[A.C. No. 4863.

September 7, 2001]
URBAN BANK, INC., complainant, vs. ATTY. MAGDALENO M. PEA, respondent.
R E S O L U T I O N
PUNO, J .:
Before us is an administrative case for disbarment filed by complainant Urban Bank, Inc., a
commercial bank, against respondent Atty. Magdaleno M. Pea. Complainant charges that respondent
is guilty of deceit, malpractice and gross misconduct in violation of Section 27, Rule 138, of the
Revised Rules of Court. The allegations of the Complaint in support of the accusation are as follows:
3. Last 1 December 1994, Complainant bought a parcel of land located along Roxas Boulevard
from the Isabela Sugar Company (ISC for brevity). One of the conditions of the sale was for
ISC to cause the eviction of all the occupants found in said property. This condition was
incorporated in the Contract to Sell and adopted in the subsequent Deed of Absolute Sale
executed by and between ISC and Complainant dated 15 November 1994 and 29 Novemebr
1994, respectively.
4. To fully implement the abovementioned condition, ISC engaged the services of herein
Respondent Atty. Magdaleno M. Pea. This was communicated by ISC to Respondent in a
Memorandum dated 20 November 1994 and relayed to Complainant in a Letter dated 19
December 1994.
5. Respondent accepted the engagement of his services by ISC and he proceeded to take the
necessary steps to evict the occupants of the property subject of the sale.
6. During the eviction process, Complainant was informed by ISC and Respondent about the
necessity of a letter of authority in favor of the latter, granting him the authority to represent
Complainant in maintaining possession of the aforesaid property and to represent Complainant in
any court action that may be instituted in connection with the exercise of said duty.
7. Complainant acceded to the request and issued a letter-authority dated 15 December 1994, but
only after making it very clear to the Respondent that it was ISC which contracted his services
and not Complainant. This clarification was communicated to Respondent by Atty. Corazon M.
Bejasa and Mr. Arturo E. Manuel, Jr., Senior Vice-President and Vice-President, respectively of
Complainant bank in a letter addressed to respondent dated 15 December 1994. A copy of said
letter is attached hereto and made an integral part of this Complaint as Annex E.
8. Subsequently however, Respondent requested for a modification of said letter of authority by
furnishing Complainant with a draft containing the desired wordings (including the date, i.e., 19
December 1994) and asking Complainant to modify the previous letter by issuing a new one
similarly worded as his draft. A copy of said request is attached hereto and made an integral part
of this Complaint as Annex F.
9. If only to expedite and facilitate matters, Complainant willingly obliged and re-issued a new
letter of authority to Respondent, this time incorporating some of Respondents
suggestions. Thus it came to pass that the actual letter of authority was dated 19 December 1994,
while Complainants clarificatory letter was dated 15 December 1994.
10. Eventually, the eviction of the occupants of the property in question was successfully carried
out. After the lapse of more than thirteen (13) months, Respondent filed a collection suit against
herein Complainant and its senior officers for recovery of agents compensation and expenses,
damages and attorneys fees, on the strength of the letter of authority issued by Atty. Bejasa and
Mr. Manuel, Jr. A copy of the complaint filed by herein Respondent with the Bago City
Regional Trial Court is attached hereto and made an integral part hereof as Annex G.
11. The act of Respondent in securing the letter of authority from Complainant, ostensibly for the
purpose of convincing the occupants sought to be evicted that he was duly authorized to take
possession of the property and then using the same letter as basis for claiming agents
compensation, expenses and attorneys fees from Complainant, knowing fully well the
circumstances surrounding the issuance of said letter of authority, constitutes deceit, malpractice
and gross misconduct under Section 27, Rule 138 of the Revised Rules of Court. Said provision
enumerates the grounds for the suspension and disbarment of lawyers, namely:
Sec. 27. Attorneys removed or suspended by Supreme Court, on what grounds, - A member of the bar
may be removed or suspended from his office as attorney by the Supreme Court for any deceit,
malpractice or other gross misconduct in such office, grossly immoral conduct or by reason of his
conviction of a crime involving moral turpitude, or for any violation of the oath of which he is
required to take before admission to practice, or for willful disobedience of any lawful order of a
superior court or for corruptly or wilfully appearing as an attorney for a party to a case without any
authority to do so. The practice of soliciting cases at law for the purpose of gain, either personally or
through paid agents or brokers, constitutes malpractice. (Emphasis supplied)
[1]

In answer to these allegations, respondent submitted with this Court his Comment, wherein he
refuted all the charges against him. Preliminarily, he claimed that the present complaint should be
dismissed outright since its filing constitutes forum shopping and it involves a matter which is sub-
judice, in view of the pending civil action involving the same parties. Respondent then disputed that he
was guilty of deceit, malpractice or gross misconduct. He declared that complainant, through its duly
authorized officers, engaged his services to rid the property of tenants and intruders in the course of a
telephone conversation. He added that there was no reason for him to deceive complainant into writing
a letter of authority because he knew very well that the verbal agreement was sufficient to constitute an
attorney-client relationship. The request for a letter of authority, according to him, was merely to
formalize the engagement.
[2]
Lastly, he argued that the complainant accepted the benefits of his
service, just as it never disclaimed that he was acting in its behalf during the period of engagement.
We referred the matter to the Integrated Bar of the Philippines (IBP) for investigation. Both
parties presented their respective evidence before the Commission on Bar Discipline of the IBP. After
only one hearing, and upon agreement of the parties, the case was submitted for resolution on the basis
of their respective pleadings and annexes thereto. The investigating officer, Commissioner Navarro,
required both parties to file their own memoranda. The commissioner made the following findings:
After going over the evidence submitted by the parties, the Undersigned noted that the complainant
(plaintiff) in RTC Bago City Civil Case is the respondent in the present case which only showed that to
get even with the respondent, complainant instituted the present case as leverage for respondents
complaint in the civil case. The complainant in the RTC Bago City Civil case is the respondent in the
present case and vice-versa; therefore there was no institution by the same party for remedies in
different fora which negates forum shopping.
The fact remains however that complainant never contested the actuations done by the respondent to rid
its property from tenants and intruders; and even executed a letter of authority in favor of respondent
dated December 19, 1994; otherwise complainant should have engaged the services of other lawyers.
Nevertheless, it is not for this Office to determine who should pay the respondent for this is a matter not
within its jurisdiction but for the proper court to do so.
The only issue for resolution of this Office is whether or not respondent committed malpractice, deceit
and gross misconduct in the practice of his profession as member of the bar.
The evidence on record showed that respondent successfully performed his task of evicting the tenants
and intruders in the property in question. More so, no less than Senior Vice-President Corazon Bejasa
was very thankful for his job well done.
Complainant benefited from respondents task and for a period of fifty (50) days no behest or complaint
was received by the respondent from the complainant. It was only when payment for his legal services
was demanded that complainant re-acted when it is incumbent upon the benefactor of services that just
compensation should be awarded.
It is but just and proper that if refusal to pay just compensation ensues in any transaction, the proper
remedy is to institute an action before the proper court and such actuation of the respondent herein did
not constitute deceit, malpractice or gross misconduct.
In view of the foregoing, the Undersigned hereby recommends that the complaint against Atty.
Magdaleno Pea be dismissed for lack of merit.
[3]

Thereafter, IBP Board of Governors passed a Resolution DISMISSING the Complaint based on
the Report and Recommendation of Commissioner Navarro. It appears that on April 26, 2000, the
complainant was closed by the Monetary Board of the Bangko Sentral Ng Pilipinas and was placed
under receivership of the Philippine Deposit Insurance Corporation (PDIC). On May 8, 2000, it
received a notice of the resolution. With the PDIC now acting as its counsel, it sought reconsideration of
the resolution with the IBP, which was denied there being no substantive reason to reverse the findings
therein and because the pleading is improper as the remedy of the complainant is to file the
appropriate Motion with the Supreme Court within fifteen days from receipt of notice of said Decision
pursuant to Section 12 of Rule 139-B.
[4]

On October 5, 2000, we received a Manifestation from the complainant, represented this time by
Corazon M. Bejasa, praying that the IBP Commission on Bar Discipline and Board of Governors be
ordered to make a more thorough determination of whether or not respondent committed the acts of
deceit, malpractice and gross misconduct complained of as grounds for the latters disbarment. We then
resolved to treat this manifestation as an appeal. Disbarment proceedings are matters of public
interest,
[5]
undertaken for public welfare and for the purpose of preserving courts of justice from the
official ministration of the persons unfit to practice them.
[6]

The sole issue raised in this appeal is whether or not respondent should be disbarred on the
ground of deceit, malpractice and gross misconduct. We rule in the negative.
From the record and evidence before us, we agree with the commissioners conclusion that
respondent cannot be found guilty of the charges against him. Apart from the allegations it made in
various pleadings, complainant has not proferred any proof tending to show that respondent really
induced it, through machination or other deceitful means, to issue the December 19 letter of authority
ostensibly for the purpose of evicting illegal occupants, then using the very same letter for demanding
agents compensation. During the scheduled hearing, it did not introduce a single witness to testify
apropos the circumstance under which the letter was dispatched. Those who signed and issued the
letter, Corazon M. Bejasa and Arturo E. Manuel Jr., were never presented before the investigating
commissioner to substantiate its assertion that the letter it gave to the respondent was only for show,
and for a purpose which is limited in scope. Similarly, not even the sworn statements from these or
other vital witnesses were attached to the memorandum or the other pleadings it submitted. It is one
thing to allege deceit, malpractice and gross misconduct, and another to demonstrate by evidence the
specific acts constituting the same.
To be sure, no evidence in respect of the supposed deceit, malpractice or gross misconduct was
adduced by the complainant. It is axiomatic that he who alleges the same has the onus of validating
it. In disbarment proceedings, the burden of proof is upon the complainant and this Court will exercise
its disciplinary power only if the former establishes its case by clear, convincing, and satisfactory
evidence.
[7]
In this regard, we find that complainant failed to meet the required standard.
In an effort to lend credence to its claim that there was no contractual relation between them,
complainant attempted to establish that the legal services of the respondent was engaged, not by it, but
by the seller of the lot, Isabela Sugar Company. This should presumably settle any doubt that the
December 19 letter was only to be used by respondent for the purpose of supervising the eviction of the
occupants of the property and protecting it from intruders, and nothing more. To support this, it
submitted correspondence coming from people who appear to be responsible officers of ISC (one from
Enrique Montilla III, and another from Julie Abad and Herman Ponce) informing respondent of the
engagement of his services by the ISC. These letters, though, cannot by themselves be accorded strong
probative weight in the face of respondents emphatic assertion that he has never seen any of these
documents.
[8]
Likewise, they do not indicate that copies thereof were received by him or by any
authorized person in his behalf. It bears stressing that they do not carry his signature, nor the time or
date he took possession of them. It follows that they cannot be used to bind and prejudice the
respondent absent any showing that he had actual and ample knowledge of their contents.
Lastly, complainant seems to belabor under the mistaken assumption that the basis of the
respondent in instituting the civil case against it was the December 19 letter of authority. Well to point
out, the suit was grounded on an oral contract of agency purportedly entered into between him and the
complainant, represented by its duly authorized officers. This is evident from the averments embodied
in the Complaint filed with the Bago City Trial Court, the pertinent portions of which state:
7. The defendant URBAN BANK through its president, defendant TEODORO BORLONGAN,
and the defendants Board of Directors as well as its Senior Vice President CORAZON BEJASA
and Vice President, ANTONIO MANUEL, JR., entered into an agency agreement with the
plaintiff, whereby the latter in behalf of the defendant URBAN BANK, shall hold and maintain
possession of the aforedescribed property, prevent entry of intruders, interlopers and squatters
therein and finally turn over peaceful possession thereof to defendant URBAN BANK; it was
further agreed that for the services rendered as its agent, defendant URBAN BANK shall pay
plaintiff a fee in an amount equivalent to 10 % of the the market value of the property prevailing
at the time of payment;
8. The plaintiff accepted the engagement and in a letter dated December 19, 1994, defendant
URBAN BANK through its authorized officials, namely, defendant CORAZON BEJASA and
ARTURO E. MANUEL, JR., Senior Vice President and Vice President respectively, of
defendant URBAN BANK, officially confirmed the engagement of the services of the plaintiff
as its Agent-representative for the following specific purposes; x x x to hold and maintain
possession of our abovecaptioned property and to protect the same from tenants, occupants or
any other person who are threatening to return to the said property and/or to interfere with your
possession of the said property for and in our behalf. You are likewise authorized to represent
Urban Bank in any court action that you may institute to carry out your aforementioned duties,
and to prevent any intruder, squatter or any other person not otherwise authorized in writing by
Urban bank from entering or staying in the premises.
A photocopy of the letter dated December 19, 1994 is hereto attached as Annex C and made
integral part hereof.
[9]
(Emphasis supplied.)
It is clear from the above that what respondent was trying to enforce were the terms and conditions of
the contract. The letter, from the his own admission, just served to officially confirm a done deal. It
was, hence, utilized solely as documentary evidence to buttress respondents assertion regarding the
existence of the agency agreement. In fact, the amount of compensation (to the tune of 10% of the
market value of the property) he was recovering in the action was never mentioned in the letter, but
apparently settled in the course of an oral conversation. Indeed, respondent, with or without the letter,
could have instituted a suit against the complainant. There is no gainsaying that a verbal engagement is
sufficient to create an attorney-client relationship.
[10]

In sum, we find that, under the premises, respondent can hardly be faulted and accused of deceit,
malpractice and gross misconduct for invoking the aid of the court in recovering recompense for legal
services which he claims he undertook for the complainant, and which the latter does not deny to have
benefited from. Indeed, what he did was a lawful exercise of a right.
IN VIEW WHEREOF, the disbarment complaint against respondent Atty. Magdaleno M. Pea
is hereby DISMISSED for lack of merit.
SO ORDERED.
J-PHIL MARINE, INC. and/or JESUS CANDAVA and NORMAN SHIPPING SERVICES,
Petitioners,
- versus -

NATIONAL LABOR RELATIONS COMMISSION and WARLITO E. DUMALAOG,
Respondents.

G.R. No. 175366

Promulgated: August 11, 2008

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D E C I S I O N

CARPIO MORALES, J.:

Warlito E. Dumalaog (respondent), who served as cook aboard vessels plying overseas, filed on March
4, 2002 before the National Labor Relations Commission (NLRC) a pro-forma complaint[1] against
petitioners manning agency J-Phil Marine, Inc. (J-Phil), its then president Jesus Candava, and its
foreign principal Norman Shipping Services for unpaid money claims, moral and exemplary damages,
and attorneys fees.

Respondent thereafter filed two amended pro forma complaints[2] praying for the award of overtime
pay, vacation leave pay, sick leave pay, and disability/medical benefits, he having, by his claim,
contracted enlargement of the heart and severe thyroid enlargement in the discharge of his duties as
cook which rendered him disabled.

Respondents total claim against petitioners was P864,343.30 plus P117,557.60 representing interest
and P195,928.66 representing attorneys fees.*3+

By Decision[4] of August 29, 2003, Labor Arbiter Fe Superiaso-Cellan dismissed respondents complaint
for lack of merit.

On appeal,*5+ the NLRC, by Decision of September 27, 2004, reversed the Labor Arbiters decision and
awarded US$50,000.00 disability benefit to respondent. It dismissed respondents other claims,
however, for lack of basis or jurisdiction.*6+ Petitioners Motion for Reconsideration*7+ having been
denied by the NLRC,[8] they filed a petition for certiorari[9] before the Court of Appeals.

By Resolution[10] of September 22, 2005, the Court of Appeals dismissed petitioners petition for,
inter alia, failure to attach to the petition all material documents, and for defective verification and
certification. Petitioners Motion for Reconsideration of the appellate courts Resolution was
denied;[11] hence, they filed the present Petition for Review on Certiorari.

During the pendency of the case before this Court, respondent, against the advice of his counsel,
entered into a compromise agreement with petitioners. He thereupon signed a Quitclaim and
Release subscribed and sworn to before the Labor Arbiter.[12]

On May 8, 2007, petitioners filed before this Court a Manifestation[13] dated May 7, 2007 informing
that, inter alia, they and respondent had forged an amicable settlement.

On July 2, 2007, respondents counsel filed before this Court a Comment and Opposition (to
Petitioners Manifestation of May 7, 2007)*14+ interposing no objection to the dismissal of the petition
but objecting to the absolution of petitioners from paying respondent the total amount of Fifty
Thousand US Dollars (US$50,000.00) or approximately P2,300,000.00, the amount awarded by the
NLRC, he adding that:

There being already a payment of P450,000.00, and invoking the doctrine of parens patriae, we pray
then [to] this Honorable Supreme Court that the said amount be deducted from the [NLRC] judgment
award of US$50,000.00, or approximately P2,300,000.00, and petitioners be furthermore ordered to
pay in favor of herein respondent [the] remaining balance thereof.

x x x x[15] (Emphasis in the original; underscoring supplied)

Respondents counsel also filed before this Court, purportedly on behalf of respondent, a
Comment[16] on the present petition.

The parties having forged a compromise agreement as respondent in fact has executed a Quitclaim
and Release, the Court dismisses the petition.

Article 227 of the Labor Code provides:

Any compromise settlement, including those involving labor standard laws, voluntarily agreed upon by
the parties with the assistance of the Department of Labor, shall be final and binding upon the parties.
The National Labor Relations Commission or any court shall not assume jurisdiction over issues
involved therein except in case of non-compliance thereof or if there is prima facie evidence that the
settlement was obtained through fraud, misrepresentation, or coercion. (Emphasis and underscoring
supplied)

In Olaybar v. NLRC,[17] the Court, recognizing the conclusiveness of compromise settlements as a
means to end labor disputes, held that Article 2037 of the Civil Code, which provides that *a+
compromise has upon the parties the effect and authority of res judicata, applies suppletorily to labor
cases even if the compromise is not judicially approved.[18]

That respondent was not assisted by his counsel when he entered into the compromise does not
render it null and void. Eurotech Hair Systems, Inc. v. Go[19] so enlightens:

A compromise agreement is valid as long as the consideration is reasonable and the employee signed
the waiver voluntarily, with a full understanding of what he was entering into. All that is required for
the compromise to be deemed voluntarily entered into is personal and specific individual consent.
Thus, contrary to respondents contention, the employees counsel need not be present at the time of
the signing of the compromise agreement.[20] (Underscoring supplied)

It bears noting that, as reflected earlier, the Quitclaim and Waiver was subscribed and sworn to before
the Labor Arbiter.

Respondents counsel nevertheless argues that *t+he amount of Four Hundred Fifty Thousand Pesos
(P450,000.00) given to respondent on April 4, 2007, as full and final settlement of judgment award, is
unconscionably low, and un-[C]hristian, to say the least.*21+ Only respondent, however, can impugn
the consideration of the compromise as being unconscionable.

The relation of attorney and client is in many respects one of agency, and the general rules of agency
apply to such relation.[22] The acts of an agent are deemed the acts of the principal only if the agent
acts within the scope of his authority.*23+ The circumstances of this case indicate that respondents
counsel is acting beyond the scope of his authority in questioning the compromise agreement.

That a client has undoubtedly the right to compromise a suit without the intervention of his lawyer[24]
cannot be gainsaid, the only qualification being that if such compromise is entered into with the intent
of defrauding the lawyer of the fees justly due him, the compromise must be subject to the said
fees.[25] In the case at bar, there is no showing that respondent intended to defraud his counsel of his
fees. In fact, the Quitclaim and Release, the execution of which was witnessed by petitioner J-Phils
president Eulalio C. Candava and one Antonio C. Casim, notes that the 20% attorneys fees would be
paid 12 April 2007 P90,000.

WHEREFORE, the petition is, in light of all the foregoing discussion, DISMISSED.

ESTATE OF LINO OLAGUER, Represented by Linda O. Olaguer, and LINDA O. MONTAYRE,
Petitioners,

- versus -

EMILIANO M. ONGJOCO, Respondent.

G.R. No. 173312

Promulgated: August 26, 2008
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D E C I S I O N

CHICO-NAZARIO, J.:

Assailed in this Petition for Review on Certiorari[1] is the Decision[2] of the Court of Appeals dated 27
February 2006 in CA-G.R. CV No. 71710. Said decision modified the Decision[3] and the subsequent
Order[4] of the Regional Trial Court (RTC) of Legazpi City, Branch 6, in Civil Case No. 6223, and upheld
the validity of the sales of properties to respondent Emiliano M. Ongjoco.

The relevant factual antecedents of the case, as found by the trial court and adapted by the Court of
Appeals, are as follows:

The plaintiffs Sor Mary Edith Olaguer, Aurora O. de Guzman, Clarissa O. Trinidad, Lina Olaguer and Ma.
Linda O. Montayre are the legitimate children of the spouses Lino Olaguer and defendant Olivia P.
Olaguer.

Lino Olaguer died on October 3, 1957 so Special Proceedings No. 528 for probate of will was filed in
the then Court of First Instance of Albay. Defendant Olivia P. Olaguer was appointed as administrator
pursuant to the will. Later, defendant Eduardo Olaguer was appointed as co-administrator. x x x

On October 15, 1959 defendant Olivia P. Olaguer got married to defendant Jose A. Olaguer before the
then Justice of the Peace of Sto. Domingo (Libog) Albay. (Exhibit NNNN) On January 24, 1965 they
were married in church. (Exhibit XX)

In the order of the probate court dated April 4, 1961, some properties of the estate were authorized to
be sold to pay obligations of the estate. Pursuant to this authority, administrators Olivia P. Olaguer
and Eduardo Olaguer on December 12, 1962 sold to Pastor Bacani for [P]25,000 Pesos, twelve (12)
parcels of land, particularly, Lots 4518, 4526, 4359, 8750, 7514, 6608, 8582, 8157, 7999, 6167, 8266,
and 76 with a total area of 99 hectares. (Exhibit A Deed of Sale notarized by defendant Jose A.
Olaguer)

This sale of twelve (12) parcels of land to Pastor Bacani was approved by the Probate Court on
December 12, 1962. (Exhibit 15)

The following day, December 13, 1962, Pastor Bacani sold back to Eduardo Olaguer and Olivia Olaguer
for [P]12,000.00 Pesos, one of the twelve (12) lots he bought the day before, particularly, Lot No. 76 in
the proportion of 7/13 and 6/13 pro-indiviso respectively. (Exhibit B Deed of Sale notarized by
Felipe A. Cevallos, Sr.)

Simultaneously, on the same day December 13, 1962, Pastor Bacani sold back to Olivia Olaguer and
Eduardo Olaguer the other eleven (11) parcels he bought from them as follows:

To Olivia Olaguer Four (4) parcels for 10,700 Pesos, particularly Lots 4518, 4526, 4359, 8750 with a
total area of 84 hectares. (Exhibit E Deed of Sale notarized by Felipe A. Cevallos, Sr.)

To Eduardo Olaguer Seven (7) parcels of land for 2,500 Pesos, particularly Lots 7514, 6608, 8582,
8157, 7999, 6167, and 8266 with a total area of 15 hectares. (Exhibit C Deed of Sale notarized by
defendant Jose A. Olaguer)

Relying upon the same order of April 4, 1961 but without prior notice or permission from the Probate
Court, defendants Olivia P. Olaguer and Eduardo Olaguer on November 1, 1965 sold to Estanislao
Olaguer for 7,000 Pesos, ten (10) parcels of land, particularly, (a) TCT No. T-4011 Lot No. 578, (b) TCT
No. T-1417 Lot No. 1557, (c) TCT No. T-4031 Lot No. 1676, (d) TCT No. T-4034 Lot No. 4521, (e)
TCT No. T-4035 Lot No. 4522, (f) TCT No. 4013 Lot No. 8635, (g) TCT No. T-4014 Lot 8638, (h) TCT
No. T-4603 Lot No. 7589, (i) TCT No. 4604 Lot No. 7593, and (j) TCT No. T-4605 Lot No. 7396.
(Exhibit D Deed of Sale notarized by Rodrigo R. Reantaso)

This sale to Estanislao Olaguer was approved by the Probate Court on November 12, 1965.

After the foregoing sale to Estanislao Olaguer, the following transactions took place:

1) On July 7, 1966, defendant Olivia P. Olaguer executed a Special Power of Attorney notarized by
Rodrigo R. Reantaso (Exhibit T) in favor of defendant Jose A. Olaguer, authorizing the latter to sell,
mortgage, assign, transfer, endorse and deliver the properties covered by TCT No. 14654 for Lot 76
6/13 share only, T-13983, T-14658, T-14655, T-14656, and T-14657.

2) On July 7, 1966, Estanislao Olaguer executed a Special Power of Attorney in favor of Jose A. Olaguer
(Exhibit X) notarized by Rodrigo R. Reantaso authorizing the latter to sell, mortgage, assign,
transfer, endorse and deliver the properties covered by TCT No. T-20221, T-20222, T-20225 for Lot
No. 8635, T-20226 for Lot No. 8638, T-20227, T-20228, and T-20229.

By virtue of this Special Power of Attorney, on March 1, 1967, Jose A. Olaguer as Attorney-in-Fact of
Estanislao Olaguer mortgaged Lots 7589, 7593 and 7396 to defendant Philippine National Bank (PNB)
as security for a loan of 10,000 Pesos. The mortgage was foreclosed by the PNB on June 13, 1973 and
the properties mortgage were sold at public auction to PNB. On December 10, 1990, the PNB
transferred the properties to the Republic of the Philippines pursuant to Exec. Order No. 407 dated
June 14, 1990 for agrarian reform purposes. (records, vol. 1, page 66)

3) On October 29, 1966, Estanislao Olaguer executed a General Power of Attorney notarized by
Rodrigo R. Reantaso (Exhibit Y) in favor of Jose A. Olaguer, authorizing the latter to exercise general
control and supervision over all of his business and properties, and among others, to sell or mortgage
any of his properties.

4) On December 29, 1966, Estanislao Olaguer sold to Jose A. Olaguer for 15,000 Pesos, (Exhibit UU)
the ten (10) parcels of land (Lots 578, 4521, 4522, 1557, 1676, 8635, 8638, 7589, 7593 and 7396) he
bought from Olivia P. Olaguer and Eduardo Olaguer under Exhibit D.

5) On March 16, 1968, Estanislao Olaguer sold to Jose A. Olaguer for 1 Peso and other valuable
consideration Lot No. 4521 TCT No. T-20223 and Lot 4522 TCT No. 20224 with a total area of 2.5
hectares. (records, vol. 1, page 33)

6) On June 5, 1968, Estanislao Olaguer sold Lot No. 8635 under TCT No. T-20225, and Lot No. 8638
under TCT No. 20226 to Jose A. Olaguer for 1 Peso and other valuable consideration. (Exhibit F)
Deed of Sale was notarized by Rodrigo R. Reantaso.

7) On May 13, 1971, Jose A. Olaguer in his capacity as Attorney in-Fact of Estanislao Olaguer sold to
his son Virgilio Olaguer for 1 Peso and other valuable consideration Lot No. 1557 TCT No. 20221 and
Lot No. 1676 TCT No. 20222. The deed of sale was notarized by Otilio Sy Bongon.

8) On July 15, 1974, Jose A. Olaguer sold to his son Virgilio Olaguer Lot No. 4521 and Lot No. 4522 for
1,000 Pesos. Deed of Sale was notarized by Otilio Sy Bongon. (records, vol. 1, page 34)

9) On September 16, 1978 Virgilio Olaguer executed a General Power of Attorney in favor of Jose A.
Olaguer notarized by Otilio Sy Bongon (Exhibit V) authorizing the latter to exercise general control
and supervision over all of his business and properties and among others, to sell or mortgage the
same.

Olivia P. Olaguer and Eduardo Olaguer were removed as administrators of the estate and on February
12, 1980, plaintiff Ma. Linda Olaguer Montayre was appointed administrator by the Probate Court.

Defendant Jose A. Olaguer died on January 24, 1985. (Exhibit NN) He was survived by his children,
namely the defendants Nimfa Olaguer Taguay, Corazon Olaguer Uy, Jose Olaguer, Jr., Virgilio Olaguer,
Jacinto Olaguer, and Ramon Olaguer.

Defendant Olivia P. Olaguer died on August 21, 1997 (Exhibit OO) and was survived by all the
plaintiffs as the only heirs.

The decedent Lino Olaguer have had three marriages. He was first married to Margarita Ofemaria who
died April 6, 1925. His second wife was Gloria Buenaventura who died on July 2, 1937. The third wife
was the defendant Olivia P. Olaguer.

Lot No. 76 with an area of 2,363 square meters is in the heart of the Poblacion of Guinobatan, Albay.
The deceased Lino Olaguer inherited this property from his parents. On it was erected their ancestral
home.

As already said above, Lot No. 76 was among the twelve (12) lots sold for 25,000 Pesos, by
administrators Olivia P. Olaguer and Eduardo Olaguer to Pastor Bacani on December 12, 1962. The
sale was approved by the probate court on December 12, 1962.

But, the following day, December 13, 1962 Pastor Bacani sold back the same 12 lots to Olivia P.
Olaguer and Eduardo Olaguer for 25,200 Pesos, as follows:

a) Lot No. 76 was sold back to Olivia P. Olaguer and Eduardo Olaguer for 12,000 Pesos, in the
proportion of *6/13+ and *7/13+ respectively. (Exhibit B)

b) 4 of the 12 lots namely, Lots 4518, 4526, 4359, and 8750 were sold back to Olivia Olaguer for
10,700 Pesos. (Exhibit E)

c) 7 of the 12 lots namely, Lots 7514, 6608, 8582, 8157, 7999, 6167, and 8266 were sold back to
Eduardo Olaguer for 2,500 Pesos. (Exhibit C)

d) Lot No. 76 was thus issued TCT No. T-14654 on December 13, 1962 in the names of Eduardo B.
Olaguer married to Daisy Pantig and Olivia P. Olaguer married to Jose A. Olaguer to the extent of 7/13
and 6/13 pro-indiviso, respectively. (Exhibit FF also 14-a)

e) It appears from Plan (LRC) Psd-180629 (Exhibit 3) that defendant Jose A. Olaguer caused the
subdivision survey of Lot 76 into eleven (11) lots, namely, 76-A, 76-B, 76-C, 76-D, 76-E, 76-F, 76-G, 76-
H, 76-I, 76-J, and 76-K, sometime on April 3, 1972. The subdivision survey was approved on October 5,
1973. After the approval of the subdivision survey of Lot 76, a subdivision agreement was entered into
on November 17, 1973, among Domingo Candelaria, Olivia P. Olaguer, Domingo O. de la Torre and
Emiliano M. [Ongjoco]. (records, vol. 2, page 109).

This subdivision agreement is annotated in TCT No. 14654 (Exhibit 14 14-d) as follows:

(omitted)
After Lot 76 was subdivided as aforesaid, Jose A. Olaguer as attorney-in-fact of Olivia P. Olaguer, sold
to his son Virgilio Olaguer Lots 76-B, 76-C, 76-D, 76-E, 76-F, and 76-G on January 9, 1974 for 3,000
Pesos. (Exhibit G) The deed of absolute sale was notarized by Otilio Sy Bongon.

Lots 76-B and 76-C were consolidated and then subdivided anew and designated as Lot No. 1 with an
area of 186 square meters and Lot No. 2 with an area of 185 square meters of the Consolidation
Subdivision Plan (LRC) Pcs-20015. (Please sketch plan marked as Exhibit 4, records, vol. 2, page 68)

On January 15, 1976, Jose A. Olaguer claiming to be the attorney-in-fact of his son Virgilio Olaguer
under a general power of attorney Doc. No. 141, Page No. 100, Book No. 7, Series of 1972 of Notary
Public Otilio Sy Bongon, sold Lot No. 1 to defendant Emiliano M. [Ongjoco] for 10,000 Pesos per the
deed of absolute sale notarized by Otilio Sy Bongon. (Exhibit H) The alleged general power of
attorney however was not presented or marked nor formally offered in evidence.

On September 7, 1976, Jose A. Olaguer again claiming to be the attorney-in-fact of Virgilio Olaguer
under the same general power of attorney referred to in the deed of absolute sale of Lot 1, sold Lot
No. 2 to Emiliano M. *Ongjoco+ for 10,000 Pesos. (Exhibit I) The deed of absolute sale was notarized
by Otilio Sy Bongon.

On July 16, 1979, Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer under a general power of
attorney Doc. No. 378, Page No. 76, Book No. 14, Series of 1978 sold Lot No. 76-D to Emiliano M.
[Ongjoco] for 5,000 Pesos. The deed of absolute sale is Doc. No. 571, Page No. 20, Book No. 16, Series
of 1979 of Notary Public Otilio Sy Bongon. (Exhibit K)

The same Lot No. 76-D was sold on October 22, 1979 by Jose A. Olaguer as attorney-in-fact of Virgilio
Olaguer under a general power of attorney Doc. No. 378, Page No. 76, Book No. 14, Series of 1978 of
Notary Public Otilio Sy Bongon sold Lot No. 76-D to Emiliano M. [Ongjoco] for 10,000 Pesos. The deed
of absolute sale is Doc. No. 478, Page No. 97, Book NO. XXII, Series of 1979 of Notary Public Antonio A.
Arcangel. (Exhibit J)

On July 3, 1979, Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer sold Lots 76-E and 76-F to
Emiliano M. [Ongjoco] for 15,000 Pesos. The deed of absolute sale is Doc. No. 526, Page No. 11, Book
No. 16, Series of 1979 of Notary Public Otilio Sy Bongon. (Exhibit M)

The same Lots 76-E and 76-F were sold on October 25, 1979, by Jose A. Olaguer as attorney-in-fact of
Virgilio Olaguer under the same general power of attorney of 1978 referred to above to Emiliano M.
[Ongjoco] for 30,000 Pesos. The deed of absolute sale is Doc. No. 47, Page No. 11, Book No. XXIII,
Series of 1972 of Notary Public Antonio A. Arcangel. (Exhibit L)

On July 2, 1979 Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer sold Lot No. 76-G to Emiliano M.
[Ongjoco] for 10,000 Pesos. The deed of sale is Doc. No. 516, Page No. 9, Book No. 16, Series of 1979
of Notary Public Otilio Sy Bongon. (Exhibit N)

The same Lot 76-G was sold on February 29, 1980 by Jose A. Olaguer as attorney-in-fact of Virgilio
Olaguer under the same general power of attorney of 1978 referred to above to Emiliano M. [Ongjoco]
for 10,000 Pesos. The deed of absolute sale is Doc. No. l02, Page No. 30, Book No. 17, Series of 1980
of Notary Public Otilio Sy Bongon. (Exhibit O)*5+ (Emphases ours.)


Thus, on 28 January 1980, the Estate of Lino Olaguer represented by the legitimate children of the
spouses Lino Olaguer and defendant Olivia P. Olaguer, namely, Sor Mary Edith Olaguer, Aurora O. de
Guzman, Clarissa O. Trinidad, Lina Olaguer and Ma. Linda O. Montayre, as attorney-in-fact and in her
own behalf, filed an action for the Annulment of Sales of Real Property and/or Cancellation of Titles[6]
in the then Court of First Instance of Albay.[7]

Docketed as Civil Case No. 6223, the action named as defendants the spouses Olivia P. Olaguer and
Jose A. Olaguer; Eduardo Olaguer; Virgilio Olaguer; Cipriano Duran; the Heirs of Estanislao O. Olaguer,
represented by Maria Juan Vda. de Olaguer; and the Philippine National Bank (PNB).

In the original complaint, the plaintiffs therein alleged that the sales of the following properties
belonging to the Estate of Lino Olaguer to Estanislao Olaguer were absolutely simulated or fictitious,
particularly: Lots Nos. 578, 1557, 1676, 4521, 4522, 8635, 8638, 7589, 7593, and 7396. In praying that
the sale be declared as null and void, the plaintiffs likewise prayed that the resulting Transfer
Certificates of Title issued to Jose Olaguer, Virgilio Olaguer, Cipriano Duran and the PNB be annulled.

Defendant PNB claimed in its Answer,[8] inter alia, that it was a mortgagee in good faith and for value
of Lots Nos. 7589, 7593 and 7396, which were mortgaged as security for a loan of P10,000.00; the
mortgage contract and other loan documents were signed by the spouses Estanislao and Maria
Olaguer as registered owners; the proceeds of the loan were received by the mortgagors themselves;
Linda Olaguer Montayre had no legal capacity to sue as attorney-in-fact; plaintiffs as well as Maria
Olaguer were in estoppel; and the action was already barred by prescription. PNB set up a compulsory
counterclaim for damages, costs of litigation and attorneys fees. It also filed a cross-claim against
Maria Olaguer for the payment of the value of the loan plus the agreed interests in the event that
judgment would be rendered against it.

Defendants Olivia P. Olaguer, Jose A. Olaguer and Virgilio Olaguer, in their Answer,[9] denied the
material allegations in the complaint. They maintained that the sales of the properties to Pastor
Bacani and Estanislao Olaguer were judicially approved; the complaint did not state a sufficient cause
of action; it was barred by laches and/or prescription; lis pendens existed; that the long possession of
the vendees have ripened into acquisitive prescription in their favor, and the properties no longer
formed part of the Estate of Lino Olaguer; until the liquidation of the conjugal properties of Lino
Olaguer and his former wives, the plaintiffs were not the proper parties in interest to sue in the action;
and in order to afford complete relief, the other conjugal properties of Lino Olaguer with his former
wives, and his capital property that had been conveyed without the approval of the testate court
should also be included for recovery in the instant case.

Defendant Maria Juan Vda. de Olaguer, representing the heirs of Estanislao Olaguer, in her
Answer,[10] likewise denied the material allegations of the complaint and insisted that the plaintiffs
had no valid cause of action against the heirs of the late Estanislao Olaguer, as the latter did not
participate in the alleged transfer of properties by Olivia P. Olaguer and Eduardo Olaguer in favor of
the late Estanislao Olaguer.

Defendant Cipriano Duran claimed, in his Answer,[11] that the complaint stated no cause of action; he
was merely instituted by his late sister-in-law Josefina Duran to take over the management of Lots
Nos. 8635 and 8638 in 1971; and the real party-in-interest in the case was the administrator of the
estate of Josefina Duran.

On 11 January 1995, an Amended Complaint[12] was filed in order to implead respondent Emiliano M.
Ongjoco as the transferee of Virgilio Olaguer with respect to portions of Lot No. 76, namely Lots Nos.
1, 2, 76-D, 76-E, 76-F, and 76-G.

In his Answer with Counterclaim and Motion to Dismiss,[13] respondent Ongjoco denied the material
allegations of the amended complaint and interposed, as affirmative defenses the statute of
limitations, that he was a buyer in good faith, that plaintiffs had no cause of action against him, and
that the sale of property to Pastor Bacani, from whom Ongjoco derived his title, was judicially
approved.

On 23 January 1996, plaintiffs filed a Re-Amended Complaint,[14] in which the heirs of Estanislao
Olaguer were identified, namely, Maria Juan Vda. de Olaguer, Peter Olaguer, Yolanda Olaguer and
Antonio Bong Olaguer.

In their Answer,[15] the heirs of Estanislao Olaguer reiterated their claim that Estanislao Olaguer never
had any transactions or dealings with the Estate of Lino Olaguer; nor did they mortgage any property
to the PNB.

On 5 August 1998, the heirs of Estanislao Olaguer and petitioner Ma. Linda Olaguer Montayre
submitted a compromise agreement,[16] which was approved by the trial court.

On 6 October 1999, Cipriano Duran filed a Manifestation[17] in which he waived any claim on Lots
Nos. 8635 and 8638. Upon motion, Duran was ordered dropped from the complaint by the trial court
in an order[18] dated 20 October 1999.

In a Decision[19] dated 13 July 2001, the RTC ruled in favor of the plaintiffs. The pertinent portions of
the decision provide:

The entirety of the evidence adduced clearly show that the sale of the 12 lots to Pastor Bacani
pursuant to Exhibit A and the sale of the 10 lots to Estanislao Olaguer pursuant to Exhibit D were
absolutely simulated sales and thus void ab initio. The two deeds of sales Exhibits A and D are
even worse than fictitious, they are completely null and void for lack of consideration and the parties
therein never intended to be bound by the terms thereof and the action or defense for the declaration
of their inexistence does not prescribe. (Art. 1410, Civil Code) Aside from being simulated they were
clearly and unequivocally intended to deprive the compulsory heirs of their legitime x x x.

The deeds of sale, Exhibits A and D being void ab initio, they are deemed as non-existent and the
approval thereof by the probate court becomes immaterial and of no consequence, because the
approval by the probate court did not change the character of the sale from void to valid x x x.

x x x x

Defendant Jose A. Olaguer simulated the sales and had them approved by the probate court so that
these properties would appear then to cease being a part of the estate and the vendee may then be at
liberty to dispose of the same in any manner he may want. They probably believed that by making it
appear that the properties were bought back from Pastor Bacani under a simulated sale, they (Olivia
Olaguer and Eduardo Olaguer) would appear then as the owners of the properties already in their
personal capacities that disposals thereof will no longer require court intervention. x x x.

x x x x

*Jose A. Olaguer+ had Olivia P. Olaguer execute a Special Power of Attorney (Exhibit T) authorizing
him (Jose A. Olaguer) to sell or encumber the properties allegedly bought back from Pastor Bacani
which Jose A. Olaguer did with respect to the 6/13 share of Olivia P. Olaguer on Lot No. 76 by selling it
to his son Virgilio for only 3,000 Pesos, then caused Virgilio to execute a power of attorney authorizing
him to sell or encumber the 6/13 share which he did by selling the same to defendant Emiliano M.
[Ongjoco].

Virgilio Olaguer however executed an affidavit (Exhibit CC) wherein he denied having bought any
property from the estate of Lino Olaguer and that if there are documents showing that fact he does
not know how it came about. x x x.

The 1972 power of attorney referred to by Jose A. Olaguer as his authority for the sale of Lots 1 and 2
(formerly lots 76-B and 76-C) was not presented nor offered in evidence.

There are two deeds of sale over Lot 76-D, (Exhibits K and J) in favor of defendant Emiliano M.
[Ongjoco] with different dates of execution, different amount of consideration, different Notary Public.

There are two deeds of sale over Lots 76-E and 76-F (Exhibits M and L) in favor of defendant
Emiliano M. [Ongjoco] with different dates of execution, different amount of consideration and
different Notary Public.

There are two deeds of sale over Lot 76-G (Exhibits N and O) in favor of Emiliano M. *Ongjoco+
with different dates of execution with the same amount of consideration and the same Notary Public.

While Lot 76-D was allegedly sold already to Emiliano M. [Ongjoco] in 1979, yet it was still Jose A.
Olaguer who filed a petition for the issuance of a second owners copy as attorney in fact of Virgilio
Olaguer on August 8, 1980 (Exhibit SS) and no mention was made about the sale.

Under these circumstances, the documents of defendant Emiliano M. [Ongjoco] on lots 76 therefore,
in so far as the portions he allegedly bought from Jose A. Olaguer as attorney in fact of Virgilio Olaguer
suffers seriously from infirmities and appear dubious.

Defendant Emiliano M. [Ongjoco] cannot claim good faith because according to him, when these lots
76-[B] to 76-G were offered to him his condition was to transfer the title in his name and then he pays.
He did not bother to verify the title of his vendor. x x x.

So with respect to the sale of Lots 76-B to 76-G, Emiliano M. [Ongjoco] has no protection as innocent
purchaser for good faith affords protection only to purchasers for value from the registered owners. x
x x. Knowing that he was dealing only with an agent x x x, it behooves upon defendant Emiliano M.
[Ongjoco] to find out the extent of the authority of Jose A. Olaguer as well as the title of the owner of
the property, because as early as 1973 pursuant to the subdivision agreement, (records, vol. 2, page
109 and Exhibit 14 and 14-d) he already knew fully well that Lots 76-B to 76-G he was buying was
owned by Olivia P. Olaguer and not by Virgilio Olaguer.

x x x x

With respect to the 10 lots sold to *Eduardo+ Olaguer (Exhibit D) Jose A. Olaguer had Estanislao
Olaguer execute a power of attorney (Exhibit X) authorizing him (Jose A. Olaguer) to sell or
encumber the 10 lots allegedly bought by Estanislao from the estate. With this power of attorney, he
mortgaged lots 7589, 7593 and 7398 to the PNB. He sold lots 1557 and 1676 to his son Virgilio
Olaguer. While under Exhibit UU dated December 29, 1966, he bought the 10 parcels of land,
among which is lots 4521 and 4522 from Estanislao Olaguer, yet, on March 16, 1968, he again bought
lots 4521 and 4522 (records, vol. 1, page 38) from Estanislao Olaguer. While lots 8635 and 8638 were
among those sold to him under Exhibit UU, it appears that he again bought the same on June 5, 1968
under Exhibit F.

The heirs of Estanislao Olaguer however denied having bought any parcel of land from the estate of
Lino Olaguer. Estanislao Olaguers widow, Maria Juan vda. de Olaguer, executed an affidavit (Exhibit
BB) that they did not buy any property from the estate of Lino Olaguer, they did not sell any
property of the estate and that they did not mortgage any property with the PNB. She repeated this in
her deposition. (records, vol. 2, page 51) This was corroborated by no less than former co-
administrator Eduardo Olaguer in his deposition too (Exhibit RRRR) that the sale of the 10 parcels of
land to Estanislao Olaguer was but a simulated sale without any consideration. x x x.

x x x x

A partial decision was already rendered by this court in its order of August 5, 1998 (records, vol. 2,
page 64) approving the compromise agreement with defendants Heirs of Estanislao Olaguer. (records,
vol. 2 page 57).

Defendant Cipriano Duran was dropped from the complaint per the order of the court dated October
20, 1999 (records, vol. 2, page 155) because he waived any right or claim over lots 8635 and 8638.
(records, vol. 2, page 150). (Emphasis ours.)


The dispositive portion of the above decision was, however, amended by the trial court in an
Order[20] dated 23 July 2001 to read as follows:

WHEREFORE, premises considered, decision is hereby rendered in favor of the plaintiffs as follows:

1) The deed of sale to Pastor Bacani (Exhibit A) and the deed of sale to Estanislao Olaguer (Exhibit
D) are hereby declared as null and void and without force and effect and all the subsequent transfers
and certificates arising therefrom likewise declared null and void and cancelled as without force and
effect, except as herein provided for.

2) Lot Nos. 4518, 4526, 4359 and 8750 are hereby ordered reverted back to the estate of Lino Olaguer
and for this purpose, within ten (10) days from the finality of this decision, the heirs of Olivia P.
Olaguer (the plaintiffs herein) [sic] are hereby ordered to execute the necessary document of
reconveyance, failure for which, the Clerk of Court is hereby ordered to execute the said deed of
reconveyance.

3) Lot Nos. 7514, 6608, 8582, 8157, 7999, 6167 and 8266 are hereby ordered reverted back to the
estate of Lino Olaguer and for this purpose, within ten (10) days from the finality of this decision,
defendant Eduardo Olaguer is hereby ordered to execute the necessary document of reconveyance,
failure for which, the Clerk of Court is hereby ordered to execute the said deed of reconveyance.

4) Lots 1 and 2, Pcs-20015, and Lots 76-D, 76-E, 76-F and 76-G, Psd-180629 sold to Emiliano M.
[Ongjoco] are hereby ordered reverted back to the estate of Lino Olaguer. For this purpose, within ten
(10) days from the finality of this decision, defendant Emiliano M. [Ongjoco] is hereby ordered to
execute the necessary deed of reconveyance, otherwise, the Clerk of Court shall be ordered to execute
the said reconveyance and have the same registered with the Register of Deeds so that new titles shall
be issued in the name of the estate of Lino Olaguer and the titles of Emiliano [Ongjoco] cancelled.

5) The parties have acquiesced to the sale of the 7/13 portion of Lot 76 to Eduardo Olaguer as well as
to the latters disposition thereof and are now in estoppel to question the same. The court will leave
the parties where they are with respect to the 7/13 share of Lot 76.

6) Lots 578, 1557, 1676, 4521, 4522, 8635, 8638, are hereby reverted back to the estate of Lino
Olaguer and for this purpose, the Clerk of [Court] is hereby ordered to execute the necessary deed of
reconveyance within ten days from the finality of this decision and cause its registration for the
issuance of new titles in the name of the Estate of Lino Olaguer and the cancellation of existing ones
over the same.

7) While the mortgage with the defendant PNB is null and void, Lots 7589, 7593 and 7396 shall remain
with the Republic of the Philippines as a transferee in good faith.


Both the petitioners and respondent filed their respective Notices of Appeal[21] from the above
decision. The case was docketed in the Court of Appeals as CA-G.R. CV No. 71710.

In their Plaintiff-Appellants Brief*22+ filed before the Court of Appeals, petitioner Estate argued that
the trial court erred in not ordering the restitution and/or compensation to them of the value of the
parcels of land that were mortgaged to PNB, notwithstanding the fact that the mortgage was declared
null and void. Petitioners maintain that the PNB benefited from a void transaction and should thus be
made liable for the value of the land, minus the cost of the mortgage and the reasonable expenses for
the foreclosure, consolidation and transfer of the lots.

Ongjoco, on the other hand, argued in his Defendant-Appellants Brief*23+ that the trial court erred in:
declaring as null and void the Deeds of Sale in favor of Pastor Bacani and Eduardo Olaguer and the
subsequent transfers and certificates arising therefrom; ordering the reconveyance of the lots sold to
him (Ongjoco); and failing to resolve the affirmative defenses of prescription, the authority of Olivia
and Eduardo to dispose of properties formerly belonging to the estate of Lino Olaguer, recourse in a
court of co-equal jurisdiction, and forum shopping.

Petitioner Linda O. Montayre was likewise allowed to file a Brief[24] on her own behalf, as Plaintiff-
Appellee and Plaintiff-Appellant.[25] She refuted therein the assignment of errors made by Defendant-
Appellant Ongjoco and assigned as error the ruling of the trial court that the lots mortgaged to the
PNB should remain with the Republic of the Philippines as a transferee in good faith.

On 27 February 2006, the Court of Appeals rendered the assailed Decision, the dispositive portion of
which reads:

WHEREFORE, premises considered, the appealed Decision is hereby MODIFIED, in that Paragraph 4 of
the amended decision is hereby Ordered Deleted, and the questioned sales to defendant-appellant
Emiliano M. Ongjoco are UPHELD.[26]


In denying the appeal interposed by petitioners, the appellate court reasoned that the claim for the
value of the lots mortgaged with the PNB were not prayed for in the original Complaint, the Amended
Complaint or even in the Re-Amended Complaint. What was sought therein was merely the
declaration of the nullity of the mortgage contract with PNB. As the relief prayed for in the appeal was
not contained in the complaint, the same was thus barred.

The Court of Appeals also ruled that the evidence of petitioners failed to rebut the presumption that
PNB was a mortgagee in good faith. Contrarily, what was proven was the fact that Olivia Olaguer and
Jose A. Olaguer were the persons responsible for the fraudulent transactions involving the questioned
properties. Thus, the claim for restitution of the value of the mortgaged properties should be made
against them.

As regards the appeal of respondent Ongjoco, the appellate court found the same to be meritorious.
The said court ruled that when the sale of real property is made through an agent, the buyer need not
investigate the principals title. What the law merely requires for the validity of the sale is that the
agents authority be in writing.

Furthermore, the evidence adduced by petitioners was ruled to be inadequate to support the
conclusion that Ongjoco knew of facts indicative of the defect in the title of Olivia Olaguer or Virgilio
Olaguer.

Petitioners moved for a partial reconsideration*27+ of the Court of Appeals decision in order to
question the ruling that respondent Ongjoco was a buyer in good faith. The motion was, however,
denied in a Resolution[28] dated 29 June 2006.

Aggrieved, petitioners filed the instant Petition for Review on Certiorari under Rule 45 of the Revised
Rules of Court, raising the following assignment of errors:

I.

THE COURT OF APPEALS COMMITTED AN ERROR IN LAW WHEN IT RULED, ON SPECULATION, THAT
RESPONDENT EMILIANO M. ONGJOCO WAS A BUYER IN GOOD FAITH OF THE PROPERTIES OF THE
ESTATE OF LINO OLAGUER, DESPITE THE EXISTENCE OF FACTS AND CIRCUMSTANCES FOUND BY THE
TRIAL COURT THAT OUGHT TO PUT EMILIANO M. ONGJOCO ON NOTICE THAT THE PETITIONERS-
APPELLANTS HAVE A RIGHT OR INTEREST OVER THE SAID PROPERTIES, AND CONTRARY TO PREVAILING
JURISPRUDENCE.

II.

THE COURT OF APPEALS COMMITTED AN ERROR IN LAW WHEN IT DISREGARDED THE CLEAR FINDINGS
OF FACTS AND CONCLUSIONS MADE BY THE TRIAL COURT, IN THE ABSENCE OF ANY STRONG AND
COGENT REASONS TO REVERSE THE SAID FINDINGS, CONTRARY TO PREVAILING JURISPRUDENCE.[29]



Essentially, the question that has been brought before us for consideration is whether or not,
under the facts and circumstances of this case, respondent Ongjoco can be considered an innocent
purchaser for value.

Petitioners agree with the pronouncement of the trial court that respondent Ongjoco could not
have been a buyer in good faith since he did not bother to verify the title and the capacity of his
vendor to convey the properties involved to him. Knowing that Olivia P. Olaguer owned the properties
in 1973 and that he merely dealt with Jose A. Olaguer as an agent in January 1976, Ongjoco should
have ascertained the extent of Joses authority, as well as the title of Virgilio as the principal and
owner of the properties.

Petitioners likewise cite the following incidents that were considered by the trial court in declaring
that respondent was a buyer in bad faith, namely: (1) that Virgilio Olaguer executed an affidavit,[30]
wherein he denied having bought any property from the estate of Lino Olaguer, and that if there are
documents showing that fact, he does not know how they came about; (2) that the power of attorney
referred to by Jose A. Olaguer as his authority for the sale of Lots 1 and 2 (formerly Lots 76-B and 76-C)
was not presented or offered in evidence; (3) that there are two deeds of sale[31] over Lot 76-D in
favor of Ongjoco; (4) that there are two deeds of sale[32] over Lots 76-E and 76-F in favor of Ongjoco;
(5) that there are two deeds of sale[33] over Lot 76-G in favor of Ongjoco; and (6) that while Lot 76-D
was already sold to Ongjoco in 1979, it was still Jose A. Olaguer as attorney in fact of Virgilio Olaguer
who filed on 8 August 1980 a petition for the issuance of a second owners copy*34+ of the title to the
property, and no mention was made about the sale to Ongjoco.

Respondent Ongjoco, on the other hand, invokes the ruling of the Court of Appeals that he was
an innocent purchaser for value. His adamant stance is that, when he acquired the subject properties,
the same were already owned by Virgilio Olaguer. Respondent insists that Jose A. Olaguer was duly
authorized by a written power of attorney when the properties were sold to him (Ongjoco). He posits
that this fact alone validated the sales of the properties and foreclosed the need for any inquiry
beyond the title to the principal. All the law requires, respondent concludes, is that the agents
authority be in writing in order for the agents transactions to be considered valid.

Respondent Ongjocos posture is only partly correct.

According to the provisions of Article 1874[35] of the Civil Code on Agency, when the sale of a
piece of land or any interest therein is made through an agent, the authority of the latter shall be in
writing. Absent this requirement, the sale shall be void. Also, under Article 1878,[36] a special power
of attorney is necessary in order for an agent to enter into a contract by which the ownership of an
immovable property is transmitted or acquired, either gratuitously or for a valuable consideration.

We note that the resolution of this case, therefore, hinges on the existence of the written power
of attorney upon which respondent Ongjoco bases his good faith.

When Lots Nos. 1 and 2 were sold to respondent Ongjoco through Jose A. Olaguer, the Transfer
Certificates of Title of said properties were in Virgilios name.*37+ Unfortunately for respondent, the
power of attorney that was purportedly issued by Virgilio in favor of Jose Olaguer with respect to the
sale of Lots Nos. 1 and 2 was never presented to the trial court. Neither was respondent able to
explain the omission. Other than the self-serving statement of respondent, no evidence was offered
at all to prove the alleged written power of attorney. This of course was fatal to his case.

As it stands, there is no written power of attorney to speak of. The trial court was thus correct in
disregarding the claim of its existence. Accordingly, respondent Ongjocos claim of good faith in the
sale of Lots Nos. 1 and 2 has no leg to stand on.

As regards Lots Nos. 76-D, 76-E, 76-F and 76-G, Ongjoco was able to present a general power of
attorney that was executed by Virgilio Olaguer. While the law requires a special power of attorney,
the general power of attorney was sufficient in this case, as Jose A. Olaguer was expressly empowered
to sell any of Virgilios properties; and to sign, execute, acknowledge and deliver any agreement
therefor.[38] Even if a document is designated as a general power of attorney, the requirement of a
special power of attorney is met if there is a clear mandate from the principal specifically authorizing
the performance of the act.[39] The special power of attorney can be included in the general power
when the act or transaction for which the special power is required is specified therein.[40]

On its face, the written power of attorney contained the signature of Virgilio Olaguer and was duly
notarized. As such, the same is considered a public document and it has in its favor the presumption
of authenticity and due execution, which can only be contradicted by clear and convincing
evidence.[41]

No evidence was presented to overcome the presumption in favor of the duly notarized power of
attorney. Neither was there a showing of any circumstance involving the said document that would
arouse the suspicion of respondent and spur him to inquire beyond its four corners, in the exercise of
that reasonable degree of prudence required of a man in a similar situation. We therefore rule that
respondent Ongjoco had every right to rely on the power of attorney in entering into the contracts of
sale of Lots Nos. 76-D to 76-G with Jose A. Olaguer.

With respect to the affidavit of Virgilio Olaguer in which he allegedly disavowed any claim or
participation in the purchase of any of the properties of the deceased Lino Olaguer, we hold that the
same is rather irrelevant. The affidavit was executed only on 1 August 1986 or six years after the last
sale of the properties was entered into in 1980. In the determination of whether or not a buyer is in
good faith, the point in time to be considered is the moment when the parties actually entered into
the contract of sale.

Furthermore, the fact that Lots Nos. 76-D to 76-G were sold to respondent Ongjoco twice does not
warrant the conclusion that he was a buyer in bad faith. While the said incidents might point to other
obscured motives and arrangements of the parties, the same do not indicate that respondent knew of
any defect in the title of the owner of the property.

As to the petition filed by Jose A. Olaguer for the issuance of a second owners copy of the title to Lot
No. 76-D, after the property was already sold to respondent Ongjoco, the same does not inevitably
indicate that respondent was in bad faith. It is more likely that Jose A. Olaguer was merely compiling
the documents necessary for the transfer of the subject property. Indeed, it is to be expected that if
the title to the property is lost before the same is transferred to the name of the purchaser, it would
be the responsibility of the vendor to cause its reconstitution.

In sum, we hold that respondent Emiliano M. Ongjoco was in bad faith when he bought Lots Nos. 1
and 2 from Jose A. Olaguer, as the latter was not proven to be duly authorized to sell the said
properties.

However, respondent Ongjoco was an innocent purchaser for value with regard to Lots Nos. 76-D, 76-
E, 76-F and 76-G since it was entirely proper for him to rely on the duly notarized written power of
attorney executed in favor of Jose A. Olaguer.

WHEREFORE, premises considered, the instant petition is hereby PARTIALLY GRANTED. The assailed
Decision of the Court of Appeals dated 27 February 2006 in CA-G.R. CV NO. 71710 is MODIFIED in that
Paragraph 4 of the Decision dated 13 July 2001 of the Regional Trial Court of Legazpi City, Branch 6,
and the Order dated 23 July 2001 shall read as follows:

4) Lots 1 and 2, Pcs-20015 sold to Emiliano M. Ongjoco are hereby ordered reverted back to the
estate of Lino Olaguer. For this purpose, within ten (10) days from the finality of this decision,
defendant Emiliano M. Ongjoco is hereby ordered to execute the necessary deed of reconveyance,
otherwise, the Clerk of Court shall be ordered to execute the said reconveyance and have the same
registered with the Register of Deeds so that new titles shall be issued in the name of the estate of
Lino Olaguer and the titles of Emiliano Ongjoco cancelled.


No costs.

SO ORDERED.


ESTATE OF LINO OLAGUER, Represented
by Linda O. Olaguer, and LINDA O.
MONTAYRE,
Petitioners,

- versus -

EMILIANO M. ONGJOCO,
Respondent.
G.R. No. 173312


Promulgated:

August 26, 2008
x- - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
D E C I S I O N
CHICO-NAZARIO, J.:
Assailed in this Petition for Review on Certiorari
[1]
is the Decision
[2]
of the Court of Appeals
dated 27 February 2006 in CA-G.R. CV No. 71710. Said decision modified the Decision
[3]
and the
subsequent Order
[4]
of the Regional Trial Court (RTC) of Legazpi City, Branch 6, in Civil Case No.
6223, and upheld the validity of the sales of properties to respondent Emiliano M. Ongjoco.

The relevant factual antecedents of the case, as found by the trial court and adapted by the
Court of Appeals, are as follows:

The plaintiffs Sor Mary Edith Olaguer, Aurora O. de Guzman,
Clarissa O. Trinidad, Lina Olaguer and Ma. Linda O. Montayre are the
legitimate children of the spouses Lino Olaguer and defendant Olivia P.
Olaguer.

Lino Olaguer died on October 3, 1957 so Special Proceedings No.
528 for probate of will was filed in the then Court of First Instance of
Albay. Defendant Olivia P. Olaguer was appointed as administrator pursuant to
the will. Later, defendant Eduardo Olaguer was appointed as co-
administrator. x x x

On October 15, 1959 defendant Olivia P. Olaguer got married to
defendant Jose A. Olaguer before the then Justice of the Peace of Sto. Domingo
(Libog) Albay. (Exhibit NNNN) On January 24, 1965 they were married in
church. (Exhibit XX)

In the order of the probate court dated April 4, 1961, some properties
of the estate were authorized to be sold to pay obligations of the estate. Pursuant
to this authority, administrators Olivia P. Olaguer and Eduardo Olaguer
on December 12, 1962 sold to Pastor Bacani for [P]25,000 Pesos, twelve (12)
parcels of land, particularly, Lots 4518, 4526, 4359, 8750, 7514, 6608, 8582,
8157, 7999, 6167, 8266, and 76 with a total area of 99 hectares. (Exhibit A
Deed of Sale notarized by defendant Jose A. Olaguer)

This sale of twelve (12) parcels of land to Pastor Bacani was
approved by the Probate Court on December 12, 1962. (Exhibit 15)

The following day, December 13, 1962, Pastor Bacani sold back
to Eduardo Olaguer and Olivia Olaguer for [P]12,000.00 Pesos, one of the
twelve (12) lots he bought the day before, particularly, Lot No. 76 in the
proportion of 7/13 and 6/13 pro-indiviso respectively. (Exhibit B Deed
of Sale notarized by Felipe A. Cevallos, Sr.)

Simultaneously, on the same day December 13, 1962, Pastor Bacani
sold back to Olivia Olaguer and Eduardo Olaguer the other eleven (11) parcels
he bought from them as follows:

To Olivia Olaguer Four (4) parcels for 10,700
Pesos, particularly Lots 4518, 4526, 4359, 8750 with a total
area of 84 hectares. (Exhibit E Deed of Sale notarized
by Felipe A. Cevallos, Sr.)

To Eduardo Olaguer Seven (7) parcels of land
for 2,500 Pesos, particularly Lots 7514, 6608, 8582, 8157,
7999, 6167, and 8266 with a total area of 15
hectares. (Exhibit C Deed of Sale notarized by
defendant Jose A. Olaguer)

Relying upon the same order of April 4, 1961 but without prior
notice or permission from the Probate Court, defendants Olivia P. Olaguer and
Eduardo Olaguer on November 1, 1965 sold to Estanislao Olaguer for 7,000
Pesos, ten (10) parcels of land, particularly, (a) TCT No. T-4011 Lot No. 578,
(b) TCT No. T-1417 Lot No. 1557, (c) TCT No. T-4031 Lot No. 1676, (d)
TCT No. T-4034 Lot No. 4521, (e) TCT No. T-4035 Lot No. 4522, (f) TCT
No. 4013 Lot No. 8635, (g) TCT No. T-4014 Lot 8638, (h) TCT No. T-4603
Lot No. 7589, (i) TCT No. 4604 Lot No. 7593, and (j) TCT No. T-4605
Lot No. 7396. (Exhibit D Deed of Sale notarized by Rodrigo R. Reantaso)

This sale to Estanislao Olaguer was approved by the Probate Court
on November 12, 1965.

After the foregoing sale to Estanislao Olaguer, the following
transactions took place:

1) On July 7, 1966, defendant Olivia P. Olaguer executed a
Special Power of Attorney notarized by Rodrigo R. Reantaso (Exhibit T)
in favor of defendant Jose A. Olaguer, authorizing the latter to sell,
mortgage, assign, transfer, endorse and deliver the properties covered
by TCT No. 14654 for Lot 76 6/13 share only, T-13983, T-14658, T-14655, T-
14656, and T-14657.

2) On July 7, 1966, Estanislao Olaguer executed a Special Power of
Attorney in favor of Jose A. Olaguer (Exhibit X) notarized by Rodrigo R.
Reantaso authorizing the latter to sell, mortgage, assign, transfer, endorse and
deliver the properties covered by TCT No. T-20221, T-20222, T-20225
for Lot No. 8635, T-20226 for Lot No. 8638, T-20227, T-20228, and T-20229.

By virtue of this Special Power of Attorney, on March 1, 1967, Jose
A. Olaguer as Attorney-in-Fact of Estanislao Olaguer mortgaged Lots 7589,
7593 and 7396 to defendant Philippine National Bank (PNB) as security for a
loan of 10,000 Pesos. The mortgage was foreclosed by the PNB on June 13,
1973 and the properties mortgage were sold at public auction to PNB. On
December 10, 1990, the PNB transferred the properties to the Republic of
the Philippines pursuant to Exec. Order No. 407 dated June 14, 1990 for
agrarian reform purposes. (records, vol. 1, page 66)

3) On October 29, 1966, Estanislao Olaguer executed a General
Power of Attorney notarized by Rodrigo R. Reantaso (Exhibit Y) in favor of
Jose A. Olaguer, authorizing the latter to exercise general control and
supervision over all of his business and properties, and among others, to sell or
mortgage any of his properties.

4) On December 29, 1966, Estanislao Olaguer sold to Jose A.
Olaguer for 15,000 Pesos, (Exhibit UU) the ten (10) parcels of land (Lots 578,
4521, 4522, 1557, 1676, 8635, 8638, 7589, 7593 and 7396) he bought from
Olivia P. Olaguer and Eduardo Olaguer under Exhibit D.

5) On March 16, 1968, Estanislao Olaguer sold to Jose A. Olaguer
for 1 Peso and other valuable consideration Lot No. 4521 TCT No. T-20223
and Lot 4522 TCT No. 20224 with a total area of 2.5 hectares. (records, vol. 1,
page 33)

6) On June 5, 1968, Estanislao Olaguer sold Lot No. 8635 under
TCT No. T-20225, and Lot No. 8638 under TCT No. 20226 to Jose A. Olaguer
for 1 Peso and other valuable consideration. (Exhibit F) Deed of Sale was
notarized by Rodrigo R. Reantaso.

7) On May 13, 1971, Jose A. Olaguer in his capacity as Attorney in-
Fact of Estanislao Olaguer sold to his son Virgilio Olaguer for 1 Peso and other
valuable consideration Lot No. 1557 TCT No. 20221 and Lot No. 1676 TCT
No. 20222. The deed of sale was notarized by Otilio Sy Bongon.

8) On July 15, 1974, Jose A. Olaguer sold to his son Virgilio
Olaguer Lot No. 4521 and Lot No. 4522 for 1,000 Pesos. Deed of Sale was
notarized by Otilio Sy Bongon. (records, vol. 1, page 34)

9) On September 16, 1978 Virgilio Olaguer executed a General
Power of Attorney in favor of Jose A. Olaguer notarized by Otilio Sy Bongon
(Exhibit V) authorizing the latter to exercise general control and supervision
over all of his business and properties and among others, to sell or mortgage the
same.

Olivia P. Olaguer and Eduardo Olaguer were removed as
administrators of the estate and on February 12, 1980, plaintiff Ma. Linda
Olaguer Montayre was appointed administrator by the Probate Court.

Defendant Jose A. Olaguer died on January 24, 1985. (Exhibit
NN) He was survived by his children, namely the defendants Nimfa Olaguer
Taguay, Corazon Olaguer Uy, Jose Olaguer, Jr., Virgilio Olaguer, Jacinto
Olaguer, and Ramon Olaguer.

Defendant Olivia P. Olaguer died on August 21, 1997 (Exhibit
OO) and was survived by all the plaintiffs as the only heirs.

The decedent Lino Olaguer have had three marriages. He was first
married to Margarita Ofemaria who died April 6, 1925. His second wife was
Gloria Buenaventura who died on July 2, 1937. The third wife was the
defendant Olivia P. Olaguer.

Lot No. 76 with an area of 2,363 square meters is in the heart of
the Poblacion of Guinobatan, Albay. The deceased Lino Olaguer inherited
this property from his parents. On it was erected their ancestral home.

As already said above, Lot No. 76 was among the twelve (12) lots
sold for 25,000 Pesos, by administrators Olivia P. Olaguer and Eduardo
Olaguer to Pastor Bacani on December 12, 1962. The sale was approved by
the probate court on December 12, 1962.

But, the following day, December 13, 1962 Pastor Bacani sold back
the same 12 lots to Olivia P. Olaguer and Eduardo Olaguer for 25,200 Pesos, as
follows:

a) Lot No. 76 was sold back to Olivia P.
Olaguer and Eduardo Olaguer for 12,000 Pesos, in the
proportion of [6/13] and [7/13] respectively. (Exhibit
B)

b) 4 of the 12 lots namely, Lots 4518, 4526,
4359, and 8750 were sold back to Olivia Olaguer for
10,700 Pesos. (Exhibit E)

c) 7 of the 12 lots namely, Lots 7514, 6608,
8582, 8157, 7999, 6167, and 8266 were sold back to
Eduardo Olaguer for 2,500 Pesos. (Exhibit C)

d) Lot No. 76 was thus issued TCT No. T-
14654 on December 13, 1962 in the names of Eduardo
B. Olaguer married to Daisy Pantig and Olivia P.
Olaguer married to Jose A. Olaguer to the extent of
7/13 and 6/13 pro-indiviso, respectively. (Exhibit FF
also 14-a)

e) It appears from Plan (LRC) Psd-180629
(Exhibit 3) that defendant Jose A. Olaguer caused the
subdivision survey of Lot 76 into eleven (11) lots,
namely, 76-A, 76-B, 76-C, 76-D, 76-E, 76-F, 76-G, 76-H,
76-I, 76-J, and 76-K, sometime on April 3, 1972. The
subdivision survey was approved on October 5,
1973. After the approval of the subdivision survey of
Lot 76, a subdivision agreement was entered into on
November 17, 1973, among Domingo Candelaria, Olivia
P. Olaguer, Domingo O. de la Torre and Emiliano M.
[Ongjoco]. (records, vol. 2, page 109).

This subdivision agreement is annotated in TCT No.
14654 (Exhibit 14 14-d) as follows:

Owner Lot No.
Area in
sq. m.
TCT No. Vol. Page
Domingo Candelaria 76-A 300 T-36277 206 97
Olivia P. Olaguer 76-B 200 T-36278 98
- do - 76-C 171 T-36279 99
- do - 76-D 171 T-36280 100
- do - 76-E 171 T-36281 101
- do - 76-F 171 T-36282 102
- do - 76-G 202 T-36283 103
Domingo O. de la Torre 76-H 168 T-36284 104
- do - 76-I 168 T-36285 105
- do - 76-J 168 T-36286 106
Emiliano M. [Ongjoco] 76-K 473 T-36287 107


After Lot 76 was subdivided as aforesaid, Jose A. Olaguer as
attorney-in-fact of Olivia P. Olaguer, sold to his son Virgilio Olaguer Lots
76-B, 76-C, 76-D, 76-E, 76-F, and 76-G on January 9, 1974 for 3,000
Pesos. (Exhibit G) The deed of absolute sale was notarized by Otilio Sy
Bongon.

Lots 76-B and 76-C were consolidated and then subdivided anew
and designated as Lot No. 1 with an area of 186 square meters and Lot No.
2 with an area of 185 square meters of the Consolidation Subdivision Plan
(LRC) Pcs-20015. (Please sketch plan marked as Exhibit 4, records, vol. 2,
page 68)

On January 15, 1976, Jose A. Olaguer claiming to be the
attorney-in-fact of his son Virgilio Olaguer under a general power of
attorney Doc. No. 141, Page No. 100, Book No. 7, Series of 1972 of Notary
Public Otilio Sy Bongon, sold Lot No. 1 to defendant Emiliano M.
[Ongjoco] for 10,000 Pesos per the deed of absolute sale notarized by Otilio
Sy Bongon. (Exhibit H) The alleged general power of attorney however
was not presented or marked nor formally offered in evidence.

On September 7, 1976, Jose A. Olaguer again claiming to be the
attorney-in-fact of Virgilio Olaguer under the same general power of
attorney referred to in the deed of absolute sale of Lot 1, sold Lot No. 2 to
Emiliano M. [Ongjoco] for 10,000 Pesos. (Exhibit I) The deed of absolute
sale was notarized by Otilio Sy Bongon.

On July 16, 1979, Jose A. Olaguer as attorney-in-fact of Virgilio
Olaguer under a general power of attorney Doc. No. 378, Page No. 76, Book
No. 14, Series of 1978 sold Lot No. 76-D to Emiliano M. [Ongjoco] for 5,000
Pesos. The deed of absolute sale is Doc. No. 571, Page No. 20, Book No. 16,
Series of 1979 of Notary Public Otilio Sy Bongon. (Exhibit K)

The same Lot No. 76-D was sold on October 22, 1979 by Jose A.
Olaguer as attorney-in-fact of Virgilio Olaguer under a general power of
attorney Doc. No. 378, Page No. 76, Book No. 14, Series of 1978 of Notary
Public Otilio Sy Bongon sold Lot No. 76-D to Emiliano M. [Ongjoco] for
10,000 Pesos. The deed of absolute sale is Doc. No. 478, Page No. 97, Book
NO. XXII, Series of 1979 of Notary Public Antonio A. Arcangel. (Exhibit
J)

On July 3, 1979, Jose A. Olaguer as attorney-in-fact of Virgilio
Olaguer sold Lots 76-E and 76-F to Emiliano M. [Ongjoco] for 15,000
Pesos. The deed of absolute sale is Doc. No. 526, Page No. 11, Book No. 16,
Series of 1979 of Notary Public Otilio Sy Bongon. (Exhibit M)

The same Lots 76-E and 76-F were sold on October 25, 1979, by
Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer under the same
general power of attorney of 1978 referred to above to Emiliano M.
[Ongjoco] for 30,000 Pesos. The deed of absolute sale is Doc. No. 47, Page
No. 11, Book No. XXIII, Series of 1972 of Notary Public Antonio A.
Arcangel. (Exhibit L)

On July 2, 1979 Jose A. Olaguer as attorney-in-fact of Virgilio
Olaguer sold Lot No. 76-G to Emiliano M. [Ongjoco] for 10,000 Pesos. The
deed of sale is Doc. No. 516, Page No. 9, Book No. 16, Series of 1979 of
Notary Public Otilio Sy Bongon. (Exhibit N)

The same Lot 76-G was sold on February 29, 1980 by Jose A.
Olaguer as attorney-in-fact of Virgilio Olaguer under the same general
power of attorney of 1978 referred to above to Emiliano M. [Ongjoco] for
10,000 Pesos. The deed of absolute sale is Doc. No. l02, Page No. 30, Book
No. 17, Series of 1980 of Notary Public Otilio Sy Bongon. (Exhibit
O)
[5]
(Emphases ours.)


Thus, on 28 January 1980, the Estate of Lino Olaguer represented by the legitimate children
of the spouses Lino Olaguer and defendant Olivia P. Olaguer, namely, Sor Mary Edith Olaguer, Aurora
O. de Guzman, Clarissa O. Trinidad, Lina Olaguer and Ma. Linda O. Montayre, as attorney-in-fact and
in her own behalf, filed an action for the Annulment of Sales of Real Property and/or Cancellation of
Titles
[6]
in the then Court of First Instance of Albay.
[7]


Docketed as Civil Case No. 6223, the action named as defendants the spouses Olivia P.
Olaguer and Jose A. Olaguer; Eduardo Olaguer; Virgilio Olaguer; Cipriano Duran; the Heirs of
Estanislao O. Olaguer, represented by Maria Juan Vda. de Olaguer; and the Philippine National Bank
(PNB).

In the original complaint, the plaintiffs therein alleged that the sales of the following
properties belonging to the Estate of Lino Olaguer to Estanislao Olaguer were absolutely simulated or
fictitious, particularly: Lots Nos. 578, 1557, 1676, 4521, 4522, 8635, 8638, 7589, 7593, and 7396. In
praying that the sale be declared as null and void, the plaintiffs likewise prayed that the resulting
Transfer Certificates of Title issued to Jose Olaguer, Virgilio Olaguer, Cipriano Duran and the PNB be
annulled.

Defendant PNB claimed in its Answer,
[8]
inter alia, that it was a mortgagee in good faith and
for value of Lots Nos. 7589, 7593 and 7396, which were mortgaged as security for a loan
of P10,000.00; the mortgage contract and other loan documents were signed by the spouses Estanislao
and Maria Olaguer as registered owners; the proceeds of the loan were received by the mortgagors
themselves; Linda Olaguer Montayre had no legal capacity to sue as attorney-in-fact; plaintiffs as well
as Maria Olaguer were in estoppel; and the action was already barred by prescription. PNB set up a
compulsory counterclaim for damages, costs of litigation and attorneys fees. It also filed a cross-claim
against Maria Olaguer for the payment of the value of the loan plus the agreed interests in the event that
judgment would be rendered against it.
Defendants Olivia P. Olaguer, Jose A. Olaguer and Virgilio Olaguer, in their
Answer,
[9]
denied the material allegations in the complaint. They maintained that the sales of the
properties to Pastor Bacani and Estanislao Olaguer were judicially approved; the complaint did not state
a sufficient cause of action; it was barred by laches and/or prescription; lis pendensexisted; that the long
possession of the vendees have ripened into acquisitive prescription in their favor, and the properties no
longer formed part of the Estate of Lino Olaguer; until the liquidation of the conjugal properties of Lino
Olaguer and his former wives, the plaintiffs were not the proper parties in interest to sue in the action;
and in order to afford complete relief, the other conjugal properties of Lino Olaguer with his former
wives, and his capital property that had been conveyed without the approval of the testate court should
also be included for recovery in the instant case.
Defendant Maria Juan Vda. de Olaguer, representing the heirs of Estanislao Olaguer, in her
Answer,
[10]
likewise denied the material allegations of the complaint and insisted that the plaintiffs had
no valid cause of action against the heirs of the late Estanislao Olaguer, as the latter did not participate
in the alleged transfer of properties by Olivia P. Olaguer and Eduardo Olaguer in favor of the late
Estanislao Olaguer.
Defendant Cipriano Duran claimed, in his Answer,
[11]
that the complaint stated no cause of
action; he was merely instituted by his late sister-in-law Josefina Duran to take over the management of
Lots Nos. 8635 and 8638 in 1971; and the real party-in-interest in the case was the administrator of the
estate of Josefina Duran.
On 11 January 1995, an Amended Complaint
[12]
was filed in order to implead respondent
Emiliano M. Ongjoco as the transferee of Virgilio Olaguer with respect to portions of Lot No. 76,
namely Lots Nos. 1, 2, 76-D, 76-E, 76-F, and 76-G.
In his Answer with Counterclaim and Motion to Dismiss,
[13]
respondent Ongjoco denied the
material allegations of the amended complaint and interposed, as affirmative defenses the statute of
limitations, that he was a buyer in good faith, that plaintiffs had no cause of action against him, and that
the sale of property to Pastor Bacani, from whom Ongjoco derived his title, was judicially approved.
On 23 January 1996, plaintiffs filed a Re-Amended Complaint,
[14]
in which the heirs of
Estanislao Olaguer were identified, namely, Maria Juan Vda. de Olaguer, Peter Olaguer, Yolanda
Olaguer and Antonio Bong Olaguer.
In their Answer,
[15]
the heirs of Estanislao Olaguer reiterated their claim that Estanislao
Olaguer never had any transactions or dealings with the Estate of Lino Olaguer; nor did they mortgage
any property to the PNB.
On 5 August 1998, the heirs of Estanislao Olaguer and petitioner Ma. Linda Olaguer
Montayre submitted a compromise agreement,
[16]
which was approved by the trial court.
On 6 October 1999, Cipriano Duran filed a Manifestation
[17]
in which he waived any claim
on Lots Nos. 8635 and 8638. Upon motion, Duran was ordered dropped from the complaint by the trial
court in an order
[18]
dated 20 October 1999.
In a Decision
[19]
dated 13 July 2001, the RTC ruled in favor of the plaintiffs. The pertinent
portions of the decision provide:

The entirety of the evidence adduced clearly show that the sale of the
12 lots to Pastor Bacani pursuant to Exhibit A and the sale of the 10 lots to
Estanislao Olaguer pursuant to Exhibit D were absolutely simulated sales and
thus void ab initio. The two deeds of sales Exhibits A and D are even
worse than fictitious, they are completely null and void for lack of consideration
and the parties therein never intended to be bound by the terms thereof and the
action or defense for the declaration of their inexistence does not
prescribe. (Art. 1410, Civil Code) Aside from being simulated they were
clearly and unequivocally intended to deprive the compulsory heirs of their
legitime x x x.

The deeds of sale, Exhibits A and D being void ab initio, they
are deemed as non-existent and the approval thereof by the probate court
becomes immaterial and of no consequence, because the approval by the probate
court did not change the character of the sale from void to valid x x x.

x x x x

Defendant Jose A. Olaguer simulated the sales and had them
approved by the probate court so that these properties would appear then to
cease being a part of the estate and the vendee may then be at liberty to dispose
of the same in any manner he may want. They probably believed that by
making it appear that the properties were bought back from Pastor Bacani under
a simulated sale, they (Olivia Olaguer and Eduardo Olaguer) would appear then
as the owners of the properties already in their personal capacities that disposals
thereof will no longer require court intervention. x x x.

x x x x

[Jose A. Olaguer] had Olivia P. Olaguer execute a Special Power
of Attorney (Exhibit T) authorizing him (Jose A. Olaguer) to sell or
encumber the properties allegedly bought back from Pastor Bacani which
Jose A. Olaguer did with respect to the 6/13 share of Olivia P. Olaguer on
Lot No. 76 by selling it to his son Virgilio for only 3,000 Pesos, then caused
Virgilio to execute a power of attorney authorizing him to sell or encumber
the 6/13 share which he did by selling the same to defendant Emiliano M.
[Ongjoco].

Virgilio Olaguer however executed an affidavit (Exhibit CC)
wherein he denied having bought any property from the estate of Lino Olaguer
and that if there are documents showing that fact he does not know how it came
about. x x x.

The 1972 power of attorney referred to by Jose A. Olaguer as his
authority for the sale of Lots 1 and 2 (formerly lots 76-B and 76-C) was not
presented nor offered in evidence.

There are two deeds of sale over Lot 76-D, (Exhibits K and
J) in favor of defendant Emiliano M. [Ongjoco] with different dates of
execution, different amount of consideration, different Notary Public.

There are two deeds of sale over Lots 76-E and 76-F (Exhibits
M and L) in favor of defendant Emiliano M. [Ongjoco] with different
dates of execution, different amount of consideration and different Notary
Public.

There are two deeds of sale over Lot 76-G (Exhibits N and
O) in favor of Emiliano M. [Ongjoco] with different dates of execution
with the same amount of consideration and the same Notary Public.

While Lot 76-D was allegedly sold already to Emiliano M.
[Ongjoco] in 1979, yet it was still Jose A. Olaguer who filed a petition for
the issuance of a second owners copy as attorney in fact of Virgilio Olaguer
on August 8, 1980 (Exhibit SS) and no mention was made about the sale.

Under these circumstances, the documents of defendant
Emiliano M. [Ongjoco] on lots 76 therefore, in so far as the portions he
allegedly bought from Jose A. Olaguer as attorney in fact of Virgilio
Olaguer suffers seriously from infirmities and appear dubious.

Defendant Emiliano M. [Ongjoco] cannot claim good faith
because according to him, when these lots 76-[B] to 76-G were offered to
him his condition was to transfer the title in his name and then he pays. He
did not bother to verify the title of his vendor. x x x.

So with respect to the sale of Lots 76-B to 76-G, Emiliano M.
[Ongjoco] has no protection as innocent purchaser for good faith affords
protection only to purchasers for value from the registered owners. x x x.
Knowing that he was dealing only with an agent x x x, it behooves upon
defendant Emiliano M. [Ongjoco] to find out the extent of the authority of
Jose A. Olaguer as well as the title of the owner of the property, because as
early as 1973 pursuant to the subdivision agreement, (records, vol. 2, page
109 and Exhibit 14 and 14-d) he already knew fully well that Lots 76-B
to 76-G he was buying was owned by Olivia P. Olaguer and not by Virgilio
Olaguer.

x x x x

With respect to the 10 lots sold to [Eduardo] Olaguer (Exhibit D)
Jose A. Olaguer had Estanislao Olaguer execute a power of attorney (Exhibit
X) authorizing him (Jose A. Olaguer) to sell or encumber the 10 lots allegedly
bought by Estanislao from the estate. With this power of attorney, he mortgaged
lots 7589, 7593 and 7398 to the PNB. He sold lots 1557 and 1676 to his son
Virgilio Olaguer. While under Exhibit UU dated December 29, 1966, he
bought the 10 parcels of land, among which is lots 4521 and 4522 from
Estanislao Olaguer, yet, on March 16, 1968, he again bought lots 4521 and 4522
(records, vol. 1, page 38) from Estanislao Olaguer. While lots 8635 and 8638
were among those sold to him under Exhibit UU, it appears that he again
bought the same on June 5, 1968 under Exhibit F.

The heirs of Estanislao Olaguer however denied having bought any
parcel of land from the estate of Lino Olaguer. Estanislao Olaguers widow,
Maria Juan vda. de Olaguer, executed an affidavit (Exhibit BB) that they did
not buy any property from the estate of Lino Olaguer, they did not sell any
property of the estate and that they did not mortgage any property with the
PNB. She repeated this in her deposition. (records, vol. 2, page 51) This was
corroborated by no less than former co-administrator Eduardo Olaguer in his
deposition too (Exhibit RRRR) that the sale of the 10 parcels of land to
Estanislao Olaguer was but a simulated sale without any consideration. x x x.

x x x x

A partial decision was already rendered by this court in its order
of August 5, 1998 (records, vol. 2, page 64) approving the compromise
agreement with defendants Heirs of Estanislao Olaguer. (records, vol. 2 page
57).

Defendant Cipriano Duran was dropped from the complaint per the
order of the court dated October 20, 1999 (records, vol. 2, page 155) because he
waived any right or claim over lots 8635 and 8638. (records, vol. 2, page 150).
(Emphasis ours.)


The dispositive portion of the above decision was, however, amended by the trial court in an
Order
[20]
dated 23 July 2001 to read as follows:

WHEREFORE, premises considered, decision is hereby rendered in
favor of the plaintiffs as follows:

1) The deed of sale to Pastor Bacani (Exhibit A) and the deed of
sale to Estanislao Olaguer (Exhibit D) are hereby declared as null and void and
without force and effect and all the subsequent transfers and certificates arising
therefrom likewise declared null and void and cancelled as without force and
effect, except as herein provided for.

2) Lot Nos. 4518, 4526, 4359 and 8750 are hereby ordered
reverted back to the estate of Lino Olaguer and for this purpose, within ten
(10) days from the finality of this decision, the heirs of Olivia P. Olaguer (the
plaintiffs herein) [sic] are hereby ordered to execute the necessary document
of reconveyance, failure for which, the Clerk of Court is hereby ordered to
execute the said deed of reconveyance.

3) Lot Nos. 7514, 6608, 8582, 8157, 7999, 6167 and 8266 are
hereby ordered reverted back to the estate of Lino Olaguer and for this
purpose, within ten (10) days from the finality of this decision, defendant
Eduardo Olaguer is hereby ordered to execute the necessary document of
reconveyance, failure for which, the Clerk of Court is hereby ordered to
execute the said deed of reconveyance.

4) Lots 1 and 2, Pcs-20015, and Lots 76-D, 76-E, 76-F and 76-G,
Psd-180629 sold to Emiliano M. [Ongjoco] are hereby ordered reverted back to
the estate of Lino Olaguer. For this purpose, within ten (10) days from the
finality of this decision, defendant Emiliano M. [Ongjoco] is hereby ordered to
execute the necessary deed of reconveyance, otherwise, the Clerk of Court shall
be ordered to execute the said reconveyance and have the same registered with
the Register of Deeds so that new titles shall be issued in the name of the estate of
Lino Olaguer and the titles of Emiliano [Ongjoco] cancelled.

5) The parties have acquiesced to the sale of the 7/13 portion
of Lot 76 to Eduardo Olaguer as well as to the latters disposition thereof and are
now in estoppel to question the same. The court will leave the parties where
they are with respect to the 7/13 share of Lot 76.

6) Lots 578, 1557, 1676, 4521, 4522, 8635, 8638, are hereby reverted
back to the estate of Lino Olaguer and for this purpose, the Clerk of [Court] is
hereby ordered to execute the necessary deed of reconveyance within ten days
from the finality of this decision and cause its registration for the issuance of new
titles in the name of the Estate of Lino Olaguer and the cancellation of existing
ones over the same.

7) While the mortgage with the defendant PNB is null and void, Lots
7589, 7593 and 7396 shall remain with the Republic of the Philippines as a
transferee in good faith.

Both the petitioners and respondent filed their respective Notices of Appeal
[21]
from the
above decision. The case was docketed in the Court of Appeals as CA-G.R. CV No. 71710.
In their Plaintiff-Appellants Brief
[22]
filed before the Court of Appeals, petitioner Estate
argued that the trial court erred in not ordering the restitution and/or compensation to them of the value
of the parcels of land that were mortgaged to PNB, notwithstanding the fact that the mortgage was
declared null and void. Petitioners maintain that the PNB benefited from a void transaction and should
thus be made liable for the value of the land, minus the cost of the mortgage and the reasonable
expenses for the foreclosure, consolidation and transfer of the lots.
Ongjoco, on the other hand, argued in his Defendant-Appellants Brief
[23]
that the trial court
erred in: declaring as null and void the Deeds of Sale in favor of Pastor Bacani and Eduardo Olaguer
and the subsequent transfers and certificates arising therefrom; ordering the reconveyance of the lots
sold to him (Ongjoco); and failing to resolve the affirmative defenses of prescription, the authority of
Olivia and Eduardo to dispose of properties formerly belonging to the estate of Lino Olaguer, recourse
in a court of co-equal jurisdiction, and forum shopping.
Petitioner Linda O. Montayre was likewise allowed to file a Brief
[24]
on her own behalf, as
Plaintiff-Appellee and Plaintiff-Appellant.
[25]
She refuted therein the assignment of errors made by
Defendant-Appellant Ongjoco and assigned as error the ruling of the trial court that the lots mortgaged
to the PNB should remain with the Republic of the Philippines as a transferee in good faith.
On 27 February 2006, the Court of Appeals rendered the assailed Decision, the dispositive
portion of which reads:

WHEREFORE, premises considered, the appealed Decision is
hereby MODIFIED, in that Paragraph 4 of the amended decision is hereby
Ordered Deleted, and the questioned sales to defendant-appellant Emiliano M.
Ongjoco are UPHELD.
[26]


In denying the appeal interposed by petitioners, the appellate court reasoned that the claim
for the value of the lots mortgaged with the PNB were not prayed for in the original Complaint, the
Amended Complaint or even in the Re-Amended Complaint. What was sought therein was merely the
declaration of the nullity of the mortgage contract with PNB. As the relief prayed for in the appeal was
not contained in the complaint, the same was thus barred.
The Court of Appeals also ruled that the evidence of petitioners failed to rebut the
presumption that PNB was a mortgagee in good faith. Contrarily, what was proven was the fact that
Olivia Olaguer and Jose A. Olaguer were the persons responsible for the fraudulent transactions
involving the questioned properties. Thus, the claim for restitution of the value of the mortgaged
properties should be made against them.
As regards the appeal of respondent Ongjoco, the appellate court found the same to be
meritorious. The said court ruled that when the sale of real property is made through an agent, the buyer
need not investigate the principals title. What the law merely requires for the validity of the sale is that
the agents authority be in writing.
Furthermore, the evidence adduced by petitioners was ruled to be inadequate to support the
conclusion that Ongjoco knew of facts indicative of the defect in the title of Olivia Olaguer or Virgilio
Olaguer.
Petitioners moved for a partial reconsideration
[27]
of the Court of Appeals decision in order
to question the ruling that respondent Ongjoco was a buyer in good faith. The motion was, however,
denied in a Resolution
[28]
dated 29 June 2006.
Aggrieved, petitioners filed the instant Petition for Review on Certiorari under Rule 45 of
the Revised Rules of Court, raising the following assignment of errors:

I.

THE COURT OF APPEALS COMMITTED AN ERROR IN LAW WHEN IT
RULED, ON SPECULATION, THAT RESPONDENT EMILIANO M.
ONGJOCO WAS A BUYER IN GOOD FAITH OF THE PROPERTIES OF
THE ESTATE OF LINO OLAGUER, DESPITE THE EXISTENCE OF
FACTS AND CIRCUMSTANCES FOUND BY THE TRIAL COURT THAT
OUGHT TO PUT EMILIANO M. ONGJOCO ON NOTICE THAT THE
PETITIONERS-APPELLANTS HAVE A RIGHT OR INTEREST OVER THE
SAID PROPERTIES, AND CONTRARY TO PREVAILING
JURISPRUDENCE.

II.

THE COURT OF APPEALS COMMITTED AN ERROR IN LAW WHEN IT
DISREGARDED THE CLEAR FINDINGS OF FACTS AND CONCLUSIONS
MADE BY THE TRIAL COURT, IN THE ABSENCE OF ANY STRONG
AND COGENT REASONS TO REVERSE THE SAID FINDINGS,
CONTRARY TO PREVAILING JURISPRUDENCE.
[29]



Essentially, the question that has been brought before us for consideration is whether or not,
under the facts and circumstances of this case, respondent Ongjoco can be considered an innocent
purchaser for value.
Petitioners agree with the pronouncement of the trial court that respondent Ongjoco could not
have been a buyer in good faith since he did not bother to verify the title and the capacity of his vendor
to convey the properties involved to him. Knowing that Olivia P. Olaguer owned the properties in 1973
and that he merely dealt with Jose A. Olaguer as an agent in January 1976, Ongjoco should have
ascertained the extent of Joses authority, as well as the title of Virgilio as the principal and owner of the
properties.
Petitioners likewise cite the following incidents that were considered by the trial court in
declaring that respondent was a buyer in bad faith, namely: (1) that Virgilio Olaguer executed an
affidavit,
[30]
wherein he denied having bought any property from the estate of Lino Olaguer, and that if
there are documents showing that fact, he does not know how they came about; (2) that the power of
attorney referred to by Jose A. Olaguer as his authority for the sale of Lots 1 and 2 (formerly Lots 76-B
and 76-C) was not presented or offered in evidence; (3) that there are two deeds of sale
[31]
over Lot 76-D
in favor of Ongjoco; (4) that there are two deeds of sale
[32]
over Lots 76-E and 76-F in favor of Ongjoco;
(5) that there are two deeds of sale
[33]
over Lot 76-G in favor of Ongjoco; and (6) that while Lot 76-D
was already sold to Ongjoco in 1979, it was still Jose A. Olaguer as attorney in fact of Virgilio Olaguer
who filed on 8 August 1980 a petition for the issuance of a second owners copy
[34]
of the title to the
property, and no mention was made about the sale to Ongjoco.
Respondent Ongjoco, on the other hand, invokes the ruling of the Court of Appeals that he was an
innocent purchaser for value. His adamant stance is that, when he acquired the subject properties, the
same were already owned by Virgilio Olaguer. Respondent insists that Jose A. Olaguer was duly
authorized by a written power of attorney when the properties were sold to him (Ongjoco). He posits
that this fact alone validated the sales of the properties and foreclosed the need for any inquiry beyond
the title to the principal. All the law requires, respondent concludes, is that the agents authority be in
writing in order for the agents transactions to be considered valid.
Respondent Ongjocos posture is only partly correct.
According to the provisions of Article 1874
[35]
of the Civil Code on Agency, when the sale of a
piece of land or any interest therein is made through an agent, the authority of the latter shall be in
writing. Absent this requirement, the sale shall be void. Also, under Article 1878,
[36]
a special power of
attorney is necessary in order for an agent to enter into a contract by which the ownership of an
immovable property is transmitted or acquired, either gratuitously or for a valuable consideration.
We note that the resolution of this case, therefore, hinges on the existence of the written power of
attorney upon which respondent Ongjoco bases his good faith.

When Lots Nos. 1 and 2 were sold to respondent Ongjoco through Jose A. Olaguer, the Transfer
Certificates of Title of said properties were in Virgilios name.
[37]
Unfortunately for respondent, the
power of attorney that was purportedly issued by Virgilio in favor of Jose Olaguer with respect to the
sale of Lots Nos. 1 and 2 was never presented to the trial court. Neither was respondent able to explain
the omission. Other than the self-serving statement of respondent, no evidence was offered at all to
prove the alleged written power of attorney. This of course was fatal to his case.
As it stands, there is no written power of attorney to speak of. The trial court was thus correct in
disregarding the claim of its existence. Accordingly, respondent Ongjocos claim of good faith in the
sale of Lots Nos. 1 and 2 has no leg to stand on.
As regards Lots Nos. 76-D, 76-E, 76-F and 76-G, Ongjoco was able to present a general power of
attorney that was executed by Virgilio Olaguer. While the law requires a special power of attorney, the
general power of attorney was sufficient in this case, as Jose A. Olaguer was expressly empowered to
sell any of Virgilios properties; and to sign, execute, acknowledge and deliver any agreement
therefor.
[38]
Even if a document is designated as a general power of attorney, the requirement of a
special power of attorney is met if there is a clear mandate from the principal specifically authorizing
the performance of the act.
[39]
The special power of attorney can be included in the general power when
the act or transaction for which the special power is required is specified therein.
[40]

On its face, the written power of attorney contained the signature of Virgilio Olaguer and
was duly notarized. As such, the same is considered a public document and it has in its favor the
presumption of authenticity and due execution, which can only be contradicted by clear and convincing
evidence.
[41]

No evidence was presented to overcome the presumption in favor of the duly notarized
power of attorney. Neither was there a showing of any circumstance involving the said document that
would arouse the suspicion of respondent and spur him to inquire beyond its four corners, in the
exercise of that reasonable degree of prudence required of a man in a similar situation. We therefore
rule that respondent Ongjoco had every right to rely on the power of attorney in entering into the
contracts of sale of Lots Nos. 76-D to 76-G with Jose A. Olaguer.
With respect to the affidavit of Virgilio Olaguer in which he allegedly disavowed any claim
or participation in the purchase of any of the properties of the deceased Lino Olaguer, we hold that the
same is rather irrelevant. The affidavit was executed only on 1 August 1986 or six years after the last
sale of the properties was entered into in 1980. In the determination of whether or not a buyer is in
good faith, the point in time to be considered is the moment when the parties actually entered into the
contract of sale.
Furthermore, the fact that Lots Nos. 76-D to 76-G were sold to respondent Ongjoco twice
does not warrant the conclusion that he was a buyer in bad faith. While the said incidents might point to
other obscured motives and arrangements of the parties, the same do not indicate that respondent knew
of any defect in the title of the owner of the property.
As to the petition filed by Jose A. Olaguer for the issuance of a second owners copy of the
title to Lot No. 76-D, after the property was already sold to respondent Ongjoco, the same does not
inevitably indicate that respondent was in bad faith. It is more likely that Jose A. Olaguer was merely
compiling the documents necessary for the transfer of the subject property. Indeed, it is to be expected
that if the title to the property is lost before the same is transferred to the name of the purchaser, it
would be the responsibility of the vendor to cause its reconstitution.
In sum, we hold that respondent Emiliano M. Ongjoco was in bad faith when he bought Lots
Nos. 1 and 2 from Jose A. Olaguer, as the latter was not proven to be duly authorized to sell the said
properties.
However, respondent Ongjoco was an innocent purchaser for value with regard to Lots Nos.
76-D, 76-E, 76-F and 76-G since it was entirely proper for him to rely on the duly notarized written
power of attorney executed in favor of Jose A. Olaguer.

WHEREFORE, premises considered, the instant petition is hereby PARTIALLY
GRANTED. The assailed Decision of the Court of Appeals dated 27 February 2006 in CA-G.R. CV
NO. 71710 is MODIFIED in that Paragraph 4 of the Decision dated 13 July 2001 of the Regional Trial
Court of Legazpi City, Branch 6, and the Order dated 23 July 2001 shall read as follows:

4) Lots 1 and 2, Pcs-20015 sold to Emiliano M. Ongjoco are hereby
ordered reverted back to the estate of Lino Olaguer. For this purpose, within ten
(10) days from the finality of this decision, defendant Emiliano M. Ongjoco is
hereby ordered to execute the necessary deed of reconveyance, otherwise, the
Clerk of Court shall be ordered to execute the said reconveyance and have the
same registered with the Register of Deeds so that new titles shall be issued in the
name of the estate of Lino Olaguer and the titles of Emiliano Ongjoco cancelled.

No costs. SO ORDERED.
BIENVENIDO C. TEOCO and G.R. No. 162333
JUAN C. TEOCO, JR.,
Petitioners,

- versus -

METROPOLITAN BANK Promulgated:
AND TRUST COMPANY,
Respondent. December 23, 2008

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

REYES, R.T., J .:

REAL creditors are rarely unwilling to receive their debts from any hand which will pay
them.
[1]
Ang tunay na may pautang ay bihirang tumanggi sa kabayaran mula kaninuman.

This is a petition for review on certiorari seeking the reversal of the Decision
[2]
of the Court
of Appeals (CA) in CA-G.R. CV No. 58891 dated February 20, 2004 which annulled and set aside the
decision of the Regional Trial Court (RTC) of Catbalogan, Samar on July 22, 1997 in Cadastral Record
No. 1378. The RTC originally dismissed the petition for writ of possession filed by respondent
Metropolitan Bank and Trust Company (Metrobank) on the ground that
intervenors and present petitioners, the brothers Bienvenido Teoco and Juan Teoco, Jr. (the brothers
Teoco), have redeemed the subject property. The CA reversed this dismissal and ordered the issuance
of a writ of possession in favor of respondent Metrobank.
Culled from the records, the facts are as follows:
Lydia T. Co, married to Ramon Co, was the registered owner of two parcels of land situated
in Poblacion, Municipality of Catbalogan, Province of Samar under Transfer Certificate of Title (TCT)
Nos. T-6220 and T-6910.
[3]
Ramon Co mortgaged the said parcels of land to Metrobank for a sum
of P200,000.00.
On February 14, 1991, the properties were sold to Metrobank in an extrajudicial foreclosure sale
under Act No. 3135. One year after the registration of the Certificates of Sale, the titles to the
properties were consolidated in the name of Metrobank for failure of Ramon Co to redeem the same
within the one year period provided for by law. TCT Nos. T-6220 and T-6910 were cancelled
and TCT Nos. T-8482 and T-8493 were issued in the name of Metrobank.

On November 29, 1993, Metrobank filed a petition for the issuance of a writ of possession
against Ramon Co and Lydia Co (the spouses Co). However, since the spouses Co were no longer
residing in the Philippines at the time the petition was filed, the trial court ordered Metrobank,
on January 12, 1994 and again on January 26, 1994 to effect summons by publication against the
spouses Co.
On May 17, 1994, the brothers Teoco filed an answer-in-intervention alleging that they are the
successors-in-interest of the spouses Co, and that they had duly and validly redeemed the subject
properties within the reglementary period provided by law. The brothers Teoco thus prayed for the
dismissal of Metrobanks petition for a writ of possession, and for the nullification of the TCTs issued in
the name of Metrobank. The brothers Teoco further prayed for the issuance in their name of new
certificates of title.
Metrobank, in its reply, alleged that the amount deposited by the brothers Teoco as redemption
price was not sufficient, not being in accordance with Section 78 of the General Banking
Act. Metrobank also said the assignment of the right of redemption by the spouses Co in favor of the
brothers Teoco was not properly executed, as it lacks the necessary authentication from the Philippine
Embassy.
On February 24, 1995, the trial court was informed that the brothers Teoco had deposited the
amount of P356,297.57 to the clerk of court of the RTC in Catbalogan, Samar. The trial court ordered
Metrobank to disclose whether it is allowing the brothers Teoco to redeem the subject
properties. Metrobank refused to accept the amount deposited by the brothers Teoco, alleging that
they are obligated to pay the spouses Cos subsequent obligations to Metrobank as well. The brothers
Teoco claimed that they are not bound to pay all the obligations of the spouses Co, but only the value
of the property sold during the public auction.
On February 26, 1997, the trial court reiterated its earlier order
directing Metrobank to effect summons by publication to the spouses Co. Metrobank complied with
said order by submitting documents showing that it caused the publication of summons against the
spouses Co. The brothers Teoco challenged this summons by publication, arguing that the newspaper
where the summons by publication was published, the Samar Reporter, was not a newspaper of
general circulation in the Philippines. The brothers Teoco furthermore argued that Metrobank did not
present witnesses to identify the documents to prove summons by publication.
RTC Disposition
On July 22, 1997, the RTC rendered its decision in favor of the brothers Teoco, to wit:
WHEREFORE, judgment is hereby rendered dismissing the petition for a
writ of possession under Section 7 of Act 3135 it appearing that intervenor Atty.
Juan C. Teoco, Jr. and his brother Atty. Bienvenido C. Teoco have legally and
effectively redeemed Lot 61 and 67 of Psd-66654, Catbalogan, Cadastre, from
the petitioner Metropolitan Bank and Trust Company.
Accordingly, Metrobank may now withdraw the aforesaid redemption
money of P356,297.57 deposited by Juan C. Teoco, Jr., on February 10,
1992 with the clerk of court and it is ordered that the Transfer Certificate of Title
Nos. T-8492 and T-8493 of Metropolitan Bank and Trust Company be and are
cancelled and in their place new transfer certificates of title be issued in favor of
Intervenors Attys. Bienvenido C. Teoco and Juan C. Teoco, Jr., of legal age,
married, and residents of Calbiga, Samar, Philippines, upon payment of the
prescribed fees therefore. No pronouncement as to costs.
[4]

According to the RTC, the case filed by Metrobank should be dismissed since intervenor Juan C.
Teoco, Jr., by his tender of P356,297.57 to Metrobank on February 10, 1992, within the reglementary
period of redemption of the foreclosed property, had legally and effectively redeemed the subject
properties from Metrobank. This redemption amount is a fair and reasonable price and is in
keeping with the letter and spirit of Section 78 of the General Banking
Act because Metrobank purchased the mortgaged properties from the sheriff of the same court for
only P316,916.29. In debunking the argument that the amount tendered was insufficient,
the RTC held:
It is contended for Metrobank that the redemption money deposited by
Juan C. Teoco, Jr., is insufficient and ineffective because the spouses Ramon Co
and Lydia T. Co owe it the total amount of P6,856,125 excluding interest and
other charges and the mortgage contract executed by them in favor of
Metrobank in 1985 and 1986 (Exh. A and B) are not only security for payment of
their obligation in the amount of P200,000 but also for those obligations that
may have been previously and later extended to the Co couple including interest
and other charges as appears in the accounts, books and records of the bank.
Metrobank cites the case of Mojica v. Court of Appeals, 201 SCRA 517
(1991) where the Supreme Court held that mortgages given to secure future
advancements are valid and legal contracts; that the amounts named as
consideration in said contract do not limit the amount for which the mortgage
may stand as security; that a mortgage given to secure the advancements is a
continuing security and is not discharged by repayment of the amount named in
the mortgage until the full amount of the advancements are paid. In the opinion
of this court, it is not fair and just to apply this rule to the case at bar. There is
no evidence offered by Metrobank that these other obligations of Ramon Co
and his wife were not secured by real estate mortgages of other lands. If the
other indebtedness of the Co couple to Metrobank are secured by a mortgage
on their other lands or properties the obligation can be enforced by foreclosure
which the court assumes Metrobank has already done. There is no proof that
Metrobank asked for a deficiency judgment for these unpaid loans.
The Supreme Court in the Mojica case was dealing with the rights of the
mortgagee under a mortgage from an owner of the land. It determined the
security covered by the mortgage the intention of the parties and the equities of
the case. What was held in that case was hedged about so as to limit the
decision to the particular facts. It must be apparent that the Mojica ruling
cannot be construed to give countenance or approval to the theory that in all
cases without exception mortgages given to secure past and future
advancements are valid and legal contracts.
In construing a contract between the bank and a borrower such a
construction as would be more favorable to the borrower should be adopted
since the alleged past and future indebtedness of Ramon Co to the bank was not
described and specified therein and that the addendum was made because the
mortgage given therefore were not sufficient or that these past and future
advancements were unsecured. That being the case the mortgage contracts,
Exh. A and B should be interpreted against Metrobank which drew said
contracts. A written contract should, in case of doubt, be interpreted against
the party who has drawn the contract (6 R.C.L. 854; H.E. Heackock Co. vs.
Macondray & Co., 42 Phil. 205). Here, the mortgage contracts are in printed
form prepared by Metrobank and therefore ambiguities therein should be
construed against the party causing it (Yatco vs. El Hogar Filipino, 67 Phil.
610; Hodges vs. Tazaro, CA, 57 O.G. 6970).
[5]

The RTC added that there is another reason for dismissing Metrobanks petition:
the RTC failed to acquire jurisdiction over the spouses Co. The RTC noted that Metrobank published its
petition for writ of possession, but did not publish the writ of summons issued by said court
on February 16, 1994. According to the RTC:
A petition for a writ of possession of foreclosed property is in reality a
possession suit. That Metrobank prayed for a writ of possession in an
independent special proceeding does not alter the nature of the case as a
possessory suit (Cabrera v. Sinoy, L.-12648, 23 November 1959).
The defendant or owner of the property foreclosed by the petitioner
should be summoned to answer the petition. Accordingly, the publication made
by the petitioner is fatally flawed and defective and on that basis alone this
court acquired no jurisdiction over the person of respondents Ramon Co and his
wife (Mapa vs. Court of Appeals, G.R. No. 79394, October 2, 1992; Lopez vs.
Philippine National Bank, L-34223,December 10, 1982).
[6]

Metrobank appealed to the CA. In its appeal, Metrobank claimed that the RTC erred in finding
that the publication made by it is fatally flawed, and that the brothers Teoco had effectively redeemed
the properties in question.
CA Disposition
On February 20, 2004, the CA decided the appeal in favor of Metrobank, with the following
disposition:
WHEREFORE, the appeal is hereby GRANTED. The assailed Decision
dated July 22, 1997 rendered by the Regional Trial Court of Catbalogan, Samar
Branch 29 in Cadastral Record No. 1378 is hereby ANNULLED and SET
ASIDE. Accordingly, let a writ of possession in favor of petitioner-appellant
METROPOLITAN BANK AND TRUST COMPANY be issued over the properties and
improvements covered by Transfer Certificates of Title Nos. T-8492 and T-8493
of the Registry of Deeds of Western Samar.
SO ORDERED.
[7]

As regards the question of jurisdiction, the CA ruled that since the parcels of land in
question were already registered in the name of Metrobank at the time the petition was filed, and
since the certificates of title of the spouses Co were already cancelled, there is no more need to issue
summons to the spouses Co. The CA noted that the best proof of ownership of the parcel of land is a
certificate of title.
[8]

The CA also held that the issue of the validity of summons to the spouses Co is unimportant
considering that the properties in question were mortgaged to Metrobank and were subsequently sold
to the same bank after the spouses Co failed to satisfy the principal obligation. Hence, the applicable
law is Act No. 3135,
[9]
as amended by Act No. 4118. Section 7 of said Act No. 3135 states that a
petition for the issuance of a writ of possession filed by the purchaser of a property in an extrajudicial
foreclosure sale may be done ex parte. It is the ministerial duty of the trial court to grant such writ of
possession. No discretion is left to the trial court. Any question regarding the cancellation of the writ,
or with respect to the validity and regularity of the public sale should be determined in a subsequent
proceeding as outlined in Section 9 of Act No. 3135.
[10]

Further, the CA held that the brothers Teoco were not able to effectively redeem the subject
properties, because the amount tendered was insufficient, and the brothers Teoco have not
sufficiently shown that the spouses Cos right of redemption was properly transferred to them.
Issues
In this Rule 45 petition, the brothers Teoco impute to the CA the following errors:
I
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR OF
JUDGMENT IN HOLDING THAT PETITIONERS FAILED TO REDEEM THE SUBJECT
PROPERTIES WITHIN THE REGLEMENTARY PERIOD OF ONE YEAR AND THAT THE
REDEMPTION PRICE TENDERED IS INSUFFICIENT.

II
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR OF
JUDGMENT IN HOLDING PETITIONERS TO PAY NOT ONLY THE P200,000
PRINCIPAL OBLIGATION BUT ALSO THAT PREVIOUSLY EXTENDED, WHETHER
DIRECT OR INDIRECT, PRINCIPAL OR SECONDARY AS APPEARS IN THE
ACCOUNTS, BOOKS AND RECORDS.

III
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
PETITIONERS HAVE NOT SUFFICIENTLY SHOW(N) THAT THE RIGHT OF
REDEMPTION WAS PROPERLY TRANSFERRED TO THEM.
IV
THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF
THE REGIONAL TRIAL COURT, BRANCH 29, AND GRANTING THE WRIT OF
POSSESSION TO THE RESPONDENT.
[11]
(Underscoring supplied)
Our Ruling
Sufficiency of Amount Tendered
We find that neither petitioners, the brothers Teoco, nor respondent, Metrobank,
were able to present sufficient evidence to prove whether the additional loans granted to the
spouses Co by Metrobank were covered by the mortgage agreement between them. The brothers
Teoco failed to present any evidence of the supposed trust receipt agreement between Metrobank
and the spouses Co, or an evidence of the supposed payment by the spouses Co of the other loans
extended by Metrobank. Metrobank, on the other hand, merely relied on the stipulation on the
mortgage deed that the mortgage was intended to secure the payment of the same (P200,000.00
loan) and those that may hereafter be obtained.
[12]
However, there was no mention whatsoever of
the mortgage agreement in the succeeding loans entered into by the spouses Co.

While we agree with Metrobank that mortgages intended to secure future advancements
are valid and legal contracts,
[13]
entering into such mortgage contracts does not necessarily put within
its coverage all loan agreements that may be subsequently entered into by the parties. If
Metrobank wishes to apply the mortgage contract in order to satisfy loan obligations not stated on
the face of such contract, Metrobank should prove by a preponderance of evidence that such
subsequent obligations are secured by said mortgage contract and not by any other form of security.

In order to prevent any injustice to, or unjust enrichment of, any of the parties, this Court
holds that the fairest resolution is to allow the brothers Teoco to redeem the foreclosed properties
based on the amount for which it was foreclosed (P255,441.14 plus interest). This is subject, however,
to the right of Metrobank to foreclose the same property anew in order to satisfy the succeeding loans
entered into by the spouses Co, if they were, indeed, covered by the mortgage contract. The right of
Metrobank to foreclose the mortgage would not be hampered by the transfer of the properties to the
brothers Teoco as a result of this decision, since Article 2127 of the Civil Code provides:

Art. 2127. The mortgage extends to the natural accessions, to the
improvements, growing fruits, and the rents or income not yet received when
the obligation becomes due, and to the amount of the indemnity granted or
owing to the proprietor from the insurers of the property mortgaged, or in
virtue of expropriation for public use, with the declarations, amplifications and
limitations established by law, whether the estate remains in the possession of
the mortgagor, or it passes into the hands of a third person. (Emphasis supplied)

Further, Article 2129 of the Civil Code provides:

Art. 2129. The creditor may claim from a third person in possession
of the mortgaged property, the payment of the part of the credit secured by the
property which said third person possesses, in the terms and with the
formalities which the law establishes.


The mortgage directly and immediately subjects the property upon which it is imposed, whoever
the possessor may be to the fulfillment of the obligation for whose security it was constituted.
Otherwise stated, a mortgage creates a real right which is enforceable against the whole world. Hence,
even if the mortgage property is sold or its possession transferred to another, the property remains
subject to the fulfillment of the obligation for whose security it was constituted.
[14]


Thus, the redemption by the brothers Teoco shall be without prejudice to the subsequent
foreclosure of same properties by Metrobank in order to satisfy other obligations covered by the Real
Estate Mortgage.

Transfer of Right of Redemption

The CA held that the brothers Teoco have not sufficiently shown that the spouses Cos right of
redemption was properly transferred to them. The assignment of the right of redemption only stated
that the spouses Co are transferring the right of redemption to their parents, brothers, and sisters, but
did not specifically include the brothers Teoco, who are just brothers-in-law of Ramon
Co. Furthermore, the spouses Co no longer reside in the Philippines, and the assignment of the right
of redemption was not properly executed and/or authenticated.

The alleged transfer of the right of redemption is couched in the following language:

KNOW ALL MEN BY THESE PRESENTS:

That we, RAMON CO and LYDIA CO, of legal ages, for and in
consideration of preserving the continuous ownership and possession of family owned properties, by
these presents, hereby cede, transfer and convey in favor of my parents, brothers and sisters, the right to
redeem the properties under TCT Nos. T-6910 and T-6220, located in Patag district, Catbalogan, Samar, sold
by public auction sale on February 14, 1991 to the Metropolitan Bank and Trust Company.

Furthermore, we waived whatever rights we may have over the properties in favor of the successor-
in-interest including that of transferring the title to whoever may redeem the aforesaid properties.

IN WITNESS WHEREOF, we have hereunto affixed our signatures this 10
th
day of January, 1992
at Vancouver, Canada.
[15]

The brothers Teoco may be brothers-in-law only of Ramon Co, but they are also the brothers of
Lydia Teoco Co, who is actually the registered owner of the properties covered byTCT Nos. T-6910 and
T-6220. Clearly, the brothers Teoco are two of the persons referred to in the above transfer of the
right of redemption executed by the spouses Co.
Anent the CA observation that the assignment of the right of redemption was not properly
executed and/or authenticated, Lopez v. Court of Appeals
[16]
is instructive. In Lopez, this Court ruled
that a special power of attorney executed in a foreign country is generally not admissible in evidence
as a public document in our courts. The Court there held:
Is the special power of attorney relied upon by Mrs. Ty a public
document? We find that it is. It has been notarized by a notary public or by a
competent public official with all the solemnities required by law of a public
document. When executed and acknowledged in the Philippines, such a public
document or a certified true copy thereof is admissible in evidence. Its due
execution and authentication need not be proven unlike a private writing.
Section 25, Rule 132 of the Rules of Court provides
Sec. 25. Proof of public or official record. An
official record or an entry therein, when admissible for
any purpose, may be evidenced by an official publication
thereof or by a copy attested by the officer having the
legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines,
with a certificate that such officer has the custody. If the
office in which the record is kept is in a foreign country,
the certificate may be made by a secretary of embassy or
legation consul general, consul, vice consul, or consular
agent or by any officer in the foreign service of the
Philippines stationed in the foreign country in which the
record is kept, and authenticated by the seal of his office.
From the foregoing provision, when the special power of attorney is
executed and acknowledged before a notary public or other competent official
in a foreign country, it cannot be admitted in evidence unless it is certified as
such in accordance with the foregoing provision of the rules by a secretary of
embassy or legation, consul general, consul, vice consul, or consular agent or by
any officer in the foreign service of the Philippines stationed in the foreign
country in which the record is kept of said public document and authenticated
by the seal of his office. A city judge-notary who notarized the document, as in
this case, cannot issue such certification.
[17]

Verily, the assignment of right of redemption is not admissible in evidence as a public
document in our courts. However, this does not necessarily mean that such document has no
probative value.
There are generally three reasons for the necessity of the presentation of public
documents. First, public documents are prima facie evidence of the facts stated in them, as provided
for in Section 23, Rule 132 of the Rules of Court:
SEC. 23. Public documents as evidence. Documents consisting of entries
in public records made in the performance of a duty by a public officer are prima
facie evidence of the facts therein stated. All other public documents are
evidence, even against a third person, of the fact which gave rise to their
execution and of the date of the latter. (Underscoring supplied)
Second, the presentation of a public document dispenses with the need to prove a documents
due execution and authenticity, which is required under Section 20, Rule 132 of the Rules of Court for
the admissibility of private documents offered as authentic:
SEC. 20. Proof of private document. Before any private document
offered as authentic is received in evidence, its due execution and authenticity
must be proved either:
(a) By anyone who saw the document executed
or written; or
(b) By evidence of the genuineness of the
signature or handwriting of the maker.
Any other private document need only be identified as that which it is
claimed to be. (Underscoring supplied)
In the presentation of public documents as evidence, on the other hand, due execution and
authenticity are already presumed:
SEC. 23. Public documents are evidence. Documents consisting of
entries in public records made in the performance of a duty by a public officer
are prima facie evidence of the facts therein stated. All other public documents
are evidence, even against a third person, of the fact which gave rise to their
execution and of the date of the latter. (Underscoring supplied)
SEC. 30. Proof of notarial documents. Every instrument duly
acknowledged or proved and certified as provided by law, may be presented in
evidence without further proof, the certificate of acknowledgment being prima
facie evidence of the execution of the instrument or document
involved. (Underscoring supplied)
Third, the law may require that certain transactions appear in public instruments, such as Articles
1358 and 1625 of the Civil Code, which respectively provide:
Art. 1358. The following must appear in a public document:
(1) Acts and contracts which have for their object the creation,
transmission, modification or extinguishment of real rights over immovable
property; sales of real property or of an interest therein governed by Articles
1403, No. 2, and 1405;

(2) The cession, repudiation or renunciation of hereditary rights or of
those of the conjugal partnership of gains;
(3) The power to administer property, or any other power which has
for its object an act appearing or which should appear in a public document, or
should prejudice a third person;
(4) The cession of actions or rights proceeding from an act appearing
in a public document.
All other contracts where the amount involved exceeds five hundred
pesos must appear in writing, even a private one. But sales of goods, chattels or
things in action are governed by Articles 1403, No. 2, and 1405.
Art. 1625. An assignment of a credit, right or action shall produce no
effect as against third person, unless it appears in a public instrument, or the
instrument is recorded in the Registry of Property in case the assignment
involves real property. (Underscoring supplied)

Would the exercise by the brothers Teoco of the right to redeem the properties in question be
precluded by the fact that the assignment of right of redemption was not contained in a public
document? We rule in the negative.
Metrobank never challenged either the content, the due execution, or the genuineness of the
assignment of the right of redemption. Consequently, Metrobank is deemed to have admitted the
same. Having impliedly admitted the content of the assignment of the right of redemption, there is no
necessity for a prima facie evidence of the facts there stated. In the same manner, since Metrobank
has impliedly admitted the due execution and genuineness of the assignment of the right of
redemption, a private document evidencing the same is admissible in evidence.
[18]

True it is that the Civil Code requires certain transactions to appear in public
documents. However, the necessity of a public document for contracts which transmit or extinguish
real rights over immovable property, as mandated by Article 1358 of the Civil Code, is only
for convenience; it is not essential for validity or enforceability.
[19]
Thus, in Cenido v.
Apacionado,
[20]
this Court ruled that the only effect of noncompliance with the provisions of Article
1358 of the Civil Code is that a party to such a contract embodied in a private document may be
compelled to execute a public document:
Article 1358 does not require the accomplishment of the acts or contracts
in a public instrument in order to validate the act or contract but only to insure
its efficacy, so that after the existence of said contract has been admitted, the
party bound may be compelled to execute the proper document. This is clear
from Article 1357, viz.:
Art. 1357. If the law requires a document or other
special form, as in the acts and contracts enumerated in
the following article (Article 1358), the contracting parties
may compel each other to observe that form, once the
contract has been perfected. This right may be exercised
simultaneously with the action upon the contract.
[21]

On the other hand, Article 1625 of the Civil Code provides that *a+n assignment of a credit, right
or action shall produce no effect as against third person, unless it appears in a public instrument, or
the instrument is recorded in the Registry of Property in case the assignment involves real property.
In Co v. Philippine National Bank,
[22]
the Court interpreted the phrase effect as against a third
person to be damage or prejudice to such third person, thus:
x x x In Lichauco vs. Olegario, et al., 43 Phil. 540, this Court held that
whether or not x x x an execution debtor was legally authorized to sell his right
of redemption, is a question already decided by this Court in the affirmative in
numerous decisions on the precepts of Sections 463 and 464 and other sections
related thereto, of the Code of Civil Procedure. (The mentioned provisions are
carried over in Rule 39 of the Revised Rules of Court.) That the transfers or
conveyances in question were not registered is of miniscule significance, there
being no showing that PNB was damaged or could be damaged by such
omission. When CITADEL made its tender on May 5, 1976, PNB did not question
the personality of CITADEL at all. It is now too late and purely technical to raise
such innocuous failure to comply with Article 1625 of the Civil Code.
[23]

In Ansaldo v. Court of Appeals,
[24]
the Court held:
In its Decision, the First Division of the Appellate Tribunal, speaking
through the Presiding Justice at the time, Hon. Magno S. Gatmaitan, held as
regards Arnaldos contentions, that
x x x x
2) there was no need that the assignment be in
a public document this being required only to produce x x
x effect as against third persons (Article 1625, Civil Code),
i.e., to adversely affect 3rd persons, i.e., a 3rd person
with a right against original creditor, for example, an
original creditor of creditor, against whom surely such
an assignment by his debtor (creditor in the credit
assigned) would be prejudicial, because he, creditor of
assigning creditor, would thus be deprived of an
attachable asset of his debtor x x x;
x x x x
Except for the question of the claimed lack of authority on the part of
TFCs president to execute the assignment of credit in favor of PCIB improperly
raised for the first time on appeal, as observed by the Court of Appeals the
issues raised by Ansaldo were set up by him in, and after analysis and
assessment rejected by, both the Trial Court and the Appellate Tribunal. This
court sees no error whatever in the appreciation of the facts by either Court or
their application of the relevant law and jurisprudence to those facts,
inclusive of the question posed anew by Ansaldo relative to the alleged absence
of authority on the part of TFCs president to assign the corporations credit to
PCIB.
[25]

In the case at bar, Metrobank would not be prejudiced by the assignment by the spouses Co of
their right of redemption in favor of the brothers Teoco. As conceded by Metrobank, the assignees,
the brothers Teoco, would merely step into the shoes of the assignors, the spouses Co. The brothers
Teoco would have to comply with all the requirements imposed by law on the spouses Co. Metrobank
would not lose any security for the satisfaction of any loan obtained from it by the spouses Co. In fact,
the assignment would even prove to be beneficial to Metrobank, as it can foreclose on the subject
properties anew, provided it proves that the subsequent loans entered into by the spouses Co are
covered by the mortgage contract.
WHEREFORE, the decision of the Court of Appeals is SET ASIDE. The decision of the Regional
Trial Court in Catbalogan, Samar is REINSTATED with the followingMODIFICATION: the redemption by
Bienvenido C. Teoco and Juan C. Teoco, Jr. of the properties covered by TCT Nos. T-6910 and T-6220
shall be without prejudice to the subsequent foreclosure of same properties by Metropolitan Bank and
Trust Company to satisfy other loans covered by the Real Estate Mortgage. SO ORDERED.
TRUST
ROGELIO, GEORGE, LOLITA, G.R. No. 159494
ROSALINDA, and JOSEPHINE, all
surnamed PASIO, represented by
their father and attorney-in-fact
JOSE PASIO, Petitioners,
- versus -

DR. TEOFILO EDUARDO F.
MONTERROYO, substituted by
ROMUALDO MONTERROYO,
MARIA TERESA MONTERROYO, Promulgated:
and STEPHEN MONTERROYO, Respondents. July 31, 2008

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

CARPIO, J .:
The Case
Before the Court is a petition for review
[1]
assailing the 31 January 2003 Decision
[2]
and the 5
August 2003 Resolution
[3]
of the Court of Appeals in CA-G.R. CV No. 63199. The Court of Appeals
affirmed the Decision
[4]
dated 2 February 1999 of the Regional Trial Court of Iligan City, Branch 6 (trial
court), in Civil Case No. 06-3060.
The Antecedent Facts
This case originated from an action for recovery of possession and damages, with prayer for the
issuance of a temporary restraining order or writ of preliminary mandatory injunction, filed by Rogelio,
George, Lolita, Rosalinda and Josephine, all surnamed Pasio, represented by their father and attorney-
in-fact Jose Pasio (petitioners) against Dr. Teofilo Eduardo F. Monterroyo (Dr. Monterroyo), later
substituted by his heirs Romualdo, Maria Teresa and Stephen, all surnamed Monterroyo (respondents).
Cad. Lot No. 2139 of Cad. 292, Iligan Cadastre (Lot No. 2139), with an area of 19,979 square
meters, located at Panul-iran, Abuno, Iligan City, was part of a 24-hectare land occupied, cultivated and
cleared by Laureano Pasio (Laureano) in 1933. The 24-hectare land formed part of the public domain
which was later declared alienable and disposable. On 18 February 1935, Laureano filed a homestead
application over the entire 24-hectare land under Homestead Application No. 205845.
[5]
On 22 April
1940, the Bureau of Forestry wrote Laureano and informed him that the tract of land covered by his
application was not needed for forest purposes.
[6]
On 11 September 1941, the Director of Lands issued
an Order
[7]
approving Laureanos homestead application and stating that Homestead Entry No. 154651
was recorded in his name for the land applied for by him.



Laureano died on 24 March 1950. On 15 April 1952, the Director of Lands issued an Order
[8]
for
the issuance of a homestead patent in favor of Laureano, married to Graciana
Herbito
[9]
(Graciana). Laureanos heirs did not receive the order and consequently, the land was not
registered under Laureanos name or under that of his heirs. In 1953, the property was covered by Tax
Declaration No. 11102
[10]
in the name of Laureano with Graciana
[11]
as administrator.
Between 1949 and 1954, a Cadastral Survey was conducted in Iligan City. The surveyor found
that a small creek divided the 24-hectare parcel of land into two portions, identified as Lot No. 2138 and
Lot No. 2139.
Petitioners claimed that Laureanos heirs, headed by his son Jose, continuously possessed and
cultivated both lots. On 16 October 1962, Joses co-heirs executed a Deed of Quitclaim renouncing
their rights and interest over the land in favor of Jose. Jose secured a title in his name for Lot No.
2138. Later, Jose alienated Lot No. 2139 in favor of his children (petitioners in this case) who, on 8
January 1994, simultaneously filed applications for grant of Free Patent Titles over their respective
shares of Lot No. 2139 before the Land Management Bureau of the Department of Environment and
Natural Resources (DENR). On 22 August 1994, the DENR granted petitioners applications and
issued Original Certificate of Title (OCT) No. P-1322 (a.f.) in favor of Rogelio Pasio, OCT No. P-
1318 (a.f.) in favor of George Pasio, OCT No. P-1317 (a.f.) in favor of Lolita Pasio, OCT No. P-1321
(a.f.) in favor of Josephine Pasio, and OCT No. P-1319 (a.f.) in favor of Rosalinda
Pasio. Petitioners alleged that their possession of Lot No. 2139 was interrupted on 3 January 1993
when respondents forcibly took possession of the property.
Respondents alleged that they had been in open, continuous, exclusive and notorious possession of
Lot No. 2139, by themselves and through their predecessors-in-interest, since 10 July 1949. They
alleged that on 10 July 1949, Rufo Larumbe (Larumbe) sold Lot No. 2139 to Petra Teves (Petra). On
27 February 1984, Petra executed a deed of sale over Lot No. 2139 in favor of Vicente Teves
(Vicente). On 20 February 1985, Vicente executed a pacto de retro sale over the land in favor of
Arturo Teves (Arturo). In 1992, Arturo sold Lot No. 2139 in favor of respondents father, Dr.
Monterroyo, by virtue of an oral contract. On 5 January 1995, Arturo executed a Deed of Confirmation
of Absolute Sale of Unregistered Land in favor of Dr. Monterroyos heirs.

Respondents alleged that Jose was not the owner of Lot No. 2139 and as such, he could not sell
the land to his children. They alleged that petitioners OCTs were null and void for having been
procured in violation of the Public Land Act. They further alleged that the Land Management Bureau
had no authority to issue the free patent titles because Lot No. 2139 was a private land.
The Ruling of the Trial Court
In its 2 February 1999 Decision, the trial court ruled, as follows:

WHEREFORE, judgment is rendered in favor of all the defendants and
against the plaintiffs:

1. Dismissing the complaint;

2. Declaring Lot No. 2139, Iligan Cadastre 292, located at Panul-
iran, Abuno, Iligan City to have acquired the character of a
private land over which the Land Management Bureau has been
divested of jurisdiction;

3. Declaring the defendants to be the owners and possessors of the
said lot;
4. Declaring OCT Nos. P-1322 (a.f.) of Rogelio Pasio, P-1318
(a.f.) of George Pasio, P-1317 (a.f.) of Lolita Pasio, P-1321
(a.f.) of Josephine Pasio and P-1319 (a.f.) of Rosalinda Pasio to
be null and void for having been procured by fraud and for having
been issued by the Land Management Bureau which has been
divested of jurisdiction over said lot;

5. Declaring the defendants to be entitled to the sum of P6,000.00
deposited with the Office of the Clerk of Court under O.R. No.
1487777;

6. Dismissing the defendants counterclaim for attorneys fees.

Costs against the plaintiffs.

SO ORDERED.
[12]


The trial court ruled that as of January 1994, Lot No. 2139 had already acquired the character of a
private land by operation of law. Since Lot No. 2139 had already ceased to be a public land, the Land
Management Bureau had no power or authority to dispose of it by issuing free patent titles.
The trial court ruled that respondents counterclaim stands on the same footing as an independent
action. Thus, it could not be considered a collateral attack on petitioners titles. The trial court further
ruled that respondents filed their counterclaim within one year from the grant of petitioners titles,
which was the reglementary period for impugning a title.
The trial court ruled that the order for the issuance of a patent in favor of Laureano lapsed and
became functus officio when it was not registered with the Director of Deeds. The trial court ruled that
while Laureano was the original claimant of the entire 24 hectares, he ceded the right to possession over
half of the property, denominated as Lot No. 2139, to Larumbe sometime in 1947. The trial court found
that Laureano offered to sell half of the land to his tenant Gavino Quinaquin (Gavino) but he did not
have money. Later, Gavino learned from Larumbe that he (Larumbe) acquired half of the land from
Laureano. Gavino then started delivering the owners share of the harvest to Larumbe. Laureano never
contested Gavinos action nor did he demand that Gavino deliver to him the owners share of the
harvest and not to Larumbe. When Lot No. 2139 was sold, Gavino and his successors delivered the
owners share of the harvest to Petra, Vicente, Arturo, Dr. Monterroyo, and Dindo Monterroyo,
successively. The trial court also found that the other tenants had never given any share of the harvest
to Jose. The trial court ruled that petitioners had failed to present convincing evidence that they and
their predecessors-in-interest were in possession of Lot No. 2139 from 1947 to 1994 when they filed
their application for free patent. The trial court ruled that petitioners committed actual fraud when they
misrepresented in their free patent applications that they were in possession of the property continuously
and publicly.
Petitioners appealed from the trial courts Decision.
The Ruling of the Court of Appeals
In its 31 January 2003 Decision, the Court of Appeals affirmed the trial courts Decision.

The Court of Appeals ruled that the trial court did not err in allowing respondents counterclaim
despite the non-appearance of Dr. Monterroyo, the original defendant, at the barangay conciliation
proceedings. The Court of Appeals ruled that petitioners themselves did not personally appear. They
were represented by their attorney-in-fact although they were all of legal age, which was a violation of
the Katarungang Pambarangay proceedings requiring the personal appearance of the parties. Hence, the
Court of Appeals ruled that there was never a valid conciliation proceeding. However, while this would
have been a ground for the dismissal of the complaint, the issue was deemed waived because
respondents did not raise it in their answer before the trial court.
The Court of Appeals ruled that the validity of petitioners titles could be attacked in a
counterclaim. The Court of Appeals ruled that respondents counterclaim was a compulsory
counterclaim.
The Court of Appeals sustained the trial courts ruling that the Land Management Bureau had
been divested of jurisdiction to grant the patent because the land already acquired the character of a
private land. While the homestead patent was issued in favor of Laureano, the issuance of patent order
became functus officio when it was not registered. The Court of Appeals further sustained the trial
courts finding that respondents were in physical, open, public, adverse and continuous possession of
Lot No. 2139 in the concept of owner for at least 30 years prior to petitioners application for free patent
titles over the land.
Petitioners filed a motion for reconsideration.
In its 5 August 2003 Resolution, the Court of Appeals denied petitioners motion for
reconsideration.
Hence, the petition before this Court.
The Issue
Petitioners raised the sole issue of whether the Court of Appeals erred in sustaining the trial
courts Decision declaring respondents as the rightful owners and possessors of Lot No. 2139.
[13]

The Ruling of this Court
The petition has no merit.

Land Management Bureau Had No J urisdiction
To I ssueFreePatent Titles
In Director of Lands v. IAC,
[14]
the Court ruled:

[A]lienable public land held by a possessor, continuously or through his
predecessors-in-interest, openly, continuously and exclusively for the prescribed
statutory period (30 years under The Public Land Act, as amended) is converted
to private property by the mere lapse or completion of the period, ipso jure.
[15]


In Magistrado v. Esplana,
[16]
the Court ruled that so long as there is a clear showing of open,
continuous, exclusive and notorious possession, and hence, a registrable possession, by present or
previous occupants, by any proof that would be competent and admissible, the property must be
considered to be private.
In this case, the trial court found that the preponderance of evidence favors respondents as the
possessors of Lot No. 2139 for over 30 years, by themselves and through their predecessors-in-
interest. The question of who between petitioners and respondents had prior possession of the property
is a factual question whose resolution is the function of the lower courts.
[17]
When the factual findings
of both the trial court and the Court of Appeals are supported by substantial evidence, they are
conclusive and binding on the parties and are not reviewable by this Court.
[18]
While the rule is subject
to exceptions, no exception exists in this case.

Respondents were able to present the original Deed of Absolute Sale, dated 10 July 1949,
executed by Larumbe in favor of Petra.
[19]
Respondents also presented the succeeding Deeds of Sale
showing the transfer of Lot No. 2139 from Petra to Vicente
[20]
and from Vicente to Arturo
[21]
and the
Deed of Confirmation of Absolute Sale of Unregistered Real Property executed by Arturo in favor of
respondents.
[22]
Respondents also presented a certification
[23]
executed by P/Sr. Superintendent
Julmunier Akbar Jubail, City Director of Iligan City Police Command and verified from the Log Book
records by Senior Police Officer Betty Dalongenes Mab-Abo confirming that Andres Quinaquin made a
report that Jose, Rogelio and Luciana Pasio, Lucino Pelarion and Nando Avilo forcibly took his
copra. This belied petitioners allegation that they were in possession of Lot No. 2139 and respondents
forcibly took possession of the property only in January 1993.
Considering that petitioners application for free patent titles was filed only on 8 January 1994,
when Lot No. 2139 had already become private land ipso jure, the Land Management Bureau had no
jurisdiction to entertain petitioners application.

Non-Registration of Homestead Patent Rendered it
Functus Officio
Once a homestead patent granted in accordance with law is registered, the certificate of title issued
by virtue of the patent has the force and effect of a Torrens title issued under the land registration
law.
[24]
In this case, the issuance of a homestead patent in 1952 in favor of Laureano was not
registered. Section 103 of Presidential Decree No. 1529
[25]
mandates the registration of patents, and
registration is the operative act to convey the land to the patentee, thus:

Sec. 103. x x x x. The deed, grant, patent or instrument of conveyance from
the Government to the grantee shall not take effect as a conveyance or bind the
land but shall operate only as a contract between the Government and the grantee
and as evidence of authority to the Register of Deeds to make registration. It is
the act of registration that shall be the operative act to affect and convey the
land, and in all cases under this Decree, registration shall be made in the office of
the Register of Deeds of the province or city where the land lies. The fees for
registration shall be paid by the grantee. After due registration and issuance of
the certificate of title, such land shall be deemed to be registered land to all intents
and purposes under this Decree. (Emphasis supplied)
Further, in this case, Laureano already conveyed Lot No. 2139 to Larumbe in 1947 before the
approval of his homestead application. In fact, Larumbe already sold the land to Petra in 1949, three
years before the issuance of the homestead patent in favor of Laureano. The trial court found that since
1947, the tenants of Lot No. 2139 had been delivering the owners share of the harvest, successively, to
Larumbe, Petra, Vicente and Arturo Teves, Dr. Monterroyo and Dindo Monterroyo. The trial court
found no instance when the owners share of the harvest was delivered to Jose Pasio.
Hence, we sustain the trial court that the non-registration of Laureanos homestead patent had
rendered it functus officio.
A Counterclaimis Not a Collateral Attack on theTitle
It is already settled that a counterclaim is considered an original complaint and as such, the attack
on the title in a case originally for recovery of possession cannot be considered as a collateral attack on
the title.
[26]
Development Bank of the Philippines v. Court of Appeals
[27]
is similar to the case before us
insofar as petitioner in that case filed an action for recovery of possession against respondent who, in
turn, filed a counterclaim claiming ownership of the land. In that case, the Court ruled:

Nor is there any obstacle to the determination of the validity of TCT No.
10101. It is true that the indefeasibility of torrens title cannot be collaterally
attacked. In the instant case, the original complaint is for recovery of possession
filed by petitioner against private respondent, not an original action filed by the
latter to question the validity of TCT No. 10101 on which petitioner bases its
right. To rule on the issue of validity in a case for recovery of possession is
tantamount to a collateral attack. However, it should not [b]e overlooked that
private respondent filed a counterclaim against petitioner, claiming ownership
over the land and seeking damages. Hence, we could rule on the question of the
validity of TCT No. 10101 for the counterclaim can be considered a direct attack
on the same. A counterclaim is considered a complaint, only this time, it is the
original defendant who becomes the plaintiff... It stands on the same footing and
is to be tested by the same rules as if it were an independent action. x x x.
[28]

As such, we sustain both the trial court and the Court of Appeals on this issue.
Principleof ConstructiveTrust Applies
Under the principle of constructive trust, registration of property by one person in his name,
whether by mistake or fraud, the real owner being another person, impresses upon the title so acquired
the character of a constructive trust for the real owner, which would justify an action for
reconveyance.
[29]
In the action for reconveyance, the decree of registration is respected as
incontrovertible but what is sought instead is the transfer of the property wrongfully or erroneously
registered in anothers name to its rightful owner or to one with a better right.
[30]
If the registration of
the land is fraudulent, the person in whose name the land is registered holds it as a mere trustee, and the
real owner is entitled to file an action for reconveyance of the property.
[31]


In the case before us, respondents were able to establish that they have a better right to Lot No.
2139 since they had long been in possession of the property in the concept of owners, by themselves
and through their predecessors-in-interest. Hence, despite the irrevocability of the Torrens titles issued
in their names and even if they are already the registered owners under the Torrens system, petitioners
may still be compelled under the law to reconvey the property to respondents.
[32]


WHEREFORE, we DENY the petition. We AFFIRM the 31 January 2003 Decision
and the 5 August 2003 Resolution of the Court of Appeals in CA-G.R. CV No. 63199. Costs against
petitioners. SO ORDERED.
_____________________________________________________________________________
G.R. No. 154096 August 22, 2008
IRENE MARCOS-ARANETA, DANIEL RUBIO, ORLANDO G. RESLIN, and JOSE G. RESLIN,petitioners, vs.
COURT OF APPEALS, JULITA C. BENEDICTO, and FRANCISCA BENEDICTO-PAULINO,respondents.
D E C I S I O N
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 assails and seeks to nullify the Decision
1
dated
October 17, 2001 of the Court of Appeals (CA) in CA-G.R. SP No. 64246 and its Resolution
2
of June 20,
2002 denying petitioners' motion for reconsideration. The assailed CA decision annulled and set aside
the Orders dated October 9, 2000, December 18, 2000, and March 15, 2001 of the Regional Trial Court
(RTC), Branch 17 in Batac, Ilocos Norte which admitted petitioners' amended complaint in Civil Case
Nos. 3341-17 and 3342-17.
The Facts
Sometime in 1968 and 1972, Ambassador Roberto S. Benedicto, now deceased, and his business
associates (Benedicto Group) organized Far East Managers and Investors, Inc. (FEMII) and Universal
Equity Corporation (UEC), respectively. As petitioner Irene Marcos-Araneta would later allege, both
corporations were organized pursuant to a contract or arrangement whereby Benedicto, as trustor,
placed in his name and in the name of his associates, as trustees, the shares of stocks of FEMII and UEC
with the obligation to hold those shares and their fruits in trust and for the benefit of Irene to the
extent of 65% of such shares. Several years after, Irene, through her trustee-husband, Gregorio Ma.
Araneta III, demanded the reconveyance of said 65% stockholdings, but the Benedicto Group refused
to oblige.
In March 2000, Irene thereupon instituted before the RTC two similar complaints for conveyance of
shares of stock, accounting and receivership against the Benedicto Group with prayer for the issuance
of a temporary restraining order (TRO). The first, docketed as Civil Case No. 3341-17, covered the UEC
shares and named Benedicto, his daughter, and at least 20 other individuals as defendants. The
second, docketed as Civil Case No. 3342-17, sought the recovery to the extent of 65% of FEMII shares
held by Benedicto and the other defendants named therein.
Respondent Francisca Benedicto-Paulino,
3
Benedicto's daughter, filed a Motion to Dismiss Civil Case
No. 3341-17, followed later by an Amended Motion to Dismiss. Benedicto, on the other hand, moved
to dismiss
4
Civil Case No. 3342-17, adopting in toto the five (5) grounds raised by Francisca in her
amended motion to dismiss. Among these were: (1) the cases involved an intra-corporate dispute over
which the Securities and Exchange Commission, not the RTC, has jurisdiction; (2) venue was
improperly laid; and (3) the complaint failed to state a cause of action, as there was no allegation
therein that plaintiff, as beneficiary of the purported trust, has accepted the trust created in her favor.
To the motions to dismiss, Irene filed a Consolidated Opposition, which Benedicto and Francisca
countered with a Joint Reply to Opposition.
Upon Benedicto's motion, both cases were consolidated.
During the preliminary proceedings on their motions to dismiss, Benedicto and Francisca, by way of
bolstering their contentions on improper venue, presented the Joint Affidavit
5
of Gilmia B. Valdez,
Catalino A. Bactat, and Conchita R. Rasco who all attested being employed as household staff at the
Marcos' Mansion in Brgy. Lacub, Batac, Ilocos Norte and that Irene did not maintain residence in said
place as she in fact only visited the mansion twice in 1999; that she did not vote in Batac in the 1998
national elections; and that she was staying at her husband's house in Makati City.
Against the aforesaid unrebutted joint affidavit, Irene presented her PhP 5 community tax
certificate
6
(CTC) issued on "11/07/99" in Curimao, Ilocos Norte to support her claimed residency in
Batac, Ilocos Norte.
In the meantime, on May 15, 2000, Benedicto died and was substituted by his wife, Julita C. Benedicto,
and Francisca.
On June 29, 2000, the RTC dismissed both complaints, stating that these partly constituted "real
action," and that Irene did not actually reside in Ilocos Norte, and, therefore, venue was improperly
laid. In its dismissal order,
7
the court also declared "all the other issues raised in the different Motions
to Dismiss x x x moot and academic."
From the above order, Irene interposed a Motion for Reconsideration
8
which Julita and Francisca duly
opposed.
Pending resolution of her motion for reconsideration, Irene filed on July 17, 2000 a Motion (to Admit
Amended Complaint),
9
attaching therewith a copy of the Amended Complaint
10
dated July 14, 2000 in
which the names of Daniel Rubio, Orlando G. Reslin, and Jose G. Reslin appeared as additional
plaintiffs. As stated in the amended complaint, the added plaintiffs, all from Ilocos Norte, were Irene's
new trustees. Parenthetically, the amended complaint stated practically the same cause of action but,
as couched, sought the reconveyance of the FEMII shares only.
During the August 25, 2000 hearing, the RTC dictated in open court an order denying Irene's motion
for reconsideration aforementioned, but deferred action on her motion to admit amended complaint
and the opposition thereto.
11

On October 9, 2000, the RTC issued an Order
12
entertaining the amended complaint, dispositively
stating:
WHEREFORE, the admission of the Amended Complaint being tenable and legal, the same is
GRANTED.
Let copies of the Amended Complaint be served to the defendants who are ordered to answer within
the reglementary period provided by the rules.
The RTC predicated its order on the following premises:
(1) Pursuant to Section 2, Rule 10 of the Rules of Court,
13
Irene may opt to file, as a matter of right, an
amended complaint.
(2) The inclusion of additional plaintiffs, one of whom was a Batac, an Ilocos Norte resident, in the
amended complaint setting out the same cause of action cured the defect of improper venue.
(3) Secs. 2 and 3 of Rule 3 in relation to Sec. 2 of Rule 4 allow the filing of the amended complaint in
question in the place of residence of any of Irene's co-plaintiffs.
In time, Julita and Francisca moved to dismiss the amended complaint, but the RTC, by Order
14
dated
December 18, 2000, denied the motion and reiterated its directive for the two to answer the amended
complaint.
In said order, the RTC stood pat on its holding on the rule on amendments of pleadings. And scoffing at
the argument about there being no complaint to amend in the first place as of October 9, 2000 (when
the RTC granted the motion to amend) as the original complaints were dismissed with finality earlier,
i.e., on August 25, 2000 when the court denied Irene's motion for reconsideration of the June 29, 2000
order dismissing the original complaints, the court stated thusly: there was actually no need to act on
Irene's motion to admit, it being her right as plaintiff to amend her complaints absent any responsive
pleading thereto. Pushing its point, the RTC added the observation that the filing of the amended
complaint on July 17, 2000 ipso facto superseded the original complaints, the dismissal of which, per
the June 29, 2000 Order, had not yet become final at the time of the filing of the amended complaint.
Following the denial on March 15, 2001 of their motion for the RTC to reconsider its December 18,
2000 order aforestated, Julita and Francisca, in a bid to evade being declared in default, filed on April
10, 2001 their Answer to the amended complaint.
15
But on the same day, they went to the CA via a
petition for certiorari, docketed as CA-G.R. SP No. 64246, seeking to nullify the following RTC orders:
the first, admitting the amended complaint; the second, denying their motion to dismiss the amended
complaint; and the third, denying their motion for reconsideration of the second issuance.
Inasmuch as the verification portion of the joint petition and the certification on non-forum shopping
bore only Francisca's signature, the CA required the joint petitioners "to submit x x x either the written
authority of Julita C. Benedicto to Francisca B. Paulino authorizing the latter to represent her in these
proceedings, or a supplemental verification and certification duly signed by x x x Julita C.
Benedicto."
16
Records show the submission of the corresponding authorizing Affidavit
17
executed by
Julita in favor of Francisca.
Later developments saw the CA issuing a TRO
18
and then a writ of preliminary injunction
19
enjoining
the RTC from conducting further proceedings on the subject civil cases.
On October 17, 2001, the CA rendered a Decision, setting aside the assailed RTC orders and dismissing
the amended complaints in Civil Case Nos. 3341-17 and 3342-17. The fallo of the CA decision reads:
WHEREFORE, based on the foregoing premises, the petition is hereby GRANTED. The
assailed Orders admitting the amended complaints are SET ASIDE for being null and void,
and the amended complaints a quo are, accordingly, DISMISSED.
20

Irene and her new trustees' motion for reconsideration of the assailed decision was denied through
the equally assailed June 20, 2002 CA Resolution. Hence, this petition for review is before us.
The Issues
Petitioners urge the setting aside and annulment of the assailed CA decision and resolution on the
following submissions that the appellate court erred in: (1) allowing the submission of an affidavit by
Julita as sufficient compliance with the requirement on verification and certification of non-forum
shopping; (2) ruling on the merits of the trust issue which involves factual and evidentiary
determination, processes not proper in a petition for certiorari under Rule 65 of the Rules of Court; (3)
ruling that the amended complaints in the lower court should be dismissed because, at the time it was
filed, there was no more original complaint to amend; (4) ruling that the respondents did not waive
improper venue; and (5) ruling that petitioner Irene was not a resident of Batac, Ilocos Norte and that
none of the principal parties are residents of Ilocos Norte.
21

The Court's Ruling
We affirm, but not for all the reasons set out in, the CA's decision.
First Issue: Substantial Compliance with the Rule
on Verification and Certification of Non-Forum Shopping
Petitioners tag private respondents' petition in CA-G.R. SP No. 64246 as defective for non-compliance
with the requirements of Secs. 4
22
and 5
23
of Rule 7 of the Rules of Court at least with regard to Julita,
who failed to sign the verification and certification of non-forum shopping. Petitioners thus fault the
appellate court for directing Julita's counsel to submit a written authority for Francisca to represent
Julita in the certiorari proceedings.
We are not persuaded.
Verification not Jurisdictional; May be Corrected
Verification is, under the Rules, not a jurisdictional but merely a formal requirement which the court
maymotu proprio direct a party to comply with or correct, as the case may be. As the Court articulated
inKimberly Independent Labor Union for Solidarity, Activism and Nationalism (KILUSAN)-Organized
Labor Associations in Line Industries and Agriculture (OLALIA) v. Court of Appeals:
V]erification is a formal, not a jurisdictional requisite, as it is mainly intended to secure an assurance that the allegations therein made are done in
good faith or are true and correct and not mere speculation. The Court may order the correction of the pleading, if not verified, or act on the
unverified pleading if the attending circumstances are such that a strict compliance with the rule may be dispensed with in order that the ends of
justice may be served.24

Given this consideration, the CA acted within its sound discretion in ordering the submission of proof
of Francisca's authority to sign on Julita's behalf and represent her in the proceedings before the
appellate court.
Signature by Any of the Principal Petitioners is Substantial Compliance
Regarding the certificate of non-forum shopping, the general rule is that all the petitioners or plaintiffs
in a case should sign it.
25
However, the Court has time and again stressed that the rules on forum
shopping, which were designed to promote the orderly administration of justice, do not interdict
substantial compliance with its provisions under justifiable circumstances.
26
As has been ruled by the
Court, the signature of any of the principal petitioners
27
or principal parties,
28
as Francisca is in this
case, would constitute a substantial compliance with the rule on verification and certification of non-
forum shopping. It cannot be overemphasized that Francisca herself was a principal party in Civil Case
No. 3341-17 before the RTC and in the certiorari proceedings before the CA. Besides being an heir of
Benedicto, Francisca, with her mother, Julita, was substituted for Benedicto in the instant case after
his demise.
And should there exist a commonality of interest among the parties, or where the parties filed the
case as a "collective," raising only one common cause of action or presenting a common defense, then
the signature of one of the petitioners or complainants, acting as representative, is sufficient
compliance. We said so in Cavile v. Heirs of Clarita Cavile.
29
Like Thomas Cavile, Sr. and the other
petitioners in Cavile, Francisca and Julita, as petitioners before the CA, had filed their petition as a
collective, sharing a common interest and having a common single defense to protect their rights over
the shares of stocks in question.
Second Issue: Merits of the Case cannot be Resolved
on Certiorari under Rule 65
Petitioners' posture on the second issue is correct. As they aptly pointed out, the CA, in the exercise of
its certiorari jurisdiction under Rule 65, is limited to reviewing and correcting errors of jurisdiction
only. It cannot validly delve into the issue of trust which, under the premises, cannot be judiciously
resolved without first establishing certain facts based on evidence.
Whether a determinative question is one of law or of fact depends on the nature of the dispute. A
question of law exists when the doubt or controversy concerns the correct application of law or
jurisprudence to a certain given set of facts; or when the issue does not call for an examination of the
probative value of the evidence presented, the truth or falsehood of facts being admitted. A question
of fact obtains when the doubt or difference arises as to the truth or falsehood of facts or when the
query invites the calibration of the whole evidence considering mainly the credibility of the witnesses,
the existence and relevancy of specific surrounding circumstances, as well as their relation to each
other and to the whole, and the probability of the situation.
30

Clearly then, the CA overstepped its boundaries when, in disposing of private respondents' petition for
certiorari, it did not confine itself to determining whether or not lack of jurisdiction or grave abuse of
discretion tainted the issuance of the assailed RTC orders, but proceeded to pass on the factual issue
of the existence and enforceability of the asserted trust. In the process, the CA virtually resolved
petitioner Irene's case for reconveyance on its substantive merits even before evidence on the matter
could be adduced. Civil Case Nos. 3341-17 and 3342-17 in fact have not even reached the pre-trial
stage. To stress, the nature of the trust allegedly constituted in Irene's favor and its enforceability,
being evidentiary in nature, are best determined by the trial court. The original complaints and the
amended complaint certainly do not even clearly indicate whether the asserted trust is implied or
express. To be sure, an express trust differs from the implied variety in terms of the manner of proving
its existence.
31
Surely, the onus of factually determining whether the trust allegedly established in
favor of Irene, if one was indeed established, was implied or express properly pertains, at the first
instance, to the trial court and not to the appellate court in a special civil action for certiorari, as here.
In the absence of evidence to prove or disprove the constitution and necessarily the existence of the
trust agreement between Irene, on one hand, and the Benedicto Group, on the other, the appellate
court cannot intelligently pass upon the issue of trust. A pronouncement on said issue of trust rooted
on speculation and conjecture, if properly challenged, must be struck down. So it must be here.
Third Issue: Admission of Amended Complaint Proper
As may be recalled, the CA veritably declared as reversibly erroneous the admission of the amended
complaint. The flaw in the RTC's act of admitting the amended complaint lies, so the CA held, in the
fact that the filing of the amended complaint on July 17, 2000 came after the RTC had ordered with
finality the dismissal of the original complaints. According to petitioners, scoring the CA for its
declaration adverted to and debunking its posture on the finality of the said RTC order, the CA failed to
take stock of their motion for reconsideration of the said dismissal order.
We agree with petitioners and turn to the governing Sec. 2 of Rule 10 of the Rules of Court which
provides:
SEC. 2. Amendments as a matter of right. -- A party may amend his pleading once as a
matter of right at any time before a responsive pleading is served or in the case of a reply,
at any time within ten (10) days after it is served.
As the aforequoted provision makes it abundantly clear that the plaintiff may amend his complaint
once as a matter of right, i.e., without leave of court, before any responsive pleading is filed or served.
Responsive pleadings are those which seek affirmative relief and/or set up defenses,
32
like an answer.
A motion to dismiss is not a responsive pleading for purposes of Sec. 2 of Rule 10.
33
Assayed against
the foregoing perspective, the RTC did not err in admitting petitioners' amended complaint, Julita and
Francisca not having yet answered the original complaints when the amended complaint was filed. At
that precise moment, Irene, by force of said Sec. 2 of Rule 10, had, as a matter of right, the option of
amending her underlying reconveyance complaints. As aptly observed by the RTC, Irene's motion to
admit amended complaint was not even necessary. The Court notes though that the RTC has not
offered an explanation why it saw fit to grant the motion to admit in the first place.
In Alpine Lending Investors v. Corpuz, the Court, expounding on the propriety of admitting an amended
complaint before a responsive pleading is filed, wrote:
W]hat petitioner Alpine filed in Civil Case No. C-20124 was a motion to dismiss, not an answer. Settled is the rule that a motion to dismiss is not a
responsive pleading for purposes of Section 2, Rule 10. As no responsive pleading had been filed, respondent could amend her complaint in Civil
Case No. C-20124 as a matter of right. Following this Court's ruling in Breslin v. Luzon Stevedoring Co. considering that respondent has the right to
amend her complaint, it is the correlative duty of the trial court to accept the amended complaint; otherwise, mandamus would lie against it. In
other words, the trial court's duty to admit the amended complaint was purely ministerial. In fact, respondent should not have filed a motion to
admit her amended complaint.34

It may be argued that the original complaints had been dismissed through the June 29, 2000 RTC
order. It should be pointed out, however, that the finality of such dismissal order had not set in when
Irene filed the amended complaint on July 17, 2000, she having meanwhile seasonably sought
reconsideration thereof. Irene's motion for reconsideration was only resolved on August 25, 2000.
Thus, when Irene filed the amended complaint on July 17, 2000, the order of dismissal was not yet
final, implying that there was strictly no legal impediment to her amending her original complaints.
35

Fourth Issue: Private Respondents did not Waive Improper Venue
Petitioners maintain that Julita and Francisca were effectively precluded from raising the matter of
improper venue by their subsequent acts of filing numerous pleadings. To petitioners, these pleadings,
taken together, signify a waiver of private respondents' initial objection to improper venue.
This contention is without basis and, at best, tenuous. Venue essentially concerns a rule of procedure
which, in personal actions, is fixed for the greatest convenience possible of the plaintiff and his
witnesses. The ground of improperly laid venue must be raised seasonably, else it is deemed waived.
Where the defendant failed to either file a motion to dismiss on the ground of improper venue or
include the same as an affirmative defense, he is deemed to have waived his right to object to
improper venue.
36
In the case at bench, Benedicto and Francisca raised at the earliest time possible,
meaning "within the time for but before filing the answer to the complaint,"
37
the matter of improper
venue. They would thereafter reiterate and pursue their objection on venue, first, in their answer to
the amended complaints and then in their petition for certiorari before the CA. Any suggestion,
therefore, that Francisca and Benedicto or his substitutes abandoned along the way improper venue
as ground to defeat Irene's claim before the RTC has to be rejected.
Fifth Issue: The RTC Has No Jurisdiction
on the Ground of Improper Venue
Subject Civil Cases are Personal Actions
It is the posture of Julita and Francisca that the venue was in this case improperly laid since the suit in
question partakes of a real action involving real properties located outside the territorial jurisdiction of
the RTC in Batac.
This contention is not well-taken. In a personal action, the plaintiff seeks the recovery of personal
property, the enforcement of a contract, or the recovery of damages.
38
Real actions, on the other
hand, are those affecting title to or possession of real property, or interest therein. In accordance with
the wordings of Sec. 1 of Rule 4, the venue of real actions shall be the proper court which has
territorial jurisdiction over the area wherein the real property involved, or a portion thereof, is
situated. The venue of personal actions is the court where the plaintiff or any of the principal plaintiffs
resides, or where the defendant or any of the principal defendants resides, or in the case of a non-
resident defendant where he may be found, at the election of the plaintiff.
39

In the instant case, petitioners are basically asking Benedicto and his Group, as defendants a quo, to
acknowledge holding in trust Irene's purported 65% stockownership of UEC and FEMII, inclusive of the
fruits of the trust, and to execute in Irene's favor the necessary conveying deed over the said 65%
shareholdings. In other words, Irene seeks to compel recognition of the trust arrangement she has
with the Benedicto Group. The fact that FEMII's assets include real properties does not materially
change the nature of the action, for the ownership interest of a stockholder over corporate assets is
only inchoate as the corporation, as a juridical person, solely owns such assets. It is only upon the
liquidation of the corporation that the stockholders, depending on the type and nature of their
stockownership, may have a real inchoate right over the corporate assets, but then only to the extent
of their stockownership.
The amended complaint is an action in personam, it being a suit against Francisca and the late
Benedicto (now represented by Julita and Francisca), on the basis of their alleged personal liability to
Irene upon an alleged trust constituted in 1968 and/or 1972. They are not actions in rem where the
actions are against the real properties instead of against persons.
40
We particularly note that
possession or title to the real properties of FEMII and UEC is not being disputed, albeit part of the
assets of the corporation happens to be real properties.
Given the foregoing perspective, we now tackle the determinative question of venue in the light of the
inclusion of additional plaintiffs in the amended complaint.
Interpretation of Secs. 2 and 3 of Rule 3; and Sec. 2 of Rule 4
We point out at the outset that Irene, as categorically and peremptorily found by the RTC after a
hearing, is not a resident of Batac, Ilocos Norte, as she claimed. The Court perceives no compelling
reason to disturb, in the confines of this case, the factual determination of the trial court and the
premises holding it together. Accordingly, Irene cannot, in a personal action, contextually opt for Batac
as venue of her reconveyance complaint. As to her, Batac, Ilocos Norte is not what Sec. 2, Rule 4 of the
Rules of Court adverts to as the place "where the plaintiff or any of the principal plaintiffs resides" at
the time she filed her amended complaint. That Irene holds CTC No. 17019451
41
issued sometime in
June 2000 in Batac, Ilocos Norte and in which she indicated her address as Brgy. Lacub, Batac, Ilocos is
really of no moment. Let alone the fact that one can easily secure a basic residence certificate
practically anytime in any Bureau of Internal Revenue or treasurer's office and dictate whatever
relevant data one desires entered, Irene procured CTC No. 17019451 and appended the same to her
motion for reconsideration following the RTC's pronouncement against her being a resident of Batac.
Petitioners, in an attempt to establish that the RTC in Batac, Ilocos Norte is the proper court venue,
asseverate that Batac, Ilocos Norte is where the principal parties reside.
Pivotal to the resolution of the venue issue is a determination of the status of Irene's co-plaintiffs in
the context of Secs. 2 and 3 of Rule 3 in relation to Sec. 2 of Rule 4, which pertinently provide as
follows:
Rule 3
PARTIES TO CIVIL ACTIONS
SEC. 2. Parties in interest. -- A real party in interest is the party who stands to be benefited
or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless
otherwise authorized by law or these Rules, every action must be prosecuted or defended
in the name of the real party in interest.
SEC. 3. Representatives as parties. -- Where the action is allowed to be prosecuted or
defended by a representative or someone acting in a fiduciary capacity, the beneficiary
shall be included in the title of the case and shall be deemed to be the real party in interest.
A representative may be a trustee of an express trust, a guardian, an executor or
administrator, or a party authorized by law or these Rules. An agent acting in his own name
and for the benefit of an undisclosed principal may sue or be sued without joining the
principal except when the contract involves things belonging to the principal.
Rule 4
VENUE OF ACTIONS
SEC. 2. Venue of personal actions. -- All other actions may be commenced and tried where
the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the
principal defendants resides, or in the case of a non-resident defendant where he may be
found, at the election of the plaintiff.
Venue is Improperly Laid
There can be no serious dispute that the real party-in-interest plaintiff is Irene. As self-styled
beneficiary of the disputed trust, she stands to be benefited or entitled to the avails of the present
suit. It is undisputed too that petitioners Daniel Rubio, Orlando G. Reslin, and Jose G. Reslin, all from
Ilocos Norte, were included as co-plaintiffs in the amended complaint as Irene's new designated
trustees. As trustees, they can only serve as mere representatives of Irene.
Upon the foregoing consideration, the resolution of the crucial issue of whether or not venue had
properly been laid should not be difficult.
Sec. 2 of Rule 4 indicates quite clearly that when there is more than one plaintiff in a personal action
case, the residences of the principal parties should be the basis for determining proper venue.
According to the late Justice Jose Y. Feria, "the word 'principal' has been added [in the uniform
procedure rule] in order to prevent the plaintiff from choosing the residence of a minor plaintiff or
defendant as the venue."
42
Eliminate the qualifying term "principal" and the purpose of the Rule
would, to borrow from Justice Regalado, "be defeated where a nominal or formal party is impleaded in
the action since the latter would not have the degree of interest in the subject of the action which
would warrant and entail the desirably active participation expected of litigants in a case."
43

Before the RTC in Batac, in Civil Case Nos. 3341-17 and 3342-17, Irene stands undisputedly as the
principal plaintiff, the real party-in-interest. Following Sec. 2 of Rule 4, the subject civil cases ought to
be commenced and prosecuted at the place where Irene resides.
Principal Plaintiff not a Resident in Venue of Action
As earlier stated, no less than the RTC in Batac declared Irene as not a resident of Batac, Ilocos Norte.
Withal, that court was an improper venue for her conveyance action.
The Court can concede that Irene's three co-plaintiffs are all residents of Batac, Ilocos Norte. But it
ought to be stressed in this regard that not one of the three can be considered as principal party-
plaintiffs in Civil Case Nos. 3341-17 and 3342-17, included as they were in the amended complaint as
trustees of the principal plaintiff. As trustees, they may be accorded, by virtue of Sec. 3 of Rule 3, the
right to prosecute a suit, but only on behalf of the beneficiary who must be included in the title of the
case and shall be deemed to be the real party-in-interest. In the final analysis, the residences of Irene's
co-plaintiffs cannot be made the basis in determining the venue of the subject suit. This conclusion
becomes all the more forceful considering that Irene herself initiated and was actively prosecuting her
claim against Benedicto, his heirs, assigns, or associates, virtually rendering the impleading of the
trustees unnecessary.
And this brings us to the final point. Irene was a resident during the period material of Forbes Park,
Makati City. She was not a resident of Brgy. Lacub, Batac, Ilocos Norte, although jurisprudence
44
has it
that one can have several residences, if such were the established fact. The Court will not speculate on
the reason why petitioner Irene, for all the inconvenience and expenses she and her adversaries would
have to endure by a Batac trial, preferred that her case be heard and decided by the RTC in Batac. On
the heels of the dismissal of the original complaints on the ground of improper venue, three new
personalities were added to the complaint doubtless to insure, but in vain as it turned out, that the
case stays with the RTC in Batac.
Litigants ought to bank on the righteousness of their causes, the superiority of their cases, and the
persuasiveness of arguments to secure a favorable verdict. It is high time that courts, judges, and
those who come to court for redress keep this ideal in mind.
WHEREFORE, the instant petition is hereby DISMISSED. The Decision and Resolution dated October
17, 2001 and June 20, 2002, respectively, of the CA in CA-G.R. SP No. 64246, insofar as they nullified
the assailed orders of the RTC, Branch 17 in Batac, Ilocos Norte in Civil Case Nos. 3341-17 and 3342-17
on the ground of lack of jurisdiction due to improper venue, are hereby AFFIRMED. The Orders dated
October 9, 2000, December 18, 2000, and March 15, 2001 of the RTC in Civil Case Nos. 3341-17 and
3342-17 are accordingly ANNULLED and SET ASIDE and said civil cases are DISMISSED.
Costs against petitioners. SO ORDERED.



Republic of the Philippines (Presidential Commission on Good Government) vs.
Sandiganbayan
[GR 107789, 30 April 2003];
Africa vs. Sandiganbayan [GR 147214]

Facts: On 7 August 1991, the Presidential Commission on Good Government (PCGG)
conducted an Eastern Telecommunications, Philippines, Inc. (ETPI) stockholders meeting
during which a PCGG controlled board of directors was elected. A special stockholders
meeting was later convened by the registered ETPI stockholders wherein another set of board
of directors was elected, as a result of which two sets of such board and officers were elected.
Victor Africa, a stockholder of ETPI, alleging that the PCGG had since 29 January 1988 been
"illegally 'exercising' the rights of stockholders of ETPI," especially in the election of the
members of the board of directors, filed a motion before the Sandiganbayan, prayed that said
court order the "calling and holding of the Eastern Telecommunications, Philippines, Inc.
(ETPI) annual stockholders meeting for 1992 under the [c]ourt's control and supervision and
prescribed guidelines." The PCGG did not object to Africa's motion provided that "(1) An Order
be issued upholding the right of PCGG to vote all the Class "A" shares of ETPI; (2) In the
alternative, in the remote event that PCGG's right to vote the sequestered shares be not
upheld, an Order be issued (a) disregarding the Stock and Transfer Book and Booklet of Stock
Certificates of ETPI in determining who can vote the shares in an Annual Stockholders
Meeting of ETPI, (b) allowing PCGG to vote 23.9% of the total subscription in ETPI, and (c)
directing the amendment of the Articles of Incorporation and By-laws of ETPI providing for the
minimum safeguards for the conservation of assets prior to the calling of a stockholders
meeting. By the assailed Resolution of 13 November 1992, the Sandiganbayan resolved
Africa's motion, ordering the conduct of an annual stockholders meeting of ETPI, for 1992.
Assailing the foregoing resolution, the PCGG filed before the Supreme Court a petition (GR
107789) for Certiorari, Mandamus and Prohibition.

By Resolution of 26 November 1992, the Supreme Court enjoined the Sandiganbayan from (a)
implementing its Resolution of 13 November 1992, and (b) holding the stockholders' meeting
of ETPI scheduled on 27 November 1992. On 7 December 1992, Aerocom Investors and
Managers, Inc. (AEROCOM), Benito Nieto, Carlos Nieto, Manuel Nieto III, Ramon Nieto,
Rosario Arellano, Victoria Legarda, Angela Lobregat, Ma. Rita de los Reyes, Carmen Tuazon
and Rafael Valdez, all stockholders of record of ETPI, filed a motion to intervene in GR
107789. Their motion was granted by the Supreme Court by Resolution of 14 January 1993.
After the parties submitted their respective memoranda, the PCGG, in early 1995, filed a
"VERY URGENT PETITION FOR AUTHORITY TO HOLD SPECIAL STOCKHOLDERS'
MEETING FOR [THE] SOLE PURPOSE OF INCREASING [ETPI's] AUTHORIZED CAPITAL
STOCK," it claiming that the increase in authorized capital stock was necessary in light of the
requirements laid down by Executive Order 109 and Republic Act 7975. By Resolution of 7
May 1996, the Supreme Court resolved to refer the PCGG's very urgent petition to hold the
special stockholders' meeting to the Sandiganbayan for reception of evidence and resolution.
In compliance therewith, the Sandiganbayan issued a Resolution of 13 December 1996,
granting the PCGG "authority to cause the holding of a special stockholders' meeting of ETPI
for the sole purpose of increasing ETPI's authorized capital stock and to vote therein the
sequestered Class 'A' shares of stock." The PCGG-controlled ETPI board of directors thus
authorized the ETPI Chair and Corporate Secretary to call the special stockholders meeting.
Notices were sent to those entitled to vote for a meeting on 17 March 1997. The meeting was
held as scheduled and the increase in ETPI's authorized capital stock from P250 Million to
P2.6 Billion was "unanimously approved." On 1 April 1997, Africa filed before the Supreme
Court a motion to cite the PCGG "and its accomplices" in contempt and "to nullify the
'stockholders meeting' called/conducted by PCGG and its accomplices," he contending that
only this Court, and not the Sandiganbayan, has the power to authorize the PCGG to call a
stockholders meeting and vote the sequestered shares. Africa went on to contend that,
assuming that the Sandiganbayan had such power, its Resolution of 13 December 1996
authorizing the PCGG to hold the stockholders meeting had not yet become final because the
motions for reconsideration of said resolution were still pending. Further, Africa alleged that he
was not given notice of the meeting, and the PCGG had no right to vote the sequestered
Class "A" shares. A motion for leave to intervene relative to Africa's "Motion to Cite the PCGG
and its Accomplices in Contempt" was filed by ETPI. The Supreme Court granted the motion
for leave but ETPI never filed any pleading relative to Africa's motion to cite the PCGG in
contempt. By Resolution of 16 February 2001, the Sandiganbayan finally resolved to deny the
motions for reconsideration of its Resolution of 13 December 1996, prompting Africa to file on
6 April 2001 before the Supreme Court a petition for Review on Certiorari (GR 147214),
challenging the Sandiganbayan Resolutions of 13 December 1996 (authorizing the holding of
a stockholders meeting to increase ETPI's authorized capital stock and to vote therein the
sequestered Class "A" shares of stock) and 16 February 2001 (denying reconsideration of the
December 13, 1996 Resolution). The petitions were consolidated.

Issue:
1. Whether the PCGG can vote the sequestered ETPI Class "A" shares in
the stockholders meeting for the election of the board of directors.
2. Whether the Sandiganbayan can order the Division Clerk of Court to call
the stockholders meeting and in appointing then Sandiganbayan Associate Justice
Sabino de Leon, Jr. to control and supervise the same.
Held:

1. When sequestered shares registered in the names of private individuals or entities are
alleged to have been acquired with ill-gotten wealth, then the two-tiered test is applied.
However, when the sequestered shares in the name of private individuals or entities are
shown, prima facie, to have been (1) originally government shares, or (2) purchased with
public funds or those affected with public interest, then the two-tiered test does not apply.
Rather, the public character exception in Baseco v. PCGG and Cojuangco Jr. v. Roxas
prevail; that is, the government shall vote the shares.

2. The Clerk of Court, who is already saddled with judicial responsibilities, need not be
burdened with the additional duties of a corporate secretary. Moreover, the Clerk of Court may
not have the requisite knowledge and expertise to discharge the functions of a corporate
secretary. The case of Board of Directors and Election Committee of SMB Workers Savings
and Loan Asso., Inc. v. Tan, etc., et al. (105 Phil. 426 (1959). Vide also 5 Fletcher Cyc Corp
(Perm Ed) 2074; 18A Am Jur 2d ) provides a solution to the Sandiganbayan's dilemma of
calling a meeting when ETPI had two sets of officers. There, the Supreme Court upheld the
creation of a committee empowered to call, conduct and supervise the election of the board of
directors. Such a committee composed of impartial persons knowledgeable in corporate
proceedings would provide the needed expertise and objectivity in the calling and the holding
of the meeting without compromising the Sandiganbayan or its officers. The appointment of
the committee members and the delineation of the scope of the duties of the committee may
be made pursuant to an agreement by the parties or in accordance with the provisions of Rule
9 (Management Committee) of the Interim Rules of Procedure for Intra-Corporate
Controversies insofar as they are applicable.