover, the power of attorney was notarized and as such, carried with it the presumption of its due execution. Thus, having had no inkling on any irregularity and having no participation thereof, private respondent was a buyer in good faith. It has been consistently held that a purchaser 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 a 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 person in the property.[18]

Documents acknowledged before a notary public have the evidentiary weight with respect to their due execution. The questioned power of attorney and deed of sale, were notarized and therefore, presumed to be valid and duly executed. Atty. Tubig denied having notarized the said documents and alleged that his signature had also been falsified. He presented samples of his signature to prove his contention. Forgery should be proved by clear and convincing evidence and whoever alleges it has the burden of proving the same. Just like the petitioner, witness Atty. Tubig merely pointed out that his signature was different from that in the power of attorney and deed of sale. There had never been an accurate examination of the signature, even that of the petitioner. To determine forgery, it was held in Cesar vs. Sandiganbayan[19](quoting Osborn, The Problem of Proof) that:The process of identification, therefore, must include the determination of the extent, kind, and significance of this resemblance as well as of the variation. It then becomes necessary to determine whether the variation is due to the operation of a different personality, or is only the expected and inevitable variation found in the genuine writing of the same writer. It is also necessary to decide whether the resemblance is the result of a more or less skillful imitation, or is the habitual and characteristic resemblance which naturally appears in a genuine writing. When these two questions are correctly answered the whole problem of identification is solved.

Even granting for the sake of argument, that the petitioners signature was falsified and consequently, the power of attorney and the deed of sale

were null and void, such fact would not revoke the title subsequently issued in favor of private respondent Aglaloma. In the case of Tenio-Obsequio vs. Court of Appeals,[20] it was held, viz.:The right of an innocent purchaser for value must be respected and protected, even if the seller obtained his title through fraud. The remedy of the person prejudiced is to bring an action for damages against those who caused or employed the fraud, and if the latter are insolvent, an action against the Treasurer of the Philippines may be filed for recovery of damages against the Assurance Fund.

Finally, the trial court did not err in applying equitable estoppel in this case. The principle of equitable estoppel states that where one or two innocent persons must suffer a loss, he who by his conduct made the loss possible must bear it. From the evidence adduced, it should be the petitioner who should bear the loss. As the court a quo found:Besides, the records of this case disclosed that the plaintiff is not entirely free from blame. He admitted that he is the sole person who has access to TCT No. 49138 and other documents appertaining thereto (TSN, May 23, 1989, pp. 7-12). However, the fact remains that the Certificate of Title, as well as other documents necessary for the transfer of title were in the possession of plaintiffs wife, Irma L. Veloso, consequently leaving no doubt or any suspicion on the part of the defendant as to her authority. Under Section 55 of Act 496, as amended, Irmas possession and production of the Certificate of Title to defendant operated as conclusive authority from the plaintiff to the Register of Deeds to enter a new certificate.[21]

Considering the foregoing premises, We found no error in the appreciation of facts and application of law by the lower court that will warrant the reversal or modification of the appealed decision.

ACCORDINGLY, the petition for review is hereby DENIED for lack of merit.

SO ORDERED.Regalado (Chairman), Romero, Puno, and Mendoza, JJ., concur.

[1] Decision, Rollo, p.59, penned by J.N. Lapea, Jr. and concurred in by J.R. Pronove and J.C. Santiago.[2] Exh. A, Annex A, Records, p.12 and 155.[3] Exh. A-1, Ibid.[4] Exh. A-2, Ibid.[5] Exh. B, Annex B, Exh. 3, Records, pp. 15 and 157.

[6] Records, pp. 96-97.[7] Records, pp. 94-95.[8] Answer, Records, pp. 43-47.[9] Order, Records, pp. 74-76.[10] Exh. F, Records, pp. 163-164.[11] Exh. H, Records, p.166.[12] Decision, Records, pp. 283-292.[13] Resolution, February 3, 1992, Rollo, p.65.[14] Rollo, p.72.[15] Rollo, p.93.[16] Records, pp. 96-97.[17] Tenio-Obsequio vs. Court of Appeals, G.R. 107967, March 1, 1994.[18] Bautista, et. al. vs. Court of Appeals, G.R. 106042, Feb. 28, 1994.[19] G.R. Nos. 54719-50, 17 January 1985.[20] G.R. 109767, March 1, 1994.[21] Decision, Records, p.291.

Republic of the PhilippinesSupreme CourtManila FIRST DIVISION SPOUSES CLARO and G.R. No. 157434NIDA BAUTISTA, Petitioners, Present: PANGANIBAN, CJ.,

Chairperson,- versus - YNARES-SANTIAGO, AUSTRIA-MARTINEZ, CALLEJO, SR. andBERLINDA F. SILVA, CHICO-NAZARIO, JJ.Represented by HERMES J. DORADO, in his capacity as Promulgated:Attorney-In-Fact, September 19, 2006Respondent.

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x D E C I S I O N AUSTRIA-MARTINEZ, J.:

To establish his status as a buyer for value in good faith, a person dealing with land registered in the name of and occupied by the seller need only show that he relied on the face of the sellers certificate of title.[1] But for a person dealing with land registered in the name of and occupied by the seller whose capacity to sell is restricted, such as by Articles 166[2] and 173[3] of the Civil Code or Article 124[4] of the Family Code, he must show

that he inquired into the latters capacity to sell in order to establish himself as a buyer for value in good faith.[5] The extent of his inquiry depends on the proof of capacity of the seller. If the proof of capacity consists of a special power of attorney duly notarized, mere inspection of the face of such public document already constitutes sufficient inquiry. If no such special power of attorney is provided or there is one but there appear flaws in its notarial acknowledgment mere inspection of the document will not do; the buyer must show that his investigation went beyond the document and into the circumstances of its execution.

Appealed by Petition for Review on Certiorari under Rule 45 of the

Rules of Court are the November 21, 2001 Decision[6] of the Court of Appeals (CA)in CA-G.R. CV No. 48767[7] which affirmed in toto the January 10, 1995 Decision of the Regional Trial Court (RTC) in Civil Case No. 3091-V-89, and the February 27, 2003 CA Resolution which denied the motion for reconsideration.

Civil Case No. 3091-V-89 is a Complaint for Annulment of Deed of

Absolute Sale and Transfer Certificate of Title (TCT) No. V-2765, Reconveyance and Damages filed with the RTC, Branch 171, Valenzuela, Metro Manila by Berlina F. Silva (Berlina), through Hermes Dorado (Dorado) as Attorney-in-Fact, against Spouses Claro and Nida Bautista (Spouses Bautista). Spouses Bautista filed their Answer[8] and a Third-Party Complaint against Berlinas husband, Pedro M. Silva (Pedro).[9] In an Order dated August 6, 1991, the RTC declared third-party defendant Pedro in default for failure to file an answer to the Third-Party Complaint.[10]

The undisputed facts of the case, as found by the RTC, are as

follows:

1. That Transfer Certificate of Title No. B-37189 of the Registry of Deeds for xxx Metro Manila District III over a parcel of land (Lot 42, Block 10, of the subdivision plan (LRC) Psd-210217, Sheet 2, being a portion of Lot 903, Malinta Estate, LRC Record No. 5941) situated in xxx Barrio of Parada, Valenzuela, Metro Manila, containing an area of 216 square meters, more or less, was registered in the names of Spouses Berlina F. Silva and Pedro M. Silva on August 14, 1980;

2. That on March 3, 1988, Pedro M. Silva, for himself and as attorney-in-fact of his wife Berlina F. Silva, thru a Special Power of Attorney purportedly executed on November 18, 1987 by Berlina F. Silva in his favor, signed and executed a Deed of Absolute Sale over the said parcel of land covered by Transfer Certificate of Title No. B-37189 in favor of defendants-spouses Claro Bautista and Nida Bautista; and

3. That as a consequence, Transfer Certificate of Title

No. 37189 was cancelled and in lieu thereof, Transfer Certificate of Title No. V-2765 of the Registry of Deeds for the Valenzuela Branch was issued in the names of Spouses Claro Bautista and Nida Bautista on March 4, 1988.[11]

Based on the evidence presented, the RTC also found that the

signature appearing on the Special Power of Attorney (SPA) as that of Berlina Silva is a forgery, and that consequently the Deed of Absolute Sale executed by Pedro in favor of Spouses Bautista is not authorized by Berlina.[12]

The RTC rendered judgment on January 10, 1995, the decretal

portion of which reads:WHEREFORE, Judgment is hereby rendered:

1. Declaring the Deed of Absolute Sale dated March 3, 1988 executed by Pedro M. Silva, for himself and as attorney-in-fact of Berlina F. Silva, in favor of defendants-spouses Claro Bautista and Nida Bautista over the parcel of land, described and covered by Transfer Certificate of Title No. B-37189 Metro Manila District III, null and void and the resulting Transfer Certificate of Title No. V-2765 of Valenzuela Registry in the name of Spouses Claro Bautista and Nida Bautista cancelled and that Transfer Certificate of Title No. B-37189 reinstated.

2. Ordering defendants to reconvey the property covered by the said Transfer Certificate of Title No. V-2765 together with the improvements thereon to the plaintiff.

3. Condemning the defendants to pay the plaintiff the sum of P5,000.00 in the concept of reasonable attorneys fees and the costs of suit.

Defendants counterclaim is dismissed. Judgment on default is hereby entered in favor of the

third-party plaintiffs Spouses Claro Bautista and Nida Bautista against third-party defendants Pedro M. Silva, condemning the third-party defendant Pedro Silva to indemnify/pay third-party plaintiffs Spouses Claro Bautista and Nida Bautista the amount of Seventy Thousand Pesos (P70,000.00) the contract price of the sale of the property, with interest at the legal rate from the date of the execution of the said document on March 3, 1988 until the amount is fully paid and for whatever amount that the thirdparty plaintiffs were adjudged and paid to the plaintiff by reason of this decision and the costs of suit.

SO ORDERED.[13]

Spouses Bautista filed an appeal with the CA which, in its November 21, 2001 Decision, affirmed in toto the RTC decision;[14] and, in a Resolution dated February 27, 2003, denied the Motion for Reconsideration.[15]

Hence, the herein petition filed by Spouses Bautista praying that the

CA Decision and Resolution be annulled and set aside on the following grounds:

I. Respondent as represented by Hermes Dorado in his capacity as attorney-in-fact has no legal authority to file action against spouses petitioners.

II. The petitioners are considered as purchasers in good faith and for value having relied upon a Special Power of Attorney which appears legal, valid and genuine on its face.

III. Gratia argumenti that the special power of attorney is a

forgery and the deed of sale executed by the husband is

null and void, the nullity [thereof] does not include the one half share of the husband.[16]

The petition fails for lack of merit. As to the first ground, petitioners argue that for lack of authority of

Dorado to represent respondent, the latters Complaint failed to state a cause of action and should have been dismissed.[17]

The argument holds no water. True, there was no written authority for Dorado to represent

respondent in the filing of her Complaint. However, no written authorization of Dorado was needed because the Complaint was actually filed by respondent, and not merely through Dorado as her attorney-in-fact. As correctly observed by the CA, respondent herself signed the verification attached to the Complaint.[18] She stated therein that she is the plaintiff in Civil Case No. 3091-V-89 and that she caused the preparation of the Complaint.[19] Respondent also personally testified on the facts alleged in her Complaint.[20] In reality, respondent acted for and by herself, and not through any representative, when she filed the Complaint. Therefore, respondent being the real party in interest, by virtue of the then prevailing Articles 166[21] and 173[22] of the Civil Code, the Complaint she filed sufficiently stated a cause of action. The sufficiency of the Complaint was not affected by the inclusion of Dorado as party representative for this was an obvious error which, under Section 11 of Rule 3,[23] is not a ground for dismissal, as it may be corrected by the court, on its own initiative and at any stage of the action, by dropping such party from the complaint.[24]

Anent the second ground, there is no merit to petitioners claim that

they are purchasers in good faith.

That the SPA is a forgery is a finding of the RTC and the CA on a question of fact.[25] The same is conclusive upon the Court, [26] especially as it is based on the expert opinion of the NBI which constitutes more than clear, positive and convincing evidence that respondent did not sign the SPA, and on the uncontroverted Certification of Dorado that respondent was in Germany working as a nurse when the SPA was purportedly executed in 1987.

The SPA being a forgery, it did not vest in Pedro any authority to alienate the subject property without the consent of respondent. Absent such marital consent, the deed of sale was a nullity.[27]

But then petitioners disclaim any participation in the forgery of the

SPA or in the unauthorized sale of the subject property. They are adamant that even with their knowledge that respondent was in Germany at the time of the sale, they acted in good faith when they bought the subject property from Pedro alone because the latter was equipped with a SPA which contains a notarial acknowledgment that the same is valid and authentic.[28] They invoke the status of buyers in good faith whose registered title in the property is already indefeasible and against which the remedy of reconveyance is no longer available.[29] In the alternative, petitioners offer that should respondent be declared entitled to reconveyance, let it affect her portion only but not that of Pedro.[30]

Whether or not petitioners are buyers for value in good faith is a

question of fact not cognizable by us in a petition for review.[31] We resolve only questions of law; we do not try facts nor examine testimonial or documentary evidence on record. We leave these to the trial and appellate courts to whose findings and conclusions we accord great weight and respect, especially when their findings concur.[32] We may have at times reversed their findings and conclusions but we resort to this only under exceptional circumstances as when it is shown that said courts failed to take into account certain relevant facts which, if properly considered, would justify a different conclusion.[33] No such exceptional circumstance obtains in the present case for we find the conclusions of the RTC and CA supported by the established facts and applicable law. However, we do not fully subscribe to some of their views on why petitioners cannot be considered in good faith, as we will discuss below.

A holder of registered title may invoke the status of a buyer for value in good faith as a defense against any action questioning his title.[34] Such status, however, is never presumed but must be proven by the person invoking it.[35]

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 well-founded belief that the person from whom he receives the thing had title to the property and capacity to convey it.[36]

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.[37] 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; [38] second, the latter is in possession thereof;[39] 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,[40] or of any defect or restriction in the title of the seller or in his capacity to convey title to the property.[41]

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 sellers title and capacity to transfer any interest in the property.[42] 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.[43] Failure to exercise such degree of precaution makes him a buyer in bad faith.[44]

In the present case, petitioners were dealing with a seller (Pedro) who had title to and possession of the land but, as indicated on the face of his title, whose capacity to sell was restricted, in that the marital consent of respondent is required before he could convey the property. To prove good faith then, petitioners must show that they inquired not only into the title of Pedro but also into his capacity to sell.

According to petitioners, to determine Pedros capacity to sell, they conducted the following forms of inquiry: first, they inspected the photocopy of the SPA presented to them by Pedro; [45] second, they brought said copy to Atty. Lorenzo Lucero (the notary public who prepared the deed of sale) and asked whether it was genuine;[46] and third, they inspected the original copy of the SPA after they advanced payment of Php55,000.00 to Pedro.[47] Essentially, petitioners relied on the SPA, specifically on its notarial acknowledgment which states that respondent appeared before

the notary public and acknowledged having executed the SPA in favor of Pedro.

The RTC and CA, however, found such inquiry superficial. They

expected of petitioners an investigation not only into the whereabouts of respondent at the time of the execution of the SPA [48] but also into the genuineness of the signature appearing on it.[49]

We find such requirements of the RTC and CA too stringent that to

adopt them would be to throw commerce into madness where buyers run around to probe the circumstances surrounding each piece of sales document while sellers scramble to produce evidence of its good order. Remember that it is not just any scrap of paper that is under scrutiny but a SPA, the execution and attestation of which a notary public has intervened.

To what extent, therefore, should an inquiry into a notarized special

power of attorney go in order for one to qualify as a buyer for value in good faith?

We agree with one author who said:x x x To speak of notice, as applied to the grantee, is to

follow the language of the Statue of Elizabeth. Its proviso protects the man who purchases upon good consideration and bona fide * * * not having at the time * * * any manner of notice or knowledge. The term notice, however, is really but an approach to the test of good faith, and all modern legislation tends toward that point. Thus, some present day statutes (outside of the Uniform Law) may speak of notice, actual and constructive, and define both terms, but they should be liberally construed, so as to protect bona fide purchaser for value. They may require the grantee to have knowledge of the debtors intent, but save for technical purposes of pleading, the term is read in the light of the rules we are studying. It comes always to a question of the grantees good faith as distinct from mere negligence. [50]

There must, indeed, be more than negligence. There

must be a conscious turning away from the subject x x x. As put by the Supreme Court, the grantee must take the

consequences if he chooses to remain ignorant of what the necessities of the case require him to know. The search, therefore, is described by the question, did the grantee make a choice between not knowing and finding out the truth; or were the circumstances such that he was not faced with that choice? (Emphasis ours)

This means that no automatic correlation exists between the state of forgery of a document and the bad faith of the buyer who relies on it. A test has to be done whether the buyer had a choice between knowing the forgery and finding it out, or he had no such choice at all.

When the document under scrutiny is a special power of attorney that

is duly notarized, we know it to be a public document where the notarial acknowledgment is prima facie evidence of the fact of its due execution.[51] A buyer presented with such a document would have no choice between knowing and finding out whether a forger lurks beneath the signature on it. The notarial acknowledgment has removed that choice from him and replaced it with a presumption sanctioned by law that the affiant appeared before the notary public and acknowledged that he executed the document, understood its import and signed it. In reality, he is deprived of such choice not because he is incapable of knowing and finding out but because, under our notarial system, he has been given the luxury of merely relying on the presumption of regularity of a duly notarized SPA. And he cannot be faulted for that because it is precisely that fiction of regularity which holds together commercial transactions across borders and time.

In sum, all things being equal, a person dealing with a seller who

has possession and title to the property but whose capacity to sell is restricted, qualifies as a buyer in good faith if he proves that he inquired into the title of the seller as well as into the latters capacity to sell; and that in his inquiry, he relied on thenotarial acknowledgment found in the sellers duly notarized special power of attorney. He need not prove anything more for it is already the function of thenotarial acknowledgment to establish the appearance of the parties to the document, its due execution and authenticity.[52]

Note that we expressly made the foregoing rule applicable only under

the operative words duly notarized and all things being equal. Thus, said

rule should not apply when there is an apparent flaw afflicting the notarial acknowledgment of the special power of attorney as would cast doubt on the due execution and authenticity of the document; or when the buyer has actual notice of circumstances outside the document that would render suspect its genuineness.

In Domingo v. Reed,[53] we found that the special power of attorney

relied upon by the buyers contained a defective notarial acknowledgment in that it stated there that only the agent-wife signed the document before the notary public while the principal-husband did not. Such flaw rendered the notarialacknowledgment of no effect and reduced the special power of attorney into a private document. We declared the buyer who relied on the private special power of attorney a buyer in bad faith.

In Lao v. Villones-Lao,[54] and Estacio v. Jaranilla,[55] we found that the buyers knew of circumstances extrinsic to the special power of attorney which put in question the actual execution of said document. In Domingo Lao, the buyer knew that the agent-wife was estranged from the principal-husband but was living within the same city. In the Estacio case, we found admissions by the buyers that they knew that at the time of the purported execution of the special power of attorney, the alleged principal was not in the Philippines. In both cases we held that the buyers were not in good faith, not because we found any outward defect in the notarial acknowledgment of the special powers of attorney, but because the latter had actual notice of facts that should have put them on deeper inquiry into the capacity to sell of the seller.

In the present case, petitioners knew that Berlina was in Germany at

the time they were buying the property and the SPA relied upon by petitioners has a defective notarial acknowledgment. The SPA was a mere photocopy[56] and we are not convinced that there ever was an original copy of said SPA as it was only this photocopy that was testified to by petitioner Nida Bautista and offered into evidence by her counsel. [57] We emphasize this fact because it was actually this photocopy that was relied upon by petitioners before they entered into the deed of sale with Pedro. As admitted to by petitioner Nida Bautista, upon inspection of the photocopy of the SPA, they gave Pedro an advanced payment of Php55,000.00; this signifies that, without further investigation on the SPA, petitioners had agreed to buy the subject property from Pedro.

But then said photocopy of the SPA contains no notarial seal. A notarial seal is a mark, image or impression on a document which would

indicate that the notary public has officially signed it.[58] There being no notarial seal, the signature of the notary public on the notarial certificate was therefore incomplete. The notarial certificate being deficient, it was as if the notarial acknowledgment was unsigned. The photocopy of the SPA has no notarial acknowledgment to speak of. It was a mere private document which petitioners cannot foist as a banner of good faith.

All told, it was not sufficient evidence of good faith that petitioners

merely relied on the photocopy of the SPA as this turned out to be a mere private document. They should have adduced more evidence that they looked beyond it. They did not. Instead, they took no precautions at all. They verified with Atty. Lucero whether the SPA was authentic but then the latter was not the notary public who prepared the document. Worse, they purposely failed to inquire who was the notary public who prepared the SPA. Finally, petitioners conducted the transaction in haste. It took them all but three days or from March 2 to 4, 1988 to enter into the deed of sale, notwithstanding the restriction on the capacity to sell of Pedro.[59] In no way then may petitioners qualify as buyers for value in good faith. That said, we come to the third issue on whether petitioners may retain the portion of Pedro Silva in the subject property. Certainly not. It is well-settled that the nullity of the sale of conjugal property contracted by the husband without the marital consent of the wife affects the entire property, not just the share of the wife.[60] We see no reason to deviate from this rule.

WHEREFORE, the petition is hereby DENIED. The Decision

dated November 21, 2001 and Resolution dated February 27, 2003 of the Court of Appeal are AFFIRMED.

Costs against petitioners. SO ORDERED.

MA. ALICIA AUSTRIA-MARTINEZAssociate Justice

WE CONCUR:

ARTEMIO V. PANGANIBANChief JusticeChairperson CONSUELO YNARES-SANTIAGOAssociate Justice

ROMEO J. CALLEJO, SR.Associate Justice

MINITA V. CHICO-NAZARIOAssociate Justice

C E R T I F I C A T I O NPursuant to Section 13, Article VIII of the Constitution, and the

Division Chairmans Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBANChief Justice

[1] Abad v. Guimba, G.R. No. 157002, July 29, 2005, 465 SCRA 356, 367.[2] Article 166. Unless the wife has been declared a non compos mentis or

a spendthrift, or is under civil interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal partnership without the wifes consent x x x.

[3] Article 173. The wife may, during the marriage, and within ten years from the transaction questioned, ask the courts for the annulment of any contract of the husband entered into without her consent, when such consent is required, or any act or contract of the husband which tends to defraud her or impair her interest in the conjugal partnership property. Should the wife fail to exercise this right, she or her heirs, after the dissolution of the marriage, may demand the value of the property fraudulently alienated by the husband.

[4] Article 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of disagreement, the husbands decision shall prevail, subject to recourse to the court by the wife for a proper remedy which must be availed of within five years from the date of the contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include the powers of disposition or encumbrance which must have the authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors.

[5] Domingo v. Reed, G.R. No. 157701, December 9, 2005, 477 SCRA 227, 242.

[6] Penned by Associate Justice Bernardo P. Abesamis and concurred in by Associate Justices Ramon A. Barcelona and Perlita J. Tria Tirona.

[7] Entitled, Berlina F. Silva, represented by Hermes J. Dorado, in his capacity as Attorney-in-Fact, Plaintiff-Appellee,

versus Sps. Claro & Nida Bautista, Defendants-Appellants & Third-Party Plaintiffs versus Pedro M. Silva, Third-Party Defendant.

[8] Records, p. 18.[9] Id. at 28.[10] Id. at 47.[11] Id. at 212-213.[12] Id. at 214.[13] Id. at 201-203; 215-216.[14] CA rollo, p. 144.[15] Id. at 170.[16] Rollo, p. 4.[17] Rollo, pp. 8-9.[18] Records, p. 4.[19] Id.[20] TSN, August 8, 1991, pp. 4-25.[21] See note 2 [22] See note 3.[23] Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor

non-joinder of parties is ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or on its own initiative at any stage of the action and on such terms as are just. Any claim against a misjoined party may be severed and proceeded with separately.

[24] Cabutihan v. Landcenter Construction & Development Corporation, 432 Phil. 927, 941 (2002).

[25] Philippine National Oil Company v. National College of Business and Arts, G.R. No. 155698, January 31, 2006, 481 SCRA 298, 309.

[26] Domingo v. Reed, supra; Estacio v. Jaranilla, G.R. No. 149250, December 8, 2003, 417 SCRA 250, 259.

[27] Heirs of Ignacia Aguilar-Reyes v. Mijares, G.R. No. 143826, August 28, 2003, 410 SCRA 97, 106; Bravo-Guerrero v. Bravo, G.R. No. 152658, July 29, 2005, 465 SCRA 244, 257. See also notes 18 and 19.

[28] Rollo, pp. 7-8.[29] Rollo, pp. 6-8.[30] Rollo, p. 9.[31] Orquiola v. Court of Appeals, 435 Phil. 323, 331 (2002).[32] See note 21.[33] Francisco v. Court of Appeals, G.R. No. 118749, April 25, 2003, 401

SCRA 594, 605. Findings of fact may also be passed upon and

reviewed by the Supreme Court in the following instances: (1) when the conclusion is a finding grounded entirely on speculation, surmises or conjecture; (2) when the inference made is manifestly mistaken, absurd, or impossible; (3) where there is a grave abuse of discretion in the appreciation of facts; (4) when judgment is based on a misapprehension of facts; (5) when the lower court, in making its findings, went beyond the issues of the case and such findings are contrary to the admissions of both appellant and appellee; (6) when the factual findings of the Court of Appeals are contrary to those of the trial court; (7) when the findings of fact are themselves conflicting; (8) when the findings of fact are conclusions made without a citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by the respondents; (10) when the findings of fact of the lower court are premised on the supposed absence of evidence and are contradicted by the evidence on record (Misa v. Court of Appeals, G.R. No. 97291, August, 5, 1992, 212 SCRA 217; Philippine American General Insurance Company v. PKS Shipping Company, 449 Phil. 223, 232 (2003); Tansipek v. Philippine Bank of Communications, 423 Phil. 727 [2001]).

[34] Sec. 32 of P.D. No. 1529 (Property Registration Decree).[35] Aguirre v. Court of Appeals, G.R. No. 122249, January 29, 2004, 421

SCRA 310, 321.[36] Heirs of Ignacia Aguilar-Reyes v. Mijares, supra note 27.[37] Abad v. Guimba, G.R. No. 157002, July 29, 2005, 465 SCRA 356; San

Lorenzo Development Corporation v. Court of Appeals, G.R. No. 124242, January 21, 2005, 449 SCRA 99, 117.

[38] Aguirre v. Court of Appeals, supra note 35.[39] Philippine National Bank v. Militar, G.R. No. 164801, August 18, 2005,

467 SCRA 377, 387.[40] Erena v. Querrer-Kauffman, G.R. No. 165853, June 22, 2006; Heirs

of Trinidad De Leon Vda. De Roxas v. Court of Appeals, G.R. No. 138660, February 5, 2004, 422 SCRA 101, 116-117; Millena v. Court of Appeals, 381 Phil. 132, 143 (2000).

[41] Occena v. Esponilla, G.R. No. 156973, June 4, 2004, 431 SCRA 116, 125; Litonjua v. Eternit Corporation, G.R. No. 144805, June 8, 2006.

[42] See note 31.[43] Instrade, Inc. v. Court of Appeals, 395 Phil. 791, 802 (2000).[44] Castro v. Miat, G.R. No. 143297, February 11, 2003, 397 SCRA 271,

284.

[45] TSN, August 5, 1993, pp. 5-10.[46] TSN, July 19, 1994, pp.. 8-9[47] TSN, August 5, 1993, pp. 5-6;[48] CA rollo, p. 138.[49] Records, pp. 215-216.[50] Garrard Flenn, Fraudulent Conveyances and Preferences (Vol. 1), 1940,

pp. 531-532.[51] Cirelos v. Court of Appeals, G.R. No. 146523, June 15, 2006; Pan

Pacific Industrial Sales Company, Inc. v. Court of Appeals, G.R. No. 125283, February 10, 2006, 482 SCRA 164, 174; Alfarero v.Sevilla, G.R. No. 142974, September 22, 2003, 411 SCRA 387, 393.

[52] See 2004 Rules on Notarial Practice.[53] See note 26.[54] 366 Phil. 49 (1999).[55] Supra note 26.[56] Records, p. 138.[57] TSN, August 5, 1993, p. 7.[58] 2004 Rules on Notarial Practice, Rule II, Section 13 and Rule VII,

Section 2.[59] Records, pp. 118-120.[60] Heirs of Ignacia Aguilar-Reyes v. Mijares, supra note 27,

citing Bucoy v. Paulino, 131 Phil. 790, 791 (1968).

SECOND DIVISION

TITAN CONSTRUCTION G.R. No. 169548CORPORATION,

Petitioner, Present: CARPIO, J., Chairperson,

- versus - BRION, DEL CASTILLO, ABAD, and PEREZ, JJ.

MANUEL A. DAVID, SR. and MARTHA S. DAVID, Promulgated:

Respondents. March 15, 2010x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - x

D E C I S I O N

DEL CASTILLO, J.:

The review of factual matters is not the province of this Court.[1] The Supreme Court is not a trier of facts, and is not the proper forum for the ventilation and substantiation of factual issues.[2]

This Petition for Review assails the July 20, 2004 Decision [3] of the Court

of Appeals (CA) in CA-G.R. CV No. 67090 which affirmed with modification the March 7, 2000 Decision[4] of the Regional Trial Court (RTC) of Quezon City, Branch 80. Also assailed is the August 31, 2005 Resolution[5] of the CA denying the motion for reconsideration.

Factual Antecedents

Manuel A. David, Sr. (Manuel) and Martha S. David (Martha) were married on March 25, 1957. In 1970, the spouses acquired a 602 square meter lot located at White Plains, Quezon City, which was registered in the name of MARTHA S. DAVID, of legal age, Filipino, married to Manuel A. David and

covered by Transfer Certificate of Title (TCT) No. 156043 issued by the Register of Deeds of Quezon City.[6] In 1976, the spouses separated de facto, and no longer communicated with each other.[7]

Sometime in March 1995, Manuel discovered that Martha had previously

sold the property to Titan Construction Corporation (Titan) for P1,500,000.00 through a Deed of Sale[8] dated April 24, 1995, and that TCT No. 156043 had been cancelled and replaced by TCT No. 130129 in the name of Titan.

Thus, on March 13, 1996, Manuel filed a Complaint[9] for Annulment of Contract and Recovenyance against Titan before the RTC of Quezon City. Manuel alleged that the sale executed by Martha in favor of Titan was without his knowledge and consent, and therefore void. He prayed that the Deed of Sale and TCT No. 130129 be invalidated, that the property be reconveyed to the spouses, and that a new title be issued in their names.

In its Answer with Counterclaim,[10] Titan claimed that it was a buyer ingood faith and for value because it relied on a Special Power of Attorney (SPA) [11] dated January 4, 1995 signed by Manuel which authorized Martha to dispose of the property on behalf of the spouses. Titan thus prayed for the dismissal of the complaint.

In his unverified Reply,[12] Manuel claimed that the SPA was spurious, and that the signature purporting to be his was a forgery; hence, Martha was wholly without authority to sell the property.

Subsequently, Manuel filed a Motion for Leave to File Amended

Complaint[13] which was granted by the trial court. Thus, on October 15, 1996, Manuel filed an Amended Complaint[14] impleading Martha as a co-defendant in the proceedings. However, despite personal service of summons[15] upon Martha, she failed to file an Answer. Thus, she was declared in default. [16] Trial then ensued. Ruling of the Regional Trial Court

On March 7, 2000, the RTC issued a Decision which (i) invalidated both

the Deed of Sale and TCT No. 130129; (ii) ordered Titan to reconvey the property to Martha and Manuel; (iii) directed the Register of Deeds of Quezon City to issue a new title in the names of Manuel and Martha; and (iv) ordered

Titan to pay P200,000.00 plusP1,000.00 per appearance as attorneys fees, and P50,000.00 as costs of suit.

The RTC found that:

1) The property was conjugal in character since it was purchased by Manueland Martha with conjugal funds during their marriage. The fact that TCT No.

156043 was registered in the name of MARTHA S. DAVID x x x married to Manuel A. David did not negate the propertys conjugal nature.

2) The SPA professing to authorize Martha to sell the property on behalf of the

spouses was spurious, and did not bear Manuels genuine signature. This was the subject of expert testimony, which Titan failed to rebut. In addition, despite the fact that the SPA was notarized, the genuineness and due execution of the SPA was placed in doubt since it did not contain Manuels residence certificate, and was not presented for registration with the Quezon City Register of Deeds, in violation of Section 64 of Presidential Decree No. 1529.[17]

3) The circumstances surrounding the transaction with Martha should have put

Titan on notice of the SPAs dubious veracity. The RTC noted that aside from Marthas failure to register the SPA with the Register of Deeds, it was doubtful that an SPA would have even been necessary, since the SPA itself indicated that Martha and Manuel lived on the same street in Navotas. The dispositive portion of the trial courts Decision reads:

Wherefore, judgment is hereby rendered: 1.) Declaring the Deed of Sale

dated April 24, 1995 as void ab initio and without force and effect.

2.) Declaring null and void TCT No.

130129 issued by the Register of Deeds of Quezon City in the name of defendant Titan Construction Corporation.

3.) Ordering defendant Titan Construction Corporation to reconvey the subject property to plaintiff and his spouse.

4.) Ordering the Register of Deeds of

Quezon City to make and issue a new title in the name of plaintiff Manuel David and his Spouse, Martha David.

5.) Ordering defendant to

pay P200,000.00 plus P1,000.00 per appearance as attorneys fees and P50,000.00 as costs of suit.

SO ORDERED.[18]

Ruling of the Court of Appeals

In its Decision dated July 20, 2004, the CA affirmed the Decision of the trial court but deleted the award of attorneys fees and the amount of P50,000.00 as costs.

The dispositive portion of the Decision reads:

WHEREFORE, with the MODIFICATION by deleting the award of attorneys fees in favor of plaintiff-appellee Manuel A. David, Sr. and the amount of P50,000.00 as costs, the Decision appealed from is AFFIRMED in all other respects, with costs against defendant-appellant Titan Construction Corporation.[19]

Titan moved for reconsideration but the motion was denied on August 31,

2005. Hence, this petition.

Issues

Titan raises the following assignment of errors:

A. THE COURT OF APPEALS PATENTLY ERRED IN DECLARING THE SUBJECT DEED OF SALE NULL AND VOID AND FAILED TO APPLY TO THIS CASE THE PERTINENT LAW AND JURISPRUDENCE ON THE TORRENS SYSTEM OF LAND REGISTRATION.

B. THE COURT OF APPEALS PATENTLY

ERRED IN RULING THAT TITAN WAS NOT A BUYER IN GOOD FAITH CONTRARY TO THE STANDARDS APPLIED BY THIS HONORABLE COURT IN CASES INVOLVING SIMILAR FACTS.

C. THE COURT OF APPEALS PATENTLY

ERRED BY DISCARDING THE NATURE OF A NOTARIZED SPECIAL POWER OF ATTORNEY CONTRARY TO JURISPRUDENCE AND BY GIVING UNDUE WEIGHT TO THE ALLEGED EXPERT TESTIMONY VIS--VIS THE CONTESTED SIGNATURES AS THEY APPEAR TO THE NAKED EYE CONTRARY TO JURISPRUDENCE.

D. THE COURT OF APPEALS PATENTLY

ERRED BY FAILING TO DETECT BADGES OF CONNIVANCE BETWEEN RESPONDENTS.

E. THE COURT OF APPEALS PATENTLY

ERRED BY NOT RULING THAT ASSUMING THE SPA WAS NULL AND VOID, THE SAME IS IMMATERIAL SINCE THE RESPONDENTS SHOULD BE CONSIDERED ESTOPPED FROM DENYING THAT THE SUBJECT PROPERTY WAS SOLELY THAT OF RESPONDENT MARTHA S. DAVID.

F. THE COURT OF APPEALS PATENTLY

ERRED BY NOT RULING THAT ASSUMING THE SALE WAS VOID, ON GROUNDS OF EQUITY MARTHA S. DAVID SHOULD REIMBURSE PETITIONER OF HIS PAYMENT WITH LEGAL INTEREST.[20]

Petitioners Arguments

Titan is claiming that it was a buyer in good faith and for value, that the property was Marthas paraphernal property, that it properly relied on the SPA presented by Martha, and that the RTC erred in giving weight to the alleged expert testimony to the effect that Manuels signature on the SPA was spurious. Titan also argues, for the first time, that the CA should have ordered Martha to reimburse the purchase price paid by Titan.

Our Ruling

The petition is without merit.The property is part of the spouses conjugal partnership. The Civil Code of the Philippines,[21] the law in force at the time of the celebration of the marriage between Martha and Manuel in 1957, provides:

Article 160. All property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife.

Article 153 of the Civil Code also provides:

Article 153. The following are conjugal partnership property: (1) That which is acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership, or for only one of the spouses;

x x x xThese provisions were carried over to the Family Code. In particular,

Article 117 thereof provides:

Art. 117. The following are conjugal partnership properties: (1) Those acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership, or for only one of the spouses;

x x x x Article 116 of the Family Code is even more unequivocal in that

[a]ll property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved.

We are not persuaded by Titans arguments that the property was Marthas

exclusive property because Manuel failed to present before the RTC any proof of his income in 1970, hence he could not have had the financial capacity to contribute to the purchase of the property in 1970; and that Manuel admitted that it was Martha who concluded the original purchase of the property. In consonance with our ruling in Spouses Castro v. Miat,[22] Manuel was not required to prove that the property was acquired with funds of the partnership. Rather, the presumption applies even when the manner in which the property was acquired does not appear.[23] Here, we find that Titan failed to overturn the presumption that the property, purchased during the spouses marriage, was part of the conjugal partnership.

In the absence of Manuels consent, the Deed of Sale is void.

Since the property was undoubtedly part of the conjugal partnership, the sale to Titan required the consent of both spouses. Article 165 of the Civil Code expressly provides that the husband is the administrator of the conjugal partnership. Likewise, Article 172 of the Civil Code ordains that (t)he wife cannot bind the conjugal partnership without the husbands consent, except in cases provided by law.

Similarly, Article 124 of the Family Code requires that any disposition or

encumbrance of conjugal property must have the written consent of the other spouse,otherwise, such disposition is void. Thus:

Art. 124. The administration and enjoyment of the conjugal partnership shall belong to both spouses jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors.

The Special Power of Attorney purportedly signed by Manuel is spurious and void.

The RTC found that the signature of Manuel appearing on the SPA was not his genuine signature.

As to the issue of the validity or invalidity of the subject Special Power of Attorney x x x the Court rules that the same is invalid. As aptly demonstrated by plaintiffs evidence particularly the testimony of expert witness Atty. Desiderio Pagui, which the defense failed to rebut and impeach, the subject Special Power of Attorney does not bear the genuine signature of plaintiff Manuel David thus rendering the same as without legal effect. Moreover, the genuineness and the due execution of the Special Power of Attorney was placed in more serious doubt as the same does not contain the Residence Certificate of the plaintiff and most importantly, was not presented for registration with the Quezon City Register of Deeds which is a clear violation of Sec. 64 of P.D. No. 1529. As regards defendant Titan Construction Corporations assertion that plaintiffs failure to verify his Reply (wherein the validity of the Special Power of Attorney is put into question) is an implied admission of its genuineness and due execution, [this] appears at

first blush a logical conclusion. However, the Court could not yield to such an argument considering that a rigid application of the pertinent provisions of the Rules of Court will not be given premium when it would obstruct rather than serve the broader interest of justice.[24]

Titan claims that the RTC gave undue weight to the testimony of Manuels witness, and that expert testimony on handwriting is not conclusive.

The contention lacks merit. The RTCs ruling was based not only on the testimony of Manuels expert witness finding that there were significant differences between the standard handwriting of Manuel and the signature found on the SPA, but also on Manuels categorical denial that he ever signed any document authorizing or ratifying the Deed of Sale to Titan.[25]

We also note that on October 12, 2004, Titan filed before the CA a

Manifestation with Motion for Re-Examination of Another Document/ Handwriting Expert[26]alleging that there is an extreme necessity[27] for a conduct of another examination of the SPA by a handwriting expert as it will materially affect and alter the final outcome[28] of the case. Interestingly, however, Titan filed on January 6, 2005 a Manifestation/Motion to Withdraw Earlier Motion for Re-Examination of PNP Laboratory Expert[29] this time praying that its motion for re-examination be withdrawn. Titan claimed that after a circumspect evaluation, deemed it wise not to pursue anymore said request (re-examination) as there is a great possibility that the x x x [PNP and the NBI] might come out with two conflicting opinions and conclusions x x x that might cause some confusion to the minds of the Honorable Justices in resolving the issues x x x as well as the waste of material time and resources said motion may result.[30]

In any event, we reiterate the well-entrenched rule that the factual findings

of trial courts, when adopted and confirmed by the CA, are binding and conclusive and will generally not be reviewed on appeal.[31] We are mandated to accord great weight to the findings of the RTC, particularly as regards its assessment of the credibility of witnesses[32] since it is the trial court judge who is in a position to observe and examine the witnesses first hand. [33] Even after a careful and independent scrutiny of the records, we find no cogent reason to depart from the rulings of the courts below.[34]

Furthermore, settled is the rule that only errors of law and not of fact are

reviewable by this Court in a petition for review on certiorari under Rule 45 of the

Rules of Court. This applies with even greater force here, since the factual findings by the CA are in full agreement with those of the trial court.[35]

Indeed, we cannot help but wonder why Martha was never subpoenaed

by Titan as a witness to testify on the character of the property, or the circumstances surrounding the transaction with Titan. Petitioners claim that she could not be found is belied by the RTC records, which show that she personally received and signed for the summons at her address in Greenhills, San Juan. Titan neither filed a cross claim nor made any adverse allegation against Martha.

On the Failure to Deny the Genuineness and Due Execution of the SPA

Titan claimed that because Manuel failed to specifically deny the genuineness and due execution of the SPA in his Reply, he is deemed to have admitted the veracity of said document, in accordance with Rule 8, Sections 7 and 8,[36] of the Rules of Court.

On this point, we fully concur with the findings of the CA that:

It is true that the reply filed by Manuel alleging that the special power of attorney is a forgery was not made under oath. However, the complaint, which was verified by Manuel under oath, alleged that the sale of the subject property executed by his wife, Martha, in favor of Titan was without his knowledge, consent, and approval, express or implied; and that there is nothing on the face of the deed of sale that would show that he gave his consent thereto. In Toribio v. Bidin, it was held that where the verified complaint alleged that the plaintiff never sold, transferred or disposed their share in the inheritance left by their mother to others, the defendants were placed on adequate notice that they would be called upon during trial to prove the genuineness or due execution of the disputed deed of sale. While Section 8, Rule 8 is mandatory, it is a discovery procedure and must be reasonably construed to attain its purpose, and in a way as not to effect a denial of substantial justice. The interpretation should be one which assists the parties in obtaining a speedy, inexpensive, and most important, a just determination of the disputed issues.

Moreover, during the pre-trial, Titan requested for stipulation

that the special power of attorney was signed by Manuel authorizing his wife to sell the subject property, but Manuel refused to admit the genuineness of said special power of attorney and stated that he is presenting an expert witness to prove that his signature in the special power of attorney is a forgery. However, Titan did not register any objection x x x. Furthermore, Titan did not object to the presentation of Atty. Desiderio Pagui, who testified as an expert witness, on his Report finding that the signature on the special power of attorney was not affixed by Manuel based on his analysis of the questioned and standard signatures of the latter, and even cross-examined said witness. Neither did Titan object to the admission of said Report when it was offered in evidence by Manuel on the ground that he is barred from denying his signature on the special power of attorney. In fact, Titan admitted the existence of said Report and objected only to the purpose for which it was offered. In Central Surety & Insurance Company v. C.N. Hodges, it was held that where a party acted in complete disregard of or wholly overlooked Section 8, Rule 8 and did not object to the introduction and admission of evidence questioning the genuineness and due execution of a document, he must be deemed to have waived the benefits of said Rule. Consequently, Titan is deemed to have waived the mantle of protection given [it] by Section 8, Rule 8.[37]

It is true that a notarial document is considered evidence of the facts expressed therein.[38] A notarized document enjoys a prima facie presumption of authenticity and due execution[39] and only clear and convincing evidence will overcome such legal presumption.[40] However, such clear and convincing evidence is present here. While it is true that the SPA was notarized, it is no less true that there were defects in the notarization which mitigate against a finding that the SPA was either genuine or duly executed. Curiously, the details of Manuels Community Tax Certificate are conspicuously absent, yet Marthas are complete. The absence of Manuels data supports his claim that he did not execute the same and that his signature thereon is a forgery. Moreover, we have Manuels positive testimony that he never signed the SPA, in addition to the expert testimony that the signature appearing on the SPA was not Manuels true signature.

Moreover, there were circumstances which mitigate against a finding that Titan was a buyer in good faith.

First, TCT No. 156043 was registered in the name of MARTHA S. DAVID, of legal age, Filipino, married to Manuel A. David but the Deed of Sale failed to include Marthas civil status, and only described the vendor as MARTHA S. DAVID, of legal age, Filipino citizen, with postal address at 247 Governor Pascual, Navotas, Rizal. And it is quite peculiar that an SPA would have even been necessary, considering that the SPA itself indicated that Martha and Manuel lived on the same street (379 and 247 Governor Pascual Street, respectively).

Second, Titans witness Valeriano Hernandez, the real estate agent who

brokered the sale between Martha and Titan, testified that Jerry Yao (Yao), Titans Vice President for Operations (and Titans signatory to the Deed of Sale), specifically inquired why the name of Manuel did not appear on the Deed of Sale.[41] This indicates that Titan was aware that Manuels consent may be necessary. In addition, Titan purportedly sent their representative to the Register of Deeds of Quezon City to verify TCT No. 156043, so Titan would have been aware that the SPA was never registered before the Register of Deeds.

Third, Valeriano Hernandez also testified that during the first meeting

between Martha and Yao, Martha informed Yao that the property was mortgaged to a casino forP500,000.00. Without even seeing the property, the original title, or the SPA, and without securing an acknowledgment receipt from Martha, Titan (through Yao) gave Martha P500,000.00 so she could redeem the property from the casino.[42] These are certainly not actions typical of a prudent buyer.Titan cannot belatedly claim that the RTC should have ordered Martha to reimburse the purchase price. Titan argues that the CA erred in not ruling that, even assuming the sale was void, on grounds of equity, Martha should reimburse petitioner its payment with legal interest. We note that this equity argument was raised for the first time before the CA, which disposed of it in this manner:

Anent defendant-appellants claim that the court a quo and this Court never considered the substantial amount of money paid by it to Martha David as consideration for the sale of the subject property, suffice it to say that said matter is being raised for the first time in the instant motion for reconsideration. If well-recognized

jurisprudence precludes raising an issue only for the first time on appeal proper, with more reason should such issue be disallowed or disregarded when initially raised only in a motion for reconsideration of the decision of the appellate court. Nonetheless, record shows that only defendant-appellant was initially sued by plaintiff-appellee in his complaint for annulment of contract and reconveyance upon the allegation that the sale executed by his wife, Martha David, of their conjugal property in favor of defendant-appellant was without his knowledge and consent and, therefore, null and void. In its answer, defendant-appellant claimed that it bought the property in good faith and for value from Martha David and prayed for the dismissal of the complaint and the payment of his counterclaim for attorneys fees, moral and exemplary damages. Subsequently, plaintiff-appellee filed a motion for leave to file amended complaint by impleading Martha David as a defendant, attaching the amended complaint thereto, copies of which were furnished defendant-appellant, through counsel. The amended complaint was admitted by the court a quo in an Order dated October 23, 1996. Martha David was declared in default for failure to file an answer. The record does not show [that] a cross-claim was filed by defendant-appellant against Martha David for the return of the amount of PhP1,500,000.00 it paid to the latter as consideration for the sale of the subject property. x x x Thus, to hold Martha David liable to defendant-appellant for the return of the consideration for the sale of the subject property, without any claim therefore being filed against her by the latter, would violate her right to due process. The essence of due process is to be found in the reasonable opportunity to be heard and submit any evidence one may have in support of his defense. It is elementary that before a person can be deprived of his property, he should be first informed of the claim against him and the theory on which such claim is premised.[43] (Emphasis supplied)

While it is true that litigation is not a game of technicalities,[44] it is equally true that elementary considerations of due process require that a party be duly apprised of a claim against him before judgment may be rendered. Thus, we cannot, in these proceedings, order the return of the amounts paid by Titan to

Martha. However, Titan is not precluded by this Decision from instituting the appropriate action against Martha before the proper court.

WHEREFORE, the petition is DENIED. The July 20, 2004 Decision of the Court of Appeals in CA-G.R. CV No. 67090 which affirmed with modifications the March 7, 2000 Decision of the Regional Trial Court of Quezon City, Branch 80, and its August 31, 2005 Resolution denying the motion for reconsideration, areAFFIRMED, without prejudice to the recovery by petitioner Titan Construction Corporation of the amounts it paid to Martha S. David in the appropriate action before the proper court.

SO ORDERED.

MARIANO DEL CASTILLOAssociate Justice

WE CONCUR:

ANTONIO T. CARPIOAssociate Justice

Chairperson

ARTURO D. BRIONAssociate Justice

ROBERTO A. ABADAssociate Justice

JOSE PORTUGAL PEREZAssociate Justice

ATTESTATION

I attest 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 Courts Division.

ANTONIO T. CARPIOAssociate Justice

Chairperson, Second Division

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

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons attestation, it is hereby certified 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 Courts Division.

REYNATO S. PUNOChief Justice

[1] City of Naga v. Court of Appeals, 254 Phil. 12, 18 (1989).[2] Soriano III v. Yuzon, G.R. No. L-79520, August 10, 1988, 164 SCRA 227,

240-241.[3] Rollo, pp. 67-78; penned by Associate Justice Marina L. Buzon and

concurred in by Associate Justices Mario L. Guaria III and Santiago Javier Ranada.

[4] Records, pp. 316-321; penned by Judge Agustin S. Dizon.[5] Rollo, pp. 20-23; penned by Associate Justice Marina L. Buzon and

concurred in by Associate Justices Mario L. Guaria III, Monina Arevalo-Zenarosa, and Estela M. Perlas-Bernabe. Associate Justice Santiago Javier Ranada wrote a Separate Opinion, id. at 24-28.

[6] Records, p. 7; TSN, April 3, 1997, pp. 6-7.[7] TSN, April 3, 1997, p. 25.

[8] Records, pp. 12-14.[9] Id. at 1-5.[10] Id. at 34-38.[11] Id. at 39-40.[12] Id. at 42-44.[13] Id. at 53-55.[14] Id. at 56-60.[15] Id. at 64-65.[16] Id. at 84.[17] Amending and Codifying The Laws Relative To Registration Of Property

And For Other Purposes (1978). Section 64 provides:Section 64. Power of attorney. Any person may, by power

of attorney, convey or otherwise deal with registered land and the same shall be registered with the Register of Deeds of the province or city where the land lies. Any instrument revoking such power of attorney shall be registered in like manner.

[18] Records, p. 321.[19] Rollo, p. 78.[20] Id. at 40-41.[21] REPUBLIC ACT NO. 386, An Act to Ordain and Institute the Civil Code of the Philippines (1949).[22] 445 Phil. 282 (2003).[23] Id. at 293.[24] Records, p. 319.[25] TSN, April 3, 1997, pp. 12-13.[26] CA rollo, pp. 151-154.[27] Id. at 151.[28] Id.[29] Id. at 156-157.[30] Id. at 156.[31] Abapo-Almario v. Court of Appeals, 383 Phil. 933, 940 (2000).[32] Ferrer v. People, G.R. No. 143487, February 22, 2006, 483 SCRA 31,

50.[33] People v. Umali, G.R. No. 84450, February 4, 1991, 193 SCRA 493,

501.[34] People v. Garchitorena, G.R. No. 184172, May 8, 2009[35] Blanco v. Quasha, 376 Phil. 480, 491 (1999).[36] Sec. 7. Action or defense based on document.

Whenever an action or defense is based upon a written instrument or document, the substance of such instrument or

document shall be set forth in the pleading, and the original or a copy thereof shall be attached to the pleading as an exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be set forth in the pleading.

Sec. 8. How to contest such documents.When an action or defense is founded upon a written

instrument, copied in or attached to the corresponding pleading as provided in the preceding section, the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party, under oath, specifically denies them, and sets forth what he claims to be the facts; but the requirement of an oath does not apply when the adverse party does not appear to be a party to the instrument or when compliance with an order for an inspection of the original instrument is refused.

[37] Rollo, pp. 13-15.[38] Mendiola v. Court of Appeals, 193 Phil. 326, 335 (1981). Rule 132,

Section 30 of the Rules of Court provides:Section 30. Proof of notarial documents. Every instrument

duly acknowledged or proved and certified as provided by law, may be presented in evidence without further proof, the certificate of acknowledgment being prima facie evidence of the execution of the instrument or document involved.

[39] Gutierrez v. Mendoza-Plaza, G.R. No. 185477, December 4, 2009.[40] Domingo v. Robles, 493 Phil. 916, 921 (2005).[41] TSN, August 21, 1998, p. 7.[42] Id. at 3-6.[43] Rollo, pp. 21-22.[44] In Sea Power Shipping Enterprises, Inc. v. Court of Appeals, 412 Phil.

603, 611-612 (2001), we held:It is true that a litigation is not a game of technicalities and

that the rules of procedure should not be strictly enforced at the cost of substantial justice. However, it does not mean that the Rules of Court may be ignored at will and at random to the prejudice of the orderly presentation and assessment of the issues and their just resolution. It must be emphasized that procedural rules should not be belittled or dismissed simply because their non-observance may have resulted in prejudice to a partys substantial rights. Like all rules, they are required to be followed except only for the most persuasive of reasons.

Republic of the PhilippinesSupreme Court

Baguio City

THIRD DIVISION

SPOUSES ONESIFORO and G.R. No. 158040ROSARIO ALINAS,Petitioners, Present:YNARES-SANTIAGO, J.Chairperson,- versus - AUSTRIA-MARTINEZ,

CHICO-NAZARIO,NACHURA, and

REYES, JJ.SPOUSES VICTOR and ELENAALINAS, Promulgated:Respondents. April 14, 2008x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

AUSTRIA-MARTINEZ, J.: This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, praying that the Decision[1] of the Court of Appeals (CA) dated September 25, 2002, and the CA Resolution[2] dated March 31, 2003, denying petitioners' motion for reconsideration, be reversed and set aside. The factual antecedents of the case are as follows. Spouses Onesiforo and Rosario Alinas (petitioners) separated sometime in 1982, with Rosario moving to Pagadian City and Onesiforo moving to Manila. They left behind two lots identified as Lot 896-B-9-A with a bodega standing on it and Lot 896-B-9-B with petitioners' house. These two lots are the subject of the present petition.

Petitioner Onesiforo Alinas (Onesiforo) and respondent Victor Alinas (Victor) are brothers. Petitioners allege that they entrusted their properties to Victor and Elena Alinas(respondent spouses) with the agreement that any income from rentals of the properties should be remitted to the Social Security System (SSS) and to the Rural Bank ofOroquieta City (RBO), as such rentals were believed sufficient to pay off petitioners' loans with said institutions. Lot 896-B-9-A with the bodega was mortgaged as security for the loan obtained from the RBO, while Lot 896-B-9-B with the house was mortgaged to the SSS. Onesiforo alleges that he left blank papers with his signature on them to facilitate the administration of said properties. Sometime in 1993, petitioners discovered that their two lots were already titled in the name of respondent spouses. Records show that after Lot 896-B-9-A was extra-judicially foreclosed, Transfer Certificate of Title (TCT) No. T-11853[3] covering said property was issued in the name of mortgagee RBO on November 13, 1987. On May 2, 1988, the duly authorized representative of RBO executed a Deed of Installment Sale of Bank's Acquired Assets[4]conveying Lot 896-B-9-A to respondent spouses. RBO's TCT over Lot 896-B-9-A was then cancelled and on February 22, 1989, TCT No. T-12664[5] covering said lot was issued in the name of respondent spouses. Lot 896-B-9-B was also foreclosed by the SSS and on November 17, 1986, the Ex-Oficio City Sheriff of Ozamis City issued a Certificate of Sale[6] over said property in favor of the SSS. However, pursuant to a Special Power of Attorney[7] signed by Onesiforo in favor of Victor, dated March 10, 1989, the latter was able to redeem, on the same date,Lot 896-B-9-B from the SSS for the sum of P111,110.09. On June 19, 1989, a Certificate of Redemption[8] was issued by the SSS. Onesiforo's signature also appears in an Absolute Deed of Sale[9] likewise dated March 10, 1989, selling Lot 896-B-9-B to respondent spouses. The records also show a notarized document dated March 10, 1989 and captioned Agreement[10] whereby petitioner Onesiforo acknowledged that his brother Victor used his own money to redeem Lot896-B-9-B from the SSS and, thus, Victor became the owner of said lot. In the same Agreeement, petitioner Onesiforo waived whatever rights, claims, and interests he or his heirs, successors and assigns have or may have over the subject property. On March

15, 1993, by virtue of said documents, TCT No. 17394[11] covering Lot 896-B-9-B was issued in the name of respondent spouses. On June 25, 1993, petitioners filed with the Regional Trial Court (RTC) of Ozamis City a complaint for recovery of possession and ownership of their conjugal properties with damages against respondent spouses. After trial, the RTC rendered its Decision dated November 13, 1995, finding that:

1. Plaintiffs have not proven that they entrusted defendant spouses with the care and administration of their properties. It was Valeria Alinas, their mother, whom plaintiff Onesifororequested/directed to take care of everything and sell everything and Teresita Nuez, his elder sister, to whom he left a verbal authority to administer his properties. 2. Plaintiffs have not proven their allegation that defendant spouses agreed to pay rent of P1,500.00 a month for the occupancy of plaintiffs' house, which rent was to be remitted to the SSS and Rural Bank of Oroquieta to pay off plaintiffs' loan and to keep for plaintiffs the rest of the rent after the loans would have been paid in full. 3. Plaintiff Onesiforo's allegation that defendants concocted deeds of conveyances (Exh. M, N & O) with the use of his signatures in blank is not worthy of credence. Why his family would conspire to rob him at a time when life had struck him with a cruel blow in the form of a failed marriage that sent him plummeting to the depths of despair is not explained and likewise defies comprehension. That his signatures appear exactly on the spot where they ought to be in Exhs. M, N & O belies his pretension that he affixed them on blank paper only for the purpose of facilitating his sister Terry's acts of administration. This Court, therefore, does not find that defendant spouses had schemed to obtain title to plaintiffs' properties or enriched themselves at the expense of plaintiffs.[12]

with the following dispositive portion:

WHEREFORE, this Court renders judgment:

1. declaring [respondents] Victor Jr. and Elena Alinas owners of Lot 896-B-9-A with the building (bodega) standing thereon and affirming the validity of their acquisition thereof from the Rural Bank of Oroquieta, Inc.;

2. declaring [petitioners] Onesiforo and

Rosario Alinas owners of Lot 896-B-9-B with the house standing thereon, plaintiff Onesiforo's sale thereof to defendants spouses without the consent of his wife being null and void and defendant spouses' redemption thereof from the SSS not having conferred its ownership to them;

3. ordering [petitioners] to reimburse [respondents]

Victor Jr. and Elena Alinas the redemption sum of P111,100.09, paid by them to the SSS (without interest as it shall be compensated with the rental value of the house they occupy) within sixty days from the finality of this judgment;

4. ordering [respondents] to vacate the subject house

within thirty days from receiving the reimbursement mentioned in No. 3 above; and

5. reinstating TCT No. T-7248 in the name of

[petitioners] and cancelling TCT No. T-17394 in the name of [respondents].

No costs. SO ORDERED.[13]

Only respondent spouses appealed to the CA assailing the RTC's ruling that they acquired Lot 896-B-9-B from the SSS by mere redemption and not by purchase. They likewise question the reimbursement by petitioners of the redemption price without interest. On September 25, 2002, the CA promulgated herein assailed Decision, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing disquisitions, the first paragraph of the dispositive portion of the assailed decision is AFFIRMED and the rest MODIFIED as follows: 1. declaring [respondents] Victor Jr. and

Elena Alinas owners of Lot 896-B-9-A with the building (bodega) standing thereon and affirming the validity of their acquisition thereof from the Rural Bank of Oroquieta, Inc.;

2. declaring Onesiforo's sale of Lot 896-B-9-B together with

the house standing thereon to [respondents] in so far as Rosario Alinas, his wife's share of one half thereof is concerned, of no force and effect;

3. ordering [petitioners] Rosario Alinas to reimburse

[respondents] the redemption amount of P55,550.00 with interest of 12% per annum from the time of redemption until fully paid.

4. ordering the [respondents] to convey and transfer one

half portion of Lot 896-B-9-B unto Rosario Alinas, which comprises her share on the property simultaneous to the tender of the above redemption price, both to be accomplished within sixty (60) days from finality of this judgment.

5. in the event of failure of [respondents] to execute the acts

as specified above, [petitioner] Rosario Alinas may proceed against them under Section 10, Rule 39 of the 1997 Rules of Civil Procedure.

6. on the other hand, failure of [petitioner] Rosario Alinas to

reimburse the redemption price within sixty (60) days from the finality of this decision will render the conveyance and sale of her share by her husband to [respondents], of full force and effect.

No costs. SO ORDERED.[14]

Petitioners moved for reconsideration but the CA denied said motion per herein assailed Resolution dated March 31, 2003.

Hence, the present petition on the following grounds:

The Honorable Court of Appeals abuse [sic] its discretion in disregarding the testimony of the Register of Deeds, Atty. Nerio Nuez, who swore that the signatures appearing on various TCTswere not his own; The Honorable Court of Appeals manifestly abuse [sic] its discretion in declaring the respondents to be the owners of Lot 896-B-9-A with the building (bodega) standing thereon when they merely redeemed the property and are therefore mere trustees of the real owners of the property; It was pure speculation and conjecture and surmise for the Honorable Court of Appeals to impose an obligation to reimburse upon petitioners without ordering respondents to account for the rentals of the properties from the time they occupied the same up to the present time and thereafter credit one against the other whichever is higher.[15]

The first issue raised by petitioners deserves scant consideration. By assailing the authenticity of the Registrar of Deeds' signature on the certificates of title, they are, in effect,questioning the validity of the certificates.

Section 48 of Presidential Decree No. 1529 provides, thus: Sec. 48. Certificate not subject to collateral attack. - A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law.

Pursuant to said provision, the Court ruled in De Pedro v. Romasan Development Corporation[16] that:

It has been held that a certificate of title, once registered, should not thereafter be impugned, altered, changed, modified, enlarged or diminished except in a direct proceeding permitted by law. xx x

The action of the petitioners against the respondents, based on the material allegations of the complaint, is one for recovery of possession of the subject property and damages. However,such action is not a direct, but a collateral attack of TCT No. 236044.[17] (Emphasis supplied)

As in De Pedro, the complaint filed by herein petitioners with the RTC is also one for recovery of possession and ownership. Verily, the present case is merely a collateral attack on TCT No. T-17394, which is not allowed by law and jurisprudence. With regard to the second issue, petitioners claim that it was the CA which declared respondent spouses owners of Lot 896-B-9-A (with bodega) is misleading. It was the RTC which ruled that respondent spouses are the owners of Lot 896-B-9-A and, therefore, since only the respondent spouses appealed to the CA, the issue of ownership over Lot 896-B-9-A is not raised before the appellate court. Necessarily, the CA merely reiterated in the dispositive portion of its decision the RTC's ruling on respondent spouses' ownership of Lot 896-B-9-A.

It is a basic principle that no modification of judgment or affirmative relief can be granted to a party who did not appeal.[18] Hence, not having appealed from the RTC Decision, petitioners can no longer seek the reversal or modification of the trial court's ruling that respondent spouses had acquired ownership of Lot 896-B-9-A by virtue of the sale of the lot to them by RBO. Furthermore, the CA did not commit any reversible error in affirming the trial court's factual findings as the records are indeed bereft of proof to support the petitioners allegations that they left the care and administration of their properties to respondent spouses; and that there is an agreement between petitioners and respondent spouses regarding remittance to the SSS and the RBO of rental income from their properties. Thus, respondent spouses may not be held responsible for the non-payment of the loan with RBO and the eventual foreclosure of petitioners' Lot 896-B-9-A. Petitioners do not assail the validity of the foreclosure of said lot but argues that respondent spouses merely redeemed the property from RBO. This is, however, belied by evidence on record which shows that ownership over the lot had duly passed on to the RBO, as shown by TCT No. T-11853 registered in its name; and subsequently, RBO sold the lot with its improvements to respondent spouses. Needless to stress, the sale was made after the redemption period had

lapsed. The trial court, therefore, correctly held that respondent spouses acquired their title over the lot from RBO and definitely not from petitioners. However, with regard to Lot 896-B-9-B (with house), the Court finds it patently erroneous for the CA to have applied the principle of equity in sustaining the validity of the sale of Onesiforos one-half share in the subject property to respondent spouses. Although petitioners were married before the enactment of the Family Code on August 3, 1988, the sale in question occurred in 1989. Thus, their property relations are governed by Chapter IV on Conjugal Partnership of Gains of the Family Code. The CA ruling completely deviated from the clear dictate of Article 124 of the Family Code which provides:

Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. x x x

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include the powers of disposition or encumbrance which must have the authority of the court or the written consent of the other spouse. In the absence of such authority or consent the disposition or encumbrance shall be void . x x x (Underscoring and emphasis supplied)

In Homeowners Savings & Loan Bank v. Dailo,[19] the Court categorically stated thus:

In Guiang v. Court of Appeals, it was held that the sale of a conjugal property requires the consent of both the husband and wife. In applying Article 124 of the Family Code, this Court declared that the absence of the consent of one renders the entire sale null and void, including the portion of the conjugal property pertaining to the husband who contracted the sale. x x x x x x x

x x x By express provision of Article 124 of the Family Code, in the absence of (court) authority or written consent of the other spouse, any disposition or encumbrance of the conjugal property shall be void. [20]

Thus, pursuant to Article 124 of the Family Code and jurisprudence, the sale of petitioners' conjugal property made by petitioner Onesiforo alone is void in its entirety. It is true that in a number of cases, this Court abstained from applying the literal import of a particular provision of law if doing so would lead to unjust, unfair and absurd results.[21]

In the present case, the Court does not see how applying Article 124 of the Family Code would lead to injustice or absurdity. It should be noted that respondent spouses were well aware that Lot 896-B-9-B is a conjugal property of petitioners. They also knew that the disposition being made by Onesiforo is without the consent of his wife, as they knew that petitioners had separated, and, the sale documents do not bear the signature of petitioner Rosario. The fact that Onesiforo had to execute two documents, namely: the Absolute Deed of Sale dated March 10, 1989 and a notarized Agreement likewise dated March 10, 1989, reveals that they had full knowledge of the severe infirmities of the sale. As held in Heirs of Aguilar-Reyes v. Spouses Mijares,[22] a purchaser cannot close his eyes to facts which should put a reasonable man on his guard and still claim he acted in good faith.[23] Such being the case, no injustice is being foisted on respondent spouses as they risked transacting with Onesiforo alone despite their knowledge that the subject property is a conjugal property. Verily, the sale of Lot 896-B-9-B to respondent spouses is entirely null and void. However, in consonance with the salutary principle of non-enrichment at anothers expense, the Court agrees with the CA that petitioners should reimburse respondent spouses the redemption price paid for Lot 896-B-9-B in the amount of P111,110.09 with legal interest from the time of filing of the complaint. In Heirs of Aguilar-Reyes, the husband's sale of conjugal property without the consent of the wife was annulled but the spouses were ordered to refund the purchase price to the buyers, it was ruled that an interest of 12% per annum on the purchase price to be refunded is not proper. The Court elucidated as follows:

The trial court, however, erred in imposing 12% interest per annum on the amount due the respondents. In Eastern Shipping Lines, Inc. v. Court of Appeals, it was held that interest on obligations not constituting a loan or forbearance of money is six percent (6%) annually. If the purchase price could be established with certainty at the time of the filing of the complaint, the six percent (6%) interest should be computed from the date the complaint was filed until finality of the decision. In Lui vs. Loy, involving a suit for reconveyance and annulment of title filed by the first buyer against the seller and the second buyer, the Court, ruling in favor of the first buyer and annulling the second sale, ordered the seller to refund to the second buyer (who was not a purchaser in good faith) the purchase price of the lots. It was held therein that the 6% interest should be computed from the date of the filing of the complaint by the first buyer. After the judgment becomes final and executory until the obligation is satisfied, the amount due shall earn interest at 12% per year, the interim period being deemed equivalent to a forbearance of credit. Accordingly, the amount of P110,000.00 due the respondent spouses which could be determined with certainty at the time of the filing of the complaint shall earn 6% interest per annum from June 4, 1986 until the finality of this decision. If the adjudged principal and the interest (or any part thereof) remain unpaid thereafter, the interest rate shall be twelve percent (12%) per annum computed from the time the judgment becomes final and executory until it is fully satisfied.[24]

Thus, herein petitioners should reimburse respondent spouses the redemption price plus interest at the rate of 6% per annum from the date of filing of the complaint, and after the judgment becomes final and executory, the amount due shall earn 12% interest per annum until the obligation is satisfied. Petitioners pray that said redemption price and interest be offset or compensated against the rentals for the house and bodega. The records show that the testimonial evidence for rentals was only with regard to the bodega.[25] However, the Court has affirmed the ruling of the RTC that Lot 896-B-9-A with the bodega had been validly purchased by respondent spouses from the RBO and a TCT over said property was issued in

the name of respondent spouses on February 22, 1989. Testimonial evidence shows that the bodega was leased out by respondent spouses only beginning January of 1990 when ownership had been transferred to them.[26]Hence, any rentals earned from the lease of said bodega rightfully belongs to respondent spouses and cannot be offset against petitioners' obligation to respondent spouses. As to rentals for Lot 896-B-9-B and the house thereon, respondent Victor testified that they never agreed to rent the house and when they finally took over the same, it was practically inhabitable and so they even incurred expenses to repair the house.[27] There is absolutely no proof of the rental value for the house, considering the condition it was in; as well as for the lot respondent spouses are occupying. Respondent spouses, having knowledge of the flaw in their mode of acquisition, are deemed to be possessors in bad faith under Article 526[28] of the Civil Code. However, theyhave a right to be refunded for necessary expenses on the property as provided under Article 546[29] of the same Code. Unfortunately, there is no credible proof to support respondent spouses' allegation that they spent more than P400,000.00 to repair and make the house habitable. Set-off or compensation is governed by Article 1279 of the Civil Code which provides, thus:

Article 1279. In order that compensation may be proper, it is

necessary: 1. That each one of the obligors be bound principally,

and that he be at the time a principal creditor of the other; 2. That both debts consist in a sum of money, or if the

things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;

3. That the two debts be due; 4. That they be liquidated and demandable;

5. That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

Therefore, under paragraph 4 of the foregoing provision, compensation or set-off is allowed only if the debts of both parties against each other is already liquidated and demandable. To liquidate means to make the amount of indebtedness or an obligation clear and settled in the form of money.[30] In the present case, no definite amounts for rentals nor for expenses for repairs on subject house has been determined. Thus, in the absence of evidence upon which to base the amount of rentals, no compensation or set-off can take place between petitioners and respondent spouses. While the courts are empowered to set an amount as reasonable compensation to the owners for the use of their property, this Court cannot set such amount based on mere surmises and conjecture WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of Appeals dated September 25, 2002 is MODIFIED to read as follows:

1. declaring respondent spouses Victor Jr. and Elena Alinas owners of Lot 896-B-9-A with the building (bodega) standing thereon and affirming the validity of their acquisition thereof from the Rural Bank of Oroquieta, Inc.;

2. declaring Onesiforo's sale of Lot 896-B-9-B together with the

house standing thereon to respondent spouses null and void ab initio; 3. ordering petitioners to jointly and severally reimburse respondent

spouses the redemption amount of P111,110.09 with interest at 6% per annum from the date of filing of the complaint, until finality of this decision. After this decision becomes final, interest at the rate of 12% per annum on the principal and interest (or any part thereof) shall be imposed until full payment;

4. ordering the respondent spouses to convey and transfer Lot 896-B-9-

B to petitioners and vacate said premises within fifteen (15) days from finality of this Decision; and

5. in the event of failure of respondent spouses to execute the acts as specified above, petitioners may proceed against them under Section 10, Rule 39 of the 1997 Rules of Civil Procedure.

No costs. SO ORDERED.

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGOAssociate Justice

Chairperson

MINITA V. CHICO-NAZARIO ANTONIO EDUARDO B. NACHURAAssociate Justice Associate Justice

RUBEN T. REYESAssociate Justice

ATTESTATION

I attest 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 Courts Division.

CONSUELO YNARES-SANTIAGOAssociate Justice

Chairperson, Third Division

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

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is hereby certified 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 Courts Division.

REYNATO S. PUNO

Chief Justice

[1] Penned by Associate Justice Josefina Guevara-Salonga, with Associate Justices Rodrigo V. Cosico and Edgardo F. Sundiam, concurring; rollo, pp. 10-23.

[2] Id. at 9.[3] Exh. 7, records, pp. 207-208.[4] Exh. 6, id. at 201-203.[5] Exh. 7-C to 7-G, id. at 209-210.[6] Exh. 11, id. at 222-223.[7] Exh. M, id. at 99-100.

[8] Exh. Q, id. at 27.[9] Exh. O, id. at 101.[10] Exh. 9, id. at 216-217.[11] Exh. 15, id at 227.[12] Records, p. 246.[13] Id. at 248-249.[14] Rollo, pp. 60-61.[15] Id. at 29-30.[16] G.R. No. 158002, February 28, 2005, 452 SCRA 564.[17] Id. at 575-576.[18] Filinvest Credit Corporation v. Intermediate Appellate Court, G.R. No. L-

65935, September 30, 1988; Del Castillo v. Del Castillo, G.R. No. L-33186, June 27, 1988, 162 SCRA 556, 561.

[19] G.R. No. 153802, March 11, 2005, 453 SCRA 283.[20] Id. at 289-291.[21] Solid Homes, Inc. v. Tan, G.R. Nos. 145156-57, July 29, 2005, 465 SCRA

137, 149.[22] 457 Phil. 120 (2003).[23] Id. at 136-137.[24] Id. at 140.[25] TSN, June 21, 1995, pp. 17-19.[26] Id. at 34.[27] Id. at 5-6, 12.[28] Article 526. He is deemed a possessor in good faith who is not aware that

there exists in his title or mode of acquisition any flaw which invalidates it.He is deemed a possessor in bad faith who possesses in any case contrary to

the foregoing.x x x x[29] Article 546. Necessary expenses shall be refunded to every possessor; but

only the possessor in good faith may retain the thing until he has been reimbursed therefor.

x x x x[30] Philippine Legal Encyclopedia, 2000 Reprint, p. 530.

Cancellation of Title Cases

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