Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-68741 January 28, 1988

NATIONAL GRAINS AUTHORITY, plaintiff-appellee,

vs.
INTERMEDIATE APPELLATE COURT, MELECIO MAGCAMIT, NENA COSICO and EMELITA
MAGCAMIT, defendants-appellants.

PARAS, J.:

This is a petition for review of the decision of the then Intermediate Appellate Court * (now Court of Appeals) dated January 31, 1984, reversing the decision of the
Court of First Instance of Laguna and San Pablo City, 8th Judicial District, Branch III, and of the resolution dated August 28, 1984 denying the motion for
reconsideration filed thereof.

The undisputed facts of this case as found by the Trial Court and the Intermediate Appellate Court are as follows:

On December 2,1971, the spouses Paulino Vivas and Engracia Lizards, as owners of a parcel of land situated in
Bo. San Francisco, Victoria, Laguna, comprising more or less 105,710 square meters, sold for P30,000.00 said
property in favor of spouses Melencio Magcamit and Nena Cosico, and Amelita Magcamit (herein private
respondents) as evidenced by "Kasulatan Ng Bilihang Mabiling Muli." This sale with right to repurchase was
recorded in the Office of the Register of Deeds of Laguna on December 6,1971 under Act No. 3344. On January
31,1972 the sale was made absolute by the spouses Vivas and Lizardo in favor of the private respondents for the
sum of P90,000.00; P50,000.00 of which was paid upon the execution of the instrument, entitled "Kasulatan Ng
Bilihan Tuluyan," after being credited with the P30,000.00 consideration of the "Kasulatan Ng Mabibiling Muli," and
the balance of P40,000.00 was to be paid the moment that the certificate of title is issued. From the execution of
said Kasulatan, private respondent have remained in peaceful, adverse and open possession of subject property.

On February 26, 1975, an Original Certificate of Title No. T-1728 covering the property in question was issued to
and in the name of the spouses Vivas and Lizardo without the knowledge of the private respondents and on April
30, 1975, said Spouses executed a Special Power of Attorney in favor of Irenea Ramirez authorizing the latter to
mortgage the property with the petitioner, National Grains Authority.

On May 2, 1974, the counsel for the petitioner wrote the Provincial Sheriff in Sta. Cruz, Laguna, requesting for the
extrajudicial foreclosure of the mortgage executed by Irenea Ramirez on May 18, 1975, covering, among others, the
property involved in this case covered by OCT No. T-1728, for unpaid indebtedness in the amount of P63,948.80 in
favor of the petitioner.

On May 31, 1974, the Provincial Sheriff caused the issuance of the notice of sale of the property in question,
scheduling the public auction sale on June 28, 1974. The petitioner was the highest and successful bidder so that a
Certificate of Sale was issued in its favor on the same date by the Provincial Sheriff.

On July 10, 1974, the petitioner in its capacity as attorney-in-fact of the mortgagor sold the subject real property in
favor of itself. By virtue of the deed of absolute sale, TCT No. T-75171 of the Register of Deeds for the Province of
Laguna was issued in the name of the petitioner on July 16, 1974. It was only in July 1974, that private respondents
learned that a title in the name of the Vivas spouses had been issued covering the property in question and that the
same property had been mortgaged in favor of the petitioner. Private respondent Nena Magcamit offered to pay the
petitioner NGA the amount of P40,000.00 which is the balance of the amount due the Vivas spouses under the
terms of the absolute deed of sale but the petitioner refused to accept the payment. On July 31, 1974, counsel for
private respondents made a formal demand on the spouses Vivas and Lizardo to comply with their obligation under
the terms of the absolute deed of sale; and soon after reiterated to the NGA, the offer to pay the balance of
P40,000.00 due under the absolute deed of sale. On August 13, 1974 petitioner in its reply informed counsel of
private respondents that petitioner is now the owner of the property in question and has no intention of disposing of
the same.

The private respondents, who as previously stated, are in possession of subject property were asked by petitioner to
vacate it but the former refused. Petitioner filed a suit for ejectment against private respondents in the Municipal
Court of Victoria, Laguna, but the case was dismissed.

On June 4, 1975, private respondents filed a complaint before the then Court of First Instance of Laguna and San
Pablo City, Branch III, San Pablo City, against the petitioner and the spouses Vivas and Lizardo, praying, among
others, that they be declared the owners of the property in question and entitled to continue in possession of the
same, and if the petitioner is declared the owner of the said property, then, to order it to reconvey or transfer the
ownership to them under such terms and conditions as the court may find just, fair and equitable under the
premises. (Record on Appeal, pp. 2-11).

In its answer to the complaint, the petitioner (defendant therein) maintained that it was never a privy to any
transaction between the private respondents (plaintiffs therein) and the spouses Paulino Vivas and Engracia Lizardo
that it is a purchaser in good faith and for value of the property formerly covered by OCT No. 1728; and that the title
is now indefeasible, hence, private respondents' cause of action has' already prescribed. (Record on Appeal, pp. 16-
22).

After due hearing, the trial court ** rendered its decision on March 17, 1981, in favor of the petitioner, the dispositive portion of said judgment reading
as follows:

WHEREFORE, judgment is hereby rendered as follows:

(1) declaring defendant National Grains Authority the lawful owner of the property in question by
virtue of its indefeasible title to the same;

(2) ordering plaintiffs to turn over possession of the land to defendant National Grains Authority;

(3) ordering defendants-spouses Paulino Vivas and Engracia Lizardo to pay plaintiffs the sum of
P56,000.00 representing the amount paid pursuant to the Kasulatan Ng Bilihang Tuluyan marked
Exhibit "3", with legal interest thereon from January 31, 1972 until the amount is paid, to pay an
additional amount of P5,000.00 for and as attorney's fees, an additional amount of Pl0,000.00 as
moral damages, another amount of P5,000.00 by way of exemplary damages and to pay the costs of
this suit. (Rollo, P. 35).

The private respondents interposed an appeal from the decision of the trial court to the Intermediate Appellate
Court.

After proper proceedings, the appellate court rendered its decision on January 31, 1984, reversing and setting aside
the decision of the trial court as follows:

WHEREFORE, the decision of the lower court is hereby reversed and set aside and another one is
rendered ordering the National Grains Authority to execute a deed of reconveyance sufficient in law
for purposes of registration and cancellation of transfer Certificate of Title No. T-75171 and the
issuance of another title in the names of plaintiff-appellants, and ordering defendants-appellees
Paulino Vivas and Engracia Lizardo to pay the National Grains Authority the sum of P78,375.00
(Exh. 3) within thirty (30) days from the receipts of the writ of execution. No damages and costs.
(Rollo, p. 19).

The petitioner filed a motion for reconsideration of the said decision but the same was denied. (Rollo, p. 26).

Hence, this petition.

In the resolution of May 20, 1985, the petition was given due course and the parties were required to submit
simultaneous memoranda (Rollo, p. 128). The memorandum for the petitioner was filed on July 3, 1985 (Rollo, p.
129) while the memorandum for the private respondents was filed on August 26, 1985 1 Rollo p. 192).

The main issue in this case is whether or not violation of the terms of the agreement between the spouses Vivas
and Lizardo, the sellers, and private respondents, the buyers, to deliver the certificate of title to the latter, upon its
issuance, constitutes a breach of trust sufficient to defeat the title and right acquired by petitioner NGA, an innocent
purchaser for value.

It is undisputed that: (1) there are two deeds of sale of the same land in favor of private respondents, namely: (a) the
conditional sale with right to repurchase or the 'Kasulatan Ng Bilihang Mabibiling Muli" which was registered under
Act 3344 and (b) the deed of absolute sale or "Kasulatan ng Bilihang Tuluyan" which was not registered; (2) the
condition that the Certificate of Title will be delivered to the buyers upon its issuance and upon payment of the
balance of P40,000.00 is contained in the deed of absolute sale; and (3) the land in question at the time of the
execution of both sales was not yet covered by the Torrens System of registration.

It is axiomatic, that while the registration of the conditional sale with right of repurchase may be binding on third
persons, it is by provision of law "understood to be without prejudice to third party who has better right" (Section 194
of the Administrative Code, as amended by Act No. 3344). In this case, it will be noted that the third party NGA, is a
registered owner under the Torrens System and has obviously a better right than private respondents and that the
deed of absolute sale with the suspensive condition is not registered and is necessarily binding only on the spouses
Vivas and Lizardo and private respondents.

In their complaint at the Regional Trial Court, private respondents prayed among others, for two alternative reliefs,
such as: (a) to be declared the owners of the property in question or (b) to order the declared owner to reconvey or
transfer the ownership of the property in their favor.

Private respondents claim a better right to the property in question by virtue of the Conditional Sale, later changed to
a deed of Absolute Sale which although unregistered under the Torrens System allegedly transferred to them the
ownership and the possession of the property in question. In fact, they argue that they have been and are still in
possession of the same openly, continuously, publicly under a claim of ownership adverse to all other claims since
the purchase on December 2, 1971 (Rollo, p. 165). It is stressed that not until the month of July, 1974 did the
plaintiff learn that a title had been issued covering the property in question (Rollo, p. 15).

Time and time again, this Court has ruled that the proceedings for the registration of title to land under the Torrens
System is an action in rem not in personam, hence, personal notice to all claimants of the res is not necessary in
order that the court may have jurisdiction to deal with and dispose of the res. Neither may lack of such personal
notice vitiate or invalidate the decree or title issued in a registration proceeding, for the State, as sovereign over the
land situated within it, may provide for the adjudication of title in a proceeding in rem or one in the nature of or akin a
to proceeding in rem which shall be binding upon all persons, known or unknown (Moscoso vs. Court of appeals,
128 SCRA 719 [1984], citing: City of Manila vs. Lack, et al., 19 Phil. 324, 337; Roxas vs. Enriquez, 29 Phil. 31;
Director of Lands vs. Roman Catholic Archbishop of Manila, 41 Phil. 120; Aguilar vs. Caogdan, 105 Phil. 661). It is
thus evident that respondents' right over the property was barred by res judicata when the decree of registration was
issued to spouses Vivas and Lizards. It does not matter that they may have had some right even the right of
ownership, BEFORE the grant of the Torrens Title.

Thus, under Section 44 of P.D. 1529, every registered owner receiving a certificate of title in pursuance of a decree
of registration, and every subsequent purchaser of registered land taking a certificate of title for value and in good
faith, shall hold the same free from all encumbrances except those noted on the certificate and any of the
encumbrances which may be subsisting, and enumerated in the law. Under said provision, claims and liens of
whatever character, except those mentioned by law as existing, against the land prior to the issuance of certificate
of title, are cut off by such certificate if not noted thereon, and the certificate so issued binds the whole world,
including the government (Aldecoa and Co. vs. Warner Barns & Co., 30 Phil. 209 [1915]; Snyder vs. Fiscal of Cebu
and Avila, 42 Phil. 766 [1922]). Under said ruling, if the purchaser is the only party who appears in the deeds and
the registration of titles in the property registry, no one except such purchaser may be deemed by law to be the
owner of the properties in question (Ibid). Moreover, no title to registered land in derogation to that of the registered
owner shall be acquired by prescription or adverse possession (Umbay vs. Alecha, 135 SCRA 427 [1985]).
It does not appear that private respondents' claim falls under any of the exceptions provided for under Section 44 of
P.D. 1529 which can be enforced against petitioner herein.

Thus, it has been invariably restated by this Court, that "The real purpose of the Torrens System is to quiet title to
land and to stop forever any question as to its legality. "Once a title is registered, the owner may rest secure, without
the necessity of waiting in the portals of the court, or sitting on the "mirador su casato," avoid the possibility of losing
his land." "An indirect or collateral attack on a Torrens Title is not allowed (Dominga vs. Santos, 55 Phil. 361;
Singian vs. Manila Railroad, 62 Phil. 467)."

The only exception to this rule is where a person obtains a certificate of title to a land belonging to another and he
has full knowledge of the rights of the true owner. He is then considered as guilty of fraud and he may be compelled
to transfer the land to the defrauded owner so long as the property has not passed to the hands of an innocent
purchaser for value (Angeles vs. Sania, 66 Phil. 444 [1938], emphasis supplied).

It will be noted that the spouses Vivas and Lizardo never committed any fraud in procuring the registration of the
property in question. On the contrary, their application for registration which resulted in the issuance of OCT No.
1728 was with complete knowledge and implied authority of private respondents who retained a portion of the
consideration until the issuance to said spouses of a certificate of title applied for under the Torrens Act and the
corresponding delivery of said title to them. The question therefore, is not about the validity of OCT No. 1728 but in
the breach of contract between private respondents and the Vivas spouses. Petitioner NGA was never a privy to this
transaction. Neither was it shown that it had any knowledge at the time of the execution of the mortgage, of the
existence of the suspensive condition in the deed of absolute sale much less of its violation. Nothing appeared to
excite suspicion. The Special Power of Attorney was regular on its face; the OCT was in the name of the mortgagor
and the NGA was the highest bidder in the public auction. Unquestionably, therefore, the NGA is an innocent
purchaser for value, first as an innocent mortgagee under Section 32 of P.D. 1529 and later as innocent purchaser
for value in the public auction sale.

Private respondents claim that NGA did not even field any representative to the land which was not even in the
possession of the supposed mortgagors, nor present any witness to prove its allegations in the ANSWER nor submit
its DEED OF MORTGAGE to show its being a mortgages in good faith and for value (Rollo, p. 110).

Such contention is, however, untenable. Well settled is the rule that all persons dealing with property covered by a
torrens certificate of title are not required to go beyond what appears on the face of the title. When there is nothing
on the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon,
the purchaser is not required to explore further than what the torrens title upon its face indicates in quest for any
hidden defect or inchoate right that may subsequently defeat his right thereto (Centeno vs. Court of Appeals, 139
SCRA 545 [1985]).

More specifically, the Court has ruled that a bank is not required before accepting a mortgage to make an
investigation of the title of the property being given as security (Phil. National Cooperative Bank vs. Carandang
Villalon, 139 SCRA 570 [1985]), and where innocent third persons like mortgagee relying on the certificate of title
acquire rights over the property, their rights cannot be disregarded (Duran vs. IAC, 138 SCRA 489 [1985]).

Under the circumstances, the Regional Trial Court could not have erred in ruling that plaintiffs (private respondents
herein) complaint insofar as it prays that they be declared owners of the land in question can not prosper in view of
the doctrine of indefeasibility of title under the Torrens System, because it is an established principle that a petition
for review of the decree of registration will not prosper even if filed within one year from the entry of the decree if the
title has passed into the hands of an innocent purchaser for value (Pres. Decree No. 1529, Sec. 32). The setting
aside of the decree of registration issued in land registration proceedings is operative only between the parties to
the fraud and the parties defrauded and their privies, but not against acquirers in good faith and for value and the
successors in interest of the latter; as to them the decree shall remain in full force and effect forever (Domingo vs.
The Mayon Realty Corp. et al., 102 Phil. 32 [19571). Assuming, therefore, that there was fraud committed by the
sellers against the buyers in the instant case, petitioner NGA who was not privy therein cannot be made to suffer the
consequences thereof As correctly declared by the trial court, the National Grains Authority is the lawful owner of
the property in question by virtue of its indefeasible title.
As to private respondents' alternative prayer that the declared owner be ordered to reconvey or transfer the
ownership of the property in their favor, it is clear that there is absolutely no reason why petitioner, an innocent
purchaser for value, should reconvey the land to the private respondents.

PREMISES CONSIDERED, the decision of the Court of Appeals is REVERSED and SET ASIDE, and the decision
of the Court of First Instance of Laguna and San Pablo City, now Regional Trial Court, is REINSTATED.

SO ORDERED.

Teehankee, C.J., Narvasa, Cruz and Gancayco, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 183589 June 25, 2014

CHARLIE LIM (represented by his heirs) and LILIA SALANGUIT,1 Petitioners,

vs.
SPOUSES DANILO LIGON and GENEROSA VITUG-LIGON, Respondents.

DECISION

VILLARAMA, JR., J.:

At bar is a petition for review on certiorari of the Decision2 and Resolution3 of the Court of Appeals (CA) in CA-G.R.
CV No. 84284 dated December 28, 2007 and July 3, 2008, respectively, affirming with modification the Decision4 of
the Regional Trial Court (RTC) of Nasugbu, Batangas. The case arose from an action5 for Quieting of Title,
Recovery of Possession and Damages with Prayer for a Temporary Restraining Order and Preliminary Injunction,
filed by herein respondents before the court a quo involving the subject land located at Sitio Kuala, Barangay Wawa,
Nasugbu, Batangas, with an area of 9,478 square meters and covered by Transfer Certificate of Title (TCT) No. TP-
1792.6

The following undisputed findings of facts, as found by the trial court, are stated in the opinion of the CA:

As synthesized from the admissions made by the parties in their respective pleadings, the documentary and
testimonial evidence adduced during the proceedings[,] it appears that sometime in 1970, one Tomas Fernandez
filed a Free Patent Application over a parcel of land situated in Sitio Kuala, Barangay Wawa, Nasugbu, Batangas
with an area 9,[478] sq. meters. After the death of Tomas Fernandez, his son Felicisimo pursued the application and
on 25 April 1984, the survey plan under Psu No. 04-008565 was approved by the Bureau of Lands.

In 1985, the spouses Isaac and Concepcion Ronulo asked the assistance of the Office of the President and
requested investigation of their claim that a parcel of land containing 1,000 square meters which they have been
occupying since the 1950s was included in the approved survey plan PSU-04-008565 in the name of Tomas
Fernandez.

The Office of the President referred the matter to the Bureau of Lands which in turn referred the same to the DENR-
Region IVB for appropriate action.

On October 9, 1995, Regional Director Antonio Prinsipe of DENR Provisional Region IV-A issued an Order in DENR
Case No. IV-5516, the dispositive portion of which reads:

"WHEREFORE, premises considered and finding the protest of Spouses Isaac and Concepcion Ronulo to be
meritorious, the plan PSU-04-008565 approved in the name of Tomas Fernandez is hereby, as it is, ordered
CANCELLED and whatever amount paid on account thereof forfeited in favor of the Government. Consequently, the
aforementioned spouses Ronulo are hereby advised to cause the survey and to file the appropriate public land
application over the land actually possessed and occupied by them. (Exh. A-2)."

The above order was appealed by Felicisimo Fernandez to the Office of the DENR Secretary and was docketed
therein as DENR Case No. 5101.

On 20 October 1995, the already widowed Concepcion Ronulo executed an Affidavit of Waiver of Rights over the
parcel of land subject of DENR Case No. IV-5516 in favor of herein defendant Lim who will "file the appropriate
public land application (Exh. A-3)." On the same date, the children of Concepcion Ronulo executed an affidavit of
conformity to the waiver, conveyance and transfer of the property subject of DENR Case No. IV-5516 in favor of
Charlie Lim (Exh. A-4).
In the meantime, herein plaintiffs Spouses Danilo Ligon and Generosa Vitug-Ligon purchased the subject property
from Felicisimo Fernandez and introduced improvements thereon, including a beach house. On 31 October 1995,
TCT No. TP-1792 (Exh. A-1) of the Registry of Deeds of Nasugbu, Batangas was issued in the name of the spouses
Ligon based on Free Patent No. (IV03A) issued on 11 December 1986 and an analogous Original Certificate of Title
No. OP-1808 (Exh. B) dated 16 December 1993, both in the name of Felicisimo Fernandez.

On 09 September 1996, defendant Lim filed a complaint for forcible entry against the petitioners with the Municipal
Trial Court of Nasugbu, Batangas involving the subject property. The case was docketed as Civil Case No. 1275.
On May 26, 1997, the trial court rendered judgment (Exh. A-5) in favor of private respondent and ordered petitioners
to vacate the subject land. The trial court based its decision on the alleged finality of the Order dated 09 October
1995 issued by Regional Director Prinsipe in DENR Case No. IV-5516.

Plaintiffs appealed the adverse decision to the Regional Trial Court of Nasugbu, Batangas but the same was
affirmed in a decision dated 12 January 1998 (Exh. A-6).

On 20 July 1998, plaintiffs appealed the RTC decision to the Court of Appeals by way of a petition for review. In a
decision (Exh. A-7) dated 20 January 1999, the Court of Appeals dismissed the petition for review.

On 28 May 1999, the DENR Secretary rendered a decision (Exh. A-8) in DENR Case No. 5102 reversing the order
of Regional Director Prinsipe in DENR Case No. IV-5516 dated 09 October 1995, dismissing the protest of the
Ronulos, and ordering that TCT No. TP-1792 in the name of plaintiffs "shall remain undisturbed."

On 14 July 1999, the Ronulos filed a motion for reconsideration of the above decision. In an order (Exh. A-9) dated
1âwphi1

21 December 1999, the DENR Secretary denied the motion for reconsideration.

On 16 January 2000, the Ronulos filed a second motion for reconsideration of the decision of the DENR Secretary
in DENR Case No. 5102.

Meanwhile, as a result of the finality of the judgment in the ejectment case, plaintiffs were evicted from the subject
property. On 01 March 2000, they filed the instant suit before this Court, a complaint against defendant Lim and his
representative, Lilia Salanguit, for Quieting of Title, Recovery of Possession and Damages with prayer for a TRO
and Preliminary Injunction, to restore them to their possession of the subject property and to enjoin herein defendant
Lim from demolishing their beach house.

On 10 April 2000, this Court denied plaintiffs’ application for injunctive relief as a result of which plaintiffs’ beach
house was demolished by the Branch Sheriff on the motion of defendants.

On 16 April 2000, plaintiffs filed a supplemental complaint for additional damages as a result of the demolition of
their beach house worth about ₱7 million. Defendants did not answer the supplemental complaint despite being
ordered to do so.

During the pre-trial on 08 August 2000, the parties agreed to hold hearings on 25 September, 06 October and 20
October 2000. However, the first two hearing dates were cancelled at the instance of the defendants. During the
scheduled hearing on 20 October 2000, defendant and counsel did not appear. Instead, Judge Antonio de Sagun,
then the Honorable Presiding Judge informed plaintiffs that herein defendant Lim filed a Motion to Suspend
Proceedings on the ground that the denial of the second motion for reconsideration in DENR Case No. 5102 was
appealed to the Office of the President. In his motion, defendant alleged that trial should be suspended pending
"final adjudication of the case (DENR Case No. 5102) before the Office of the President where the issue of validity
of plaintiff’s title is squarely involved.

In an Order dated 13 November 2000, this Court granted the motion to suspend proceedings. Petitioners filed a
motion for reconsideration but the same was denied by then Presiding Judge Antonio de Sagun in an order dated 10
January 2001.

On February 19, 2001, plaintiffs filed a Petition for Certiorari before the Court of Appeals in CA-G.R. SP No. 63441,
assailing the suspension of proceedings ordered by this Honorable Court which, after due proceedings, was granted
and the Order dated November 13, 2000 issued by this Court suspending the proceedings of this case reversed and
set aside in a Decision of the said appellate court dated March 6, 2002.

No motion for reconsideration or any appellate recourse to the Supreme Court having been interposed by
defendants, plaintiffs on June 7, 2002, moved to set this case for further proceedings. This Court granted the motion
and this case was set for trial on August 30, 2002 at 8:30 a.m.

On August 30, 2002, in view of the absence of the defendants and their counsel despite due notice, evidence for
plaintiffs was presented ex-parte with plaintiff Danilo Ligon taking the witness stand. After plaintiff’s direct
examination, this Court ordered a resetting of the case for cross-examination by defendants on November 18, 2002
at 8:30 a.m. Counsel and his witness plaintiff Danilo Ligon were present during the November 18, 2002 scheduled
trial in which defendants were properly notified. Defendants and counsel were absent prompting this Honorable
Court, upon plaintiff’s motion to consider the cross-examination of plaintiff Danilo Ligon by defendants as waived;
the continued absence of the defendants as indicative of lack of interest to further defend this case; Grant plaintiff’s
motion for ten (10) days within which to file Formal Offer of Evidence and thirty (30) days from November 18, 2002,
within which to file their Memorandum. After which, this case will be deemed submitted for decision.7

In its decision dated February 3, 2004, the RTC ruled, viz.:

WHEREFORE, PREMISES CONSIDERED, judgment is rendered for the plaintiffs as follows:

1. Confirming the ownership of the plaintiffs and right of possession over the property;

2. Ordering the defendants to indemnify the plaintiffs the sum of ₱6,000,000.00 for indecent haste in causing
the demolition of plaintiffs’ house;

3. Ordering the defendants to pay plaintiffs the sum of ₱50,000.00 a month as monthly rental for the duration
of the period they are deprived thereof commencing the month of November 1999;

4. Ordering the defendants to pay plaintiffs the sum of ₱1,000,000.00 as moral damages; and

5. Ordering the defendants to pay plaintiffs the sum of ₱500,000.00 as attorney’s fees and the costs.

SO ORDERED.8

Petitioners appealed the RTC decision with the CA alleging that the lower court erred in deciding the case based on
the ex-parte evidence presented by respondents, in ruling that Felicisimo was the original owner of the questioned
property, in ruling that the Order of the Department of Environment and Natural Resources (DENR) Regional
Executive Director was a collateral attack against TCT No. TP-1792 of the Spouses Ligon, in ruling that the Spouses
acquired the subject property in good faith, in not giving weight and credit to the Resolution of the Office of the
President (OP) dated March 24, 2004, in ordering Lim and Salanguit to pay a monthly rental of ₱50,000.00 for the
duration of the period that the Spouses Ligon have been deprived of their property, and in ordering Lim and
Salanguit to pay the Spouses Ligon attorney’s fees.

In its assailed Decision dated December 28, 2007, the appellate court dismissed the appeal, viz.: WHEREFORE, in
the light of the foregoing, the appeal is DISMISSED for utter lack of merit. The challenged decision of the Regional
Trial Court of Nasugbu, Batangas, Branch 14 is AFFIRMED with the MODIFICATION that the awards of
₱6,000,000.00 as indemnity and ₱50,000.00 representing the monthly rental for the subject property to the plaintiffs-
appellees are DELETED for lack of factual basis. Costs against the defendants-appellants.

SO ORDERED.9

Petitioners moved for reconsideration10 while respondents filed their Opposition To Motion For Reconsideration11 in
compliance with the directive of the appellate court. In a Resolution dated July 3, 2008, the CA denied
reconsideration for lack of merit. Hence, this appeal raising the following issues:
WHETHER OR NOT THE PRINCIPLE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES IS APPLICABLE IN
THIS CASE IN LINE WITH [THE] PRINCIPLE OF RES JUDICATA OF A DECISION OF A QUASI-JUDICIAL
AGENCY SUCH AS THE OFFICE OF THE PRESIDENT? WHETHER OR NOT THE LOWER COURT AND THE
COURT OF APPEALS RENDERED AN UNJUST JUDGMENT IN DEPRIVING THE PETITIONERS OF THEIR
OWNERSHIP OVER THE SUBJECT PROPERTY BASED ON TECHNICALITY?

WHETHER OR NOT THE FINALITY OF THE JUDGMENT IN THE EJECTMENT CASE SERVED AS RES
JUDICATA WITH RESPECT TO THE ISSUE OF PRIOR POSSESSION OF THE SPOUSES RONULOS (THE
PREDECESSORS-IN-INTEREST OF THE PETITIONERS)? WHETHER OR NOT THE COURT OF APPEALS
ERRED IN AFFIRMING THE OWNERSHIP OFTHE RESPONDENTS AND THE AWARD OF MORAL DAMAGES
AS WELL AS ATTORNEYS FEES?12

We deny the petition.

On the first issue, petitioner Lim contends that when the OP reinstated the October 9, 1995 Order of DENR
Regional Director Antonio G. Principe in its Resolution13 dated March 24, 2004, such disposition served to put an
end to the administrative proceedings. The petition thus states:

In a nutshell, the proceedings in the administrative case which went on to become a judicial case is the proper forum
to determine the issue of ownership over the parcel of land subject matter of this case. Basically, this case lodged
before the DENR Provincial Region IV-A is an initiatory move by the government for the reversion/cancellation of the
title of the respondents herein, which title was derived from the fraudulent and irregular survey of the lot in question
and the grant of the land patent application of Felicisimo Fernandez. In other words, if this case before the Court of
Appeals where this issue was raised affirms with finality the Resolution of the Office of the President (Annex "C"),
this will have the effect of cancelling the title of the respondents and shall pave the way to the institution of the
application by the Ronulos (or the herein petitioners as their successors-in-interest) of a public land patent in their
favor.14

Petitioner Lim further argues that the subject Resolution of the OP should have operated as a bar to the furtherance
of these proceedings as to "the issue" judicially determined by the OP. According to petitioner Lim, had the CA
taken into account the administrative proceedings before the DENR and the Resolution of the OP, it would have
come up with a determination that fraud was perpetrated by the respondents. The findings of the DENR Regional
Executive Director, as affirmed in the subject resolution of the OP, should operate as res judicata that will have the
effect of cancelling the title of respondents.

We do not agree.

For a judgment to constitute res judicata, the following requisites must concur:

x x x (a) the former judgment was final; (b) the court that rendered it had jurisdiction over the subject matter and the
parties; (c) the judgment was based on the merits; and (d) between the first and the second actions, there was an
identity of parties, subject matters, and causes of action.

Res judicata embraces two concepts: (1) bar by prior judgment and (2) conclusiveness of judgment.

Bar by prior judgment exists "when, as between the first case where the judgment was rendered and the second
case that is sought to be barred, there is identity of parties, subject matter, and causes of action."

On the other hand, the concept of conclusiveness of judgment finds application "when a fact or question has been
squarely put in issue, judicially passed upon, and adjudged in a former suit by a court of competent jurisdiction."
This principle only needs identity of parties and issues to apply.15

Neither bar by prior judgment nor conclusiveness of judgment applies to the case at bar. While there is identity of
parties and subject matter between the instant case and the matter before the DENR and later the OP, the causes
of action are not the same. The present case arose from a case for quieting of title16 where the plaintiff must show or
prove legal or equitable title to or interest in the property which is the subject-matter of the action. Legal title denotes
registered ownership, while equitable title means beneficial ownership. Without proof of such legal or equitable title,
or interest, there is no cloud to be prevented or removed.17 The administrative proceedings before the DENR and
now the OP, on the other hand, were instituted on behalf of the Director of Lands, in order to investigate any
allegation of irregularity in securing a patent and the corresponding title to a public land under Section 91 of the
Public Land Act, viz.:

SEC. 91. The statements made in the application shall be considered as essential conditions and parts of any
concession, title, or permit issued on the basis of such application, and any false statement therein or omission of
facts altering, changing, or modifying the consideration of the facts set forth in such statements, and any subsequent
modification, alteration or change of the material facts set forth in the application shall ipso facto produce the
cancellation of the concession, title, or permit granted. It shall be the duty of the Director of Lands, from time to time
and whenever he may deem it advisable, to make the necessary investigations for the purpose of ascertaining
whether the material facts set out in the application are true, or whether they continue to exist and are maintained
and preserved in good faith, and for the purposes of such investigation, the Director of Lands is hereby empowered
to issue subpoenas and subpoenas duces tecum and, if necessary, to obtain compulsory process from the courts. In
every investigation made in accordance with this section, the existence of bad faith, fraud, concealment, or
fraudulent and illegal modification of essential facts shall be presumed if the grantee or possessor of the land shall
refuse or fail to obey a subpoena or subpoena duces tecum lawfully issued by the Director of Lands or his
authorized delegates or agents, or shall refuse or fail to give direct and specific answers to pertinent questions, and
on the basis of such presumption, an order of cancellation may issue without further proceedings.

Given the lack of identity of the issue involved in the instant case vis-à-vis the issue in the administrative
proceedings before the DENR and the OP, there can also be no bar by conclusiveness of judgment.

To be sure, even if there was an identity of the issues involved, there still would have been no bar by prior judgment
or conclusiveness of judgment since the March 24, 2004 Resolution of the OP has not reached finality – it being the
subject of an appeal by respondents Spouses Ligon under CA-G.R. SP No. 85011. Furthermore, in terms of subject
matter, the property involved in the administrative proceedings is a 1,000-square meter tract of land over which
petitioners’ alleged right of possession could ripen into ownership. On the other hand, the instant case involves the
issue of the ownership or the validity of the title of respondents over the entire 9,478-square meter tract of land
where petitioners claim to have enjoyed open, continuous exclusive and notorious possession for more than thirty
years over a 1,000-square meter portion thereof.

On the second issue that the lower court and the CA rendered an unjust judgment depriving petitioners of their
ownership over the subject property on the basis of technicality, we cannot as well agree.

Petitioner Lim proffers the following excuses for his failure to comply with the resolutions and other directives of the
court a quo: that his counsel withdrew his appearance while the case was pending before the RTC; that his
representative, Salanguit, had a sudden death, causing him to lose track and control of the proceedings; that he was
not aware of the ex-parte presentation of evidence by respondent Danilo Ligon; and, that the court a quo waived for
him his right to present evidence due to lack of interest. It is central to petitioner Lim’s argument that he was
deprived of his right to due process and lost his right to property without being fully afforded an opportunity to
interpose his defense – part of which is the March 24, 2004 Resolution of the OP which would have been highly
persuasive in determining the issues of ownership and possession in this case. Petitioner Lim therefore pleads that
this Court afford him the amplest opportunity to present evidence and disregard technicalities in the broader interest
of justice.

We hold that the RTC did not err when it ruled and based its decision on the ex-parte evidence of respondents
spouses. Petitioners were absent, despite due notice, during the ex-parte presentation of evidence of respondents.
Petitioners were likewise absent during cross-examination despite proper notice. When respondents filed their
Formal Offer of Evidence and Memorandum, petitioners did not file any opposition or comment despite receipt of the
documents.

To be sure, petitioner Lim cannot attribute all blame on the gross negligence of his previous counsels. He cannot
bank on such negligence, including the sudden death of his representative Salanguit who used to coordinate with
his counsels, with impunity. Petitioner Lim’s own equally gross and contributory negligence in this case is glaring
and inexcusable that it constrains us from re-opening the case. This was aptly described by the RTC in its
Resolution18 dated December 10, 2003 denying petitioners’ motion for reconsideration to the Order considering the
case submitted for decision, viz.:
The reasons advanced by the defendants are flimsy and bereft of merit. x x x.

x x x defendants’ counsel was duly notified beforehand of the scheduled hearing on August 30, 2002, but for
unknown reasons, defendants and counsel failed to appear. Suffice it to say that this Court even became lenient to
them when it set another hearing on November 18, 2002, for them to exercise their so-called right to cross-examine
plaintiffs’ witness. But then again, records will show that despite receipt of Order dated August 30, 2002, wherein the
Court directed plaintiff Ligon to be present on November 18, 2002 for cross-examination, both defendants and
counsel did not show up without giving any reason for their absence.

xxxx

Defendants cannot rightfully claim of losing track and control of the proceedings had in this case since they can
easily verify the records regarding the status of the case, especially that they admitted that they have differences
with their counsel. They should have taken account of the length of time that already elapsed since the August 30,
2002 hearing. They could have done so with facility. The fact that they did not is clear that they slept unreasonably
on their right.

Stress should be made that plaintiff even furnished them with a copy of the Formal Offer of Evidence and
Memorandum filed to this Court as early as November 26, 2002 and December 18, 2002, respectively, yet not even
a comment or opposition evinced reply from the defendants. This matter is too important to be completely
disregarded.

xxxx

If the defendants were, using their own terms, not allowed to cross-examine would be denied due process, then,
they have nobody but themselves to blame. They failed to comply with the basic rudiments of the Rules of Civil
Procedure. Defendants cannot take advantage of their own faux pas and invoke the principle of liberality. If they
come to Court for leniency, they must do so with clean hands. Since they sought relief with "dirty hands", their plea
must be denied. x x x.19 Likewise, the CA properly concluded that:

x x x there is no truth to the defendants-appellants’ claim that they were denied due process when the trial court
allowed the plaintiffs-appellees to present their evidence ex-parte. The trial court gave them all the opportunity to
cross-examine the plaintiff-appellee Danilo Ligon but they failed to appear on the scheduled hearing. Hence, they
have nobody to blame but themselves.20

As to the third issue, petitioner Lim argues that the finality of the judgment in the ejectment case serves as res
judicata with respect to the issue of prior possession of the Spouses Ronulos – the predecessors-in-interest of the
petitioners. In the ejectment case filed by petitioner Lim against the same respondents in the Municipal Trial Court
(MTC) of Nasugbu, Batangas in Civil Case No. 1275, the MTC ruled on May 26, 1997 that prior possession was
established in favor of the Ronulo spouses. When the respondents Ligon Spouses appealed, the RTC affirmed the
decision of the MTC. The CA also dismissed the appeal of respondent spouses. On appeal to this Court docketed
as G.R. No. 139856, a Resolution dated October 13, 1999 was issued denying the appeal with finality. Hence,
petitioner Lim now contends that the finality of the ejectment case "determining the issues of possession and prior
possession serves as [res judicata] between the parties x x x in as much as the case herein involves the same
parties, same issues and same property therein."21

An ejectment suit is brought before the proper court to recover physical possession or possession de facto and not
possession de jure. The use of summary procedure in ejectment cases is intended to provide an expeditious means
of protecting actual possession or right to possession of the property and not to determine the actual title to an
estate.22 If at all, inferior courts are empowered to rule on the question of ownership raised by the defendant in such
suits, only to resolve the issue of possession. Its determination on the ownership issue is, however, not conclusive.23

The following discussion in the case of Spouses Diu v. Ibajan24 is instructive:

Detainer, being a mere quieting process, questions raised on real property are incidentally discussed. (Peñalosa v.
Tuason, 22 Phil. 303.) In fact, any evidence of ownership is expressly banned by Sec. 4 of Rule 70 (Sec. 4, Rule 70
provides: "Evidence of title, when admissible. - Evidence of title to the land or building may be received solely for the
purpose of determining the character and extent of possession and damages for detention.") except to resolve the
question of possession. (Tiu v. CA, 37 SCRA 99; Calupitan v. Aglahi, 65 Phil. 575; Pitargue v. Sorilla, 92 Phil. 5.)
Thus, all that the court may do, is to make an initial determination of who is the owner of the property so that it can
resolve who is entitled to its possession absent other evidence to resolve the latter. But such determination of
ownership is not clothed with finality. Neither will it affect ownership of the property nor constitute a binding and
conclusive adjudication on the merits with respect to the issue of ownership. x x x.25

Thus, under Section 18, Rule 70 of the Rules on Civil Procedure:

SEC. 18. Judgment conclusive only on possession; not conclusive in actions involving title or ownership.– The
judgment rendered in an action for forcible entry or detainer shall be conclusive with respect to the possession only
and shall in no wise bind the title or affect the ownership of the land or building. Such judgment shall not bar an
action between the same parties respecting title to the land or building.

xxxx

The legal limitation, despite the finality of the ruling in the ejectment case, however, is that the concept of
possession or prior possession which was established in favor of petitioners’ predecessors-in-interest in the
ejectment case pertained merely to possession de facto, and not possession de jure. The favorable judgment in
favor of petitioners’ predecessors-in-interest cannot therefore bar an action between the same parties with respect
to who has title to the land in question. The final judgment shall not also be held conclusive of the facts therein found
in a case between the same parties upon a different cause of action not involving possession.26 As what took place
in the case at bar, the final judgment was not bar to this subsequent action to quiet respondents’ title in order to
settle ownership over the 9,478-square meter property. Finally, on the fourth assignment of error, petitioner Lim
raises the issue as to whether the CA erred in affirming the ownership of the respondents. This part of the petition,
however, discusses no other additional ground for assailing the validity of the decision of the CA in affirming
respondents’ title to the property. Failing to adduce evidence to overturn the ruling of both the court a quo and the
appellate court, we affirm the indefeasibility of respondents’ title over the 9,478-squaremeter property.

We do not agree, however, with the ruling of the appellate court that a certificate of title issued pursuant to a public
land patent becomes indefeasible and incontrovertible upon the expiration of one year from the date of issuance of
the order for the issuance of the patent.27 A free patent obtained through fraud or misrepresentation is void. Hence,
the one-year prescriptive period provided in the Public Land Act does not bar the State from asking for the reversion
of property acquired through such means.28

On the issue of moral damages, we agree with petitioner Lim that there is no basis for the award of moral damages
of ₱1,000,000.00. Lim caused the demolition of the beach house of respondents pursuant to a writ of execution
issued by the MTC of Nasugbu, Batangas in the ejectment case – the same judgment which was affirmed by the
RTC, the CA and this Court. As Lim states in this petition, it will become an absurdity if he will be penalized and
required to pay moral damages over a property the rightful possession of which has been awarded to them29 in the
ejectment case.

Lastly, we sustain the award of attorney’s fees in the amount of ₱50,000.00 which the appellate court found to be
reasonable considering the factual circumstances surrounding the case.30 WHEREFORE, the petition is DENIED.
The Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 84284 dated December 28, 2007 and July
3, 2008, respectively, are AFFIRMED with the MODIFICATION that the award of ₱1,000,000.00 as moral damages
is deleted for lack of factual basis. However, the award by the Court of Appeals of the amount of ₱50,000.00 as and
for attorney's fees in favor of the herein respondents is hereby REITERATED and UPHELD.

No pronouncement as to costs.

SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 180076 November 21, 2012

DIONISIO MANANQUIL, LAUDENCIA MANANQUIL-VILLAMOR, ESTANISLAO MANANQUIL, and DIANITA

MANANQUIL-RABINO, represented by OTILLO RABINO, Petitioners,
vs.
ROBERTO MOICO, Respondent.**

DECISION

DEL CASTILLO, J.:

In order that an action for quieting of title may proper, it is essential that the plaintiff must have legal or equitable title
to, or interest in, the property which is the subject-matter of the action. Legal title denotes registered ownership,
while equitable title means beneficial ownership. In the absence of such legal or equitable title, or interest, there is
no cloud to be prevented or removed.

This Petition for Review on Certiorari1 assails the March 13, 2007 Decision2 of the Court of Appeals (CA) in CA-G.R.
CV No. 81229, which reversed and set aside the January 2, 2001 Decision3 of the Malabon Regional Trial Court,
Branch 74 in Civil Case No. 2741-MN, thus dismissing the said civil case for quieting of title.

Factual Antecedents

Lots 18 and 19 in Dagat-Dagatan, Navotas form part of the land previously expropriated by the National Housing
Authority (NHA) and placed under its Tondo Dagat-Dagatan Foreshore Development Project – where occupants,
applicants or beneficiaries may purchase lots on installment basis. In October 1984, Lot 18 was awarded to spouses
Iluminardo and Prescilla Mananquil under a Conditional Contract to Sell. Lot 19, on the other hand, was sold to
Prescilla in February 1980 by its occupant.

In 1991, Iluminardo and Prescilla died without issue, but it turned out that Prescilla had a child by a previous
marriage – namely Eulogio Francisco Maypa (Eulogio). After the spouses’ death, Iluminardo’s supposed heirs
(Mananquil heirs) – his brothers and sisters and herein petitioners Dionisio and Estanislao Mananquil (Estanislao),
Laudencia Mananquil-Villamor (Laudencia), and Dianita Mananquil-Rabino (Dianita) – executed an Extrajudicial
Settlement Among Heirs and adjudicated ownership over Lots 18 and 19 in favor of Dianita. They took possession
of Lots 18 and 19 and leased them out to third parties.

Sometime later, the Mananquil heirs discovered that in 1997, Eulogio and two others, Eulogio Baltazar Maypa and
Brenda Luminugue, on the claim that they are surviving heirs of Iluminardo and Prescilla, had executed an
Extrajudicial Settlement of Estate with Waiver of Rights and Sale, and a Deed of Absolute Sale in favor of Roberto
Moico (Moico).

In May 1997, Moico began evicting the Mananquils’ tenants and demolishing the structures they built on Lots 18 and
19. In June, the Mananquils instituted Civil Case No. 2741-MN for quieting of title and injunctive relief.

Ruling of the Regional Trial Court

The trial court issued a temporary restraining order, thus suspending eviction and demolition. After trial on the
merits, a Decision was rendered in favor of the Mananquils. The dispositive portion thereof reads:

WHEREFORE, premises considered, judgment is hereby rendered:

 1. Ordering that a permanent injunction be issued enjoining defendant Roberto Moico to refrain from
threatening the tenants and destroying the improvements standing on the subject properties and from filing
the ejectment suits against the tenants;

2. Ordering the Extrajudicial Settlement of Estate with Waiver of Rights and Sale and the Deed of Absolute
Sale dated January 9, 1997 cancelled for having no force and effect;

3. Declaring plaintiffs to be rightfully entitled to the subject properties and the Extrajudicial Settlement of
Heirs of the plaintiffs to be valid and enforceable;

4. Ordering defendants to pay jointly and severally the plaintiffs the following, to wit:

a. P50,000.00 as moral damages;

b. P50,000.00 as exemplary damages;

c. P50,000.00 for and as attorney’s fees; and

d. Costs of suit.

SO ORDERED.4

Ruling of the Court of Appeals

Moico appealed to the CA, which reversed the trial court. It held that the petitioners have failed to show that
Iluminardo and Prescilla have –

x x x perfected their grant/award from the NHA so as to secure a firm, perfect and confirmed title over the subject
lots. It must be stressed that the Conditional Contract to Sell that covers Lot No. 18 stipulates several terms and
conditions before a grantee of the NHA may legally acquire perfect title over the land, and there should be no
mistake that the same stipulations hold true with respect to Lot No. 19. Inter alia, the more vital contractual
conditions, are: (a) payment in installment of the price for a specified period, (b) personal use of and benefit to the
land by the grantee, and (c) explicit prohibition from selling, assigning, encumbering, mortgaging, leasing, or sub-
leasing the property awarded x x x.5

The CA noted that Lots 18 and 19 must still belong to the NHA, in the absence of proof that Iluminardo and Prescilla
have completed installment payments thereon, or were awarded titles to the lots. And if the couple disposed of
these lots even before title could be issued in their name, then they may have been guilty of violating conditions of
the government grant, thus disqualifying them from the NHA program. Consequently, there is no right in respect to
these properties that the Mananquils may succeed to. If this is the case, then no suit for quieting of title could
prosper, for lack of legal or equitable title to or interest in Lots 18 and 19.

Issues

The present recourse thus raises the following issues for the Court’s resolution:

THE COURT OF APPEALS GRAVELY ERRED IN PASSING UPON AN ISSUE NOT BEING ASSIGNED
AS ERROR IN THE APPELLANTS’ BRIEF OF PRIVATE RESPONDENTS AND NOT TOUCHED UPON
DURING THE TRIAL IN THE COURT A QUO PARTICULARLY THE ALLEGED VIOLATION OF THE
SPOUSES ILUMINARDO AND PRESCILLA MANANQUIL OF THE CONDITIONAL CONTRACT TO SELL
PURPORTEDLY COVERING THE PROPERTIES IN QUESTION, TO SUIT ITS RATIONALIZATION IN ITS
QUESTIONED DECISION JUSTIFYING THE REVERSAL OF THE DECISION OF THE COURT A QUO.

II
 THE COURT OF APPEALS ALSO COMMITTED A GRIEVOUS ERROR IN CONSTRUING THE
PROVISIONS OF ARTICLES 476 AND 477 OF THE CIVIL CODE AGAINST PETITIONERS
NOTWITHSTANDING THE POSITIVE CIRCUMSTANCES OBTAINING IN THIS CASE POINTING TO THE
PROPRIETY OF THE CAUSE OF ACTION FOR QUIETING OF TITLE.6

Petitioners’ Arguments

Petitioners argue that the CA cannot touch upon matters not raised as issues in the trial court, stressing that the
NHA did not even intervene during the proceedings below to ventilate issues relating to the rights of the parties to
Lots 18 and 19 under the Tondo Dagat-Dagatan Foreshore Development Project. Petitioners claim that since the
issue of violation of the terms of the grant may be resolved in a separate forum between the Mananquils and the
NHA, it was improper for the CA to have pre-empted the issue.

On quieting of title, petitioners advance the view that since they are the legal heirs of Iluminardo Mananquil, then
they possess the requisite legal or equitable title or interest in Lots 18 and 19, which thus permits them to pursue
Civil Case No. 2741-MN; whatever rights Iluminardo had over the lots were transmitted to them from the moment of
his death, per Article 777 of the Civil Code. And among these rights are the rights to continue with the amortizations
covering Lots 18 and 19, as well as to use and occupy the same; their interest as successors-in-interest, though
imperfect, is enough to warrant the filing of a case for quieting of title to protect these rights.

Respondent Moico’s Arguments

Moico, on the other hand, argues that because the issue relating to Iluminardo and Prescilla’s possible violation of
the terms and conditions of the NHA grant is closely related to the issue of ownership and possession over Lots 18
and 19, then the CA possessed jurisdiction to pass upon it.

Moico supports the CA view that petitioners failed to prove their title or interest in the subject properties, just as he
has proved below that it was his predecessor, Eulogio, who paid all obligations relative to Lots 18 and 19 due and
owing to the NHA, for which reason the NHA released and cleared the lots and thus paved the way for their proper
transfer to him.

Our Ruling

The petition lacks merit.

An action for quieting of title is essentially a common law remedy grounded on equity. The competent court is
1âw phi 1

tasked to determine the respective rights of the complainant and other claimants, not only to place things in their
proper place, to make the one who has no rights to said immovable respect and not disturb the other, but also for
the benefit of both, so that he who has the right would see every cloud of doubt over the property dissipated, and he
could afterwards without fear introduce the improvements he may desire, to use, and even to abuse the property as
he deems best. But "for an action to quiet title to prosper, two indispensable requisites must concur, namely: (1) the
plaintiff or complainant has a legal or an equitable title to or interest in the real property subject of the action; and (2)
the deed, claim, encumbrance, or proceeding claimed to be casting cloud on his title must be shown to be in fact
invalid or inoperative despite its prima facie appearance of validity or legal efficacy."7

Contrary to petitioners’ stand, the issue relating to the grant of rights, title or award by the NHA determines whether
the case for quieting of title may be maintained. If the petitioners are legitimate successors to or beneficiaries of
Iluminardo upon his death – under the certificate of title, award, or grant, or under the special law or specific terms of
the NHA program/project – then they possess the requisite interest to maintain suit; if not, then Civil Case No. 2741-
MN must necessarily be dismissed.

From the evidence adduced below, it appears that the petitioners have failed to show their qualifications or right to
succeed Iluminardo in his rights under the NHA program/project. They failed to present any title, award, grant,
document or certification from the NHA or proper government agency which would show that Iluminardo and
Prescilla have become the registered owners/beneficiaries/ awardees of Lots 18 and 19, or that petitioners are
qualified successors or beneficiaries under the Dagat-Dagatan program/project, taking over Iluminardo’s rights after
his death. They did not call to the witness stand competent witnesses from the NHA who can attest to their rights as
successors to or beneficiaries of Lots 18 and 19. They failed to present proof, at the very least, of the specific law,
provisions, or terms that govern the Tondo Dagat-Dagatan Foreshore Development Project which would indicate a
modicum of interest on their part. For this reason, their rights or interest in the property could not be established.

It was erroneous, however, for the CA to assume that Iluminardo and Prescilla may have violated the conditions of
the NHA grant under the Tondo Dagat-Dagatan Foreshore Development Project by transferring their rights prior to
the issuance of a title or certificate awarding Lots 18 and 19 to them. In the absence of proof, a ruling to this effect is
speculative. Instead, in resolving the case, the trial court – and the CA on appeal – should have required proof that
petitioners had, either: 1) a certificate of title, award, or grant from the proper agency (NHA or otherwise) in the
name of their predecessor Iluminardo, or, in the absence thereof, 2) a right to succeed to Iluminardo’s rights to Lots
18 and 19, not only as his heirs, but also as qualified legitimate successors/beneficiaries under the Tondo Dagat-
Dagatan Foreshore Development Project terms and conditions as taken over by the NHA.8 Petitioners should have
shown, to the satisfaction of the courts that under the NHA program project governing the grant of Lots 18 and 19,
they are entitled and qualified to succeed or substitute for Iluminardo in his rights upon his death. As earlier stated,
this takes the form of evidence apart from proof of heirship, of course – of the specific law, regulation or terms
covering the program/project which allows for a substitution or succession of rights in case of death; the certificate of
title, award or grant itself; or the testimony of competent witnesses from the NHA.

Proof of heirship alone does not suffice; the Mananquils must prove to the satisfaction of the courts that they have a
right to succeed Iluminardo under the law or terms of the NHA project, and are not disqualified by non-payment,
prohibition, lack of qualifications, or otherwise.

WHEREFORE, premises considered, the Petition is DENIED for lack of merit. The March 13, 2007 Decision of the
Court of Appeals in CA-G.R. CV No. 81229 is AFFIRMED.

SO ORDERED.
G.R. No. L-25788 April 30, 1980

PACIFICO C. DEL MUNDO, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, ANTONIO, EUGENIA, DELFIN and MARCIANA, all surnamed
ALVAREZ, and SIMPLICIO BALCOS, respondents.

Manuel P. Dumatol for petitioner.

Balcos & Salazar for respondents.

DE CASTRO, J.:

Petitioner seeks in this petition for certiorari to reverse in toto the decision of the Court of Appeals promulgated on 3
January 1966 in CA-G. R. No. 28276-R, entitled "Antonio Alvarez, Eugenia Alvarez, Delfin Alvarez, Marciana
Alvarez, and Simplicio Balcos, plaintiffs-appellants vs. Isidra de la Cruz, Teodora Alvarez and Pacifico C. del
Mundo, defendants-appellees, the dispositive portion of which reads: 1

WHEREFORE, the extrajudicial partition executed by Isidra de la Cruz and Teodora Alvarez on July
31, 1956 acknowledged before Notary Public Benjamin N. Domingo and recorded as document No.
143 on page 43, book 1, series of 1956 of his notarial registry, copy of which is attached to the
records and marked as Exhibit G is hereby declared null and void and of no force nor effect.

Transfer Certificate of Title No. 32529 of the land records for Quezon City is hereby declared
cancelled and of no force and effect. In lieu thereof, the Register of Deeds of Quezon City is hereby
ordered to issue a new Transfer Certificate of Title in the names of Antonio Alvarez, Eugenia
Alvarez, Delfin Alvarez, as co-owners pro indiviso in the following proportions: To each of Antonio,
Eugenia, Delfin, Marciana and Teodora all surnamed Alvarez, 13/75 share in full ownership and 2/75
share in naked ownership, to Isidra de la Cruz 10/75 share in full.

The Court of Appeals found undisputed the following facts. 2

Plaintiffs (herein private respondents) Antonio, Eugenia, Delfin and Marciana all surnamed Alvarez
are legitimate children of Agripino Alvarez and his first wife Alejandra Martin. After the death of
Alejandra Martin, Agripino Alvarez married Isidra de la Cruz in February 1927 and they had one child
named Teodora Alvarez.

On December 23, 1947, Agripino Alvarez died intestate, survived by his widow Isidra and his five
children, the four plaintiffs and Teodora.

On July 31, 1956, a public instrument entitled 'Extra-judicial Partition with Absolute Sale of Shares'
was executed by the widow Isidra and her daughter Teodora Alvarez (Exhibit G) wherein, after
reciting that they are 'the legal and absolute heirs, the first being the wife and the second, is the
daughter of the deceased Agripino Alvarez', they adjudicated to themselves in equal shares the
property covered by Transfer Certificate of Title No. 42562 of the land records for Rizal and in the
same instrument, both Isidra and her daughter Teodora sold the entire property to Pacifico C. del
Mundo who registered the instrument in August 1956. As a result of such registration, Transfer
Certificate of Title No. 32529 of the land records for Quezon City was issued in the name of del
Mundo.

On February 10, 1958, the children of Agripino by his first wife sold to Simplicio Balcos four tenths
(4/10) undivided share in the property in question (which they claim as their share in the estate of
their father). The deed of sale has never been registered.
 On May 31, 1958, said children by the first marriage of Agripino Alvarez and their vendee Simplicio
Balcos brought the present action against Isidra de la Cruz and her daughter Teodora Alvarez as
well as against the vendee Pacifico del Mundo before the Court of First Instance of Rizal asking that
judgment be rendered:

1. Declaring the Extra-Judicial Partition with Absolute Sale of Shares Annex 'B', null and void;

2. Declaring null and void T.C.T. No. 32529, Registry of Deeds for Quezon City, and reviving T.C.T.
No. 42562, Registry of Deeds for the Province of Rizal;

3. Declaring the plaintiffs Alvarez' entitled to an undivided share of 1/10 each of the lot in question
with right to dispose of the same;

4. Ordering the defendant Pacifica C. del Mundo, married to Ester dela Cruz and plaintiff Simplicio
Balcos to enter into and agreement or extra-judicial petition of the property in accordance with their
participation as purchasers of the shares of the original heirs;

5. Ordering the defendants to pay attorney's fees in the sum of P1,000.00 and to pay the costs.

After trial the Court of First Instance of Rizal rendered its decision 3 dated 20 June 1960 dismissing private
respondents' complaint, holding that the property in question is the paraphernal property of Isidra de la Cruz.

Their motion for reconsideration of the above decision having been denied, private respondents appealed to the
Court of Appeals the dispositive portion of whose decision was quoted at the beginning of this decision, said Court
sustaining the appeal thereby reversing the judgment of the lower court.

Only petitioner Pacifico del Mundo filed a motion for reconsideration which was, however, denied by the Court of
Appeals on 21 February 1966. 4 Hence, the instant petition filed by him to review the decision of the appellate court,
following assignment of errors. 5

THE COURT OF APPEALS ERRED IN DECLARING THE PROPERTY IN QUESTION AS

CONJUGAL PROPERTY OF AGRIPINO ALVAREZ AND ISIDRA DE LA CRUZ AND NOT AS
PARAPHERNAL PROPERTY OF ISIDRA DE LA CRUZ ALONE.

II

THE COURT OF APPEALS ERRED IN ORDERING THE CANCELLATION OF TRANSFER

CERTIFICATE OF TITLE NO. 32529 OF THE REGISTRY OF DEEDS OF QUEZON CITY WHICH
IS IN THE NAME OF HEREIN PETITIONER APPELLANT.

III

THE COURT OF APPEALS ERRED IN ORDERING THE REGISTER OF DEEDS OF QUEZON

CITY TO ISSUE A NEW TRANSFER CERTIFICATE OF TITLE IN THE NAMES OF ANTONIO
ALVAREZ, EUGENIA ALVAREZ, DELFIN ALVAREZ, MARCIANA ALVAREZ AND TEODORA
ALVAREZ AS CO-OWNERS PRO-INDIVISO IN THE FOLLOWING PROPORTIONS: TO EACH OF
ANTONIO, EUGENIA, DELFIN, MARCIANA AND TEODORA, ALL SURNAMED ALVAREZ, 13/75
SHARE IN FULL OWNERSHIP AND 2/75 SHARE IN NAKED OWNERSHIP: TO ISIDRA DE LA
CRUZ, 10/75 SHARE IN FULL.

The pivotal question thus presented in this petition is whether the property formerly covered by Transfer Certificate
of Title No. 42562 (Rizal) now Transfer Certificate of Title No. 32529 (Quezon City) is the conjugal property of
Agripino Alvarez and Isidra de la Cruz or the paraphernal property of the latter alone. Petitioner maintains that it is
the paraphernal property of Isidra de la Cruz as ruled by the lower court because of two grounds, namely: 6 "(1) the
admission by Agripino Alvarez in Exhibit F, the deed of sale executed by Simplicio Dantes and Emilia Rivera of the
property in question to Isidra de la Cruz, that the said property is Isidras paraphernal property'; and (2) the said
admission operates as estoppel against Agripino Alvarez and/or his heirs, namely, the respondents-appellees in the
instant case, from claiming any interest in said property, adverse to that of Isidra de la Cruz and/or transferee or
persons privy to her.

Private respondents, on the other hand, seek to uphold the decision of the respondent Court of Appeals which, as
aforestated, ruled in favor of the conjugal nature of the property and discredited the evidence of petitioner, as well as
that of his co-defendants in the court a quo, regarding the purchase of the property by Isidra de la Cruz prior to her
marriage with Agripino, by saying, inter alia that: 7

... If the sale by Juan Dantes and his wife to Isidra is true and was really not reduced to writing for
the reasons given by Simplicio, why is it that Juan Dantes, in executing the deed of sale in favor of
Simplicio stated in the deed of sale that he sold the entire lot of over three hectares to Simplicio
instead of stating that he previously sold a portion thereof to Isidra and the remainder to Simplicio?
Had this been stated in the deed of sale to Simplicio, there would have been no need for Simplicio to
execute Exhibit F in favor of Isidra de la Cruz.

Moreover, if the property was really sold by Juan Dantes to Isidra in 1920 or 1921. as claimed by the
defendants, why is it that in Exhibit F, Simplicio did not state so? Simplicio stated in said document
(Exhibit F) that he was the one selling the lot to Isidra. Had he stated that he was merely transfering
to Isidra the smaller lot which was not actually purchased by him from Juan Dantes, there would
have been no necessity of making it appear in Exhibit F that the money used by Isidra was her own
paraphernalia property.

Apparently, the question is factual for it involves an examination of the probative value of the evidence Presented by
the litigants or any of them, 8 in order to determine the true nature of the property in question. While as a rule, the
findings of fact of the Court of Appeals are final and conclusive and cannot be reviewed on appeal to this Court, one
of the recognized exceptions to said rule is when the conclusion made is manifestly mistaken. 9 We are of the
opinion that the ruling of the Court of Appeals is not persuasive, and We are accordingly constrained to hold that it is
in error in concluding that the property in question is conjugal.

The testimony of Marcelo Bernal, which "was wholly corroborated by Simplicio Dantes and Valentina San Andres"
as correctly observed by the lower court, 10 anent the sale of the questioned property to Isidra in 1920 or 1921 when
the latter was then single, it having been admitted that Agripino married Isidra only in February 1927, appears to be
unrebutted by the private respondents. They place reliance mainly on the deed of sale 11 executed by Simplicio
Dantes and his wife in favor of Isidra de la Cruz, when the latter was already married and where in said deed, no
mention was made about the sale by the original owners to Isidra. They lose sight of the fact, however, that this
deed of sale was executed only for the purpose of recognizing or confirming the verbal sale made by the original
owners to Isidra in 1920 or 1921, long before her marriage to Agripino in February 1927. This is the very reason why
Agripino had to sign in said deed of sale, declaring that "the money with which Lot No. 1189-C was purchased from
the spouses Simplicio Dantes and Emilia Rivera is her own money, and does not belong to our conjugal property,
and therefore, the said Lot No. 1189-C, is her, Isidra's paraphernal property" (sic). 12 The declaration aforequoted is
of the highest evidentiary value being one against the declarant's own interest. It may well be presumed that
Agripino would not have made the said declaration unless he believed the same to be true, prejudicial as it is to his
children's interests as his heirs, with his first wife. Good faith is always to be presumed, and a person always takes
ordinary care of his concerns. 13 Against these presumptions, the contrary must be clearly established and proven by
sufficient evidence, which is clearly wanting in the instant case. No explanation was given why the aforesaid
declaration should not be given due weight. It is significant to note that the same was made on 28 February 1941 or
more than six (6) years prior to Agripino's death on 23 December 1947 without his having repudiated the same.
Neither did the private respondents, as heirs, question said declaration. Agripino was, therefore, clearly in estoppel
to deny his declaration. As such, he can lay no claim nor interest in the questioned property, nor can the private
respondents do so, for the person from whom they claim to have succeeded to the property had no title thereto.
Estoppel is effective even on successors in interest. 14

Moreover, when the question is exclusively between husband and wife, or between one of them and the heirs of the
other, the admission or acknowledgment of one spouse that the money used to purchase the property came from
the other spouse, is evidence against the party making the admission or his heirs. 15 Likewise, where the husband
has been a party to an act of purchase of immovable property in the name of his wife, which recited that the
purchase was made with paraphernal funds, and that the property was to be and remain paraphernal property,
neither he nor his heirs can be permitted to go behind the deed and contest the wife's title to the property by
claiming that it is conjugal.16 Since the property is the paraphernal property of Isidra, the same having been acquired
by her prior to her marriage with Agripino 17 and having been purchased with her exclusive or private funds 18 any
declaration to the contrary made by her, as well as that of her child, cannot prevail nor change the character of the
property in question. The extra-judicial partition was evidently an expedient only to facilitate the sale without giving
rise to any question as to the legality of the transmission of the property to Isidra and his daughter, as the death of
Agripino Alvarez may occasion, for the better protection of the vendee, the petitioner herein. If the property were
conjugal the private respondents would have been made parties to the extra-judicial partition and made signatories
thereto. As the Court of First Instance aptly observed.

The Court believed that the Deed of Extra-Judicial Partition submitted in the case at bar cannot
affect or change the paraphernal character of the property in question. ... Since the deceased
Agripino Alvarez has formally and categorically declared that he has no right or interest whatsoever
in the property in question, the same being paraphernal it follows that his heirs, the plaintiffs herein,
have not inherited any portion or right in the property, as the heirs merely step into the shoes of the
decedent.

Moreover, the law does not provide that separate property becomes conjugal simply by reason of an
extra-judicial partition after the death of one spouse, or by erroneous conclusions or declarations
made later. The Court has noticed that defendant Isidra de la Cruz affixed only her thumb-mark on
the deed of extra-judicial partition it is therefore obvious that she is illiterate and does not know the
technical intricacies of the law of property. Reason and justice demand that acts done beyond the
manifest understanding of illiterates must not be used to deprive them of their acquired rights or their
property, or as a weapon to work injustice upon them Hence, the Court is of the opinion that in the
instant case the money used in the purchase chase of the property subject of litigation is the
exclusive money of defendant Isidra de la Cruz.

From what has been said on the foregoing, We find the first two assigned errors t• be well taken. Since the property
involved in this case is the paraphernal property of Isidra, it follows that the Court of Appeals erred in ordering the
cancellation of transfer Certificate of Title No. 32529 of the Registry of Deeds of Quezon City which is in the name of
herein petitioner. The sale between Isidra and herein petitioner is a perfectly valid sale, although in the document
drawn 19 the property was erroneously treated as conjugal. No valid reason is shown to invalidate the same,
especially so where the persons, herein private respondents, claiming to be entitled to a portion thereof have been
shown to have neither interest nor title thereto.

And finally, the third assigned error is likewise meritorious. As stated beforehand, the Court of Appeal found that the
property in litigation is the conjugal property of the spouses Agripino Alvarez and Isidra de la Cruz. Granting that
finding to be true, said Court should have first liquidated the conjugal partnership of the spouses and adjudicate one
half of the property in favor of the surviving spouse Isidra, in full ownership; 20 and the other half, to the deceased
husband's heirs, wherein Isidra shall likewise be entitled to a portion thereof in usufruct equal to that corresponding
by way of legitime to each of the legitimate children or descendants who has not received any betterment 21 to be
taken from the third at the free disposal of the deceased parent. 22 This, said Court did not do. Instead, in designating
the fractional shares of Agripino's heirs, it had treated the property as his capital alone. The dispositive portion,
therefore, is in conflict with the basic finding of said Court, which actuation was branded by the petitioner as a
showing of "seeming partiality. 23 Hence, the questioned decision is a nullity, giving justification for its reversal and
for Us to revert to that of the lower court.

UPON THE FOREGOING CONSIDERATIONS, the decision appealed from should be, as it is hereby, REVERSED
and the complaint filed by the private respondents' DISMISSED. No pronouncements as to costs.

SO ORDERED.
G.R. No. L-52361 April 27, 1981

SUNSET VIEW CONDOMINIUM CORPORATION, petitioner,

vs.
THE HON. JOSE C. CAMPOS, JR. OF THE COURT OF FIRST INSTANCE, BRANCH XXX, PASAY CITY and
AGUILAR-BERNARES REALTY, respondents.

G.R. No. L-52524 April 27, 1981

SUNSET VIEW CONDOMINIUM CORPORATION, petitioner,

vs.
THE HON. JOSE C. CAMPOS, JR., PRESIDING JUDGE OF THE COURT OF FIRST INSTANCE, BRANCH XXX,
PASAY CITY, and LIM SIU LENG, respondents.

FERNANDEZ, J.:

These two cases which involve similar facts and raise Identical questions of law were ordered consolidated by
resolution of this Court dated March 17, 1980. 1

The petitioner, Sunset View Condominium Corporation, in both cases, is a condominium corporation within the
meaning of Republic Act No. 4726 in relation to a duly registered Amended Master Deed with Declaration of
Restrictions of the Sunset View Condominium Project located at 2230 Roxas Boulevard, Pasay City of which said
petitioner is the Management Body holding title to all the common and limited common areas. 2

G.R. NO. 52361

The private respondent, Aguilar-Bernares Realty, a sole proprietorship with business name registered with the
Bureau of Commerce, owned and operated by the spouses Emmanuel G. Aguilar and Zenaida B. Aguilar, is the
assignee of a unit, "Solana", in the Sunset View Condominium Project with La Perla Commercial, Incorporated, as
assignor. 3 The La Perla Commercial, Incorporated bought the "Solana" unit on installment from the Tower Builders,
Inc. 4 The petitioner, Sunset View Condominium Corporation, filed for the collection of assessments levied on the
unit against Aguilar-Bernares Realty, private respondent herein, a complaint dated June 22, 1979 docketed as Civil
Case No. 7303-P of the Court of First Instance of Pasay City, Branch XXX. The private respondent filed a Motion to
Dismiss the complaint on the grounds (1) that the complaint does not state a cause of action: (2) that the court has
no jurisdiction over the subject or nature other action; and (3) that there is another action pending between the same
parties for the same cause. The petitioner filed its opposition thereto. The motion to dismiss was granted on
December 11, 1979 by the respondent Judge who opined that the private respondent is, pursuant to Section 2 of
Republic Act No. 4726, a "holder of a separate interest" and consequently, a shareholder of the plaintiff
condominium corporation; and that "the case should be properly filed with the Securities & Exchange Commission
which has exclusive original jurisdiction on controversies arising between shareholders of the corporation." the
motion for reconsideration thereof having been denied, the petitioner, alleging grave abuse of discretion on the part
of respondent Judge, filed the instant petition for certiorari praying that the said orders be set aside.

G.R. NO. 52524

The petitioner filed its amended complaint dated July 16, 1979 docketed as Civil Case No. 14127 of Branch I of the
City Court of Pasay City for the collection of overdue accounts on assessments and insurance premiums and the
interest thereon amounting to P6,168 06 as of March 31, 1979 against the private respondent Lim Siu Leng 5 to
whom was assigned on July 11, 1977 a unit called "Alegria" of the Sunset. View Condominium Project by Alfonso
Uy 6 who had entered into a "Contract to Buy and Sell" with Tower Builders, Inc. over the said unit on installment
basis. 7

The private respondent filed a motion to dismiss on the ground of lack of jurisdiction, alleging that the amount
sought to be collected is an assessment. The correctness and validity of which is certain to involve a dispute
between her and the petitioner corporation; that she has automatically become, as a purchaser of the condominium
unit, a stockholder of the petitioner pursuant to Section 2 of the Condominium Act, Republic Act No. 4726; that the
dispute is intra-corporate and is consequently under the exclusive jurisdiction of the Securities & Exchange
Commission as provided in Section 5 of P.D. No. 902-A. 8

The petitioner filed its opposition thereto, alleging that the private respondent who had not fully paid for the unit was
not the owner thereof, consequently was not the holder of a separate interest which would make her a stockholder,
and that hence the case was not an intra-corporate dispute. 9

After the private respondent had filed her answer to the opposition to the motion to dismiss 10 of the petitioner, the
trial court issued an order dated August 13, 1979 denying the motion to dismiss. 11 The private respondent's motion
for reconsideration thereof was denied by the trial court in its Order dated September 19, 1979. 12

The private respondent then appealed pursuant to Section 10 of Rule 40 of the Rules of Court to the Court of First
Instance, where the appeal was docketed as Civil Case No. 7530P. The petitioner filed its "Motion to Dismiss
Appeal" on the ground that the order of the trial court appealed from is interlocutory. 13

The motion to dismiss the appeal was denied and the parties were ordered to submit their respective memorandum
on the issue raised before the trial court and on the disputed order of the trial judge. 14 After the parties had
submitted their respective memoranda on the matter, the respondent Judge issued an order dated December 14,
1979 in which he directed that "the appeal is hereby dismissed and d the judgment of the lower court is reversed.
The case is dismissed and the parties are directed to ventilate their controversy with the Securities & Exchange
Commission. 15 The petitioner's motion for reconsideration thereof was denied in an order dated January 14,
1980. 16 Hence this petition for certiorari, alleging grave abuse of discretion on the part of the respondent Judge.

Issues Common to Both Cases

It is admitted that the private respondents in both cases have not yet fully paid the purchase price of their units. The
Identical issues raised in both petitions are the following:

1. Is a purchaser of a condominium unit in the condominium project managed by the petitioner, who has not yet fully
paid the purchase price thereof, automaticaly a ,stockholder of the petitioner Condominium Corporation

2. Is it the regular court or the Securities & Exchange Commission that has jurisdiction over cases for collection of
assessments assessed by the Condominium Corporation on condominium units the full purchase price of which has
not been paid?

The private respondents in both cases argue that every purchaser of a condominium unit, regardless of whether or
not he has fully paid the purchase price, is a "holder of a separate interest" mentioned in Section 2 of Republic Act
No. 4726, otherwise known as "The Condominium Act" and is automatically a shareholder of the condominium
corporation.

The contention has no merit. Section 5 of the Condominium Act expressly provides that the shareholding in the
Condominium Corporation will be conveyed only in a proper case. Said Section 5 provides:

Any transfer or conveyance of a unit or an apartment, office or other space therein, shall include the
transfer or conveyance of the undivided interests in the common areas or, in a proper case, the
membership or shareholding in the condominium corporation ...

It is clear then that not every purchaser of a condominium unit is a shareholder of the condominium corporation. The
Condominium Act leaves to the Master Deed the determination of when the shareholding will be transferred to the
purchaser of a unit. Thus, Section 4 of said Act provides:

The provisions of this Act shall apply to property divided or to be divided into condominium only if
there shall be recorded in the Register of Deeds of the province or city in which the property lies and
duly annotated in the corresponding certificate of title of the land ... an enabling or master deed
which shall contain, among others, the following:
 xxx xxx xxx

(d) Astatement of the exact nature of the interest acquired or to be acquired by the purchaser in the
separate units and in the common areas of the condominium project ...

The Amended Master Deeds in these cases, which were duly registered in the Register of Deeds, and which
contain, by mandate of Section 4, a statement of the exact nature of the interest acquired by a purchaser of a unit,
provide in Section 6 of Part 1:

(d) Each Unit owner shall, as an essential condition to such ownership, acquire stockholding in the
Condominium Corporation herein below provided ... 17

The Amended Master Deeds likewise provide in Section 7 (b), thus.

(b) All unit owners shall of necessity become stockholders of the Condominium Corporation.
TOWER shall acquire all the shares of stock of SUNSET VIEW and shall allocate the said shares to
the units in proportion to the appurtenant interest in the COMMON AREAS and LIMITED COMMON
AREAS as provided in Section 6 (b) above. Said shares allocated are mere appurtenances of each
unit, and therefore, the same cannot be transferred, conveyed, encumbered or otherwise disposed
of separately from the Unit ... 18

It is clear from the above-quoted provisions of the Master Deeds that the shareholding in the Condominium
Corporation is inseparable from the unit to which it is only an appurtenant and that only the owner of a unit is a
shareholder in the Condominium Corporation.

Subparagraph (a) of Part 1, Section 6, of the Master Deeds determines when and under what conditions ownership
of a unit is acquired by a purchaser thus:

(a) The purchaser of a unit shall acquire title or ownership of such Unit, subject to the terms and
conditions of the instrument conveying the unit to such purchaser and to the terms and conditions of
any subsequent conveyance under which the purchaser takes title to the Unit, and subject further to
this MASTER DEED ... 19

The instrument conveying the unit "Solana" in G.R. NO. 52361 is the "Contract to Buy and Sell" dated September
13, 1977, Annex "D", while that conveying the unit "Alegria" in G.R. NO. 52524 is the "Contract to Buy and Sell"
dated May 12, 1976, Annex "C". In both deeds of conveyance, it is provided:

4. Upon full payment by the BUYER of the total purchase price and full compliance by the BUYER of
an its obligations herein, the SELLER will convey unto the BUYER, as soon as practicable after
completion of the construction, full and absolute title in and to the subject unit, to the shares of stock
pertaining thereto and to an rights and interests in connection therewith ... 20

The share of stock appurtenant to the unit win be transferred accordingly to the purchaser of the unit only upon full
payment of the purchase price at which time he will also become the owner of the unit. Consequently, even under
the contract, it is only the owner of a unit who is a shareholder of the Condominium Corporation. Inasmuch as
owners is conveyed only upon full payment of the purchase price, it necessarily follows that a purchaser of a unit
who has not paid the full purchase price thereof is not The owner of the unit and consequently is not a shareholder
of the Condominium Corporation.

That only the owner of a unit is a stockholder of the Condominium Corporation is inferred from Section 10 of the
Condominium Act which reads:

SEC. 10. ... Membership in a condominium corporation, regardless of whether it is a stock or non-
stock corporation, shall not be transferable separately from the condominium unit of which it is an
appurtenance When a member or stockholder ceases is to own a unit in the project in which the
condominium corporation owns or holds the common areas, he shall automatically cease to be a
member or stockholder of the condominium corporation.
Pursuant to the above statutory provision, ownership of a unit is a condition sine qua non to being a shareholder in
the condominium corporation. It follows that a purchaser of a unit who is not yet the owner thereof for not having
fully paid the full purchase price, is not a shareholder By necessary implication, the "separate interest" in a
condominium, which entitles the holder to become automatically a share holder in the condominium corporation, as
provided in Section 2 of the Condominium Act, can be no other than ownership of a unit. This is so because nobody
can be a shareholder unless he is the owner of a unit and when he ceases to be the owner, he also ceases
automatically to be a shareholder.

The private respondents, therefore, who have not fully paid the purchase price of their units and are consequently
not owners of their units are not members or shareholders of the petitioner condominium corporation,

Inasmuch as the private respondents are not shareholders of the petitioner condominium corporation, the instant
case for collection cannot be a "controversy arising out of intracorporate or partnership relations between and
among stockholders, members or associates; between any or all of them and the corporation, partnership or
association of which they are stockholders, members or associates, respectively" which controversies are under the
original and exclusive jurisdiction of the Securities & Exchange Commission, pursuant to Section 5 (b) of P.D. No.
902- A. The subject matters of the instant cases according to the allegations of the complaints are under the
jurisdiction of the regular courts: that of G.R. NO. 52361, which is for the collection of P8,335.38 with interest plus
attorney's fees equivalent to the principal or a total of more than P10,000.00 is under the jurisdiction of the Court of
First Instance; and that of G.R. NO. 52524, which is for the collection of P6,168-06 is within the jurisdiction of the
City Court.

In view of the foregoing, it is no longer necessary to resolve the issue raised in G.R. NO. 52524 of whether an order
of the City Court denying a motion to dismiss on the ground of lack of jurisdiction can be appealed to the Court of
First Instance.

WHEREFORE, the questioned orders of the respondent Judge dated December 11, 1979 and January 4, 1980 in
Civil Case No. 7303-P, subject matter of the Petition in G.R. No. 52361, are set aside and said Judge is ordered to
try the case on the merits. The orders dated December 14, 1979 and January 14, 1980 in Civil Case No. 7530-P,
subject matter of the petition in G.R. No. 52524 are set aside and the case is ordered remanded to the court a quo,
City Court of Pasay City, for trial on the merits, with costs against the private respondents.

SO ORDERED.
G.R. No. 206038

MARY E. LIM, represented by her Attorney-in-fact, REYNALDO V. LIM, Petitioner,

vs.
MOLDEX LAND, INC., 1322 ROXAS BOULEVARD CONDOMINIUM CORPORATION, and JEFFREY
JAMINOLA, EDGARDO MACALINTAL, JOJI MILANES, and CLOTHILDA ANNE ROMAN, in their capacity as
purported MENDOZA, and LEONEN,JJ. members of the Board of Directors of 1322 Golden Empire
Corporation,, Respondents.

DECISION

MENDOZA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the March 4, 2013
Decision 1 of the Regional Trial Court of Manila, Branch 24, (RTC) in Civil Case No. 12-128478, which dismissed the
complaint against the respondents for 1] annulment of the July 21, 2012 general membership meeting of 1322
Roxas Boulevard Condominium Corporation (Condocor); 2] annulment of election of Jeffrey
Jaminola (Jaminola), Edgardo Macalintal (Macalintal), Joji Milanes (Milanes), and Clothilda Anne
Roman (Roman) (collectively referred to as "individual respondents") as members of the Board of Directors; and 3]
accounting.

The primordial issue presented before the R TC, acting as a special commercial court, was the validity, legality and
effectivity of the July 21, 2012 Annual General Membership Meeting and Organizational Meeting of Condocor's
Board of Directors.2

Initially, the Court, in its Resolution3 dated April 1, 2013, denied the petition for having availed of the wrong mode of
appeal because Lim raised mixed questions of fact and law, which should have been filed before the Court of
Appeals (CA).4Upon motion for reconsideration, however, the Court granted it. Thereafter, the respondents filed their
Comment5 and Lim filed a Reply6 thereto.

The Antecedents

Lim is a registered unit owner of 1322 Golden Empire Tower (Golden Empire Tower), a condominium project of
Moldex Land, Inc. (Moldex), a real estate company engaged in the construction and development of high-end
condominium projects and in the marketing and sale of the units thereof to the general public. Condocor, a non-
stock, non-profit corporation, is the registered condominium corporation for the Golden Empire Tower. Lim, as a unit
owner of Golden Empire Tower, is a member of Condocor.

Lim claimed that the individual respondents are non-unit buyers, but all are members of the Board of Directors of
Condocor, having been elected during its organizational meeting in 2008. They were again elected during the July
21, 2012 general membership meeting.7

Moldex became a member of Condocor on the basis of its ownership of the 220 unsold units in the Golden Empire
Tower. The individual respondents acted: as its representatives.

On July 21, 2012, Condocor held its annual general membership meeting. Its corporate secretary certified, and
Jaminola, as Chairman, declared the existence of a quorum even though only 29 of the 1088 unit buyers were
present. The declaration of quorum was based on the presence of the majority of the voting rights, including those
pertaining to the 220 unsold units held by Moldex through its representatives. Lim, through her attorney-in-fact,
objected to the validity of the meeting. The objection was denied. Thus, Lim and all the other unit owners present,
except for one, walked out and left the meeting.

Despite the walkout, the individual respondents and the other unit owner proceeded with the annual general
membership meeting and elected the new members of the Board of Directors for 2012-2013. All four (4) individual
respondents were voted as members of the board, together with three (3) others whose election was conditioned on
their subsequent confirmation.9 Thereafter, the newly elected members of the board conducted an organizational
meeting and proceeded with the election of its officers. The individual respondents were elected as follows:
1. Atty. Jeffrey Jaminola - Chairman of the Board and President

2. Ms. Joji Milanes - Vice-President

3. Ms. Clothilda Ann Roman - Treasurer

4. Mr. Edgardo Macalintal - Corporate Secretary

5. Atty. Ma. Rosario Bernardo - Asst. Corporate Secretary

6. Atty. Mary Rose Pascual - Asst. Corporate Secretary

7. Atty. Jasmin Cuizon - Asst. Corporate Secretary10

Consequently, Lim filed an election protest before the RTC. Said court, however, dismissed the complaint holding
that there was a quorum during the July 21, 2012 annual membership meeting; that Moldex is a member of
Condocor, being the registered owner of the unsold/unused condominium units, parking lots and storage areas; and
that the individual respondents, as Moldex's representatives, were entitled to exercise all membership rights,
including the right to vote and to be voted. 11 In so ruling, the trial court explained that the presence or absence of a
quorum in the subject meeting was determined on the basis of the voting rights of all the units owned by the
members in good standing. 12 The total voting rights of unit owners in good standing was 73,376 and, as certified by
the corporate secretary, 83.33% of the voting rights in good standing were present in the said meeting, inclusive of
the 5 8,504 voting rights of Moldex. 13

Not in conformity, Lim filed the subject petition raising the following

ISSUES

A. THE LOWER COURT GRAVELY ERRED IN RULING THAT IN DETERMINING THE PRESENCE OR
ABSENCE OF QUORUM AT GENERAL OR ANNUAL MEMBERSHIP MEETINGS OF RESPONDENT
CONDOCOR, EVEN NONUNIT BUYERS SHOULD BE INCLUDED DESPITE THE EXPRESS PROVISION OF ITS
BY-LAWS, THE LAW AND SETTLED JURISPRUDENCE;

B. THE LOWER COURT ERRED IN RULING THAT RESPONDENT MOLDEX IS A MEMBER OF RESPONDENT
CONDOCOR AND THAT IT MAY APPOINT INDIVIDUAL RESPONDENTS TO REPRESENT IT THEREIN;

C. EVEN ASSUMING THAT RESPONDENT MOLDEX MAY BE A MEMBER OF RESPONDENT CONDOCOR,

THERE IS STILL NO BASIS FOR IT TO BE ELECTED TO THE BOARD OF DIRECTORS OF RESPONDENT
CONDOCOR BECAUSE IT IS A JURIDICAL PERSON;

D. ASSUMING FURTHER THAT DESPITE BEING A JURIDICAL PERSON, IT MAY BE ELECTED TO THE
BOARD OF DIRECTORS OF RESPONDENT CONDOCOR, THERE IS NO LEGAL BASIS FOR THE LOWER
COURT TO HOLD THAT RESPONDENT MOLDEX HAS AUTOMATICALLY RESERVED FOUR SEATS
THEREIN; AND,

E. THE LOWER COURT GRAVELY ERRED IN RULING TO RECOGNIZE RESPONDENT MOLDEX AS

OWNERDEVELOPER HAVING FOUR RESERVED SEATS IN RESPONDENT CONDOCOR BOARD, AS SUCH
RULING EFFECTIVELY ALLOWED THE VERY EVIL THAT PD 957 SOUGHT TO PREVENT FROM
DOMINATING THE CONTROL AND MANAGEMENT OF RESPONDENT CONDOCOR TO THE GRAVE AND
IRREPARABLE DAMAGE AND INJURY OF PETITIONER AND THE OTHER UNIT BUYERS, WHO ARE THE
BONA FIDE MEMBERS OF RESPONDENT CONDOCOR.

In sum, the primordial issues to be resolved are: 1) whether the July 21, 2012 membership meeting was valid; 2)
whether Moldex can be deemed a member of Condocor; and 3) whether a non-unit owner can be elected as a
member of the Board of Directors of Condocor.

Procedural Issues
The issues raised being purely legal, the Court may properly entertain the subject petition.

The subject case was initially denied because it appeared that Lim raised mixed questions of fact and law which
should have been filed before the CA. After judicious perusal of Lim's arguments, however, the Court ascertained
that a reconsideration of its April 1, 2013 Resolution14 was in order.

It has been consistently held that only pure questions of law can be entertained in a petition for review under Rule
45 of the Rules of Court. In Century Iron Works, Inc. v. Banas,15the Court held:

A petition for review on certiorari under Rule 45 is an appeal from a ruling of a lower tribunal on pure questions of
law. It is only in exceptional circumstances that we admit and review questions of fact.

A question of law arises when there is doubt as to what the law is on a certain state of facts, while there is a
question of fact when the doubt arises as to the truth or falsity of the alleged facts. For a question to be one of law,
the question must not involve an examination of the probative value of the evidence presented by the litigants or any
of them. The resolution of the issue must rest solely on what the law provides on the given set of circumstances.
Once it is clear that the issue invites a review of the evidence presented, the question posed is one of fact.

Thus, the test of whether a question is one of law or of fact is not the appellation given to such question by
the party raising the same; rather, it is whether the appellate court can determine the issue raised without
reviewing or evaluating the evidence, in which case, it is a question of law; otherwise it is a question of
fact. 16 [Emphasis supplied]

Respondents argued that the initial denial of the petition was correct because Lim availed of the wrong mode of
appeal. As the assailed judgment involved an intra-corporate dispute cognizable by the RTC, the appeal should
have been filed before the CA, and not before this Court.

Doubtless, this case involves intra-corporate controversies and, thus, jurisdiction lies with the R TC, acting as a
special commercial court. Section 5.2 of Republic Act No. 8799 (R.A. No. 8799)17effectively transferred to the
appropriate RTCs jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A (P.D.
No. 902-A), to wit:

a) Devices or schemes employed by or any acts, of the board of directors, business associates, its officers or
partnership, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/ or
of the stockholder, partners, members of associations or organizations registered with the Commission;

b) Controversies arising out of intra-corporate or partnership relations, between and

amongstockholders, members, or associates; between any or all of them and the corporation, partnership or
association of which they are stockholders, members or associates, respectively; and between such corporation,
partnership or association and the state insofar as it concerns their individual franchise or right to exist as such
entity; and

c) Controversies in the election or appointments of directors, trustees, officers or managers of such

corporations, partnerships or associations. [Emphases supplied]

Pursuant to A.M. No. 04-9-07-SC, all decisions and final orders in cases falling under the Interim Rules of Corporate
Rehabilitation and the Interim Rules of Procedure Governing Intra-Corporate Controversies shall be appealable to
the CA through a petition for review under Rule 43 of the Rules of Court. Such petition shall be taken within fifteen
(15) days from notice of the decision or final order of the RTC.18

In turn, Rule 43 governs the procedure for appeals from judgments or final orders of quasi-judicial agencies to the
CA, whether it involves questions of fact, of law, or mixed questions of fact and law. Nevertheless, a party may
directly file a petition for review on certiorari before the Court to question the judgment of a lower court, especially
when the issue raised is purely of law and is one of novelty.

Substantive Issues
Lim is still a member of Condocor

Respondents argued that Lim had no cause of action to file the subject action because she was no longer the owner
of a condominium unit by virtue of a Deed of Assignment19 she executed in favor of Reynaldo Valera Lim and Dianna
Mendoza Lim, her nephew and niece.

Section 90 of the Corporation Code states that membership in a non-stock corporation and all rights arising
therefrom are personal and non-transferable, unless the articles of incorporation or the by-laws otherwise provide. A
perusal of Condocor's By-Laws as regards membership and transfer of rights or ownership over the unit reveal that:

Membership in the CORPORATION is a mere appurtenance of the ownership of any unit in the CONDOMINIUM
and may not therefore be sold, transferred or otherwise encumbered separately from the said unit. Any member
who sells or transfer his/her/its unit/s in the CONDOMINIUM shall automatically cease to be a member of the
CORPORATION, the membership being automatically assumed by the buyer or transferee upon registration
of the sale or transfer and ownership of the latter over the unit with the Register of Deeds for the City of
Manila.20 [Emphasis supplied.]

Likewise, the Master Deed of Condocor provides:

Section 11 : MORTGAGES, LIENS, LEASES, TRANSFERS OF RIGHTS AND SALE OF UNITS: All transactions
involving the transfer of the ownership or occupancy of any UNIT, such as sale, transfer of rights or leases, as well
as encumbrances involving said UNIT, such as mortgages, liens and the like, shall be reported to the
CORPORATION within five (5) days after the effectivity of said transactions.21

Nothing in the records showed that the alleged transfer made by Lim was registered with the Register of Deeds of
the City of Manila or was reported to the corporation. Logically, until and unless the registration is effected, Lim
remains to be the registered owner of the condominium unit and thus, continues to be a member of Condocor.

Moreover, even assuming that there was a transfer by virtue of the Deed of Assignment, the Confirmatory Special
Power of Attorney22 executed later by Lim, wherein she reiterated her membership in Condocor and constituted
Reynaldo V. Lim as her true and lawful Attorney-in-Fact, strengthened the fact that she still owns the condominium
unit and that there has been no transfer of ownership over the said property to her nephew, but only a mere
assignment of rights to the latter. As held by the Court in Casabuena v. CA,23 at most, an assignee can only acquire
rights duplicating those which his assignor is entitled by law to exercise. 24 Had it been otherwise, Reynaldo V. Lim
himself would have questioned and objected to the granting of the special power of attorney, and would have
insisted that he was really the owner of the condominium unit.

In non-stock corporations, quorum

is determined by the majority
of its actual members

In corporate parlance, the term "meeting" applies to every duly convened assembly either of stockholders,
members, directors, trustees, or managers for any legal purpose, or the transaction of business of a common
interest.25 Under Philippine corporate laws, meetings may either be regular or special. A stockholders' or members'
meeting must comply with the following requisites to be valid:

1. The meeting must be held on the date fixed in the By-Laws or in accordance with law;26

2. Prior written notice of such meeting must be sent to all stockholders/members of record;27

3. It must be called by the proper party;28

4. It must be held at the proper place;29 and

5. Quorum and voting requirements must be met. 30

Of these five (5) requirements, the existence of a quorum is crucial. Any act or transaction made during a meeting
without quorum is rendered of no force and effect, thus, not binding on the corporation or parties concerned.

In relation thereto, Section 52 of the Corporation Code of the Philippines (Corporation Code) provides:

Section 52. Quorum in meetings. - Unless otherwise provided for in this Code or in the by-laws, a quorum shall
consist of the stockholders representing a majority of the outstanding capital stock or a majority of the members in
the case of non-stock corporations.

Thus, for stock corporations, the quorum is based on the number of outstanding voting stocks while for non-stock
corporations, only those who are actual, living members with voting rights shall be counted in determining the
existence of a quorum. 31

To be clear, the basis in determining the presence of quorum in non-stock corporations is the numerical equivalent
of all members who are entitled to vote, unless some other basis is provided by the By-Laws of the corporation. The
qualification "with voting rights" simply recognizes the power of a non-stock corporation to limit or deny the right to
vote of any of its members.32 To include these members without voting rights in the total number of members for
purposes of quorum would be superfluous for although they may attend a particular meeting, they cannot cast their
vote on any matter discussed therein.

Similarly, Section 6 of Condocor's By-Laws reads: "The attendance of a simple majority of the members who are in
good standing shall constitute a quorum ... x x x." The phrase, "members in good standing," is a mere qualification
as to which members will be counted for purposes of quorum. As can be gleaned from Condocor's By-Laws, there
are two (2) kinds of members: 1) members in good standing; and 2) delinquent members. Section 6 merely stresses
that delinquent members are not to be taken into consideration in determining quorum. In relation thereto, Section
733 of the By-Laws, referring to voting rights, also qualified that only those members in good standing are entitled to
vote. Delinquent members are stripped off their right to vote. Clearly, contrary to the ruling of the RTC, Sections 6
and 7 of Condocor's By-Laws do not provide that majority of the total voting rights, without qualification, will
constitute a quorum.

It must be emphasized that insofar as Condocor is concerned, quorum is different from voting rights. Applying the
law and Condocor's By-Laws, if there are 100 members in a non-stock corporation, 60 of which are members in
good standing, then the presence of 50% plus 1 of those members in good standing will constitute a quorum. Thus,
31 members in good standing will suffice in order to consider a meeting valid as regards the presence of quorum.
The 31 members will naturally have to exercise their voting rights. It is in this instance when the number of voting
rights each member is entitled to becomes significant. If 29 out of the 31 members are entitled to 1 vote each,
another member (known as A) is entitled to 20 votes and the remaining member (known as B) is entitled to 15 votes,
then the total number of voting rights of all 31 members is 64. Thus, majority of the 64 total voting rights, which is 33
(50% plus 1), is necessary to pass a valid act. Assuming that only A and B concurred in approving a specific
undertaking, then their 35 combined votes are more than sufficient to authorize such act.

The By-Laws of Condocor has no rule different from that provided in the Corporation Code with respect the
determination of the existence of a quorum. The quorum during the July 21, 2012 meeting should have been
majority of Condocor's members in good standing. Accordingly, there was no quorum during the July 21, 2012
meeting considering that only 29 of the 108 unit buyers were present.

As there was no quorum, any resolution passed during the July 21, 2012 annual membership meeting was null and
void and, therefore, not binding upon the corporation or its members. The meeting being null and void, the resolution
and disposition of other legal issues emanating from the null and void July 21, 2012 membership meeting has been
rendered unnecessary.

To serve as a guide for the bench and the bar, however, the Court opts to discuss and resolve the same.

Moldex is a member
Of Condocor
Matters involving a condominium are governed by Republic Act No. 4726 (Condominium Act). Said law sanctions
the creation of a condominium corporation which is especially formed for the purpose of holding title to the common
areas, including the land, or the appurtenant interests in such areas, in which the holders of separate interest shall
automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of
their respective units in the common areas. 34 In relation thereto, Section 10 of the same law clearly provides that the
condominium corporation shall constitute the management body of the project.

Membership in a condominium corporation is limited only to the unit owners of the condominium project. This is
provided in Section 10 of the Condominium Act which reads:

Membership in a condominium corporation, regardless of whether it is a stock or non-stock corporation, shall not be
transferable separately from the condominium unit of which it is an appurtenance. When a member or
stockholder ceases to own a unit in the project in which the condominium corporation owns or holds the common
areas, he shall automatically cease to be a member or stockholder of the condominium
corporation.35 [Emphases supplied]

Although the Condominium Act provides for the minimum requirement for membership in a condominium
corporation, a corporation's articles of incorporation or by-laws may provide for other terms of membership, so long
as they are not inconsistent with the provisions of the law, the enabling or master deed, or the declaration of
restrictions of the condominium project.

In this case, Lim argued that Moldex cannot be a member of Condocor. She insisted that a condominium
corporation is an association of homeowners for the purpose of managing the condominium project, among others.
Thus, it must be composed of actual unit buyers or residents of the condominium project.36 Lim further averred that
the ownership contemplated by law must result from a sale transaction between the owner-developer and the
purchaser. She advanced the view that the ownership of Moldex was only in the nature of an owner-developer and
only for the sole purpose of selling the units.37 In justifying her arguments, Lim cited Section 30 of Presidential
Decreee No. 957, known as The Subdivision and Condominium Buyers' Protective Decree (P.D. No. 957), to wit:

Section 30. Organization of Homeowners Association. The owner or developer of a subdivision project or
condominium project shall initiate the organization of a homeowners association among the buyers and residents
of the projects for the purpose of promoting and protecting their mutual interest and assist in their community
development. [Emphasis in the original.]

Furthermore, in distinguishing between a unit buyer and an owner-developer of a project, Lim cited Section 25 of
P.D. No. 957, which provides:

Section 25. Issuance of Title. The owner or developer shall deliver the title of the lot or unit to the buyer upon full
payment of the lot or unit. xxx

Likewise, Lim relied on Sunset View Condominium Corp. v. Hon. Campos, Jr., 38 where the Court wrote:

The share of stock appurtenant to the unit will be transferred accordingly to the purchaser of the unit only upon
full payment of the purchase price at which time he will also become the owner of the unit. Consequently,
even under the contract, it is only the owner of a unit who is a shareholder of the Condominium Corporation.

Inasmuch as owners is conveyed only upon full payment of the purchase price, it necessarily follows that a
purchaser of a unit who has not paid the full purchase price thereof is not the owner of the unit and
consequently is not a shareholder of the Condominium Corporation.[Emphasis in the original]

On these grounds, Lim asserted that only unit buyers are entitled to become members of Condocor. 39

The Court finds itself unable to agree.

Lim's reliance of P.D. No. 957 is misplaced. There is no provision in P.D. No. 957 which states that an owner-
developer of a condominium project cannot be a member of a condominium corporation. Section 30 of P.D. No. 957
determines the purposes of a homeowners association - to promote and protect the mutual interest of the buyers
and residents, and to assist in their community development. A condominium corporation, however, is not just a
management body of the condominium project. It also holds title to the common areas, including the land, or the
appurtenant interests in such areas. Hence, it is especially governed by the Condominium Act. Clearly, a
homeowners association is different from a condominium corporation. P.D. No. 957 does not regulate condominium
corporations and, thus, cannot be applied in this case.

Sunset View merely delineated the difference between a "purchaser" and an "owner," whereby the former could be
considered an owner only upon full payment of the purchase price. The case merely clarified that not every
purchaser of a condominium unit could be a shareholder of the condominium corporation.

Respondents, for their part, countered that a registered owner of a unit in a condominium project or the holders of
duly issued condominium certificate of title (CCT),40automatically becomes a member of the condominium
corporation,41 relying on Sections 2 and 10 of the Condominium Act, the Master Deed and Declaration of
Restrictions, as well as the By-Laws of Condocor. For said reason, respondents averred that as Moldex is the owner
of 220 unsold units and the parking slots and storage areas attached thereto, it automatically became a member of
Condocor upon the latter's creation.42

On this point, respondents are correct.

Section 2 of the Condominium Act states:

Sec. 2. A condominium is an interest in real property consisting of separate interest in a unit in a residential,
industrial or commercial building and an undivided interest in common, directly or indirectly, in the land on which it is
located and in other common areas of the building. A condominium may include, in addition, a separate interest in
other portions of such real property. Title to the common areas, including the land, or the appurtenant interests
in such areas, may be held by a corporation specially formed for the purpose (hereinafter known as the
"condominium corporation") in which the holders of separate interest shall automatically be members or
shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units
in the common areas. [Emphasis supplied]

In Sunset View,43the Court elucidated on what constitutes "separate interest," in relation to membership, as
mentioned in the Condominium Act, to wit:

By necessary implication, the "separate interest" in a condominium, which entitles the holder to become
automatically a shareholder in the condominium corporation, as provided in Section 2 of the Condominium
Act, can be no other than ownership of a unit. This is so because nobody can be a shareholder unless he is the
owner of a unit and when he ceases to be the owner, he also ceases automatically to be a shareholder.44 [Emphasis
supplied.]

Thus, law and jurisprudence dictate that ownership of a unit entitles one to become a member of a condominium
corporation. The Condominium Act does not provide a specific mode of acquiring ownership. Thus, whether one
1âwphi1

becomes an owner of a condominium unit by virtue of sale or donation is of no moment.

It is erroneous to argue that the ownership must result from a sale transaction between the owner-developer and the
purchaser. Such interpretation would mean that persons who inherited a unit, or have been donated one, and
properly transferred title in their names cannot become members of a condominium corporation.

The next issue is - may Moldex appoint duly authorized representatives who will exercise its membership rights,
specifically the right to be voted as corporate directors/officers?

Moldex may appoint a

duly authorized representative

A corporation can act only through natural persons duly authorized for the purpose or by a specific act of its board of
directors.45 Thus, in order for Moldex to exercise its membership rights and privileges, it necessarily has to appoint
its representatives.
Section 58 of the Corporation Code mandates:

Section 58. Proxies. - Stockholders and members may vote in person or by proxy in all meetings
of stockholders or members. Proxies shall in writing, signed by the stockholder or member and filed before the
scheduled meeting with the corporate secretary. Unless otherwise provided in the proxy, it shall be valid only for the
meeting for which it is intended. No proxy shall be valid and effective for a period longer than five (5) years at any
one time. [Emphasis supplied]

Relative to the above provision is Section 1, Article II of Condocor's By-Laws, 46 which grants registered owners the
right to designate any person or entity to represent them in Condocor, subject to the submission of a written
notification to the Secretary of such designation. Further, the owner's representative is entitled to enjoy and avail
himself of all the rights and privileges, and perform all the duties and responsibilities of a member of the corporation.
The law and Condocor's By-Laws evidently allow proxies in members' meeting.

Prescinding therefrom, Moldex had the right to send duly authorized representatives to represent it during the
questioned general membership meeting. Records showed that, pursuant to a Board Resolution, as certified47 by
Sandy T. Uy, corporate secretary of Moldex, the individual respondents were instituted as Moldex's representatives.
This was attested to by Mary Rose V. Pascual, Assistant Corporate Secretary of Condocor, in a sworn
statement48she executed on August 31, 2012.

Next question is - can the individual respondents be elected as directors of Condocor?

Individual respondents who

are non-members cannot be
elected as directors and officers
of the condominium corporation

The governance and management of corporate affairs in a corporation lies with its board of directors in case of stock
corporations, or board of trustees in case of non-stock corporations. As the board exercises all corporate powers
and authority expressly vested upon it by law and by the corporations' by-laws, there are minimum requirements set
in order to be a director or trustee, one of which is ownership of a share in one's name or membership in a non-
stock corporation. Section 23 of the Corporation Code provides:

Section 23. The Board of Directors or Trustees. - Unless otherwise provided in this Code, the corporate powers of
all corporations formed under this Code shall be exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or trustees to be elected from among the holders of
stocks, or where there is no stock, from among the members of the corporation, who shall hold office for one
(1) year until their successors are elected and qualified.

Every director must own at least one (1) share of the capital stock of the corporation of which he is a director, which
share shall stand in his name on the books of the corporation. Any director who ceases to be the owner of at least
one (1) share of the capital stock of the corporation of which he is a director shall thereby cease to be a
director. Trustees of non-stock corporations must be members thereof.A majority of the directors or trustees of
all corporations organized under this Code must be residents of the Philippines. [Emphases supplied]

This rule was reiterated in Section 92 of the Corporation Code, which states:

Section 92. Election and term of trustees. – x x x No person shall be elected as trustee unless he is a member of the
corporation. x x x

While Moldex may rightfully designate proxies or representatives, the latter, however, cannot be elected as directors
or trustees of Condocor. First, the Corporation Code clearly provides that a director or trustee must be a member of
record of the corporation. Further, the power of the proxy is merely to vote. If said proxy is not a member in his own
right, he cannot be elected as a director or proxy.

Respondents cannot rely on the Securities and Exchange Commission (SEC) Opinions they cited to justify the
individual respondents' election as directors. In Heirs of Gamboa v. Teves,49 the Court En Banc held that opinions
issued by SEC legal officers do not have the force and effect of SEC rules and regulations because only the SEC en
banc can adopt rules and regulations.

Following Section 25 of the Corporation Code, the election of individual respondents, as corporate officers, was
likewise invalid.

Section 25 of the Corporation Code mandates that the President shall be a director. As previously discussed,
Jaminola could not be elected as a director. Consequently, Jaminola's election as President was null and void.

The same provision allows the election of such other officers as may be provided for in the by-laws. Condocor's By-
Laws, however, require that the Vice-President shall be elected by the Board from among its member-directors in
good standing, and the Secretary may be appointed by the Board under the same circumstance. Like Jaminola,
Milanes and Macalintal were not directors and, thus, could not be elected and appointed as Vice-President and
Secretary, respectively.

Insofar as Roman's election as Treasurer is concerned, the same would have been valid, as a corporate treasurer
may or may not be a director of the corporation's board. The general membership meeting of Condocor, however,
was null and void. As a consequence, Roman's election had no legal force and effect.

In fine, the July 21, 2012 annual general membership meeting of Condocor being null and void, all acts and
resolutions emanating therefrom are likewise null and void.

WHEREFORE, the petition is GRANTED. The March 4, 2013 Decision of the Regional Trial Court, Branch 24,
Manila, in Civil Case No. 12-128478 is hereby REVERSED and SET ASIDE. The Court declares that:

a) The July 21, 2012 Annual General Membership Meeting of Condocor is null and void;

b) The election of members of the Board of Directors in the annual general membership meeting is likewise null and
void; and

c) The succeeding Organizational Meeting of Condocor's Board of Directors as well as the election of its corporate
officers are of no force and effect.

Costs against respondents.

SO ORDERED.
G.R. No. 156364 September 3, 2007

JACOBUS BERNHARD HULST, petitioner,

vs.
PR BUILDERS, INC., respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court assailing the
Decision1 dated October 30, 2002 of the Court of Appeals (CA) in CA-G.R. SP No. 60981.

The facts:

Jacobus Bernhard Hulst (petitioner) and his spouse Ida Johanna Hulst-Van Ijzeren (Ida), Dutch nationals, entered
into a Contract to Sell with PR Builders, Inc. (respondent), for the purchase of a 210-sq m residential unit in
respondent's townhouse project in Barangay Niyugan, Laurel, Batangas.

When respondent failed to comply with its verbal promise to complete the project by June 1995, the spouses Hulst
filed before the Housing and Land Use Regulatory Board (HLURB) a complaint for rescission of contract with
interest, damages and attorney's fees, docketed as HLRB Case No. IV6-071196-0618.

On April 22, 1997, HLURB Arbiter Ma. Perpetua Y. Aquino (HLURB Arbiter) rendered a Decision 2 in favor of
spouses Hulst, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainant, rescinding
the Contract to Sell and ordering respondent to:

1) Reimburse complainant the sum of P3,187,500.00, representing the purchase price paid by the
complainants to P.R. Builders, plus interest thereon at the rate of twelve percent (12%) per annum from the
time complaint was filed;

2) Pay complainant the sum of P297,000.00 as actual damages;

3) Pay complainant the sum of P100,000.00 by way of moral damages;

4) Pay complainant the sum of P150,000.00 as exemplary damages;

5) P50,000.00 as attorney's fees and for other litigation expenses; and

6) Cost of suit.

SO ORDERED.3

Meanwhile, spouses Hulst divorced. Ida assigned her rights over the purchased property to petitioner.4 From then
on, petitioner alone pursued the case.

On August 21, 1997, the HLURB Arbiter issued a Writ of Execution addressed to the Ex-Officio Sheriff of the
Regional Trial Court of Tanauan, Batangas directing the latter to execute its judgment.5

On April 13, 1998, the Ex-Officio Sheriff proceeded to implement the Writ of Execution. However, upon complaint of
respondent with the CA on a Petition for Certiorari and Prohibition, the levy made by the Sheriff was set aside,
requiring the Sheriff to levy first on respondent's personal properties.6 Sheriff Jaime B. Ozaeta (Sheriff) tried to
implement the writ as directed but the writ was returned unsatisfied.7
On January 26, 1999, upon petitioner's motion, the HLURB Arbiter issued an Alias Writ of Execution.8

On March 23, 1999, the Sheriff levied on respondent's 15 parcels of land covered by 13 Transfer Certificates of Title
(TCT)9 in Barangay Niyugan, Laurel, Batangas.10

In a Notice of Sale dated March 27, 2000, the Sheriff set the public auction of the levied properties on April 28, 2000
at 10:00 a.m..11

Two days before the scheduled public auction or on April 26, 2000, respondent filed an Urgent Motion to Quash Writ
of Levy with the HLURB on the ground that the Sheriff made an overlevy since the aggregate appraised value of the
levied properties at P6,500.00 per sq m is P83,616,000.00, based on the Appraisal Report12 of Henry Hunter Bayne
Co., Inc. dated December 11, 1996, which is over and above the judgment award.13

At 10:15 a.m. of the scheduled auction date of April 28, 2000, respondent's counsel objected to the conduct of the
public auction on the ground that respondent's Urgent Motion to Quash Writ of Levy was pending resolution. Absent
any restraining order from the HLURB, the Sheriff proceeded to sell the 15 parcels of land. Holly Properties Realty
Corporation was the winning bidder for all 15 parcels of land for the total amount of P5,450,653.33. The sum
of P5,313,040.00 was turned over to the petitioner in satisfaction of the judgment award after deducting the legal
fees.14

At 4:15 p.m. of the same day, while the Sheriff was at the HLURB office to remit the legal fees relative to the auction
sale and to submit the Certificates of Sale15 for the signature of HLURB Director Belen G. Ceniza (HLURB Director),
he received the Order dated April 28, 2000 issued by the HLURB Arbiter to suspend the proceedings on the
matter.16

Four months later, or on August 28, 2000, the HLURB Arbiter and HLURB Director issued an Order setting aside the
sheriff's levy on respondent's real properties,17 reasoning as follows:

While we are not making a ruling that the fair market value of the levied properties is PhP6,500.00 per
square meter (or an aggregate value of PhP83,616,000.00) as indicated in the Hunter Baynes Appraisal
Report, we definitely cannot agree with the position of the Complainants and the Sheriff that the aggregate
value of the 12,864.00-square meter levied properties is only around PhP6,000,000.00. The disparity
between the two valuations are [sic] so egregious that the Sheriff should have looked into the matter first
before proceeding with the execution sale of the said properties, especially when the auction sale
proceedings was seasonably objected by Respondent's counsel, Atty. Noel Mingoa. However, instead of
resolving first the objection timely posed by Atty. Mingoa, Sheriff Ozaete totally disregarded the objection
raised and, posthaste, issued the corresponding Certificate of Sale even prior to the payment of the legal
fees (pars. 7 & 8, Sheriff's Return).

While we agree with the Complainants that what is material in an execution sale proceeding is the amount
for which the properties were bidded and sold during the public auction and that, mere inadequacy of the
price is not a sufficient ground to annul the sale, the court is justified to intervene where the inadequacy of
the price shocks the conscience (Barrozo vs. Macaraeg, 83 Phil. 378). The difference between
PhP83,616,000.00 and Php6,000,000.00 is PhP77,616,000.00 and it definitely invites our attention to look
into the proceedings had especially so when there was only one bidder, the HOLLY PROPERTIES REALTY
CORPORATION represented by Ma, Chandra Cacho (par. 7, Sheriff's Return) and the auction sale
proceedings was timely objected by Respondent's counsel (par. 6, Sheriff's Return) due to the pendency of
the Urgent Motion to Quash the Writ of Levy which was filed prior to the execution sale.

Besides, what is at issue is not the value of the subject properties as determined during the auction
sale, but the determination of the value of the properties levied upon by the Sheriff taking into
consideration Section 9(b) of the 1997 Rules of Civil Procedure x x x.

xxxx
 It is very clear from the foregoing that, even during levy, the Sheriff has to consider the fair market value of
the properties levied upon to determine whether they are sufficient to satisfy the judgment, and any levy in
excess of the judgment award is void (Buan v. Court of Appeals, 235 SCRA 424).

x x x x18 (Emphasis supplied).

The dispositive portion of the Order reads:

WHEREFORE, the levy on the subject properties made by the Ex-Officio Sheriff of the RTC of Tanauan,
Batangas, is hereby SET ASIDE and the said Sheriff is hereby directed to levy instead Respondent's real
properties that are reasonably sufficient to enforce its final and executory judgment, this time, taking into
consideration not only the value of the properties as indicated in their respective tax declarations, but also all
the other determinants at arriving at a fair market value, namely: the cost of acquisition, the current value of
like properties, its actual or potential uses, and in the particular case of lands, their size, shape or location,
and the tax declarations thereon.

SO ORDERED.19

A motion for reconsideration being a prohibited pleading under Section 1(h), Rule IV of the 1996 HLURB Rules and
Procedure, petitioner filed a Petition for Certiorari and Prohibition with the CA on September 27, 2000.

On October 30, 2002, the CA rendered herein assailed Decision20 dismissing the petition. The CA held that
petitioner's insistence that Barrozo v. Macaraeg21 does not apply since said case stated that "when there is a right to
redeem inadequacy of price should not be material" holds no water as what is obtaining in this case is not "mere
inadequacy," but an inadequacy that shocks the senses; that Buan v. Court of Appeals22 properly applies since the
questioned levy covered 15 parcels of land posited to have an aggregate value of P83,616,000.00 which shockingly
exceeded the judgment debt of only around P6,000,000.00.

Without filing a motion for reconsideration,23 petitioner took the present recourse on the sole ground that:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE ARBITER'S ORDER
SETTING ASIDE THE LEVY MADE BY THE SHERIFF ON THE SUBJECT PROPERTIES.24

Before resolving the question whether the CA erred in affirming the Order of the HLURB setting aside the levy made
by the sheriff, it behooves this Court to address a matter of public and national importance which completely
escaped the attention of the HLURB Arbiter and the CA: petitioner and his wife are foreign nationals who are
disqualified under the Constitution from owning real property in their names.

Section 7 of Article XII of the 1987 Constitution provides:

Sec. 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed
except to individuals, corporations, or associations qualified to acquire or hold lands of the public
domain. (Emphasis supplied).

The capacity to acquire private land is made dependent upon the capacity to acquire or hold lands of the public
domain. Private land may be transferred or conveyed only to individuals or entities "qualified to acquire lands of the
public domain." The 1987 Constitution reserved the right to participate in the disposition, exploitation, development
and utilization of lands of the public domain for Filipino citizens25 or corporations at least 60 percent of the capital of
which is owned by Filipinos.26 Aliens, whether individuals or corporations, have been disqualified from acquiring
public lands; hence, they have also been disqualified from acquiring private lands.27

Since petitioner and his wife, being Dutch nationals, are proscribed under the Constitution from acquiring and
owning real property, it is unequivocal that the Contract to Sell entered into by petitioner together with his wife and
respondent is void. Under Article 1409 (1) and (7) of the Civil Code, all contracts whose cause, object or purpose is
contrary to law or public policy and those expressly prohibited or declared void by law are inexistent and void from
the beginning. Article 1410 of the same Code provides that the action or defense for the declaration of the
inexistence of a contract does not prescribe. A void contract is equivalent to nothing; it produces no civil effect.28 It
does not create, modify or extinguish a juridical relation.29

Generally, parties to a void agreement cannot expect the aid of the law; the courts leave them as they are, because
they are deemed in pari delicto or "in equal fault."30 In pari delicto is "a universal doctrine which holds that no action
arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to
recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation;
and where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other."31

This rule, however, is subject to exceptions32 that permit the return of that which may have been given under a void
contract to: (a) the innocent party (Arts. 1411-1412, Civil Code);33 (b) the debtor who pays usurious interest (Art.
1413, Civil Code);34 (c) the party repudiating the void contract before the illegal purpose is accomplished or
before damage is caused to a third person and if public interest is subserved by allowing recovery (Art.
1414, Civil Code);35 (d) the incapacitated party if the interest of justice so demands (Art. 1415, Civil Code);36 (e) the
party for whose protection the prohibition by law is intended if the agreement is not illegal per se but merely
prohibited and if public policy would be enhanced by permitting recovery (Art. 1416, Civil Code);37 and (f) the party
for whose benefit the law has been intended such as in price ceiling laws (Art. 1417, Civil Code)38 and labor laws
(Arts. 1418-1419, Civil Code).39

It is significant to note that the agreement executed by the parties in this case is a Contract to Sell and not a contract
of sale. A distinction between the two is material in the determination of when ownership is deemed to have been
transferred to the buyer or vendee and, ultimately, the resolution of the question on whether the constitutional
proscription has been breached.

In a contract of sale, the title passes to the buyer upon the delivery of the thing sold. The vendor has lost and cannot
recover the ownership of the property until and unless the contract of sale is itself resolved and set aside.40 On the
other hand, a contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's
obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive
condition does not take place, the parties would stand as if the conditional obligation had never existed.41 In other
words, in a contract to sell, the prospective seller agrees to transfer ownership of the property to the buyer upon the
happening of an event, which normally is the full payment of the purchase price. But even upon the fulfillment of the
suspensive condition, ownership does not automatically transfer to the buyer. The prospective seller still has to
convey title to the prospective buyer by executing a contract of absolute sale.42

Since the contract involved here is a Contract to Sell, ownership has not yet transferred to the petitioner when he
filed the suit for rescission. While the intent to circumvent the constitutional proscription on aliens owning real
property was evident by virtue of the execution of the Contract to Sell, such violation of the law did not materialize
because petitioner caused the rescission of the contract before the execution of the final deed transferring
ownership.

Thus, exception (c) finds application in this case. Under Article 1414, one who repudiates the agreement and
demands his money before the illegal act has taken place is entitled to recover. Petitioner is therefore entitled to
recover what he has paid, although the basis of his claim for rescission, which was granted by the HLURB, was not
the fact that he is not allowed to acquire private land under the Philippine Constitution. But petitioner is entitled to
the recovery only of the amount of P3,187,500.00, representing the purchase price paid to respondent. No damages
may be recovered on the basis of a void contract; being nonexistent, the agreement produces no juridical tie
between the parties involved.43 Further, petitioner is not entitled to actual as well as interests thereon,44 moral and
exemplary damages and attorney's fees.

The Court takes into consideration the fact that the HLURB Decision dated April 22, 1997 has long been final and
executory. Nothing is more settled in the law than that a decision that has acquired finality becomes immutable and
unalterable and may no longer be modified in any respect even if the modification is meant to correct erroneous
conclusions of fact or law and whether it was made by the court that rendered it or by the highest court of the
land.45The only recognized exceptions to the general rule are the correction of clerical errors, the so-called nunc pro
tunc entries which cause no prejudice to any party, void judgments, and whenever circumstances transpire after the
finality of the decision rendering its execution unjust and inequitable.46 None of the exceptions is present in this
case. The HLURB decision cannot be considered a void judgment, as it was rendered by a tribunal with jurisdiction
over the subject matter of the complaint.47
Ineluctably, the HLURB Decision resulted in the unjust enrichment of petitioner at the expense of respondent.
Petitioner received more than what he is entitled to recover under the circumstances.

Article 22 of the Civil Code which embodies the maxim, nemo ex alterius incommode debet lecupletari (no man
ought to be made rich out of another's injury), states:

Art. 22. Every person who through an act of performance by another, or any other means, acquires or
comes into possession of something at the expense of the latter without just or legal ground, shall return the
same to him.

The above-quoted article is part of the chapter of the Civil Code on Human Relations, the provisions of which were
formulated as basic principles to be observed for the rightful relationship between human beings and for the stability
of the social order; designed to indicate certain norms that spring from the fountain of good conscience; guides for
human conduct that should run as golden threads through society to the end that law may approach its supreme
ideal which is the sway and dominance of justice.48 There is unjust enrichment when a person unjustly retains a
benefit at the loss of another, or when a person retains money or property of another against the fundamental
principles of justice, equity and good conscience.49

A sense of justice and fairness demands that petitioner should not be allowed to benefit from his act of entering into
a contract to sell that violates the constitutional proscription.

This is not a case of equity overruling or supplanting a positive provision of law or judicial rule. Rather, equity is
exercised in this case "as the complement of legal jurisdiction [that] seeks to reach and to complete justice where
courts of law, through the inflexibility of their rules and want of power to adapt their judgments to the special
circumstances of cases, are incompetent to do so."50

The purpose of the exercise of equity jurisdiction in this case is to prevent unjust enrichment and to ensure
restitution. Equity jurisdiction aims to do complete justice in cases where a court of law is unable to adapt its
judgments to the special circumstances of a case because of the inflexibility of its statutory or legal jurisdiction.51

The sheriff delivered to petitioner the amount of P5,313,040.00 representing the net proceeds (bidded amount
is P5,450,653.33) of the auction sale after deducting the legal fees in the amount of P137,613.33.52 Petitioner is only
entitled to P3,187,500.00, the amount of the purchase price of the real property paid by petitioner to respondent
under the Contract to Sell. Thus, the Court in the exercise of its equity jurisdiction may validly order petitioner to
return the excess amount of P2,125,540.00.

The Court shall now proceed to resolve the single issue raised in the present petition: whether the CA seriously
erred in affirming the HLURB Order setting aside the levy made by the Sheriff on the subject properties.

Petitioner avers that the HLURB Arbiter and Director had no factual basis for pegging the fair market value of the
levied properties at P6,500.00 per sq m or P83,616,000.00; that reliance on the appraisal report was misplaced
since the appraisal was based on the value of land in neighboring developed subdivisions and on the assumption
that the residential unit appraised had already been built; that the Sheriff need not determine the fair market value of
the subject properties before levying on the same since what is material is the amount for which the properties were
bidded and sold during the public auction; that the pendency of any motion is not a valid ground for the Sheriff to
suspend the execution proceedings and, by itself, does not have the effect of restraining the Sheriff from proceeding
with the execution.

Respondent, on the other hand, contends that while it is true that the HLURB Arbiter and Director did not
categorically state the exact value of the levied properties, said properties cannot just amount to P6,000,000.00; that
the HLURB Arbiter and Director correctly held that the value indicated in the tax declaration is not the sole
determinant of the value of the property.

The petition is impressed with merit.

If the judgment is for money, the sheriff or other authorized officer must execute the same pursuant to the provisions
of Section 9, Rule 39 of the Revised Rules of Court, viz:
 Sec. 9. Execution of judgments for money, how enforced. –

(a) Immediate payment on demand. - The officer shall enforce an execution of a judgment for money by
demanding from the judgment obligor the immediate payment of the full amount stated in the writ of
execution and all lawful fees. x x x

(b) Satisfaction by levy. - If the judgment obligor cannot pay all or part of the obligation in cash, certified
bank check or other mode of payment acceptable to the judgment obligee, the officer shall levy upon the
properties of the judgment obligor of every kind and nature whatsoever which may be disposed of
for value and not otherwise exempt from execution, giving the latter the option to immediately choose
which property or part thereof may be levied upon, sufficient to satisfy the judgment. If the judgment obligor
does not exercise the option, the officer shall first levy on the personal properties, if any, and then on the
real properties if the personal properties are insufficient to answer for the judgment.

The sheriff shall sell only a sufficient portion of the personal or real property of the judgment obligor
which has been levied upon.

When there is more property of the judgment obligor than is sufficient to satisfy the judgment and
lawful fees, he must sell only so much of the personal or real property as is sufficient to satisfy the
judgment and lawful fees.

Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or
personal property, may be levied upon in like manner and with like effect as under a writ of
attachment(Emphasis supplied).53

Thus, under Rule 39, in executing a money judgment against the property of the judgment debtor, the sheriff shall
levy on all property belonging to the judgment debtor as is amply sufficient to satisfy the judgment and costs, and
sell the same paying to the judgment creditor so much of the proceeds as will satisfy the amount of the judgment
debt and costs. Any excess in the proceeds shall be delivered to the judgment debtor unless otherwise directed by
the judgment or order of the court.54

Clearly, there are two stages in the execution of money judgments. First, the levy and then the execution sale.

Levy has been defined as the act or acts by which an officer sets apart or appropriates a part or the whole of a
judgment debtor's property for the purpose of satisfying the command of the writ of execution.55 The object of a levy
is to take property into the custody of the law, and thereby render it liable to the lien of the execution, and put it out
of the power of the judgment debtor to divert it to any other use or purpose.56

On the other hand, an execution sale is a sale by a sheriff or other ministerial officer under the authority of a writ of
execution of the levied property of the debtor.57

In the present case, the HLURB Arbiter and Director gravely abused their discretion in setting aside the levy
conducted by the Sheriff for the reason that the auction sale conducted by the sheriff rendered moot and academic
the motion to quash the levy. The HLURB Arbiter lost jurisdiction to act on the motion to quash the levy by virtue of
the consummation of the auction sale. Absent any order from the HLURB suspending the auction sale, the sheriff
rightfully proceeded with the auction sale. The winning bidder had already paid the winning bid. The legal fees had
already been remitted to the HLURB. The judgment award had already been turned over to the judgment creditor.
What was left to be done was only the issuance of the corresponding certificates of sale to the winning bidder. In
fact, only the signature of the HLURB Director for that purpose was needed58 – a purely ministerial act.

A purely ministerial act or duty is one which an officer or tribunal performs in a given state of facts, in a prescribed
manner, in obedience to the mandate of a legal authority, without regard for or the exercise of his own judgment
upon the propriety or impropriety of the act done. If the law imposes a duty upon a public officer and gives him the
right to decide how or when the duty shall be performed, such duty is discretionary and not ministerial. The duty is
ministerial only when the discharge of the same requires neither the exercise of official discretion nor judgment.59 In
the present case, all the requirements of auction sale under the Rules have been fully complied with to warrant the
issuance of the corresponding certificates of sale.
And even if the Court should go into the merits of the assailed Order, the petition is meritorious on the following
grounds:

Firstly, the reliance of the HLURB Arbiter and Director, as well as the CA, on Barrozo v. Macaraeg60 and Buan v.
Court of Appeals61 is misplaced.

The HLURB and the CA misconstrued the Court's pronouncements in Barrozo. Barrozo involved a judgment debtor
who wanted to repurchase properties sold at execution beyond the one-year redemption period. The statement of
the Court in Barrozo, that "only where such inadequacy shocks the conscience the courts will intervene," is at best a
mere obiter dictum. This declaration should be taken in the context of the other declarations of the Court
in Barrozo,to wit:

Another point raised by appellant is that the price paid at the auction sale was so inadequate as to shock the
conscience of the court. Supposing that this issue is open even after the one-year period has expired and
after the properties have passed into the hands of third persons who may have paid a price higher than the
auction sale money, the first thing to consider is that the stipulation contains no statement of the reasonable
value of the properties; and although defendant' answer avers that the assessed value was P3,960 it also
avers that their real market value was P2,000 only. Anyway, mere inadequacy of price – which was the
complaint' allegation – is not sufficient ground to annul the sale. It is only where such inadequacy
shocks the conscience that the courts will intervene. x x x Another consideration is that the assessed
value being P3,960 and the purchase price being in effect P1,864 (P464 sale price plus P1,400 mortgage
lien which had to be discharged) the conscience is not shocked upon examining the prices paid in the sales
in National Bank v. Gonzales, 45 Phil., 693 and Guerrero v. Guerrero, 57 Phil., 445, sales which were left
undisturbed by this Court.

Furthermore, where there is the right to redeem – as in this case – inadequacy of price should not be
material because the judgment debtor may re-acquire the property or else sell his right to redeem
and thus recover any loss he claims to have suffered by reason of the price obtained at the
execution sale.

x x x x (Emphasis supplied).62

In other words, gross inadequacy of price does not nullify an execution sale. In an ordinary sale, for reason of
equity, a transaction may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks
one's conscience as to justify the courts to interfere; such does not follow when the law gives the owner the right to
redeem as when a sale is made at public auction,63 upon the theory that the lesser the price, the easier it is for the
owner to effect redemption.64 When there is a right to redeem, inadequacy of price should not be material because
the judgment debtor may re-acquire the property or else sell his right to redeem and thus recover any loss he claims
to have suffered by reason of the price obtained at the execution sale.65 Thus, respondent stood to gain rather than
be harmed by the low sale value of the auctioned properties because it possesses the right of redemption. More
importantly, the subject matter in Barrozo is the auction sale, not the levy made by the Sheriff.

The Court does not sanction the piecemeal interpretation of a decision. To get the true intent and meaning of a
decision, no specific portion thereof should be isolated and resorted to, but the decision must be considered in its
entirety.66

As regards Buan, it is cast under an entirely different factual milieu. It involved the levy on two parcels of land owned
by the judgment debtor; and the sale at public auction of one was sufficient to fully satisfy the judgment, such that
the levy and attempted execution of the second parcel of land was declared void for being in excess of and beyond
the original judgment award granted in favor of the judgment creditor.

In the present case, the Sheriff complied with the mandate of Section 9, Rule 39 of the Revised Rules of Court, to
"sell only a sufficient portion" of the levied properties "as is sufficient to satisfy the judgment and the lawful fees."
Each of the 15 levied properties was successively bidded upon and sold, one after the other until the judgment debt
and the lawful fees were fully satisfied. Holly Properties Realty Corporation successively bidded upon and bought
each of the levied properties for the total amount of P5,450,653.33 in full satisfaction of the judgment award and
legal fees.67
Secondly, the Rules of Court do not require that the value of the property levied be exactly the same as the
judgment debt; it can be less or more than the amount of debt. This is the contingency addressed by Section 9, Rule
39 of the Rules of Court. In the levy of property, the Sheriff does not determine the exact valuation of the levied
property. Under Section 9, Rule 39, in conjunction with Section 7, Rule 57 of the Rules of Court, the sheriff is
required to do only two specific things to effect a levy upon a realty: (a) file with the register of deeds a copy of the
order of execution, together with the description of the levied property and notice of execution; and (b) leave with the
occupant of the property copy of the same order, description and notice.68 Records do not show that respondent
alleged non-compliance by the Sheriff of said requisites.

Thirdly, in determining what amount of property is sufficient out of which to secure satisfaction of the execution, the
Sheriff is left to his own judgment. He may exercise a reasonable discretion, and must exercise the care which a
reasonably prudent person would exercise under like conditions and circumstances, endeavoring on the one hand
to obtain sufficient property to satisfy the purposes of the writ, and on the other hand not to make an unreasonable
and unnecessary levy.69 Because it is impossible to know the precise quantity of land or other property necessary to
satisfy an execution, the Sheriff should be allowed a reasonable margin between the value of the property levied
upon and the amount of the execution; the fact that the Sheriff levies upon a little more than is necessary to satisfy
the execution does not render his actions improper.70 Section 9, Rule 39, provides adequate safeguards against
excessive levying. The Sheriff is mandated to sell so much only of such real property as is sufficient to satisfy the
judgment and lawful fees.

In the absence of a restraining order, no error, much less abuse of discretion, can be imputed to the Sheriff in
proceeding with the auction sale despite the pending motion to quash the levy filed by the respondents with the
HLURB. It is elementary that sheriffs, as officers charged with the delicate task of the enforcement and/or
implementation of judgments, must, in the absence of a restraining order, act with considerable dispatch so as not to
unduly delay the administration of justice; otherwise, the decisions, orders, or other processes of the courts of
justice and the like would be futile.71 It is not within the jurisdiction of the Sheriff to consider, much less resolve,
respondent's objection to the continuation of the conduct of the auction sale. The Sheriff has no authority, on his
own, to suspend the auction sale. His duty being ministerial, he has no discretion to postpone the conduct of the
auction sale.

Finally, one who attacks a levy on the ground of excessiveness carries the burden of sustaining that contention.72 In
the determination of whether a levy of execution is excessive, it is proper to take into consideration encumbrances
upon the property, as well as the fact that a forced sale usually results in a sacrifice; that is, the price demanded for
the property upon a private sale is not the standard for determining the excessiveness of the levy.73

Here, the HLURB Arbiter and Director had no sufficient factual basis to determine the value of the levied property.
Respondent only submitted an Appraisal Report, based merely on surmises. The Report was based on the
projected value of the townhouse project after it shall have been fully developed, that is, on the assumption that the
residential units appraised had already been built. The Appraiser in fact made this qualification in its Appraisal
Report: "[t]he property subject of this appraisal has not been constructed. The basis of the appraiser is on the
existing model units."74 Since it is undisputed that the townhouse project did not push through, the projected value
did not become a reality. Thus, the appraisal value cannot be equated with the fair market value. The Appraisal
Report is not the best proof to accurately show the value of the levied properties as it is clearly self-serving.

Therefore, the Order dated August 28, 2000 of HLURB Arbiter Aquino and Director Ceniza in HLRB Case No. IV6-
071196-0618 which set aside the sheriff's levy on respondent's real properties, was clearly issued with grave abuse
of discretion. The CA erred in affirming said Order.

WHEREFORE, the instant petition is GRANTED. The Decision dated October 30, 2002 of the Court of Appeals in
CA-G.R. SP No. 60981 is REVERSED and SET ASIDE. The Order dated August 28, 2000 of HLURB Arbiter Ma.
Perpetua Y. Aquino and Director Belen G. Ceniza in HLRB Case No. IV6-071196-0618 is
declared NULL and VOID.HLURB Arbiter Aquino and Director Ceniza are directed to issue the corresponding
certificates of sale in favor of the winning bidder, Holly Properties Realty Corporation. Petitioner is ordered to return
to respondent the amount of P2,125,540.00, without interest, in excess of the proceeds of the auction sale delivered
to petitioner. After the finality of herein judgment, the amount of P2,125,540.00 shall earn 6% interest until fully paid.

SO ORDERED.