G.R. No.

61584 November 25, 1992

DONATO S. PAULMITAN, JULIANA P. FANESA and RODOLFO FANESA, petitioners,

vs.
COURT OF APPEALS, ALICIO PAULMITAN, ELENA PAULMITAN, ABELINO PAULMITAN, ANITA
PAULMITAN, BAKING PAULMITAN, ADELINA PAULMITAN and ANITO PAULMITAN, respondents.

ROMERO, J.:

This is a petition for review on certiorari seeking the reversal of the decision 1 of the Court of Appeals, dated July 14,
1982 in CA-G.R. No. 62255-R entitled "Alicio Paulmitan, et al. v. Donato Sagario Paulmitan, et al." which affirmed
the decision 2 of the then Court of First Instance (now RTC) of Negros Occidental, 12th Judicial District, Branch IV,
Bacolod City, in Civil Case No. 11770.

The antecedent facts are as follows:

Agatona Sagario Paulmitan, who died sometime in 1953, 3 left the two following parcels of land located in the
Province of Negros Occidental: (1) Lot No. 757 with an area of 1,946 square meters covered by Original Certificate
of Title (OCT) No. RO-8376; and (2) Lot No. 1091 with an area of 69,080 square meters and covered by OCT No.
RO-11653. From her marriage with Ciriaco Paulmitan, who is also now deceased, Agatona begot two legitimate
children, namely: Pascual Paulmitan, who also died in 1953, 4 apparently shortly after his mother passed away, and
Donato Paulmitan, who is one of the petitioners. Petitioner Juliana P. Fanesa is Donato's daughter while the third
petitioner, Rodolfo Fanes, is Juliana's husband. Pascual Paulmitan, the other son of Agatona Sagario, is survived by
the respondents, who are his children, name: Alicio, Elena, Abelino, Adelina, Anita, Baking and Anito, all surnamed
Paulmitan.

Until 1963, the estate of Agatona Sagario Paulmitan remained unsettled and the titles to the two lots mentioned
above remained in the name of Agatona. However, on August 11, 1963, petitioner Donato Paulmitan executed an
Affidavit of Declaration of Heirship, extrajudicially adjudicating unto himself Lot No. 757 based on the claim that he is
the only surviving heir of Agatona Sagario. The affidavit was filed with the Register of Deeds of Negros Occidental
on August 20, 1963, cancelled OCT No. RO-8376 in the name of Agatona Sagario and issued Transfer Certificate of
Title (TCT) No. 35979 in Donato's name.

As regards Lot No. 1091, Donato executed on May 28, 1974 a Deed of Sale over the same in favor of petitioner
Juliana P. Fanesa, his daughter. 5

In the meantime, sometime in 1952, for non-payment of taxes, Lot No. 1091 was forfeited and sold at a public
auction, with the Provincial Government of Negros Occidental being the buyer. A Certificate of Sale over the land
was executed by the Provincial Treasurer in favor of the Provincial Board of Negros Occidental. 6

On May 29, 1974, Juliana P. Fanesa redeemed the property from the Provincial Government of Negros Occidental
for the amount of P2,959.09. 7

On learning of these transactions, respondents children of the late Pascual Paulmitan filed on January 18, 1975 with
the Court of First Instance of Negros Occidental a Complaint against petitioners to partition the properties plus
damages.

Petitioners set up the defense of prescription with respect to Lot No. 757 as an affirmative defense, contending that
the Complaint was filed more than eleven years after the issuance of a transfer certificate of title to Donato
Paulmitan over the land as consequence of the registration with the Register of Deeds, of Donato's affidavit
extrajudicially adjudicating unto himself Lot No. 757. As regards Lot No. 1091, petitioner Juliana P. Fanesa claimed
in her Answer to the Complaint that she acquired exclusive ownership thereof not only by means of a deed of sale
executed in her favor by her father, petitioner Donato Paulmitan, but also by way of redemption from the Provincial
Government of Negros Occidental.
Acting on the petitioners' affirmative defense of prescription with respect to Lot No. 757, the trial court issued an
order dated April 22, 1976 dismissing the complaint as to the said property upon finding merit in petitioners'
affirmative defense. This order, which is not the object of the present petition, has become final after respondents'
failure to appeal therefrom.

Trial proceeded with respect to Lot No. 1091. In a decision dated May 20, 1977, the trial court decided in favor of
respondents as to Lot No. 1091. According to the trial court, the respondents, as descendants of Agatona Sagario
Paulmitan were entitled to one-half (1/2) of Lot No. 1091, pro indiviso. The sale by petitioner Donato Paulmitan to
his daughter, petitioner Juliana P. Fanesa, did not prejudice their rights. And the repurchase by Juliana P. Fanesa of
the land from the Provincial Government of Negros Occidental did not vest in Juliana exclusive ownership over the
entire land but only gave her the right to be reimbursed for the amount paid to redeem the property. The trial court
ordered the partition of the land and directed petitioners Donato Paulmitan and Juliana P. Fanesa to pay private
respondents certain amounts representing the latter's share in the fruits of the land. On the other hand, respondents
were directed to pay P1,479.55 to Juliana P. Fanesa as their share in the redemption price paid by Fanesa to the
Provincial Government of Negros Occidental. The dispositive portion of the trial court's decision reads:

WHEREFORE, judgment is hereby rendered on the second cause of action pleaded in the complain
as follows:

1. The deed of sale (Exh. "F") dated May 28, 1974 is valid insofar as the one-half undivided portion
of Lot 1091 is concerned as to vest ownership over said half portion in favor of defendant Juliana
Fanesa and her husband Rodolfo Fanesa, while the remaining half shall belong to plaintiffs, pro-
indiviso;

2. Lot 1091, Cadastral Survey of Pontevedra, Province of Negros Occidental, now covered by TCT
No. RO-11653 (N.A.), is ordered partitioned. The parties must proceed to an actual partition by
property instrument of partition, submitting the corresponding subdivision within sixty (60) days from
finality of this decision, and should they fail to agree, commissioners of partition may be appointed
by the Court;

3. Pending the physical partition, the Register of Deeds of Negros Occidental is ordered to cancel
Original Certificate of Title No. RO-11653 (N.A.) covering Lot 1091, Pontevedra Cadastre, and to
issue in lieu thereof a new certificate of title in the name of plaintiffs and defendants, one-half portion
each,pro-indiviso, as indicated in paragraph 1 above;

4. Plaintiffs are ordered to pay, jointly and severally, defendant Juliana Fanesa the amount of
P1,479.55 with interest at the legal rate from May 28, 1974 until paid;

5 Defendants Donato Sagario Paulmitan and Juliana Paulmitan Fanesa are ordered to account to
plaintiffs and to pay them, jointly and severally, the value of the produce from Lot 1091 representing
plaintiffs' share in the amount of P5,000.00 per year from 1966 up to the time of actual partition of
the property, and to pay them the sum of P2,000.00 as attorney's fees as well as the costs of the
suit.

xxx xxx xxx

On appeal, the Court of Appeals affirmed the trial court's decision. Hence this petition.

To determine the rights and obligations of the parties to the land in question, it is well to review, initially, the relatives
who survived the decedent Agatona Sagario Paulmitan. When Agatona died in 1953, she was survived by two (2)
sons, Donato and Pascual. A few months later in the same year, Pascual died, leaving seven children, the private
respondents. On the other had, Donato's sole offspring was petitioner Juliana P. Fanesa.

At the time of the relevant transactions over the properties of decedent Agatona Sagario Paulmitan, her son Pascual
had died, survived by respondents, his children. It is, thus, tempting to apply the principles pertaining to the right of
representation as regards respondents. It must, however, be borne in mind that Pascual did no predecease his
mother, 8 thus precluding the operation of the provisions in the Civil Code on the right of representation 9 with respect to his children, the respondents. When
Agatona Sagario Paulmitan died intestate in 1952, her two (2) sons Donato and Pascual were still alive. Since it is well-settled by virtue of Article 777 of the Civil
Code that "[t]he rights to the succession are transmitted from the moment of the death of the decedent," 10 the right of ownership, not only of Donato but also of
Pascual, over their respective shares in the inheritance was automatically and by operation of law vested in them in 1953 when their mother died intestate. At that
stage, the children of Donato and Pascual did not yet have any right over the inheritance since "[i]n every inheritance, the relative nearest in degree excludes the
more distant
ones." 11 Donato and Pascual excluded their children as to the right to inherit from Agatona Sagario Paulmitan, their mother.

From the time of the death of Agatona Sagario Paulmitan to the subsequent passing away of her son Pascual in
1953, the estate remained unpartitioned. Article 1078 of the Civil Code provides: "Where there are two or more
heirs, the whole estate of the decedent is, before its partition, owned in common by such heirs, subject to the
payment of debts of the deceased." 12 Donato and Pascual Paulmitan were, therefore, co-owners of the estate left by
their mother as no partition was ever made.

When Pascual Paulmitan died intestate in 1953, his children, the respondents, succeeded him in the co-ownership
of the disputed property. Pascual Paulmitan's right of ownership over an undivided portion of the property passed on
to his children, who, from the time of Pascual's death, became co-owners with their uncle Donato over the disputed
decedent estate.

Petitioner Juliana P. Fanesa claims ownership over Lot No. 1091 by virtue of two transactions, namely: (a) the sale
made in her favor by her father Donato Paulmitan; and (b) her redemption of the land from the Provincial of Negros
Occidental after it was forfeited for non-payment of taxes.

When Donato Paulmitan sold on May 28, 1974 Lot No. 1091 to his daughter Juliana P. Fanesa, he was only a co-
owner with respondents and as such, he could only sell that portion which may be allotted to him upon termination
of the co-ownership. 13 The sale did not prejudice the rights of respondents to one half (1/2) undivided share of the
land which they inherited from their father. It did not vest ownership in the entire land with the buyer but transferred
only the seller's pro-indiviso share in the property 14 and consequently made the buyer a co-owner of the land until it
is partitioned. In Bailon-Casilao v. Court of Appeals, 15 the Court, through Justice Irene R. Cortes, outlined the effects
of a sale by one co-owner without the consent of all the co-owners, thus:

The rights of a co-owner of a certain property are clearly specified in Article 493 of the Civil Code,
Thus:

Art. 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits
pertaining thereto, and he may therefore alienate, assign or mortgage it and even substitute another
person its enjoyment, except when personal rights are involved. But the effect of the alienation or
mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him
in the division upon the termination of the co-ownership. [Emphasis supplied.]

As early as 1923, this Court has ruled that even if a co-owner sells the whole property as his, the
sale will affect only his own share but not those of the other co-owners who did not consent to the
sale [Punsalan v. Boon Liat, 44 Phil. 320 (1923)]. This is because under the aforementioned codal
provision, the sale or other disposition affects only his undivided share and the transferee gets only
what would correspond to his grantor in the partition of the thing owned in common [Ramirez v.
Bautista, 14 Phil. 528 (1909)]. Consequently, by virtue of the sales made by Rosalia and Gaudencio
Bailon which are valid with respect to their proportionate shares, and the subsequent transfers which
culminated in the sale to private respondent Celestino Afable, the said Afable thereby became a co-
owner of the disputed parcel of land as correctly held by the lower court since the sales produced
the effect of substituting the buyers in the enjoyment thereof [Mainit v. Bandoy, 14 Phil. 730 (1910)].

From the foregoing, it may be deduced that since a co-owner is entitled to sell his undivided share, a
sale of the entire property by one co-owner without the consent of the other co-owners is not null
and void. However, only the rights of the co-owner-seller are transferred, thereby making the buyer a
co-owner of the property.

Applying this principle to the case at bar, the sale by petitioner Donato Paulmitan of the land to his daughter,
petitioner Juliana P. Fanesa, did not give to the latter ownership over the entire land but merely transferred to her
the one half (1/2) undivided share of her father, thus making her the co-owner of the land in question with the
respondents, her first cousins.
Petitioner Juliana P. Fanesa also claims ownership of the entire property by virtue of the fact that when the
Provincial Government of Negros Occidental bought the land after it was forfeited for non-payment of taxes, she
redeemed it.

The contention is without merit.

The redemption of the land made by Fanesa did not terminate the co-ownership nor give her title to the entire land
subject of the co-ownership. Speaking on the same issue raised by petitioners, the Court, in Adille v. Court of
Appeals, 16 resolved the same with the following pronouncements:

The petition raises a purely legal issue: May a co-owner acquire exclusive ownership over the
property held in common?

Essentially, it is the petitioners' contention that the property subject of dispute devolved upon him
upon the failure of his co-heirs to join him in its redemption within the period required by law. He
relies on the provisions of Article 1515 of the old Civil Code, Article 1613 of the present Code, giving
the vendee a retro the right to demand redemption of the entire property.

There is no merit in this petition.

The right of repurchase may be exercised by co-owner with respect to his share alone (CIVIL CODE,
art. 1612, CIVIL CODE (1889), art. (1514.). While the records show that petitioner redeemed the
property in its entirety, shouldering the expenses therefor, that did not make him the owner of all of
it. In other words, it did not put to end the existing state of co-ownership (Supra, Art. 489). There is
no doubt that redemption of property entails a necessary expense. Under the Civil Code:

Art. 488. Each co-owner shall have a right to compel the other co-owners to contribute to the
expenses of preservation of the thing or right owned in common and to the taxes. Any one of the
latter may exempt himself from this obligation by renouncing so much of his undivided interest as
may be equivalent to his share of the expenses and taxes. No such waiver shall be made if it is
prejudicial to the co-ownership.

The result is that the property remains to be in a condition of co-ownership. While a vendee a retro,
under Article 1613 of the Code, "may not be compelled to consent to a partial redemption," the
redemption by one co-heir or co-owner of the property in its totality does not vest in him ownership
over it. Failure on the part of all the co-owners to redeem it entitles the vendee a retro to retain the
property and consolidate title thereto in his name (Supra, art. 1607). But the provision does not give
to the redeeming co-owner the right to the entire property. It does not provide for a mode of
terminating a co-ownership.

Although petitioner Fanesa did not acquire ownership over the entire lot by virtue of the redemption she made,
nevertheless, she did acquire the right to reimbursed for half of the redemption price she paid to the Provincial
Government of Negros Occidental on behalf of her co-owners. Until reimbursed, Fanesa hold a lien upon the subject
property for the amount due her. 17

Finally, petitioners dispute the order of the trial court, which the Court of Appeals affirmed, for them to pay private
respondents P5,000.00 per year from 1966 until the partition of the estate which represents the share of private
respondents in the fruits of the land. According to petitioners, the land is being leased for P2,000.00 per year only.
This assigned error, however raises a factual question. The settled rule is that only questions of law may be raised
in a petition for review. As a general rule, findings of fact made by the trial court and the Court of Appeals are final
and conclusive and cannot be reviewed on appeal. 18

WHEREFORE, the petition is DENIED and the decision of the Court of Appeals AFFIRMED.

SO ORDERED
G.R. No. 111077 July 14, 1994

VIRGILIO B. GESMUNDO and EDNA C. GESMUNDO, petitioners,

vs.
JRB REALTY CORPORATION, JAIME R. BLANCO, and HON. OSCAR B. PIMENTEL, in his capacity as
Presiding Judge of Branch 148 of the Regional Trial Court of Makati, respondents.

Virgilio B. Gesmundo on his own and wife's behalf.

Blanco Law Firm for private respondents.

MENDOZA, J.:

This is a petition for review on certiorari of the order 1 of the Regional Trial Court of Makati (Branch 148),
dismissing on the ground of improper venue a complaint which the spouses Virgilio B. Gesmundo and
Edna C. Gesmundo filed against the JRB Realty Corporation and Jaime R. Blanco. 2

The facts of the case are as follows:

On April 7, 1980, petitioner Virgilio B. Gesmundo, as lessee, and respondent JRB Realty Corporation, represented
by its president, respondent Jaime R. Blanco, as lessor, entered into a lease contract covering Room 116, Blanco
Suites, at 246 Villaruel St., Pasay City, the parties stipulating that the

venue for all suits, whether for branch hereof or damages or any cause between the LESSOR and
the LESSEE, and persons claiming under each, being the courts of appropriate jurisdiction in Pasay
City. . .

On March 19, 1993, petitioners filed the complaint below for damages against respondents. They alleged that from
April 8, 1980 to November 1992, they had been in possession of the leased premises; that on or about November 9,
1992, they were; "shocked and stunned" upon receiving respondents' letter terminating their lease effective
November 30, 1992; that no other tenant in the building had been sent a similar letter; that during their conversation
over the telephone, respondent Blanco told petitioner Virgilio B. Gesmundo that since the Corporation for which the
latter works did not pay him (Blanco) his retainer fees, he did not want petitioners in any of his apartment units; that
on November 18, 1992, petitioners sent respondents a letter asking for reconsideration of the termination of their
lease; that on November 27, 1992, respondents sent petitioners a statement of accounts reiterating their letter of
November 9, 1992; that on November 28, 1992, petitioners were forced to vacate the leased premises and
consequently they leased an apartment at P2,500.00 monthly; and that respondents' action was "unwarranted,
unjustified, malicious, abusive, and capricious." Petitioners prayed for P33,500.00 as actual or compensatory
damages; P1,000,000.00 as moral damages; P50,000.00 as attorney's fees, and costs.

Respondents moved to dismiss the case on the ground that the venue of the action had been improperly laid in the
RTC of Makati. They contended that pursuant to their lease contract, the venue of the action was in a court of
competent jurisdiction in Pasay City.

In their opposition to the motion to dismiss, petitioners alleged that their cause of action is not based on the lease
contract and, therefore, the case is not covered by the stipulation as to venue. Instead it is governed by the general
rule as to venue stated in Rule 4, sec. 2(b). 3 They also alleged that even assuming that the stipulation is
applicable, it does not operate to limit the venue to Pasay City but merely provides for an additional
forum.

On May 28, 1990, the trial court dismissed petitioners' action on the ground of improper venue. On July 9, 1993, it
denied their motion for reconsideration.

Hence this petition based on the following grounds:

 I.

THE HONORABLE COURT BELOW ERRED IN CONSIDERING THE ACTION FOR DAMAGES AS
REAL ACTION AND NOT PERSONAL.

II.

THE HONORABLE COURT BELOW ERRED IN CONSIDERING THE LEASE CONTRACT

EXECUTED BETWEEN ONLY ONE OF THE PETITIONERS AND ONLY ONE OF THE PRIVATE
RESPONDENTS APPLICABLE TO THE INSTANT COMPLAINT.

III.

THE HONORABLE COURT ERRED IN CONSIDERING THE COMPLAINT AS BASED ON THE

CONTRACT OF LEASE.

IV.

THE HONORABLE COURT BELOW ERRED IN UTILIZING THE VERY ACT COMPLAINED OF
(THE RIGHT ABUSED) TO DEFEAT THE COMPLAINT FILED BY PETITIONERS.

V.

THE HONORABLE COURT BELOW ERRED IN ATTEMPTING TO CAUSE THE FILING OF THE
COMPLAINT IN A JURISDICTION OTHER THAN THE PLACE WHERE ALL THE PARTIES ARE
FOUND WITHOUT ANY JUSTIFIABLE REASON.

VI.

THE HONORABLE COURT ERRED IN SUSTAINING A DISMISSAL SOLELY GROUNDED ON A

TECHNICALITY.

VII.

ASSUMING FOR THE SAKE OF ARGUMENT THAT THE LEASE AGREEMENT IS APPLICABLE,
THE HONORABLE COURT BELOW ERRED IN CONSIDERING THE PROVISION STIPULATING
THE VENUE OF THE ACTION EXCLUSIVISTIC.

These contentions boil down to one main issue: whether venue was properly laid in the Regional Trial Court of
Makati.

We hold in the negative. We have in the past held stipulations limiting venue as valid and binding on the contracting
parties, 4 based on Rule 4, sec. 3 which provides:

Venue by agreement. — By written agreement of the parties, the venue of an action may be
changed or transferred from one province to another.

In the case at bar, it is clear from the parties' contract that the venue of any action which they might bring are the
courts of competent jurisdiction in Pasay City, whether the action is for "breach [of the lease agreement] or damages
or any other cause between the LESSOR and LESSEE and persons claiming under each."

The language used leaves no room for interpretation. It clearly evinces the parties' intent to limit to the "courts of
appropriate jurisdiction of Pasay City" the venue of all suits between the lessor and lessee and those between
parties claiming under them. This means a waiver of their right to institute action in the courts provided for in Rule 4,
sec. 2(b).
This case, therefore, differs from the cases 5 cited by petitioner. It is true that in Polytrade Corporation v.
Blanco, a stipulation that "The agree to sue and be sued in the City of Manila" was held to merely
6

provide an additional forum in the absence of any qualifying or restrictive words. But here, by laying in
Pasay City the venue for all suits, the parties made it plain that in no other place may they bring suit
against each other for "breach [of their lease contract] or damages or any other cause between [them]
and persons claiming under each [of them]."

The stipulation in this case is similar to that involved in Hoechst Philippines, Inc. v. Torres 7 where the parties
agreed that "in case of any litigation arising out of this agreement, the venue of any action shall be in
the competent courts of the Province of Rizal." This court held: "No further stipulations are necessary
to elicit the thought that both parties agreed that any action by either of them would be filed only in the
competent courts of Rizal province exclusively." The similarity in the language used in the stipulation
8

in this case and that in the Hoechst case is striking. Again, in Villanueva v. Mosqueda it was 9

stipulated that if the lessor violated the contract of lease he could be sued in Manila, while if it was the
lessee who violated the contract, the lessee could be sued in Masantol, Pampanga. It was held that
there was an agreement concerning venue of action and that the parties were bound by their
agreement. The agreement as to venue was not permissive but mandatory.

Petitioners contend that neither they nor the private respondent Jaime Blanco reside in Pasay City. This fact is,
however, irrelevant to the resolution of the issue in this case since parties do stipulate concerning the venue of an
action without regard to their residence. In one case, it was held that the parties stipulated that the venue of action
shall be in the City of Manila. It was held that it was reasonable to infer that the parties intended to fix the venue of
their action, in connection with the contract sued upon, in the proper court of the City of Manila only, notwithstanding
that neither one was a resident of Manila. 10

It is nonetheless contended that the stipulation as to venue is inapplicable because (1) only one of the petitioners
(Virgilio B. Gesmundo) and only one of the private respondents (JRB Realty) are parties to the lease contract and
(2) their cause of action is not based on the lease contract.

The contention is without merit. Petitioner Edna C. Gesmundo is the wife of the lessee Virgilio B. Gesmundo, while
Jaime R. Blanco is the president of the lessor JRB Realty Corporation. Their inclusion in this case is not necessary.
What is more, as already noted, by its terms the stipulation applies not only to the parties to the contract but to "any
persons claiming under each."

Petitioners claim that their cause of action is not based on the lease contract because it seeks neither its
implementation nor its the cancellation. The contention is also without merit. Petitioners' action is for alleged breach
of the lease contract which, it is contended, was terminated to spite them. 11 Petitioners view this act of
respondents as an abuse of right under arts. 19, 20, and 21 of the Civil Code, warranting an award of
damages. Their cause of action is ultimately anchored on their right under the lease contract and,
therefore, they cannot avoid the limitation as to the venue in that contract.

Nor is there any warrant for petitioners' view that a motion to dismiss on the ground of improper venue is based on a
"mere technicality" which "does not even pretend to invoke justice" and, therefore, must not be sustained. As we
have in other cases 12 held, "procedural rules are not to be belittled or dismissed simply because their
non-observance may have resulted in prejudice to a party's substantive rights. Like all rules, they are
required to be followed except only for the most persuasive of reasons when they may be relaxed to
relieve a litigant of an injustice not commensurate with the degree of his thoughtlessness in not
complying with the procedure prescribed." Here what is involved is no less than the parties'
agreement to limit the venue of any action between them and those claiming under them under the
contract. Petitioners must abide by that agreement.

WHEREFORE, the petition is DENIED and the order appealed from is AFFIRMED.

SO ORDERED.
G.R. No. 107132 October 8, 1999

MAXIMA HEMEDES, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, DOMINIUM REALTY AND CONSTRUCTION CORPORATION,
ENRIQUE D. HEMEDES and R & B INSURANCE CORPORATION, respondents.

G.R. No. 108472 October 8, 1999

R & B INSURANCE CORPORATION, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, DOMINIUM REALTY AND CONSTRUCTION CORPORATION,
ENRIQUE D. HEMEDES and MAXIMA HEMEDES, respondents.

GONZAGA-REYES, J.:

Assailed in these petitions for review on certiorari is the decision 1 of the eleventh division of the Court of Appeals in
CA-G.R. CV No. 22010 promulgated on September 11, 1992 affirming in toto the decision of Branch 24 of the
Regional Trial Court of Laguna in Civil Case No. B-1766 dated February 22, 1989, 2 and the resolution dated
December 29, 1992 denying petitioner R & B Insurance Corporation's (R & B Insurance) motion for reconsideration.
As the factual antecedents and issues are the same, we shall decide the petitions jointly.

The instant controversy involves a question of ownership over an unregistered parcel of land, identified as Lot No. 6,
plan Psu-111331, with an area of 21,773 square meters, situated in Sala, Cabuyao, Laguna. It was originally owned
by the late Jose Hemedes, father of Maxima Hemedes and Enrique D. Hemedes. On March 22, 1947 Jose
Hemedes executed a document entitled "Donation Inter Vivos With Resolutory Conditions" 3 whereby he conveyed
ownership over the subject land, together with all its improvements, in favor of his third wife, Justa Kauapin, subject
to the following resolutory conditions:

(a) Upon the death or remarriage of the DONEE, the title to the property donated shall revert to any
of the children, or their heirs, of the DONOR expressly designated by the DONEE in a public
document conveying the property to the latter; or

(b) In absence of such an express designation made by the DONEE before her death or remarriage
contained in a public instrument as above provided, the title to the property shall automatically revert
to the legal heirs of the DONOR in common.

Pursuant to the first condition above mentioned, Justa Kausapin executed on September 27, 1960 a "Deed of
Conveyance of Unregistered Real Property by Reversion" 4 conveying to Maxima Hemedes the subject property
under the following terms —

That the said parcel of land was donated unto me by the said Jose Hemedes, my deceased
husband, in a deed of "DONATION INTER VIVOS WITH RESOLUTORY CONDITIONS" executed
by the donor in my favor, and duly accepted by me on March 22, 1947, before Notary Public Luis
Bella in Cabuyao, Laguna;

That the donation is subject to the resolutory conditions appearing in the said deed of "DONATION
INTER VIVOS WITH RESOLUTORY CONDITIONS," as follows:

(a) Upon the death or remarriage of the DONEE, the title to the property donated
shall revert to any of the children, or their heirs, of the DONOR expressly designated
by the DONEE in a public document conveying the property to the latter; or
 (b) In absence of such an express designation made by the DONEE before her death
or remarriage contained in a public instrument as above provided, the title to the
property shall automatically revert to the legal heirs of the DONOR in common.

That, wherefore, in virtue of the deed of donation above mentioned and in the exercise of my right
and privilege under the terms of the first resolutory condition therein contained and hereinabove
reproduced, and for and in consideration of my love and affection, I do hereby by these presents
convey, transfer, and deed unto my designee, MAXIMA HEMEDES, of legal age, married to RAUL
RODRIGUEZ, Filipino and resident of No. 15 Acacia Road, Quezon City, who is one of the children
and heirs of my donor, JOSE HEMEDES, the ownership of, and title to the property hereinabove
described, and all rights and interests therein by reversion under the first resolutory condition in the
above deed of donation; Except the possession and enjoyment of the said property which shall
remain vested in me during my lifetime, or widowhood and which upon my death or remarriage shall
also automatically revert to, and be transferred to my designee, Maxima Hemedes.

Maxima Hemedes, through her counsel, filed an application for registration and confirmation of title over the subject
unregistered land. Subsequently, Original Certificate of Title (OCT) No. (0-941) 0-198 5 was issued in the name of
Maxima Hemedes married to Raul Rodriguez by the Registry of Deeds of Laguna on June 8, 1962, with the
annotation that "Justa Kausapin shall have the usufructuary rights over the parcel of land herein described during
her lifetime or widowhood."

It is claimed by R & B Insurance that on June 2, 1964, Maxima Hemedes and her husband Raul Rodriguez
constituted a real estate mortgage over the subject property in its favor to serve as security for a loan which they
obtained in the amount of P6,000.00. On February 22, 1968, R & B Insurance extrajudicially foreclosed the
mortgage since Maxima Hemedes failed to pay the loan even after it became due on August 2, 1964. The land was
sold at a public auction on May 3, 1968 with R & B Insurance as the highest bidder and a certificate of sale was
issued by the sheriff in its favor. Since Maxima Hemedes failed to redeem the property within the redemption period,
R & B Insurance executed an Affidavit of Consolidation dated March 29, 1974 and on May 21, 1975 the Register of
Deeds of Laguna cancelled OCT No. (0-941) 0-198 and issued Transfer Certificate of Title (TCT) No. 41985 in the
name of R & B Insurance. The annotation of usufruct in favor of Justa Kausapin was maintained in the new title. 6

Despite the earlier conveyance of the subject land in favor of Maxima Hemedes, Justa Kausapin executed a
"Kasunduan" on May 27, 1971 whereby she transferred the same land to her stepson Enrique D. Hemedes,
pursuant to the resolutory condition in the deed of donation executed in her favor by her late husband Jose
Hemedes. Enrique D. Hemedes obtained two declarations of real property — in 1972, and again, in 1974, when the
assessed value of the property was raised. Also, he has been paying the realty taxes on the property from the time
Justa Kausapin conveyed the property to him in 1971 until 1979. In the cadastral survey of Cabuyao, Laguna
conducted from September 8, 1974 to October 10, 1974, the property was assigned Cadastral No. 2990, Cad. 455-
D, Cabuyao Cadastre, in the name of Enrique Hemedes. Enrique Hemedes is also the named owner of the property
in the records of the Ministry of Agrarian Reform office at Calamba, Laguna.

On February 28, 1979, Enriques D. Hemedes sold the property to Dominium Realty and Construction Corporation
(Dominium). On April 10, 1981, Justa Kausapin executed an affidavit affirming the conveyance of the subject
property in favor of Enrique D. Hemedes as embodied in the "Kasunduan" dated May 27, 1971, and at the same
time denying the conveyance made to Maxima Hemedes.

On May 14, 1981, Dominium leased the property to its sister corporation Asia Brewery, Inc. (Asia Brewery) who,
even before the signing of the contract of lease, constructed two warehouses made of steel and asbestos costing
about P10,000,000.00 each. Upon learning of Asia Brewery's constructions upon the subject property, R & B
Insurance sent it a letter on March 16, 1981 informing the former of its ownership of the property as evidenced by
TCT No. 41985 issued in its favor and of its right to appropriate the constructions since Asia Brewery is a builder in
bad faith. On March 27, 1981, a conference was held between R & B Insurance and Asia Brewery but they failed to
arrive at an amicable settlement.1âwphi 1.nêt

On May 8, 1981, Maxima Hemedes also wrote a letter addressed to Asia Brewery wherein she asserted that she is
the rightful owner of the subject property by virtue of OCT No. (0-941) 0-198 and that, as such, she has the right to
appropriate Asia Brewery's constructions, to demand its demolition, or to compel Asia Brewery to purchase the land.
In another letter of the same date addressed to R & B Insurance, Maxima Hemedes denied the execution of any real
estate mortgage in favor of the latter.

On August 27, 1981, Dominium and Enrique D. Hemedes filed a

complaint 7 with the Court of First Instance of Binan, Laguna for the annulment of TCT No. 41985 issued in favor of
R & B Insurance and/or the reconveyance to Dominium of the subject property. Specifically, the complaint alleged
that Dominium was the absolute owner of the subject property by virtue of the February 28, 1979 deed of sale
executed by Enrique D. Hemedes, who in turn obtained ownership of the land from Justa Kausapin, as evidenced
by the "Kasunduan" dated May 27, 1971. The plaintiffs asserted that Justa Kausapin never transferred the land to
Maxima Hemedes and that Enrique D. Hemedes had no knowledge of the registration proceedings initiated by
Maxima Hemedes.

After considering the merits of the case, the trial court rendered judgment on February 22, 1989 in favor of plaintiffs
Dominium and Enrique D. Hemedes, the dispositive portion of which states —

WHEREFORE, judgment is hereby rendered:

(a) Declaring Transfer Certificate of Title No. 41985 of the Register of Deeds of
Laguna null and void and ineffective;

(b) Declaring Dominium Realty and Construction Corporation the absolute owner and
possessor of the parcel of land described in paragraph 3 of the complaint;

(c) Ordering the defendants and all persons acting for and/or under them to respect
such ownership and possession of Dominium Realty and Construction Corporation
and to forever desist from asserting adverse claims thereon nor disturbing such
ownership and possession; and

(d) Directing the Register of Deeds of Laguna to cancel said Transfer Certificate of
Title No. 41985 in the name of R & B Insurance Corporation, and in lieu thereof,
issue a new transfer certificate of title in the name of Dominium Realty and
Construction Corporation. No pronouncement as to costs and attorney's fees. 8

Both R & B Insurance and Maxima Hemedes appealed from the trial court's decision. On September 11, 1992 the
Court of Appeals affirmed the assailed decision in toto and on December 29, 1992, it denied R & B Insurance's
motion for reconsideration. Thus, Maxima Hemedes and R & B Insurance filed their respective petitions for review
with this Court on November 3, 1992 and February 22, 1993, respectively.

In G.R. No. 107132 9, petitioner Maxima Hemedes makes the following assignment of errors as regards public
respondent's ruling —

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN APPLYING ARTICLE 1332 OF THE

NEW CIVIL CODE IN DECLARING AS SPURIOUS THE DEED OF CONVEYANCE OF
UNREGISTERED REAL PROPERTY BY REVERSION EXECUTED BY JUSTA KAUSAPIN IN
FAVOR OF PETITIONER MAXIMA HEMEDES.

II

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING AS VOID AND OF NO

LEGAL EFFECT THE "KASUNDUAN" DATED 27 MAY 1971 EXECUTED BY JUSTA KAUSAPIN IN
FAVOR OF RESPONDENT ENRIQUE HEMEDES AND THE SALE OF THE SUBJECT PROPERTY
BY RESPONDENT ENRIQUE HEMEDES IN FAVOR OF RESPONDENT DOMINIUM REALTY AND
CONSTRUCTION CORPORATION.

III
 RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING RESPONDENTS
ENRIQUE AND DOMINIUM IN BAD FAITH.

IV

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT ORIGINAL

CERTIFICATE OF TITLE NO. (0-941) 0-198 ISSUED IN THE NAME OF PETITIONER MAXIMA
HEMEDES NULL AND VOID.

RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT NO LOAN WAS

OBTAINED BY PETITIONER MAXIMA HEMEDES FROM RESPONDENT R & B INSURANCE
CORPORATION.

VI

RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT NO REAL ESTATE

MORTGAGE OVER THE SUBJECT PROPERTY WAS EXECUTED BY PETITIONER MAXIMA
HEMEDES IN FAVOR OF RESPONDENT R & B INSURANCE CORPORATION.

VII

RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT THE VALID TITLE
COVERING THE SUBJECT PROPERTY IS THE ORIGINAL CERTIFICATE OF TITLE NO. (0-941)
0-198 IN THE NAME OF PETITIONER MAXIMA HEMEDES AND NOT THE TRANSFER
CERTIFICATE OF TITLE (TCT) NO. 41985 IN THE NAME OF R & B INSURANCE
CORPORATION. 10

Meanwhile, in G.R. No. 108472 11, petitioner R & B Insurance assigns almost the same errors, except with regards to
the real estate mortgage allegedly executed by Maxima Hemedes in its favor. Specifically, R & B Insurance alleges
that:

RESPONDENT COURT ERRONEOUSLY ERRED IN APPLYING ARTICLE 1332 OF THE CIVIL

CODE.

II

RESPONDENT COURT SERIOUSLY ERRED IN GIVING CREDENCE ON (sic) THE KASUNDUAN

BY AND BETWEEN JUSTA KAUSAPIN AND ENRIQUE NOTWITHSTANDING THE FACT THAT
JUSTA KAUSAPIN BY WAY OF A DEED OF CONVEYANCE OF UNREGISTERED REAL
PROPERTY BY REVERSION CEDED THE SUBJECT PROPERTY TO MAXIMA SOME ELEVEN
(11) YEARS EARLIER.

III

RESPONDENT COURT SERIOUSLY ERRED IN GIVING CREDENCE ON (sic) THE AFFIDAVIT

OF REPUDIATION OF JUSTA KAUSAPIN NOTWITHSTANDING THE FACT THAT SHE IS A BIAS
(sic) WITNESS AND EXECUTED THE SAME SOME TWENTY-ONE (21) YEARS AFTER THE
EXECUTION OF THE DEED OF CONVEYANCE IN FAVOR OF MAXIMA.

IV
 RESPONDENT COURT SERIOUSLY ERRED IN NOT FINDING THAT THE COMPLAINT OF
ENRIQUE AND DOMINIUM HAS PRESCRIBED AND/OR THAT ENRIQUE AND DOMINIUM WERE
GUILTY OF LACHES.

RESPONDENT COURT SERIOUSLY ERRED IN FINDING

R & B AS A MORTGAGEE NOT IN GOOD FAITH.

VI

RESPONDENT COURT SERIOUSLY ERRED IN NOT GRANTING THE DAMAGES PRAYED FOR
BY R & B IN ITS COUNTERCLAIM AND CROSSCLAIM. 12

The primary issue to be resolved in these consolidated petitions is which of the two conveyances by Justa
Kausapin, the first in favor of Maxima Hemedes and the second in favor of Enrique D. Hemedes, effectively
transferred ownership over the subject land.

The Register of Deeds of Laguna issued OCT No. (0-941) 0-198 in favor of Maxima Hemedes on the strength of the
"Deed of Conveyance of Unregistered Real Property by Reversion" executed by Justa Kausapin. Public respondent
upheld the trial court's finding that such deed is sham and spurious and has "no evidentiary value under the law
upon which claimant Maxima Hemedes may anchor a valid claim of ownership over the property." In ruling thus, it
gave credence to the April 10, 1981 affidavit executed by Justa Kausapin repudiating such deed of conveyance in
favor of Maxima Hemedes and affirming the authenticity of the "Kasunduan" in favor of Enrique D. Hemedes. Also, it
considered as pivotal the fact that the deed of conveyance in favor of Maxima Hemedes was in English and that it
was not explained to Justa Kausapin, although she could not read nor understand English; thus, Maxima Hemedes
failed to discharge her burden, pursuant to Article 1332 of the Civil Code, to show that the terms thereof were fully
explained to Justa Kausapin. Public respondent concluded by holding that the registration of the property on the
strength of the spurious deed of conveyance is null and void and does not confer any right of ownership upon
Maxima Hemedes. 13

Maxima Hemedes argues that Justa Kausapin's affidavit should not be given any credence since she is obviously a
biased witness as it has been shown that she is dependent upon Enrique D. Hemedes for her daily subsistence, and
she was most probably influenced by Enrique D. Hemedes to execute the "Kasunduan" in his favor. She also
refutes the applicability of article 1332. It is her contention that for such a provision to be applicable, there must be a
party seeking to enforce a contract; however, she is not enforcing the "Deed of Conveyance of Unregistered Real
Property by Reversion" as her basis in claiming ownership, but rather her claim is anchored upon OCT No. (0-941)
0-198 issued in her name, which document can stand independently from the deed of conveyance. Also, there exist
various circumstances which show that Justa Kausapin did in fact execute and understand the deed of conveyance
in favor of Maxima Hemedes. First, the "Donation Intervivos With Resolutory Conditions" executed by Jose
Hemedes in favor of Justa Kausapin was also in English, but she never alleged that she did not understand such
document. Secondly, Justa Kausapin failed to prove that it was not her thumbmark on the deed of conveyance in
favor of Maxima Hemedes and in fact, both Enrique D. Hemedes and Dominium objected to the request of Maxima
Hemedes' counsel to obtain a specimen thumbmark of Justa Kausapin. 14

Public respondent's finding that the "Deed of Conveyance of Unregistered Real Property By Reversion" executed by
Justa Kausapin in favor of Maxima Hemedes is spurious is not supported by the factual findings in this case. It is
grounded upon the mere denial of the same by Justa Kausapin. A party to a contract cannot just evade compliance
with his contractual obligations by the simple expedient of denying the execution of such contract. If, after a perfect
and binding contract has been executed between the parties, it occurs to one of them to allege some defect therein
as a reason for annulling it, the alleged defect must be conclusively proven, since the validity and fulfillment of
contracts cannot be left to the will of one of the contracting parties. 15

Although a comparison of Justa Kausapin's thumbmark with the thumbmark affixed upon the deed of conveyance
would have easily cleared any doubts as to whether or not the deed was forged, the records do not show that such
evidence was introduced by private respondents and the lower court decisions do not make mention of any
comparison having been made. 16 It is a legal presumption that evidence willfully suppressed would be adverse if
produced. 17 The failure of private respondents to refute the due execution of the deed of conveyance by making a
comparison with Justa Kausapin's thumbmark necessarily leads one to conclude that she did in fact affix her
thumbmark upon the deed of donation in favor of her stepdaughter.

Moreover, public respondent's reliance upon Justa Kausapin's repudiation of the deed of conveyance is misplaced
for there are strong indications that she is a biased witness. The trial court found that Justa Kausapin was
dependent upon Enrique D. Hemedes for financial assistance. 18 Justa Kausapin's own testimony attests to this fact
—

Atty. Conchu:

Q: Aling Justa, can you tell the Honorable Court why you donated this particular
property to Enrique Hemedes?

A: Because I was in serious condition and he was the one supporting me financially.

Q: As of today, Aling Justa are you continuing to receive any assistance from
Enrique Hemedes?

A: Yes Sir.

(TSN pp. 19 and 23, November 17, 1981) 19

Even Enrique Hemedes admitted that Justa Kausapin was dependent upon him for financial support. The
transcripts state as follows:

Atty. Mora:

Now you said that Justa Kausapin has been receiving from you advances for food,
medicine & other personal or family needs?

E. Hemedes:

A: Yes.

Q: Was this already the practice at the time this "Kasunduan" was executed?

A: No that was increased, no, no, after this document.

xxx xxx xxx

Q: And because of these accommodations that you have given to Justa Kausapin;
Justa Kausapin has in turn treated you very well because she's very grateful for that,
is it not?

A: I think that's human nature.

Q: Answer me categorically, Mr. Hemedes she's very grateful?

A: Yes she might be grateful but not very grateful.

(TSN, p. 34, June 15, 1984) 20

A witness is said to be biased when his relation to the cause or to the parties is such that he has an incentive to
exaggerate or give false color to his statements, or to suppress or to pervert the truth, or to state what is false. 21 At
the time the present case was filed in the trial court in 1981, Justa Kausapin was already 80 years old, suffering
from worsening physical infirmities and completely dependent upon her stepson Enrique D. Hemedes for support. It
is apparent that Enrique D. Hemedes could easily have influenced his aging stepmother to donate the subject
property to him. Public respondent should not have given credence to a witness that was obviously biased and
partial to the cause of private respondents. Although it is a well-established rule that the matter of credibility lies
within the province of the trial court, such rule does not apply when the witness' credibility has been put in serious
doubt, such as when there appears on the record some fact or circumstance of weight and influence, which has
been overlooked or the significance of which has been
misinterpreted. 22

Finally, public respondent was in error when it sustained the trial court's decision to nullify the "Deed of Conveyance
of Unregistered Real Property by Reversion" for failure of Maxima Hemedes to comply with article 1332 of the Civil
Code, which states:

When one of the parties is unable to read, or if the contract is in a language not understood by him,
and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof
have been fully explained to the former.

Art. 1332 was intended for the protection of a party to a contract who is at a disadvantage due to his illiteracy,
ignorance, mental weakness or other handicap. 23 This article contemplates a situation wherein a contract has been
entered into, but the consent of one of the parties is vitiated by mistake or fraud committed by the other contracting
party. 24 This is apparent from the ordering of the provisions under Book IV, Title II, Chapter 2, section 1 of the Civil
Code, from which article 1332 is taken. Article 1330 states that —

A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud
is voidable.

This is immediately followed by provisions explaining what constitutes mistake, violence, intimidation, undue
influence, or fraud sufficient to vitiate consent. 25 In order that mistake may invalidate consent, it should refer to the
substance of the thing which is the object of the contract, or to those conditions which have principally moved one or
both parties to enter into the contract. 26 Fraud, on the other hand, is present when, through insidious words or
machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he
would not have agreed to. 27 Clearly, article 1332 assumes that the consent of the contracting party imputing the
mistake or fraud was given, although vitiated, and does not cover a situation where there is a complete absence of
consent. 1âw phi 1.nêt

In this case, Justa Kausapin disclaims any knowledge of the "Deed of Conveyance of Unregistered Real Property by
Reversion" in favor of Maxima Hemedes. In fact, she asserts that it was only during the hearing conducted on
December 7, 1981 before the trial court that she first caught a glimpse of the deed of conveyance and thus, she
could not have possibly affixed her thumbmark thereto. 28 It is private respondents' own allegations which render
article 1332 inapplicable for it is useless to determine whether or not Justa Kausapin was induced to execute said
deed of conveyance by means of fraud employed by Maxima Hemedes, who allegedly took advantage of the fact
that the former could not understand English, when Justa Kausapin denies even having seen the document before
the present case was initiated in 1981.

It has been held by this Court that ". . . mere preponderance of evidence is not sufficient to overthrow a certificate of
a notary public to the effect that the grantor executed a certain document and acknowledged the fact of its execution
before him. To accomplish this result, the evidence must be so clear, strong and convincing as to exclude all
reasonable controversy as to the falsity of the certificate, and when the evidence is conflicting, the certificate will be
upheld." 29 In the present case, we hold that private respondents have failed to produce clear, strong, and convincing
evidence to overcome the positive value of the "Deed Conveyance of Unregistered Real Property by Reversion" —
a notarized document. The mere denial of its execution by the donor will not suffice for the purpose.

In upholding the deed of conveyance in favor of Maxima Hemedes, we must concomitantly rule that Enrique D.
Hemedes and his transferee, Dominium, did not acquire any rights over the subject property. Justa Kausapin sought
to transfer to her stepson exactly what she had earlier transferred to Maxima Hemedes — the ownership of the
subject property pursuant to the first condition stipulated in the deed of donation executed by her husband. Thus,
the donation in favor of Enrique D. Hemedes is null and void for the purported object thereof did not exist at the time
of the transfer, having already been transferred to his sister. 30 Similarly, the sale of the subject property by Enrique
D. Hemedes to Dominium is also a nullity for the latter cannot acquire more rights than its predecessor-in-interest
and is definitely not an innocent purchaser for value since Enrique D. Hemedes did not present any certificate of title
upon which it relied.

The declarations of real property by Enrique D. Hemedes, his payment of realty taxes, and his being designated as
owner of the subject property in the cadastral survey of Cabuyao, Laguna and in the records of the Ministry of
Agrarian Reform office in Calamba, Laguna cannot defeat a certificate of title, which is an absolute and indefeasible
evidence of ownership of the property in favor of the person whose name appears therein. 31 Particularly, with regard
to tax declarations and tax receipts, this Court has held on several occasions that the same do not by themselves
conclusively prove title to land. 32

We come now to the question of whether or not R & B Insurance should be considered an innocent purchaser of the
land in question. At the outset, we note that both the trial court and appellate court found that Maxima Hemedes did
in fact execute a mortgage over the subject property in favor of R & B Insurance. This finding shall not be disturbed
because, as we stated earlier, it is a rule that the factual findings of the trial court, especially when affirmed by the
Court of Appeals, are entitled to respect, and should not be disturbed on
appeal. 33

In holding that R & B Insurance is not a mortgagee in good faith, public respondent stated that the fact that the
certificate of title of the subject property indicates upon its face that the same is subject to an encumbrance, i.e.
usufructuary rights in favor of Justa Kausapin during her lifetime or widowhood, should have prompted R & B
Insurance to ". . . investigate further the circumstances behind this encumbrance on the land in dispute," but which it
failed to do. Also, public respondent considered against R & B Insurance the fact that it made it appear in the
mortgage contract that the land was free from all liens, charges, taxes and encumbrances. 34

R & B Insurance alleges that, contrary to public respondent's ruling, the presence of an encumbrance on the
certificate of title is not reason for the purchaser or a prospective mortgagee to look beyond the face of the
certificate of title. The owner of a parcel of land may still sell the same even though such land is subject to a
usufruct; the buyer's title over the property will simply be restricted by the rights of the usufructuary. Thus, R & B
Insurance accepted the mortgage subject to the usufructuary rights of Justa Kausapin. Furthermore, even assuming
that R & B Insurance was legally obliged to go beyond the title and search for any hidden defect or inchoate right
which could defeat its right thereto, it would not have discovered anything since the mortgage was entered into in
1964, while the "Kasunduan" conveying the land to Enrique D. Hemedes was only entered into in 1971 and the
affidavit repudiating the deed of conveyance in favor of Maxima Hemedes was executed by Justa Kausapin in
1981. 35

We sustain petitioner R & B Insurance's claim that it is entitled to the protection of a mortgagee in good faith.

It is a well-established principle that every person dealing with registered land may safely rely on the correctness of
the certificate of title issued and the law will in no way oblige him to go behind the certificate to determine the
condition of the property. 36 An innocent purchaser for value 37 is one who buys the property of another without notice
that some other person has a right to or interest in such property and pays a full and fair price for the same at the
time of such purchase or before he has notice of the claim of another person. 38

The annotation of usufructuary rights in favor of Justa Kausapin upon Maxima Hemedes' OCT dose not impose
upon R & B Insurance the obligation to investigate the validity of its mortgagor's title. Usufruct gives a right to enjoy
the property of another with the obligation of preserving its form and
substance. 39 The usufructuary is entitled to all the natural, industrial and civil fruits of the property 40 and may
personally enjoy the thing in usufruct, lease it to another, or alienate his right of usufruct, even by a gratuitous title,
but all the contracts he may enter into as such usufructuary shall terminate upon the expiration of the usufruct. 41

Clearly, only the jus utendi and jus fruendi over the property is transferred to the usufructuary. 42 The owner of the
property maintains the jus disponendi or the power to alienate, encumber, transform, and even destroy the
same. 43This right is embodied in the Civil Code, which provides that the owner of property the usufruct of which is
held by another, may alienate it, although he cannot alter the property's form or substance, or do anything which
may be prejudicial to the usufructuary. 44

There is no doubt that the owner may validly mortgage the property in favor of a third person and the law provides
that, in such a case, the usufructuary shall not be obliged to pay the debt of the mortgagor, and should the
immovable be attached or sold judicially for the payment of the debt, the owner shall be liable to the usufructuary for
whatever the latter may lose by reason thereof. 45

Based on the foregoing, the annotation of usufructuary rights in favor of Justa Kausapin is not sufficient cause to
require R & B Insurance to investigate Maxima Hemedes' title, contrary to public respondent's ruling, for the reason
that Maxima Hemedes' ownership over the property remained unimpaired despite such encumbrance. R & B
Insurance had a right to rely on the certificate of title and was not in bad faith in accepting the property as a security
for the loan it extended to Maxima Hemedes.

Even assuming in gratia argumenti that R & B Insurance was obligated to look beyond the certificate of title and
investigate the title of its mortgagor, still, it would not have discovered any better rights in favor of private
respondents. Enrique D. Hemedes and Dominium base their claims to the property upon the "Kasunduan" allegedly
executed by Justa Kausapin in favor of Enrique Hemedes. As we have already stated earlier, such contract is a
nullity as its subject matter was inexistent. Also, the land was mortgaged to R & B Insurance as early as 1964, while
the "Kasunduan" was executed only in 1971 and the affidavit of Justa Kausapin affirming the conveyance in favor of
Enrique D. Hemedes was executed in 1981. Thus, even if R & B Insurance investigated the title of Maxima
Hemedes, it would not have discovered any adverse claim to the land in derogation of its mortgagor's title. We
reiterate that at no point in time could private respondents establish any rights or maintain any claim over the land.

It is a well-settled principle that where innocent third persons rely upon the correctness of a certificate of title and
acquire rights over the property, the court cannot just disregard such rights. Otherwise, public confidence in the
certificate of title, and ultimately, the Torrens system, would be impaired for everyone dealing with registered
property would still have to inquire at every instance whether the title has been regularly or irregularly issued. 46Being
an innocent mortgagee for value, R & B Insurance validly acquired ownership over the property, subject only to the
usufructuary rights of Justa Kausapin thereto, as this encumbrance was properly annotated upon its certificate of
title.

The factual findings of the trial court, particularly when affirmed by the appellate court, carry great weight and are
entitled to respect on appeal, except under certain circumstances. 47 One such circumstance that would compel the
Court to review the factual findings of the lower courts is where the lower courts manifestly overlooked certain
relevant facts not disputed by the parties and which, if properly considered, would justify a different
conclusion. 48Also, it is axiomatic that the drawing of the proper legal conclusions from such factual findings are
within the peculiar province of this Court. 49

As regards R & B Insurance's prayer that Dominium be ordered to demolish the warehouses or that it be declared
the owner thereof since the same were built in bad faith, we note that such warehouses were constructed by Asia
Brewery, not by Dominium. However, despite its being a necessary party in the present case, the lower courts never
acquired jurisdiction over Asia Brewery, whether as a plaintiff or defendant, and their respective decisions did not
pass upon the constructions made upon the subject property. Courts acquire jurisdiction over a party plaintiff upon
the filing of the complaint, while jurisdiction over the person of a party defendant is acquired upon the service of
summons in the manner required by law or by his voluntary appearance. As a rule, if a defendant has not been
summoned, the court acquires no jurisdiction over his person, and any personal judgment rendered against such
defendant is null and void. 50 In the present case, since Asia Brewery is a necessary party that was not joined in the
action, any judgment rendered in this case shall be without prejudice to its rights. 51

As to its claim for moral damages, we hold that R & B Insurance is not entitled to the same for it has not alleged nor
proven the factual basis for the same. Neither is it entitled to exemplary damages, which may only be awarded if the
claimant is entitled to moral, temperate, liquidated or compensatory damages. 52 R & B Insurance's claim for
attorney's fees must also fail. The award of attorney's fees is the exception rather than the rule and counsel's fees
are not to be awarded every time a party wins a suit. Its award pursuant to article 2208 of the Civil Code demands
factual, legal and equitable justification and cannot be left to speculation and conjecture. 53 Under the circumstances
prevailing in the instant case, there is no factual or legal basis for an award of attorney's fees.

WHEREFORE, the assailed decision of public respondent and its resolution dated February 22, 1989 are
REVERSED. We uphold petitioner R & B Insurance's assertion of ownership over the property in dispute, as
evidenced by TCT No. 41985, subject to the usufructuary rights of Justa Kausapin, which encumbrance has been
properly annotated upon the said certificate of title. No pronouncement as to costs.
SO ORDERED.

Panganiban and Purisima, JJ., concur.

Melo, J., please see dissenting opinion.

Vitug, J., please see separate (concurring) opinion.

Separate Opinions

VITUG, J., separate opinion;

I share the opinion expressed by my esteemed colleague, Mme. Justice Minerva P. Gonzaga-Reyes, in
herponencia.

I just would like to add that a donation would not be legally feasible if the donor has neither ownership nor real right
that he can transmit to the donee. Unlike an ordinary contract, a donation, under Article 712, in relation to Article
725, of the Civil Code is also a mode of acquiring and transmitting ownership and other real rights by an act of
liberality whereby a person disposes gratuitously that ownership or real right in favor of another who accepts it. It
would be an inefficacious process if the donor would have nothing to convey at the time it is made.

Art. 744 of the Civil Code states that the "donation of the same thing to two or more different donees shall be
governed by the provisions concerning the sale of the same thing to two or more persons," i.e., by Article 1544 of
the same Code, as if so saying that there can be a case of "double donations" to different donees with opposing
interest. Article 744 is a new provision, having no counterpart in the old Civil Code, that must have been added
unguardedly. Being a mode of acquiring and transmitting ownership or other real rights, a donation once perfected
would deny the valid execution of a subsequent inconsistent donation (unless perhaps if the prior donation has
provided a suspensive condition which still pends when the later donation is made).

In sales, Article 1544, providing for the rules to resolve the conflicting rights of two or more buyers, is appropriate
since the law does not prohibit but, in fact, sanctions the perfection of a sale by a non-owner, such as the sale of
future things or a short sale, for it is only at the consummation stage of the sale, i.e., delivery of the thing sold, that
ownership would be deemed transmitted to the buyer. In the meanwhile, a subsequent sale to another of the same
thing by the same seller can still be a legal possibility. This rule on double sales finds no relevance in an ordinary
donation where the law requires the donor to have ownership of the thing or the real right he donates at the time of
its perfection (see Article 750, Civil Code) since a donation constitutes a mode, not just a title, in an acquisition and
transmission of ownership.

MELO, J., dissenting opinion;

I find myself unable to join the majority. The opinion written by my esteemed colleague, Madame Justice Minerva
Gonzaga-Reyes, will have far-reaching ramifications on settled doctrines concerning the finality and conclusiveness
of the factual findings of the trial court in view of its unique advantage of being able to observe at first-hand the
demeanor and deportment of witnesses, and especially when such findings of facts are affirmed by the Court of
Appeals, which is the final arbiter of questions of fact (People vs. Edaño, 64 SCRA 675 [1975]; People vs. Tala, 141
SCRA 240; People vs. Canada and Dondoy, 144 SCRA 121 [1986]; People vs. Clore, 184 SCRA 638 [1990];
Binalay vs. Manalo, 195 SCRA 374 [1991]; People vs. Miscala, 202 SCRA 26 [1991]; People vs. Lagrosa, 230
SCRA. 298 [1994]). All these conditions are present in the case at bar, and I have grave reservations about the
propriety of setting aside time-tested principles in favor of a finding that hinges principally on the credibility of a
single witness, whom we are asked to disbelieve on the basis merely of her recorded testimony without the benefit
of the advantage that the trial court had, disregarding in the process another long-established rule — that mere
relationship of a witness to a party does not discredit his testimony in court (U.S. vs. Mante, 27 Phil 124; People vs.
Pagaduan, 37 Phil 90; People vs. Reyes, 69 SCRA 474 [1976]; People vs. Padiernos, 69 SCRA 484 [1976];
Borromeo vs. Court of Appeals, 70 SCRA 329 [1976]; People vs. Estocada, 75 SCRA 295 [1977]; People vs. Ciria,
106 SCRA 381 [1981]; People vs. Ramo, 132 SCRA 174 [1984]; People vs. Atencio, 156 SCRA 242 [1987]; People
vs. Gutierrez. Jr., 158 SCRA 614 [1988]; People vs. Bandoquillo, 167 SCRA 549 [1988]; People vs. Suitos, 220
SCRA 419 [1993]).
The primordial issue is whether or not the "Deed of Conveyance of Unregistered Real Property by Reversion" dated
September 27, 1960 conveying the subject property to Maxima Hemedes is valid. If the transfer is not valid, no title
passed to her successor-in-interest, R & B Insurance Corporation.

The Court of Appeals, confirming and summarizing the findings of fact and law made by the trial court, declared:

We sustain the findings of the trial court.

To begin with, the "Deed of Conveyance of Unregistered Real Property by Reversion" was nullified
by the trial court on two (2) grounds:

First, MAXIMA failed to comply with the requirements laid down by Article 1332 of the Civil Code.
Said provision reads:

Art. 1332. When one of the parties is unable to read, or if the contract is in a
language not understood by him, and mistake or fraud is alleged, the person
enforcing the contract must show that the terms thereof have been fully explained to
the former.

In her testimony, MAXIMA admitted the entire document was written in English, a language not
known to Justa Kausapin (TSN, 17 November 1981, pp. 7-8; Deposition of Justa Kausapin). Yet,
MAXIMA failed to introduce sufficient evidence that would purportedly show that the deed of
conveyance was explained to Justa Kausapin before the latter allegedly affixed her thumbmark. On
the contrary, she admitted having failed to translate the deed of conveyance to Justa Kausapin
because according to her, the latter has "no voice" anyway insofar as the property is concerned. Her
testimony reads:

Q — In connection with this deed of conveyance which has been marked as Exh. "2-
Maxima," we note that this is written in English, do you know, Mrs. Hernandez
(MAXIMA), whether this document was ever translated to Justa Kausapin?

A — Justa Kausapin has no voice because that's the order of my father, so anyway. .
.

Court — Answer the question, you were only asked whether that was translated.

A — No. (TSN 26 November, 1984, pp. 36-37, Maxima Hemedes).

Second, MAXIMA failed to repudiate the allegation of Justa Kausapin disclaiming knowledge of her
having executed such a deed. As a matter of fact, Justa Kausapin claimed that it was only during the
hearing conducted on 07 December 1981 that she first caught glimpse of the deed of conveyance
(TSN, 07 December 1981, pp. 22-23, ibid.) She therefore could not have possibly affixed her
thumbmark therein. In the light of such a denial, the burden of proving that the deed of conveyance
was indeed genuine laid on MAXIMA. After all, any party who asserts the affirmative of the issue has
the burden of presenting evidence required to obtain a favorable judgment (Republic v. Court of
Appeals, 182 SCRA 290). 1âwphi1.nêt

Instead, what was clearly established from the deposition of Justa Kausapin is the fact that she
never executed any document donating the property to anybody else except ENRIQUE. This can be
readily gleaned from her testimony, reading:

Q — From the time, Aling Justa, that your husband Jose Hemedes donated the
property to you up to the time you in turn donated the same to Enrique Hemedes in
1971, do you recall having executed any document donating this particular property
to anybody else?

A — None, Sir. (TSN, 17 November 1981, p. 21)

There is no dispute that Justa Kausapin twice repudiated the conveyance in favor of Maxima Hemedes. As found by
the trial court:

In an Affidavit dated April 10, 1981 executed by Justa Kausapin before three witnesses (Exh. D-
Dominium), said affiant disowned the alleged "Deed of Conveyance of Unregistered Real Property
by Reversion" invoked by defendant Maxima Hemedes, and expressly stated that she never granted
any right over the property to Maxima Hemedes, whether as owner or mortgagor, that she never
allowed her to use the land as security or collateral for a loan. In the same affidavit, Justa Kausapin
affirmed the authenticity of the "Kasunduan" whereby she transferred ownership of the disputed land
to Enrique Hemedes, her stepson and reliable source of assistance throughout the years that she
was in need of help. The testimony of Justa Kausapin was also taken by deposition on November
17, December 7 and 14, 1981 and on January 14, 1982, wherein all the contending parties were
represented and had the opportunity to cross-examine her. In her testimony (the entire transcript of
which has been submitted as Exh. K-Enrique), Justa Kausapin reiterated her repudiation of the Deed
of Conveyance in favor of Maxima Hemedes and re-affirmed the validity of the "Kasunduan" in favor
of Enrique Hemedes, as well as the subsequent sale of the land by Enrique Hemedes to Dominium.

(pp. 83-84, Rollo.)

The majority would hold that the twin repudiations cannot be given credence because the witness is biased in favor
of Enrique Hemedes, who, by providing support and financial assistance to the witness before, during and after the
execution of the "Kasunduan," is said to have influenced her into signing the same. This issue refers to the
credibility of witnesses which, as stated earlier, is best left for determination by the trial court (People vs. Oliano, 287
SCRA 158 [1998], citing People vs. Pontillar, Jr., 275 SCRA 338 [1997]; People vs. Rubio, 257 SCRA 528 [1996];
People vs. Del Prado, 253 SCRA 731 [1996]). I am not prepared to substitute my judgment for that of the trial court
on the credibility of Justa Kausapin on the basis alone of the relationship between her and Enrique Hemedes. To
reiterate, the rule is: "Mere relationship of a witness to a party does not discredit his testimony in court." (U.S. vs.
Mante, supra; Aznar vs. Court of Appeals, 70 SCRA 329 [1976]; People vs. Letigio, 268 SCRA 227, 243 [1997]).

I cannot infer from the mere circumstance that Justa Kausapin was receiving support and sustenance from Enrique
Hemedes that she had any improper motives to testify in favor of Enrique and against Maxima. It must be
remembered that Justa Kausapin had a legal right to such financial assistance, not only from respondent Enrique
Hemedes, but also from Maxima Hemedes, who are both her stepchildren. If one must impute improper motives in
favor of Enrique, one could just as easily ascribe these to Maxima. Furthermore, it must be noted that Justa
Kausapin's entitlement to support flowed from her usufructuary rights contained in the "Donation Inter Vivos with
Resolutory Conditions" executed by her late husband, Jose Hemedes, the common father of petitioner Maxima and
respondent Enrique Hemedes. In supporting his stepmother, Enrique was, therefore, merely performing a legal or
contractual duty in favor of Justa Kausapin. There was nothing improper in Justa Kausapin's repudiation of the
conveyance in favor of Maxima, especially so if one considers the fact that the latter did not adduce any other
evidence to defeat the presumption that Justa Kausapin was stating the truth when she said that she never
conveyed the property to Justa Maxima. As the trial court found:

. . . The actuation of Enrique Hemedes towards Justa Kausapin is legally and morally justified. It
must be remembered that Justa Kausapin is the stepmother of Enrique Hemedes; she was also the
usufructuary of the property in dispute. It is only natural and in keeping with law and custom, or
Filipino tradition, for a son to support his mother (even if she happens to be a stepmother); and form
a legal standpoint, the naked owner Enrique Hemedes was bound to support Justa Kausapin by way
of giving her what she was entitled to as usufructuary.

(p. 104, Rollo.)

The trial court's ruling on the invalidity of the title of Maxima is not based solely on Justa Kausapin's repudiation of
the deed of conveyance, but likewise on the very acts of Maxima and her transferee R & B Surety and Insurance.
The factual findings of the trial court are to the effect that despite the alleged transfer of ownership from Justa
Kausapin to Maxima Hemedes on September 27, 1960 and the subsequent transfer to R & B Insurance on May 3,
1968 by way of foreclosure and public auction sale, neither do these petitioners exercised their rights of ownership
over the disputed property, never even asserting their supposed ownership rights until it was too late. The following
findings of the trial court stand unassailed:

There are other indications which led this Court to believe that neither defendant Maxima Hemedes
nor defendant R & B INSURANCE consider themselves the owner of the property in question. Both
of these claimants never declared themselves as owners of the property for tax purposes; much less
did they pay a single centavo in real estate taxes. The argument that since Justa Kausapin was in
possession of the property as usufructuary she should pay the taxes contravenes the clear provision
of the Civil Code that the taxes which may be imposed directly on the capital during the usufruct, in
this case the realty taxes, shall be at the expense of the owner (Article 597, Civil Code). If Maxima
Hemedes and R & B INSURANCE were convinced that they were the owners of the property, why
did they not pay taxes for the same? This attitude is not consistent with that of an owner in good
faith. The Court has noted that the very owner of R & B INSURANCE has admitted in her testimony
that they declared the property as one of the assets of R & B INSURANCE only in 1976, which is
eight years after they supposedly bought it at public auction in 1968 (TSN, July 6, 1987, pp. 22-23)
(Decision, pp. 32-33).

(pp.
101-
102, R
ollo.)

Faced with the categorical and straightforward repudiations of the conveyance supposedly made in her favor,
Maxima Hemedes could only gratuitously assert otherwise, as no other testimonial or documentary evidence was
adduced in support thereof. Maxima's self-serving assertions, however, are legally infirm in view of her admission
that the deed of conveyance in her favor was written in a language unknown to the person who supposedly
executed the same and the terms thereof were not fully explained to the person who executed the same. These are
the facts as found by the trial court:

Questioned about the execution of the "Deed of Conveyance of Unregistered Real Property by
Reversion" which is the basis of her claim, defendant Maxima Hemedes admitted that the document
which is in English was not translated or explained to Justa Kausapin before the latter supposedly
affixed her thumbmark to the document (TSN, November 26, 1984, p. 34; TSN, December 10, 1984,
p. 9). The Court has noted from the records that the Notary Public before whom the said document
was notarized was not presented as a wittiness by defendant Maxima Hemedes, if only to attest to
the execution of said document by Justa Kausapin, considering that the latter is an illiterate when it
comes to documents written in English. Maxima explained the non-translation of the Deed of
Conveyance into a language understood by Justa Kausapin with the statement that the latter (Justa
Kausapin) "has no voice" anyway in so far as the property is concerned (TSN, November 26, 1984,
p. 36) . . . the Notary Public before whom the said document was supposed to have been
 axknowledged was also not presented as a witness, and there was no explanation as to why he was
not also presented. In the face of such an admission and failure on the part of defendant Maxima
Hemedes, coupled with the straightforward repudiation by Justa Kausapin herself of the document
relied upon by said defendant the Court finds and so concludes that the "Deed of Conveyance of
Unregistered Real Property by Reversion" is not a credible and convincing evidence and is of no
evidentiary value under the law upon which claimant Maxima Hemedes may anchor a valid claim of
ownership over the property subject of this action.

(pp.
91-
93, Roll
o.)

It is argued that private respondents failed to have the thumbmarks of Justa Kausapin appearing on the deeds
executed in favor of Maxima and Enrique compared and this failure may be taken as wilful suppression of evidence
that is presumed to be adverse if produced (Rules of Court, Rule 131, Sec. 3(e). The applicability of this rule
presupposes that the suppressed evidence is not available to the other party for production in court (People vs.
Padiernos, 69 SCRA 484 [1976]; People vs. Silvestre, 279 SCRA 474, 495 [1997]). This is not the case here for the
same documents were available to petitioners. In fact, the records show that counsel for Maxima Hemedes pledged
to submit the document which will be compared with the specimen thumbmark to be obtained from Justa Kausapin
(TSN, December 7, 1981, p. 28). The records, however, do not show that said counsel persisted in his request for
comparison of Kausapin's thumbmarks. If petitioners were convinced that the specimen thumbprint of Justa
Kausapin was of crucial importance to their cause, they should have insisted on presenting her as a witness and,
thereupon, obtaining her thumbprint. Their own failure to pursue the production of the specimen thumbprint of Justa
Kausapin negated any belated claim that the said specimen was suppressed (People vs. Tulop, citing People vs.
Pagal, 272 SCRA 443 [1998]; Commissioner of Internal Revenue vs. Tokyo Shipping Company, Ltd., 244 SCRA
332 [1995]; citing Nicolas vs. Nicolas, 52 Phil 265 [1928] and Ang Seng Quiem vs. Te Chico, 7 Phil 541 [1907]). 1âw phi1.nêt

The two courts below were, to my mind, most perceptive when they held that proof of authenticity of the thumbprint
of Justa Kausapin would not render valid an otherwise void document in light of the admission of Maxima Hemedes
that she did not explain the English contents thereof to Justa Kausapin in a language understood by her.

On the other hand, the validity of the conveyance to Enrique Hemedes is amply proven by the evidence on record.
Thus, largely uncontested are the following findings of fact of the trial court:

Enough has already been said hereinabove concerning the claim of ownership of plaintiff Enrique.
From an overall evaluation of the facts found by the Court to be substantiated by the evidence on
record, the Court is convinced and so holds that the three conflicting claimants, it is party plaintiffs,
Enrique Hemedes and now DOMINIUM, who have both law and equity on their side. Plaintiff Enrique
Hemedes' title to the property in question by virtue of the "Kasunduan" dated May 27, 1971 was
confirmed twice by his grantor, Justa Kausapin; he complied with his obligations as naked owner by
giving Justa Kausapin her usufructuary rights in the form of financial and other assistance; he
declared his ownership of the property openly and adversely to other claimants by recording the
same in the appropriate government agencies, namely, the Municipal and Provincial Assessor's
Office, the Ministry of Agrarian Reform and the Bureau of Lands; he was openly known in the
community where the property is located as the owner thereof; he paid the taxes on the property
conscientiously from the time he acquired the same to the time he sold the same to co-plaintiff
DOMINIUM; he was in continuous possession of the property during the said period; he paid the
tenant, Nemesio Marquez, the disturbance fee required under the Land Reform Law.

(pp.,
102-
103, R
ollo.)

The Court of Appeals, therefore, did not err in holding that since the deed of conveyance to Maxima was found to be
spurious, it necessarily follows that OCT No. (0-941) 0-198 issued in her name is null and void. This is because the
registration will not invalidate a forged or invalid document.
I, therefore, vote to dismiss the petition and to affirm the decision appealed from.