oblicon cases 4th exam

8/19/2019 oblicon cases 4th exam

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DOROTHY DEA T. BOLOFER

RESCISSIBLE CONTRACTS

G.R. No. 140479 March 8, 001

ROSENCOR DE!ELO"MENT COR"ORATION a#$ RENE%OA&'IN, petitioners,vs."ATERNO IN&'ING, IRENE G'ILLERMO, FEDERICO

BANT'GAN, FERNANDO MAGBAN'A a#$ LI((ATIANGCO, respondents.

GON(AGA)REYES, J.*

This is a petition for review on certiorari under Rule 45 of the Rulesof Court seeking reversal of the Decision1 of the Court of Appealsdated June 5, 1!!! in CA"#.R. C$ %o. 5&!'&. The Court ofAppeals decision reversed and set aside the Decision dated (a)1&, 1!!' of *ranch 1+ of the Regional Trial Court of ue-on Cit)in Civil Case %o. "!&"15.1âwphi1.nêt

The case was originall) /led on Dece0er 12, 1!!& ) 3aternonuing, rene #uiller0o and 6ederico *antugan, hereinrespondents, against Rosencor Develop0ent Corporation

7hereinafter 8Rosencor89, Rene Joauin, and :ufrocina de ;eon.epte0e4, 1!!2 while de ;eon 0ade the o?er to the0 onl) in ale etween de ;eon and Rosencor dated>epte0er 4, 1!!2H 9 the defendants RosencorERene Joauin eordered to reconve) the propert) to de ;eonH and c9 de ;eon eordered to rei0urse the plainti?s for the repairs of the propert)or appl) the said a0ount as part of the price for the purchase ofthe propert) in the su0 of 3122,222.22.84

After trial on the 0erits, the Regional Trial Court rendered aDecision5 dated (a) 1&, 1!!' dis0issing the co0plaint. The triacourt held that the right of rede0ption on which the co0plaint. The trial court held that the right of rede0ption on which theco0plaint was ased was 0erel) an oral one and as such, isunenforceale under the law. The dispositive portion of the (a)1&, 1!!' Decision is as follows=

8G:R:6(>>:> the

instant action. 3lainti?s and plainti?s"intervenors are here)ordered to pa) their respective 0onthl) rental of 31,222.22 per0onth reckoned fro0 (a) 1!!2 up to the ti0e the) leave thepre0ises. %o costs.

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The uestion now is whether a 8right of /rst refusal8 is a0ongthose enu0erated in the list of contracts covered ) the >tatute of 6rauds. (ore speci/call), is a right of /rst refusal akin to 8anagree0ent for the leasing of a longer period than one )ear, or forthe sale of real propert) or of an interest therein8 as conte0plated) Article 142&, par. 7e9 of the %ew Civil Code.

Ge have previousl) held that not all agree0ents 8a?ecting land80ust e put into writing to attain enforceailit).14 Thus, we haveheld that the setting up of oundaries,15 the oral partition of realpropert)1', and an agree0ent creating a right of wa) 1+ are notcovered ) the provisions of the statute of frauds. The reasonsi0pl) is that these agree0ents are not a0ong those enu0erated

in Article 142& of the %ew Civil Code.

A right of /rst refusal is not a0ong those listed as unenforcealeunder the statute of frauds. 6urther0ore, the application of Article142&, par. 7e9 of the %ew Civil Code presupposes the eBistence of a perfected, aleit unwritten, contract of sale.1 A right of /rstrefusal, such as the one involved in the instant case, is not ) an)0eans a perfected contract of sale of real propert). At est, it is acontractual grant, not of the sale of the real propert) involved, utof the right of /rst refusal over the propert) sought to e sold1!.

t is thus evident that the statute of frauds does not conte0platecases involving a right of /rst refusal. As such, a right of /rstrefusal need not e written to e enforceale and 0a) e proven) oral evidence.

The neBt uestion to e ascertained is whether or not respondentshave satisfactoril) proven their right of /rst refusal over thepropert) suect of the Deed of Asolute >ale dated >epte0er 4,1!!2 etween petitioner Rosencor and :ufrocina de ;eon.


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8Ghat Car0elo and (a)fair agreed to, ) eBecuting the two leasecontracts, was that (a)fair will have the right of /rst refusal in theevent Car0elo sells the leased pre0ises. t is undisputed thatCar0elo did recogni-e this right of (a)fair, for it infor0ed thelatter of its intention to sell the said propert) in 1!+4. There wasan eBchange of letters evidencing the o?er and counter"o?ers0ade ) oth parties. Car0elo, however, did not pursue theeBercise to its logical end. Ghile it initiall) recogni-ed (a)fairsright of /rst refusal, Car0elo violated such right when withouta?ording its negotiations with (a)fair the full process to ripen toat least an interface of a de/nite o?er and a possilecorresponding acceptance within the 8&2"da) eBclusive option8ti0e granted (a)fair, Car0elo aandoned negotiations, kept a low

pro/le for so0e ti0e, and then sold, without prior notice to(a)fair, the entire Claro (. Recto propert) to :uatorial.

>ince :uatorial is a u)er in ad faith, this /nding renders thesale to it of the propert) in uestion, rescissile. Ge agree withrespondent Appellate Court that the records ear out the fact that:uatorial was aware of the lease contracts ecause its law)ershad, prior to the sale, studied the said contracts. As such,:uatorial cannot tenal) clai0 that to e a purchaser in goodfaith, and, therefore, rescission lies.

As also earlier e0phasi-ed, the contract of sale etween:uatorial and Car0elo is characteri-ed ) ad faith, since it was

knowingl) entered into in violation of the rights of and to thepreudice of (a)fair. n fact, as correctl) oserved ) the Court ofAppeals, :uatorial ad0itted that its law)ers had studied thecontract or lease prior to the sale. :uatorials knowledge of thestipulations therein should have cautioned it to look further intothe agree0ent to deter0ine if it involved stipulations that wouldpreudice its own interests.

>ince (a)fair had a right of /rst refusal, it can eBercise the rightonl) if the fraudulent sale is /rst set aside or rescinded. All ofthese 0atters are now efore us and so there should e nopiece0eal deter0ination of this case and leave festering sores todeteriorate into endless litigation. The facts of the case andconsiderations of ustice and euit) reuire that we orderrescission here and now. Rescission is a relief allowed for theprotection of one of the contracting parties and even third persons

fro0 all inur) and da0age the contract 0a) cause or to protectso0e inco0patile and preferred right ) the contract. The sale of the suect real propert) should now e rescinded considering that(a)fair, which had sustantial interest over the suect propert),was preudiced ) the sale of the suect propert) to :uatorialwithout Car0elo conferring to (a)fair ever) opportunit) tonegotiate within the &2"da) stipulate periond.+

n (aranaque )ings Enterprises, Inc. vs. Court o$ *ppeals, theCourt held that the allegations in a co0plaint showing violation ofa contractual right of 8/rst option or priorit) to u) the propertiessuect of the lease8 constitute a valid cause of action enforceale) an action for speci/c perfor0ance. >u00ari-ing the rulings inthe two previousl) cited cases, the Court aFr0ed the nature ofand conco0itant rights and oligations of parties under a right of/rst refusal. Thus=

8Ge hold however, that in order to have full co0pliance with thecontractual right granting petitioner the /rst option to purchase,the sale of the properties for the a0ount of 3!,222,222.22, theprice for which the) were /nall) sold to respondent Ra)0undo,should have likewise een o?ered to petitioner.

The Court has 0ade an eBtensive and length) discourse on theconcept of, and oligations under, a right of /rst refusal in thecase of Guzman, Bocaling ' Co. vs. Bonnevie. n that case, undera contract of lease, the lessees 7Raul and Christopher *onnevie9were given a 8right of /rst priorit)8 to purchase the leasedpropert) in case the lessor 7Re)noso9 decided to sell. The sellingprice uoted to the *onnevies was '22,222.22 to e full) paid in

cash, less a 0ortgage lien of 3122,222.22.


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t was then held that the Contract of >ale there, which violated theright of /rst refusal, was rescissile.

n the case at ar, 3GA> cannot clai0 ignorance of the right of/rst refusal granted to ; L R Corporation over the suectproperties since the Deed of Real :state (ortgage containing sucha provision was dul) registered with the Register of Deeds. Assuch, 3GA> is presu0ed to have een noti/ed thereof )registration, which euates to notice to the whole world.

All things considered, what then are the relative rights andoligations of the partiesK To recapitulate= the sale etween thespouses ;itonua and 3GA> is valid, notwithstanding the asenceof ; L R Corporations prior written consent thereto. nas0uch asthe sale to 3GA> was valid, its o?er to redee0 and its tender ofthe rede0ption price, as successor"in"interest of the spouses;itonua, within the one")ear period should have een accepted asvalid ) the ; L R Corporation. owever, while the sale is, indeed,valid, the sa0e is rescissile ecause it ignored ; L RCorporations right of /rst refusal.8

Thus, the prevailing doctrine, as enunciated in the cited cases, isthat a contract of sale entered into in violation of a right of /rst

refusal of another person, while valid, is rescissile.

There is, however, a circu0stance which prevents the applicationof this doctrine in the case at ench. n the cases cited aove, theCourt ordered the rescission of sales 0ade in violation of a right of /rst refusal precisel) ecause the vendees therein could not haveacted in good faith as the) were aware or should have een awareof the right of /rst refusal granted to another person ) thevendors therein. The rationale for this is found in the provisions ofthe %ew Civil Code on rescissile contracts. @nder Article 1&1 ofthe %ew Civil Code, paragraph &, a contract validl) agreed upon0a) e rescinded if it is 8undertaken in fraud of creditors when thelatter cannot in an) 0anner collect the clai0 due the0.8(oreover, under Article 1&5, rescission shall not take place8when the things which are the oect of the contract are legall) inthe possession of third persons who did not act in ad faith.8&2

t 0ust e orne in 0ind that, unlike the cases cited aove, theright of /rst refusal involved in the instant case was an oral onegiven to respondents ) the deceased spouses Tiangco andsuseuentl) recogni-ed ) their heirs. As such, in order to holdthat petitioners were in ad faith, there 0ust e clear andconvincing proof that petitioners were 0ade aware of the saidright of /rst refusal either ) the respondents or ) the heirs ofthe spouses Tiangco.

t is aBio0atic that good faith is alwa)s presu0ed unless contrar)evidence is adduced.&1 A purchaser in good faith is one who u)sthe propert) of another without notice that so0e other person hasa right or interest in such a propert) and pa)s a full and fair priceat the ti0e of the purchase or efore he has notice of the clai0 or

interest of so0e other person in the propert).& n this regard, therule on constructive notice would e inapplicale as it isundisputed that the right of /rst refusal was an oral one and thatthe sa0e was never reduced to writing, 0uch less registered withthe Registr) of Deeds. n fact, even the lease contract ) whichrespondents derive their right to possess the propert) involvedwas an oral one.

epte0er 4, 1!!2, petitioners were aware orhad notice of the oral right of /rst refusal.

Respondents point to the letter dated June 1, 1!!2&& as indicativof petitioners knowledge of the said right. n this letter, a certainAtt). :rlinda Aguila de0anded that respondent rene #uiller0ovacate the structure the) were occup)ing to 0ake wa) for itsde0olition.

Ge fail to see how the letter could give rise to ad faith on the paof the petitioner. %o 0ention is 0ade of the right of /rst refusalgranted to respondents. The na0e of petitioner Rosencor or an)it oFcers did not appear on the letter and the letter did not statethat Att). Aguila was writing in ehalf of petitioner. n fact, Att).Aguila stated during trial that she wrote the letter in ehalf of theheirs of the spouses Tiangco. (oreover, even assu0ing that Att)

Aguila was indeed writing in ehalf of petitioner Rosencor, there no showing that Rosencor was aware at that ti0e that such a rigof /rst refusal eBisted.

%either was there an) showing that after receipt of this June 1,1!!2 letter, respondents noti/ed Rosencor or Att). Aguila of theirright of /rst refusal over the propert). Respondents did not tr) toco00unicate with Att). Aguila and infor0 her aout theirpreferential right over the disputed propert). There is even noshowing that the) contacted the heirs of the spouses Tiangco aftthe) received this letter to re0ind the0 of their right over thepropert).

Respondents likewise point to the letter dated ale on>epte0er 4, 1!!2 etween petitioner Rosencor and the heirs ofthe spouses Tiangco. There is no showing that prior to the date othe eBecution of the said Deed, petitioners were put on notice ofthe eBistence of the right of /rst refusal.

Clearl), if there was an) indication of ad faith ased onrespondents evidence, it would onl) e on the part of :ufrocina ;eon as she was aware of the right of /rst refusal of respondents)et she still sold the disputed propert) to Rosencor. owever, a

faith on the part of :ufrocina de ;eon does not 0ean thatpetitioner Rosencor likewise acted in ad faith. There is noshowing that prior to the eBecution of the Deed of Asolute >ale,petitioners were 0ade aware or put on notice of the eBistence ofthe oral right of /rst refusal. Thus, asent clear and convincingevidence to the contrar), petitioner Rosencor will e presu0ed thave acted in good faith in entering into the Deed of Asolute >aover the disputed propert).

Considering that there is no showing of ad faith on the part of tpetitioners, the Court of Appeals thus erred in ordering therescission of the Deed of Asolute >ale dated >epte0er 4, 1!!2etween petitioner Rosencor and the heirs of the spouses Tiangc The acuisition ) Rosencor of the propert) suect of the right o/rst refusal is an ostacle to the action for its rescission where, ain this case, it was shown that Rosencor is in lawful possession o

the suect of the contract and that it did not act in ad faith. &4

This does not 0ean however that respondents are left without are0ed) for the unusti/ed violation of their right of /rst refusal. Their re0ed) however is not an action for the rescission of theDeed of Asolute >ale ut an action for da0ages against the heiof the spouses Tiangco for the unusti/ed disregard of their right/rst refusal&5.

G:R:6:D and >:T A>D:. TheDecision dated (a) 1&, 1!!' of the ue-on Cit) Regional TrialCourt, *ranch 1+ is here) R:%>TAT:D insofar as it dis0issesthe action for rescission of the Deed of Asolute >ale dated


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>epte0er 4, 1!!2 and orders the pa)0ent of 0onthl) rentals of31,222.22 per 0onth reckoned fro0 (a) 1!!2 up to the ti0erespondents leave the pre0ises.

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G.R. No. 1441+9 March 8, 00

HE HONG CHENG, a-a/ FELI HE, SANDRA %OY HE a#$RAY STE!EN HE, petitioners,vs.CO'RT OF A""EALS, HON. TEOFILO G'ADI(, RTC 147,MAATI CITY a#$ "HILAM INS'RANCE CO., INC.,respondents.

A"'NAN, J.*

*efore the Court is a 3etition for Review on Certiorari under Rule45, seeking to set aside the decision of the Court of Appeals datedApril 12, 222 and its resolution dated Jul) 11, 222 den)ing the0otion for reconsideration of the aforesaid decision. The originalco0plaint that is the suect 0atter of this case is an accionpauliana -- an action /led ) 3hila0 nsurance Co0pan), nc.7respondent 3hila09 to rescind or annul the donations 0ade )petitioner Mhe ong Cheng allegedl) in fraud of creditors. The0ain issue for resolution is whether or not the action to rescindthe donations has alread) prescried. Ghile the /rst paragraph ofArticle 1&! of the Civil Code states= 8The action to clai0rescission 0ust e co00enced within four )ears...8 the uestionis, fro0 which point or event does this prescriptive periodco00ence to runK

The facts are as follows=

3etitioner Mhe ong Cheng, alias 6eliB Mhe, is the owner of *utuan>hipping ;ines. t appears that on or aout


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3@*;C R:>3: CR:T>T: CA>: *A>:D


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8The following successive 0easures 0ust e taken ) a creditorefore he 0a) ring an action for rescission of an allegedl)fraudulent sale= 719 eBhaust the properties of the detor throughlev)ing ) attach0ent and eBecution upon all the propert) of thedetor, eBcept such as are eBe0pt fro0 eBecutionH 79 eBercise allthe rights and actions of the detor, save those personal to hi07accion surogatoria9H and 7&9 seek rescission of the contractseBecuted ) the detor in fraud of their rights 7accionpauliana9. Githout availing of the /rst and second re0edies, i.e..eBhausting the properties of the detor or surogating the0selvesin 6rancisco *aregOs trans0issile rights and actions. petitionerssi0pl)= undertook the third 0easure and /led an action forannul0ent of sale. This cannot e done.811 7:0phasis ours9

n the sa0e case, the Court also uoted the rationale of the CAwhen it upheld the dis0issal of the accion pauliana on the asis oflack of cause of action=

8n this case, plainti?s appellants had not even co00enced anaction against defendants"appellees *areng for the collection ofthe alleged indetedness, 3lainti?s"appellants had not even triedto eBhaust the propert) of defendants"appellees *areng, 3lainti?s"appellants, in seeking the rescission of the contracts of saleentered into etween defendants"appellees, failed to show andprove that defendants"appellees *areng had no otherpropert), either at the ti0e of the sale or at the ti0e this actionwas /led, out of which the) could have collected this 7sic9 dets.87:0phasis ours9

:ven if respondent 3hila0 was aware, as of Dece0er +, 1!!,that petitioner Mhe ong Cheng had eBecuted the deeds ofdonation in favor of his children, the co0plaint against *utuan>hipping ;ines andEor petitioner Mhe ong Cheng was still pendingefore the trial court. Respondent 3hila0 had no inkling, at theti0e, that the trial courts udg0ent would e in its favor andfurther, that such udg0ent would not e satis/ed due to thedeeds of donation eBecuted ) petitioner Mhe ong Cheng duringthe pendenc) of the case. ad respondent 3hila0 /led hisco0plaint on Dece0er +, 1!!, such co0plaint would haveeen dis0issed for eing pre0ature. %ot onl) were all other legalre0edies for the enforce0ent of respondent 3hila0Os clai0s not)et eBhausted at the ti0e the needs of donation were eBecutedand registered. Respondent 3hila0 would also not have een aleto prove then that petitioner Mhe ong Cheng had no 0orepropert) other than those covered ) the suect deeds to satisf)a favorale udg0ent ) the trial court.

t ears stressing that petitioner Mhe ong Cheng even eBpressl)declared and represented that he had reserved to hi0self propert)suFcient to answer for his dets contracted prior to this date=

8That the DuFce it to sa) that petitioners are alread) dee0ed tohave waived their right to uestion the venue of the instant case0proper venue should e oected to as follows 19 in a 0otion tdis0iss /led within the ti0e ut efore the /ling of theanswerH1& or 9 in the answer as an aFr0ative defense over whicin the discretion of the court, a preli0inar) hearing 0a) e held if a 0otion to dis0iss had een /led.14 aving failed to either /le0otion to dis0iss on the ground of i0proper of venue or includethe sa0e as an aFr0ative defense in their answer, petitioners adee0ed to have their right to oect to i0proper venue.

HEREFORE, pre0ises considered, the petition ishere) DENIED for lack of 0erit.

SO ORDERED.


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G.R. No. 12347 %#5 1, 00+

'NION BAN OF THE "HILI""INES, 3etitioner,vs.S"S. ALFREDO ONG AND S'SANA ONG a#$ %ACSONLEE, Respondents.

D : C > < %

GARCIA, J.:

*) this petition for review under Rule 45 of the Rules of Court,petitioner @nion *ank of the 3hilippines 7@nion *ank9 seeks to setaside the decision1 dated Dece0er 5, 221 of the Court ofAppeals 7CA9 in CA"#.R. %o. ''2&2 reversing an earlier decision ofthe Regional Trial Court 7RTC9 of 3asig Cit) in Civil Case %o. '1'21,a suit thereat co00enced ) the petitioner against the hereinrespondents for annul0ent or rescission of sale in fraud ofcreditors.

The facts=

erein respondents, the spouses Alfredo usana an Juan, (etro (anila,together with the house and other i0prove0ents standingthereon, to their co"respondent, Jackson ;ee 7;ee, for short9. Thefollowing da), ;ee registered the sale and was then issued TransferCerti/cate of Title 7TCT9 %o. 4+4'"R. At aout this ti0e, *(C hadalread) availed itself of the credit facilities, and had in facteBecuted a total of twent)"two 79 pro0issor) notes in favor of@nion *ank.

uspension of 3a)0ents with the >ecurities and:Bchange Co00ission 7>:C9. To protect its interest, @nion *anklost no ti0e in /ling with the RTC of 3asig Cit) an action forrescission of the sale etween the spouses


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0arket value of the propert), as what perhaps happened in theinstant case, is not out of the ordinar), let alone indicative offraudulent intention. That the spouses


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closeness or usiness and professional interdependence etweenthe spouses an Juan, (etro (anila, after the usualregistration of the corresponding conve)ing deed of sale.


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3etitionerOs reliance on the afore"uoted provision is 0isplaced forthe following reasons=

4irst , >ection +2, supra, of the nsolvenc) ;aw speci/call) 0akesreference to conve)ance of properties 0ade ) a 8detor8 or ) an8insolvent8 who /led a petition, or against who0 a petition forinsolvenc) has een /led. Respondent spouses :C. The nagging fact, howeveris that *(C is a di?erent uridical person fro0 the respondentspouses. Their sevent) percent 7+2P9 ownership of *(Cs capitalstock does not change the legal situation. Accordingl), the allegedinsolvenc) of *(C cannot, as petitioner postulates, eBtend to therespondent spouses such that transaction of the latter co0eswithin the purview of >ection +2 of the nsolvenc) ;aw.

5econd, the real detor of petitioner ank in this case is *(C. Thefact that the respondent spouses ound the0selves to answer for*(Cs indetedness under the suret) agree0ent referred to at theoutset is not reason enough to conclude that the spouses arethe0selves detors of petitioner ank. Ge have alread) passedupon the si0ple reason for this proposition. Ge refer to the asic

precept in this urisdiction that a corporation, upon co0ing intoeBistence, is invested ) law with a personalit) separate anddistinct fro0 those of the persons co0posing it.4 (ere ownership) a single or s0all group of stockholders of nearl) all of thecapital stock of the corporation is not, without 0ore, suFcient todisregard the /ction of separate corporate personalit). 5

%hird, >ection +2 of the nsolvenc) ;aw considers transfers 0adewithin a 0onth after the date of cleavage void, eBcept those 0adein good faith and for valuale pecuniar) consideration. The twinele0ents of good faith and valuale and suFcient considerationhave een dul) estalished. #iven the validit) and the asiclegiti0ac) of the sale in uestion, there is si0pl) no occasion toappl) >ection +2 of the nsolvenc) ;aw to nullif) the transactionsuect of the instant case.

All told, we are far fro0 convinced ) petitioners argu0entationthat the circu0stances surrounding the sale of the suectpropert) 0a) e considered adges of fraud. Conseuentl), itsfailure to show actual fraudulent intent on the part of the spouses


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HEIRS OF SOFIA &'IRONG, R5r5/5#5$ ;< ROMEO ".&'IRONG, 3etitioners,vs.DE!ELO"MENT BAN OF THE "HILI""INES, Respondent.

D E C I S I O N

ABAD, J.:

This case is aout the prescriptive period of an action for

rescission of a contract of sale where the u)er is evicted fro0 thething sold ) a suseuent udicial order in favor of a third part).

Th5 Fac/ a#$ h5 Ca/5

The facts are not disputed. Ghen the late :0ilio Dalope died, heleft a 5!"suare 0eter untitled lot1 in >ta. *arara, 3angasinan,to his wife, 6elisa Dalope 76elisa9 and their nine children, one ofwho0 was Rosa Dalope"6uncion. To enale Rosa and her husandAntonio 6uncion 7the 6uncions9 get a loan fro0 respondentDevelop0ent *ank of the 3hilippines 7D*39, 6elisa sold the wholelot to the 6uncions. Gith the deed of sale in their favor and the taBdeclaration transferred in their na0es, the 6uncions 0ortgagedthe lot with the D*3.

epte0er 2, 1!& the D*3 conditionall)sold the lot to >o/a uirong4 for the price of 3+,222.22. n theircontract of sale, >o/a uirong waived an) warrant) againsteviction. The contract provided that the D*3 did not guaranteepossession of the propert) and that it would not e liale for an)lien or encu0rance on the sa0e. uirong gave a down pa)0entof 314,222.22.

Two 0onths after that sale or on %ove0er , 1!& 6elisa andher eight children 7collectivel), the Dalopes95/led an action forpartition and declaration of nullit) of docu0ents with da0agesagainst the D*3 and the 6uncions efore the Regional Trial Court7RTC9 of Dagupan Cit), *ranch 4, in Civil Case D"+15!.

o/auirongs favor. The deed of sale carried sustantiall) the sa0ewaiver of warrant) against eviction and of an) adverse lien orencu0rance.

o/a uirong having since died, her heirs7petitioner uirong heirs9 /led an answer in intervention' in CivilCase D"+15! in which the) asked the RTC to award the lot to the0and, should it instead e given to the Dalopes, to allow theuirong heirs to recover the lots value fro0 the D*3. *ut, ecausethe heirs failed to /le a for0al o?er of evidence, the trial court didnot rule on the 0erits of their clai0 to the lot and, alternativel), to

relief fro0 the D*3.+

o/a uirong, their predecessor, ought fro0 the D*3. The D*3/led a 0otion to dis0iss the action on ground of prescription andres udicata ut the RTC denied their 0otion.

o/a uirong and the D*and ordering the latter to return to the uirong heirs the3+,222.22 >o/a uirong paid the ank.1


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*ut the incident efore this Court in #.R. 11'5+5 did not deal withthe 0erit of the RTC decision in Civil Case D"+15!. That decisioneca0e /nal and eBecutor) on Januar) , 1!!& when the D*3failed to appeal fro0 it within the ti0e set for such appeal. Theincident efore this Court in #.R. 11'5+5 involved the issuance ofthe writ of eBecution in that case. The D*3 contested suchissuance supposedl) ecause the dispositive portion of thedecision failed to specif) details that were needed for itsi0ple0entation. >ince this incident did not a?ect the /nalit) of thedecision in Civil Case D"+15!, the prescriptive period re0ained toe reckoned fro0 Januar) , 1!!&, the date of such /nalit).

The neBt uestion that needs to e resolved is the applicale

period of prescription. The D*3 clai0s that it should e four )earsas provided under Article 1&! of the Civil Code.1' Article 1&!provides that 8the action to clai0 rescission 0ust e co00encedwithin four )ears.8 The uirong heirs, on the other hand, clai0that it should e 12 )ears as provided under Article 1144 whichstates that actions 8upon a written contract8 0ust e rought8within 12 )ears fro0 the date the right of action accrues.8

%ow, was the action of the uirong heirs 8for rescission8 or 8upona written contract8K There is no uestion that their action was forrescission, since their co0plaint in Civil Case C$"!"2&!!"D askedfor the rescission of the contract of sale etween >o/a uirong,their predecessor, and the D*3 and the rei0urse0ent of theprice of 3+,222.22 that >o/a uirong paid the ank plusda0ages. The prescriptive period for rescission is four )ears.

*ut it is not that si0ple. The re0ed) of 8rescission8 is not con/nedto the rescissile contracts enu0erated under Article1&1.1+ Article 11!1 of the Civil Code gives the inured part) inreciprocal oligations, such as what contracts are aout, theoption to choose etween ful/ll0ent and 8rescission.8 Arturo (.Tolentino, a well"known authorit) in civil law, is uick to note,however, that the euivalent of Article 11!1 in the old codeactuall) uses the ter0 8resolution8 rather than the present8rescission.81 The calirated 0eanings of these ter0s are distinct.

8Rescission8 is a susidiar) action ased on inur) to the plainti?secono0ic interests as descried in Articles 1&2 and 1&1.8Resolution,8 the action referred to in Article 11!1, on the otherhand, is ased on the defendants reach of faith, a violation ofthe reciprocit) etween the parties. As an action ased on the

inding force of a written contract, therefore, rescission7resolution9 under Article 11!1 prescries in 12 )ears. Ten )ears isthe period of prescription of actions ased on a written contractunder Article 1144.

The distinction 0akes sense. Article 11!1 gives the inured part)an option to choose etween, /rst, ful/ll0ent of the contract and,second, its rescission. An action to enforce a written contract7ful/ll0ent9 is de/nitel) an 8action upon a written contract,8 whichprescries in 12 )ears 7Article 11449. t will not e logical to 0akethe re0ed) of ful/ll0ent prescrie in 12 )ears while thealternative re0ed) of rescission 7or resolution9 is 0ade toprescrie after onl) four )ears as provided in Article 1&! whenthe inur) fro0 which the two kinds of actions derive is the sa0e.

ere, the uirong heirs alleged in their co0plaint that the) wereentitled to the rescission of the contract of sale of the lot etweenthe D*3 and >o/a uirong ecause the decision in Civil Case D"+15! deprived her heirs of nearl) the whole of that lot. *ut whatwas the status of that contract at the ti0e of the /ling of theaction for rescissionK Apparentl), that contract of sale had alread)een full) perfor0ed when >o/a uirong paid the full price for thelot and when, in eBchange, the D*3 eBecuted the deed of asolutesale in her favor. There was a turnover of control of the propert)fro0 D*3 to >o/a uirong since she assu0ed under their contract,8the eect0ent of suatters andEor occupants8 on the lot, at herown eBpense.1!

Actuall), the cause of action of the uirong heirs ste0s fro0 theirhaving een ousted ) /nal udg0ent fro0 the ownership of the

lot that the D*3 sold to >o/a uirong, their predecessor, inviolation of the warrant) against eviction that co0es with ever)sale of propert) or thing. Article 154 of the Civil Code provides=

Article 154. :viction shall take place whenever ) a /nal udg0ent ased on a right prior to the sale or an act i0putale tthe vendor, the vendee is deprived of the whole or of a part ofthing purchased.

B B B B

Gith the loss of 2P of the suect lot to the Dalopes ) reason

the udg0ent of the RTC in Civil Case D"+15!, the uirong heirshad the right to /le an action for rescission against the D*3pursuant to the provision of Article 155' of the Civil Code whichprovides=

Article 155'. >hould the vendee lose, ) reason of the eviction, apart of the thing sold of such i0portance, in relation to the wholethat he would not have ought it without said part, he 0a)de0and the rescission of the contractH ut with the oligation toreturn the thing without other encu0rances than those which ithad when he acuired it. B B B

And that action for rescission, which is ased on a suseuentecono0ic loss su?ered ) the u)er, was precisel) the action thathe uirong heirs took against the D*3. Conseuentl), it

prescried as Article 1&! provides in four )ears fro0 the ti0e taction accrued. >ince it accrued on Januar) , 1!!& when thedecision in Civil Case D"+15! eca0e /nal and eBecutor) andousted the heirs fro0 a sustantial portion of the lot, the latterhad onl) until Januar) , 1!!+ within which to /le their action forescission. #iven that the) /led their action on June 12, 1!!, thdid so e)ond the four")ear period.

Gith the conclusion that the Court has reached respecting the /rissue presented in this case, it would serve no useful purpose forto further consider the issue of whether or not the heirs of uirowould have een entitled to the rescission of the D*3s sale of thsuect lot to >o/a uirong as a conseuence of her heirs havingeen evicted fro0 it. As the Court has ruled aove, their actionwas arred ) prescription. The CA acted correctl) in reversing tRTC decision and dis0issing their action.

3arentheticall), the uirong heirs were allowed ) the RTC tointervene in the original action for annul0ent of sale in Civil CaseD"+15! that the Dalopes /led against the D*3 and the 6uncions.%ot onl) did the heirs intervene in defense of the sale, the)likewise /led a cross clai0 against the D*3. And the) wereapparentl) heard on their defense and cross clai0 ut the RTC dnot adudicate their clai0 for the reason that the) failed to 0akefor0al o?er of their docu0entar) eBhiits. Iet, the) did not appefro0 this o0ission or fro0 the udg0ent of the RTC, annulling theD*3s sale of the suect lot to >o/a uirong. This point is ofcourse entirel) acade0ic ut it shows that the uirong heirs havthe0selves to la0e for the loss of whatever right the) 0a) havin the case.

HEREFORE, the Court

DENIES the petition and

AFFIRMS the%ove0er &2, 225 decision of the Court of Appeals in CA"#.R. C

&!+.

SO ORDERED.

1

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G.R. No. 18432 A>/ 13, 01

LILIA B. ADA, L'( B. ADAN(A, FLORA C. BA YLON, REMO BAYLON, %OSE BA YLON, ERIC BA YLON, FLORENTINO BA YLON,a#$ MA. R'BY BA YLON, 3etitioners,vs.FLORANTE BA YLON, Respondent.

$;;ARA(A, JR.,V

D E C I S I O N

REYES, J.:

*efore this Court is a petition for review on certiorari under Rule45 of the Rules of Court seeking to annul and set aside theDecision1 dated pouses *a)lon were survived ) their legiti0ate children,na0el), Rita *a)lon 7Rita9, $ictoria *a)lon 7$ictoria9, Dolores*a)lon 7Dolores9, 3an/la #o0e- 73an/la9, Ra0on *a)lon 7Ra0on9and herein petitioner ;ilia *. Ada 7;ilia9.

Dolores died intestate and without issue on August 4, 1!+'.$ictoria died on %ove0er 11, 1!1 and was survived ) herdaughter, herein petitioner ;u- *. Adan-a. Ra0on died intestateon Jul) , 1!! and was survived ) herein respondent 6lorante*a)lon 76lorante9, his child fro0 his /rst 0arriage, as well as )petitioner 6lora *a)lon, his second wife, and their legiti0atechildren, na0el), Ra0on, Jr. and herein petitioners Re0o, Jose,:ric, 6lorentino and (a. Ru), all surna0ed *a)lon.

upple0ental 3leading1+ dated6eruar) ', 22, pra)ing that the said donation in favor of therespondent e rescinded in accordance with Article 1&1749 of thCivil Code. The) further alleged that Rita was alread) sick andver) weak when the said Deed of Donation was supposedl)eBecuted and, thus, could not have validl) given her consentthereto.

6lorante and 3an/la opposed the rescission of the said donation,asserting that Article 1&1749 of the Civil Code applies onl) when

there is alread) a prior udicial decree on who etween thecontending parties actuall) owned the properties under litigation

Th5 RTC D5c/o#


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e rescissile on the ground that it was entered into ) thedefendant Rita *a)lon without the knowledge and approval of thelitigants Qor of co0petent udicial authorit). The suect parcels oflands are involved in the case for which plainti?s have asked theCourt to partition the sa0e a0ong the heirs of 6lorentino *a)lonand (aBi0ina :lnas.

Clearl), the donation inter vivos in favor of 6lorante *a)lon waseBecuted to preudice the plainti?s right to succeed to the estateof Rita *a)lon in case of death considering that as testi/ed )6lorante *a)lon, Rita *a)lon was ver) weak and he tried to giveher vita0ins B B B. The donation inter vivos eBecuted ) Rita*a)lon in favor of 6lorante *a)lon is rescissile for the reason that

it refers to the parcels of land in litigation B B B without theknowledge and approval of the plainti?s or of this Court. owever,the rescission shall not a?ect the share of 6lorante *a)lon to theestate of Rita *a)lon.1

6lorante sought reconsideration of the Decision dated pousesestate, then Rita *a)lons donation thereof in favor of 6lorante*a)lon, in eBcess of her undivided share therein as co"heir, is void.

>urel), she could not have validl) disposed of so0ething she didnot own. n such a case, an action for rescission of the donation0a), therefore, prosper.

f the lots, however, are found to have elonged eBclusivel) to Rita*a)lon, during her lifeti0e, her donation thereof in favor of6lorante *a)lon is valid. 6or then, she 0erel) eBercised herownership right to dispose of what legall) elonged to her. @ponher death, the lots no longer for0 part of her estate as theirownership now pertains to 6lorante *a)lon.


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%evertheless, while parties to an action 0a) assert in onepleading, in the alternative or otherwise, as 0an) causes of actionas the) 0a) have against an opposing part), such oinder ofcauses of action is suect to the condition, inter alia, that theoinder shall not include special civil actions governed ) specialrules.&1

ere, there was a 0isoinder of causes of action. The action forpartition /led ) the petitioners could not e oined with the actionfor the rescission of the said donation inter vivos in favor of6lorante. ;est it e overlooked, an action for partition is a specialcivil action governed ) Rule '! of the Rules of Court while anaction for rescission is an ordinar) civil action governed ) the

ordinar) rules of civil procedure. The variance in the procedure inthe special civil action of partition and in the ordinar) civil actionof rescission precludes their oinder in one co0plaint or their eingtried in a single proceeding to avoid confusion in deter0ining whatrules shall govern the conduct of the proceedings as well as in thedeter0ination of the presence of reuisite ele0ents of eachparticular cause of action.&

A =/@o#5$ ca/5 o aco#, #o/5:5r5$ o# =oo# o a ar< or;< h5 cor /a /o#5, =a< ;5a$@$ca5$ ;< h5 cor o>5h5rh h5 oh5r ca/5/ o aco#.

%evertheless, 0isoinder of causes of action is not a ground for

dis0issal. ndeed, the courts have the power, acting upon the0otion of a part) to the case or sua sponte, to order theseverance of the 0isoined cause of action to e proceeded withseparatel).&& owever, if there is no oection to the i0properoinder or the court did not 0otu proprio direct a severance, thenthere eBists no ar in the si0ultaneous adudication of all theerroneousl) oined causes of action. uect ;ots.

B B B B

Considering ever) application for land registration /led in strictaccordance with the 3ropert) Registration Decree as a singlecause of action, then the defect in the oint application forregistration /led ) the respondents with the (TC constitutes a0isoinder of causes of action and parties. nstead of a single oroint application for registration, respondents Jere0ias and David,0ore appropriatel), should have /led separate applications forregistration of ;ots %o. 4 and 4&, respectivel).

(isoinder of causes of action and parties do not involve auestion of urisdiction of the court to hear and proceed with thecase. The) are not even accepted grounds for dis0issal thereof.nstead, under the Rules of Court, the 0isoinder of causes ofaction and parties involve an i0plied ad0ission of the courtsurisdiction. t acknowledges the power of the court, acting upon

the 0otion of a part) to the case or on its own initiative, to orderthe severance of the 0isoined cause of action, to e proceededwith separatel) 7in case of 0isoinder of causes of action9H andEorthe dropping of a part) and the severance of an) clai0 againstsaid 0isoined part), also to e proceeded with separatel) 7in caseof 0isoinder of parties9.&5 7Citations o0itted9

t should e e0phasi-ed that the foregoing rule onl) applies if thecourt tr)ing the case has urisdiction over all of the causes ofaction therein notwithstanding the 0isoinder of the sa0e. f thecourt tr)ing the case has no urisdiction over a 0isoined cause ofaction, then such 0isoined cause of action has to e severed fro0the other causes of action, and if not so severed, an) adudicationrendered ) the court with respect to the sa0e would e a nullit).

ere, 6lorante posed no oection, and neither did the RTC directthe severance of the petitioners action for rescission fro0 theiraction for partition. Ghile this 0a) e a patent o0ission on thepart of the RTC, this does not constitute a ground to assail thevalidit) and correctness of its decision. The RTC validl) adudicatthe issues raised in the actions for partition and rescission /led the petitioners.

A//5r#> a N5 Ca/5 o Aco# # a S-5=5#a-"-5a$#>

n its Decision dated ec. '. >upple0ental 3leadings. X @pon 0otion of a part) the co0a), upon reasonale notice and upon such ter0s as are ust,per0it hi0 to serve a supple0ental pleading setting forthtransactions, occurrences or events which have happened sincethe date of the pleading sought to e supple0ented. The adverspart) 0a) plead thereto within ten 7129 da)s fro0 notice of theorder ad0itting the supple0ental pleading.

n 7oung v. 5pouses 5! ,&' this Court had the opportunit) toelucidate on the purpose of a supple0ental pleading. Thus=

As its ver) na0e denotes, a supple0ental pleading onl) serves tolster or add so0ething to the pri0ar) pleading. A supple0enteBists side ) side with the original. t does not replace that whicit supple0ents. (oreover, a supple0ental pleading assu0es tha

the original pleading is to stand and that the issues oined with toriginal pleading re0ained an issue to e tried in the action. t isut a continuation of the co0plaint. ts usual oFce is to set upnew facts which ustif), enlarge or change the kind of relief withrespect to the sa0e suect 0atter as the controvers) referred tin the original co0plaint.

The purpose of the supple0ental pleading is to ring into therecords new facts which will enlarge or change the kind of relief twhich the plainti? is entitledH hence, an) supple0ental facts whifurther develop the original right of action, or eBtend to var) therelief, are availale ) wa) of supple0ental co0plaint eventhough the) the0selves constitute a right of action.&+ 7Citationso0itted and e0phasis ours9

Thus, a supple0ental pleading 0a) properl) allege transactionsoccurrences or events which had transpired after the /ling of thepleading sought to e supple0ented, even if the saidsupple0ental facts constitute another cause of action.

Ad0ittedl), in +eo&rera v. Court o$ *ppeals,& we held that asupple0ental pleading 0ust e ased on 0atters arisingsuseuent to the original pleading related to the clai0 or defenpresented therein, and founded on the sa0e cause of action. Gefurther stressed therein that a supple0ental pleading 0a) not used to tr) a new cause of action.

owever, in (lanters "evelopment Ban8 v. +9) 6oldings and"evelopment Corp.,&! we clari/ed that, while a 0atter stated in a

1

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supple0ental co0plaint should have so0e relation to the cause of action set forth in the original pleading, the fact that thesupple0ental pleading technicall) states a new cause of actionshould not e a ar to its allowance ut onl) a 0atter that 0a) econsidered ) the court in the eBercise of its discretion. n suchcases, we stressed that a road de/nition of 8cause of action8should e applied.

ere, the issue as to the validit) of the donation inter vivos of ;ot%o. 4+2! and half of ;ot %o. 4+2' 0ade ) Rita in favor of 6loranteis a new cause of action that occurred after the /ling of theoriginal co0plaint. owever, the petitioners pra)er for therescission of the said donation inter vivos in their supple0ental

pleading is ger0ane to, and is in fact, intertwined with the causeof action in the partition case. ;ot %o. 4+2! and half of ;ot %o.4+2' are included a0ong the properties that were sought to epartitioned.

The petitioners supple0ental pleading 0erel) a0pli/ed theoriginal cause of action, on account of the gratuitous conve)anceof ;ot %o. 4+2! and half of ;ot %o. 4+2' after the /ling of theoriginal co0plaint and pra)ed for additional reliefs, i.e., rescission.ndeed, the petitioners clai0 that the said lots for0 part of theestate of >pouses *a)lon, ut cannot e partitioned unless thegratuitous conve)ance of the sa0e is rescinded. Thus, theprincipal issue raised ) the petitioners in their original co0plaintre0ained the sa0e.

Ma# I//5* "ror5< o R5/c//o#

After having threshed out the procedural 0atters, we now proceedto adudicate the sustantial issue presented ) the instantpetition.

The petitioners assert that the CA erred in re0anding the case tothe RTC for the deter0ination of ownership of ;ot %o. 4+2! andhalf of ;ot %o. 4+2'. The) 0aintain that the RTC aptl) rescindedthe said donation inter vivos of ;ot %o. 4+2! and half of ;ot %o.4+2' pursuant to Article 1&1749 of the Civil Code.

n his Co00ent,42 6lorante asserts that efore the petitioners 0a)/le an action for rescission, the) 0ust /rst otain a favoraleudicial ruling that ;ot %o. 4+2! and half of ;ot %o. 4+2' actuall)

elonged to the estate of >pouses *a)lon. @ntil then, 6loranteavers that an action for rescission would e pre0ature.

The petitioners contentions are well"taken.

The resolution of the instant dispute is funda0entall) contingentupon a deter0ination of whether the donation inter vivos of ;ot%o. 4+2! and half of ;ot %o. 4+2' in favor of 6lorante 0a) erescinded pursuant to Article 1&1749 of the Civil Code on theground that the sa0e was 0ade during the pendenc) of the actionfor partition with the RTC.

R5/c//o# / a r5=5$< o a$$r5//h5 $a=a>5 or #@r< ca/5$ o h5co#rac#> ar5/ or hr$

5r/o#/.

Rescission is a re0ed) granted ) law to the contracting partiesand even to third persons, to secure the reparation of da0agescaused to the0 ) a contract, even if it should e valid, ) 0eansof the restoration of things to their condition at the 0o0ent priorto the celeration of said contract.41 t is a re0ed) to 0akeine?ective a contract, validl) entered into and therefore oligator)under nor0al conditions, ) reason of eBternal causes resulting ina pecuniar) preudice to one of the contracting parties or theircreditors.4

Contracts which are rescissile are valid contracts having all theessential reuisites of a contract, ut ) reason of inur) or

da0age caused to either of the parties therein or to third personare considered defective and, thus, 0a) e rescinded.

The kinds of rescissile contracts, according to the reason for thsusceptiilit) to rescission, are the following= /rst, those which arescissile ecause of lesion or preudiceH4& second, those whichare rescissile on account of fraud or ad faithH44 and third, thosewhich, ) special provisions of law,45 are susceptile torescission.4'

Co#rac/ hch r55r o h#>//;@5c o ->ao# / r5/c//;-5

r/a# o Arc-5 13814 o h5C:- Co$5.

Contracts which are rescissile due to fraud or ad faith includethose which involve things under litigation, if the) have eenentered into ) the defendant without the knowledge and approvof the litigants or of co0petent udicial authorit). Thus, Article1&1749 of the Civil Code provides=

Art. 1&1. The following contracts are rescissile=

B B B B

749 Those which refer to things under litigation if the) have eenentered into ) the defendant without the knowledge and approv

of the litigants or of co0petent udicial authorit).

The rescission of a contract under Article 1&1749 of the Civil Codonl) reuires the concurrence of the following= /rst, the defendaduring the pendenc) of the case, enters into a contract whichrefers to the thing suect of litigationH and second, the saidcontract was entered into without the knowledge and approval othe litigants or of a co0petent udicial authorit). As long as theforegoing reuisites concur, it eco0es the dut) of the court toorder the rescission of the said contract.

The reason for this is si0ple. Article 1&1749 seeks to re0ed) thpresence of ad faith a0ong the parties to a case andEor an)fraudulent act which the) 0a) co00it with respect to the thingsuect of litigation.

Ghen a thing is the suect of a udicial controvers), it shouldulti0atel) e ound ) whatever disposition the court shall rend The parties to the case are therefore eBpected, in deference to tcourts eBercise of urisdiction over the case, to refrain fro0 doinacts which would dissipate or dease the thing suect of thelitigation or otherwise render the i0pending decision thereinine?ectual.

There is, then, a restriction on the disposition ) the parties of ththing that is the suect of the litigation. Article 1&1749 of the CCode reuires that an) contract entered into ) a defendant in acase which refers to things under litigation should e with theknowledge and approval of the litigants or of a co0petent udiciaauthorit).

6urther, an) disposition of the thing suect of litigation or an) acwhich tends to render inutile the courts i0pending disposition insuch case, sans the knowledge and approval of the litigants or othe court, is un0istakal) and irrefutal) indicative of ad faith.>uch acts under0ine the authorit) of the court to la) down therespective rights of the parties in a case relative to the thingsuect of litigation and ind the0 to such deter0ination.

t should e stressed, though, that the defendant in such a case not asolutel) proscried fro0 entering into a contract which refto things under litigation. f, for instance, a defendant enters intocontract which conve)s the thing under litigation during thependenc) of the case, the conve)ance would e valid, there ein

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no de/nite disposition )et co0ing fro0 the court with respect tothe thing suect of litigation. After all, notwithstanding that thesuect thereof is a thing under litigation, such conve)ance is ut0erel) an eBercise of ownership.

This is true even if the defendant e?ected the conve)ance withoutthe knowledge and approval of the litigants or of a co0petentudicial authorit). The asence of such knowledge or approvalwould not precipitate the invalidit) of an otherwise valid contract.%evertheless, such contract, though considered valid, 0a) erescinded at the instance of the other litigants pursuant to Article1&1749 of the Civil Code.

ere, contrar) to the CAs disposition, the RTC aptl) ordered therescission of the donation inter vivos of ;ot %o. 4+2! and half of;ot %o. 4+2' in favor of 6lorante. The petitioners had suFcientl)estalished the presence of the reuisites for the rescission of acontract pursuant to Article 1&1749 of the Civil Code. t isundisputed that, at the ti0e the) were gratuitousl) conve)ed )Rita, ;ot %o. 4+2! and half of ;ot %o. 4+2' are a0ong theproperties that were the suect of the partition case then pendingwith the RTC. t is also undisputed that Rita, then one of thedefendants in the partition case with the RTC, did not infor0 norsought the approval fro0 the petitioners or of the RTC with regardto the donation inter vivos of the said parcels of land to 6lorante.

Although the gratuitous conve)ance of the said parcels of land infavor of 6lorante was valid, the donation inter vivos of the sa0e

eing 0erel) an eBercise of ownership, Ritas failure to infor0 andseek the approval of the petitioners or the RTC regarding theconve)ance gave the petitioners the right to have the saiddonation rescinded pursuant to Article 1&1749 of the Civil Code.

R5/c//o# #$5r Arc-5 13814 o h5 C:- Co$5 / #o r5co#$o#5$o# h5 @$ca- $55r=#ao# a/o h5 o#5r/h o h5 h#>/;@5c o ->ao#.

n this regard, we also /nd the assertion that rescission 0a) onl)e had after the RTC had /nall) deter0ined that the parcels ofland elonged to the estate of >pouses *a)lon intrinsicall) a0iss.The petitioners right to institute the action for rescission pursuantto Article 1&1749 of the Civil Code is not preconditioned upon theRTCs deter0ination as to the ownership of the said parcels ofland.

t ears stressing that the right to ask for the rescission of acontract under Article 1&1749 of the Civil Code is not contingentupon the /nal deter0ination of the ownership of the thing suectof litigation. The pri0ordial purpose of Article 1&1749 of the CivilCode is to secure the possile e?ectivit) of the i0pendingudg0ent ) a court with respect to the thing suect of litigation.t seeks to protect the inding e?ect of a courts i0pendingadudication vis"U"vis the thing suect of litigation regardless ofwhich a0ong the contending clai0s therein would suseuentl)e upheld. Accordingl), a de/nitive udicial deter0ination withrespect to the thing suect of litigation is not a condition sine uanon efore the rescissor) action conte0plated under Article

1&1749 of the Civil Code 0a) e instituted.

(oreover, conceding that the right to ring the rescissor) actionpursuant to Article 1&1749 of the Civil Code is preconditionedupon a udicial deter0ination with regard to the thing suectlitigation, this would onl) ring aout the ver) predica0ent thatthe said provision of law seeks to oviate. Assu0ing arguendo thata rescissor) action under Article 1&1749 of the Civil Code couldonl) e instituted after the dispute with respect to the thingsuect of litigation is udiciall) deter0ined, there is the possiilit)that the sa0e 0a) had alread) een conve)ed to third personsacting in good faith, rendering an) udicial deter0ination withregard to the thing suect of litigation illusor). >urel), thisparadoBical eventualit) is not what the law had envisioned.

E:5# h5 $o#ao# #5r ::o/ /:a-$-< r5/c#$5$, a $55r=#ao#a/ o h5 o#5r/h o h5 /;@5carc5-/ o -a#$ / /-- #5c5//arpouses *a)lon, thesa0e would ulti0atel) e trans0itted to the parties in theproceedings efore the RTC as the) are the onl) surviving heirs o

oth >pouses *a)lon and Rita. owever, the RTC failed to reali-ethat a de/nitive adudication as to the ownership of ;ot %o. 4+2!and half of ;ot %o. 4+2' is essential in this case as it a?ects theauthorit) of the RTC to direct the partition of the said parcels ofland. >i0pl) put, the RTC cannot properl) direct the partition of ;%o. 4+2! and half of ;ot %o. 4+2' until and unless it deter0inesthat the said parcels of land indeed for0 part of the estate of>pouses *a)lon.

t should e stressed that the partition proceedings efore the RTonl) covers the properties co"owned ) the parties therein in therespective capacit) as the surviving heirs of >pouses *a)lon.ence, the authorit) of the RTC to issue an order of partition in thproceedings efore it onl) a?ects those properties which actuall)elonged to the estate of >pouses *a)lon.

n this regard, if ;ot %o. 4+2! and half of ;ot %o. 4+2', asunwaveringl) clai0ed ) 6lorante, are indeed eBclusivel) owned) Rita, then the said parcels of land 0a) not e partitionedsi0ultaneousl) with the other properties suect of the partitioncase efore the RTC. n such case, although the parties in the casefore the RTC are still co"owners of the said parcels of land, theRTC would not have the authorit) to direct the partition of the saparcels of land as the proceedings efore it is onl) concerned withe estate of >pouses *a)lon.

HEREFORE, in consideration of the foregoing disuisitions, thpetition is "ARTIALLY GRANTED. The Decision dated


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G.R. No. 191178 March 13, 013

ANCHOR SA!INGS BAN FORMERLY ANCHOR FINANCE ANDIN!ESTMENT COR"ORATION, 3etitioner,vs.HENRY H. F'RIGAY, GELINDA C. F'RIGAY, HERRIETTE C.F'RIGAY a#$ HEGEM C. F'RIGAY,Respondents.

D : C > < %

MENDO(A, J.:

This concerns a petition for reviewY on certiorari /led ) petitioner

Anchor >avings *ank 7A>*9 under Rule 45 of the 1!!+ Rules ofCivil 3rocedure, assailing the (a) , 22! Decision1 and theJanuar) , 212 Resolution of the Court of Appeals 7CA9, in CA"#.R. C$ %o. !21&, dis0issing the appeal.&

The assailed resolution denied the separate 0otions forreconsideration of oth parties.

Th5 Fac/

* /led a veri/ed co0plaint for su0 of 0one)and da0ages with application for replevin against CiudadTransport >ervices, nc. 7CT>9, its president, respondent enr) .6uriga)H his wife, respondent #elinda C. 6uriga)H and a 8John Doe.8The case was docketed as Civil Case %o. !!"'5 and raSed to*ranch 14& of the Regional Trial Court of (akati Cit) 7RTC9.4

*, the dispositive portion of which reads=

G:R:6avings *ank ordering defendants Ciudad Transport>ervices, nc., enr) . 6uriga) and #enilda C. 6uriga) to pa) thefollowing=

19 The a0ount of :ight (illion >iB undred %inet) 6ive ThousandTwo undred Two pesos and 6ift) %ine centavos 73hp,'!5,2.5!9as 3R%C3A; of Ten 712P9 per cent of the totala0ount dueH

59 H

'9 Costs of suit.

>< * /led a Co0plaint for Rescission of Deed ofDonation, Title and Da0ages11 against the respondent spousesand their children. The case was docketed as Civil Case %o. A"&242and raSed to *ranch 55 of the RTC of Ala0inos, 3angasinan. n itsCo0plaint, A>* 0ade the following allegations=

B B B B

4. That Ciudad Transport >ervices, nc., enr) . 6uriga) and#elinda C. 6uriga) otained a loan fro0 Anchor >avings *ank andsuseuentl) the for0er defaulted fro0 their loan oligation which

pro0pted Anchor >avings *ank to /le the case entitled 8Anchor>avings *ank vs. Ciudad Transport >ervices, nc., enr) . 6urigaand #elinda C. 6uriga)8 lodged efore (akati Cit) Regional TrialCourt *ranch 14& and docketed as Civil Case %o. !!"'5. ps. enr) . 6uriga) and #elinda C. 6uriga)are the registered owners of various real properties located at th3rovince of 3angasinan covered ) Transfer Certi/cate of Title %o1!+1, 1'+, 1'+!, and 1'. B B B

'. That on (arch 221 defendants >ps. enr) . 6uriga) and#elinda C. 6uriga) eBecuted a Deed of Donation in favor of theirchildren herein defendants ege0 C. 6uriga) and erriette C.6uriga) donating to the0 all of the aove"0entioned properties.ence, the following titles were issued under their na0es to wit= Transfer Certi/cate of Title %os. 1+4&, 1+4, 1+41, and 1+4B B B

+. That the donation 0ade ) defendants >ps. enr) . 6uriga)and #elinda C. 6uriga) were done with the intention to defraud itcreditors particularl) Anchor >avings *ank. >aid transfer orconve)ance is the one conte0plated ) Article 1&+ of the %ewCivil Code, which reads=

B B B B

. B B B n the instant case, >ps. 6uriga) donated the properties athe ti0e there was a pending case against the0. B B B. n theinstant case, the >ps. 6uriga) donated the properties to their sonand daughter. (oreover, the transfer or donation was eBecuted i221 when oth donees ege0 C. 6uriga) and erriette C. 6urigare 0inors.

!. Clearl), the Donation 0ade ) defendants >ps. 6uriga) wasintended to deprive plainti? Anchor >avings *ank fro0 going aftethe suect properties to answer for their due and de0andaleoligation with the *ank. The donation eing undertaken in fraudof creditors then the sa0e 0a) e rescinded pursuant to Article1&1 of the %ew Civil Code. The said provision provides that= B BB

Conseuentl), Transfer Certi/cate of Title %os. 1+4&, 1+4,1+41, and 1+42 issued under the na0es of defendants errieC. 6uriga) and ege0 C. 6uriga) should likewise e cancelled anreverted to the na0es of co"defendants enr) and #elinda6uriga).

12. That ecause of the fraud perpetrated ) defendants, plaintisu?ered the following da0ages.

11. 3lainti? su?ered actual and co0pensator) da0ages as a resof the /ling of the case the ank has spent a lot of 0an"hours ofits e0plo)ees and oFcers re"evaluating the account of defendan>ps. 6uriga). >uch 0an"hour when converted into 0onetar)consideration represents the salaries and per die0s of itse0plo)ees particularl) the CEAppraiser, ead aid clai0 likewise represents ad0inistrative eBpenses such transportation eBpenses, reproduction of docu0ents, and courieeBpenses a0ong othersH

1&. Defendants should e 0ade to pa) plainti? Anchor >avings*ank the a0ount of 3:>=


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15. Attorne)s fees euivalent to twent)"/ve percent 75P9 of thetotal a0ount that can e collected fro0 defendantH

1'. Defendants should also e held liale to pa) for the cost ofsuit.1

nstead of /ling an answer, respondents sought the dis0issal ofthe co0plaint, principall) arguing that the RTC failed to acuireurisdiction over their persons as well as over the suect 0atter inview of the failure of the A>* to serve the su00ons properl) andto pa) the necessar) legal fees.

RTC R5/o-o#/

epte0er !, 22', the RTC issued an *s opposition to the 0otion for reconsideration,on 6eruar) +, 22+, the RTC reconsidered its earlierpronounce0ent and dis0issed the co0plaint for failure of A>* topa) the correct docket fees and for prescription.14

RTC eBplained that the service of su00ons ) pulication 0ade) A>* was valid ecause respondents whereaouts could nothave een ascertained with eBactitude and ecause >ection 14,Rule 14 of the Rules of Court did not distinguish what kind ofaction it would appl).

* did not state the current taBdeclaration or current -onal valuation of the real propertiesinvolved, as well as the a0ount of actual da0ages and attorne)sfees it pra)ed for, the trial court was of the view that A>*purposel) evaded the pa)0ent of the correct /ling fees.

* /led the action for rescission onl)on


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to e proved during trial. t asserts that its action is not )et arred) prescription, insisting that the reckoning point of the four

749")ear prescriptive period should e counted fro0 >epte0er225, when it discovered the fraudulent donation 0ade )respondent spouses.

The asic issue in this case is whether the CA was correct indis0issing A>*s co0plaint on the ground that the action againstrespondents was pre0ature.

R-#> o h5 Cor

The Court /nds the petition ereft of 0erit.

>ection 1 of Rule of the Revised Rules of Court reuires thatever) ordinar) civil action 0ust e ased on a cause of action.>ection of the sa0e rule de/nes a cause of action as an act oro0ission ) which a part) violates the right of another. n orderthat one 0a) clai0 to have a cause of action, the followingele0ents 0ust concur= 719 a right in favor of the plainti? )whatever 0eans and under whatever law it arises or is createdH79 an oligation on the part of the na0ed defendant to respect ornot to violate such rightH and 7&9 an act or o0ission on the part ofsuch defendant in violation of the right of the plainti? orconstituting a reach of the oligation of the defendant to theplainti? for which the latter 0a) 0aintain an action for recover) of da0ages or other appropriate relief.1! n other words, 8a cause ofaction arises when that should have een done is not done, or that

which should not have een done is done.82

n 3hilippine A0erican #eneral nsurance Co., nc. v. >weet ;ines,nc.,1 it was held that 8efore an action can properl) eco00enced, all the essential ele0ents of the cause of action 0uste in eBistence, that is, the cause of action 0ust e co0plete. Allvalid conditions precedent to the institution of the particularaction, whether prescried ) statute, /Bed ) agree0ent of theparties or i0plied ) law 0ust e perfor0ed or co0plied withefore co00encing the action, unless the conduct of the adversepart) has een such as to prevent or waive perfor0ance or eBcusenon"perfor0ance of the condition.8

(oreover, it is not enough that a part) has, in e?ect, a cause ofaction.

The rules of procedure reuire that the co0plaint 0ust contain aconcise state0ent of the ulti0ate or essential facts constitutingthe plainti?Os cause of action. 8The test of the suFcienc) of thefacts alleged in the co0plaint is whether or not, ad0itting thefacts alleged, the court can render a valid udg0ent upon thesa0e in accordance with the pra)er of plainti?.8 The focus is onthe suFcienc), not the veracit), of the 0aterial allegations. 6ailureto 0ake a suFcient allegation of a cause of action in theco0plaint warrants its dis0issal.&

n relation to an action for rescission, it should e noted that there0ed) of rescission is susidiar) in natureH it cannot e institutedeBcept when the part) su?ering da0age has no other legal 0eansto otain reparation for the sa0e.4 Article 11++ of the %ew CivilCode provides=

The creditors, after having pursued the propert) in possession ofthe detor to satisf) their clai0s, 0a) eBercise all the rights andring all the actions of the latter for the sa0e purpose, save thosewhich are inherent in his personH the) 0a) also i0pugn theactions which the detor 0a) have done to defraud the0.7:0phasis added9

Conseuentl), following the susidiar) nature of the re0ed) ofrescission, a creditor would have a cause of action to ring anaction for rescission, if it is alleged that the following successive0easures have alread) een taken= 719 eBhaust the properties ofthe detor through lev)ing ) attach0ent and eBecution upon allthe propert) of the detor, eBcept such as are eBe0pt ) law fro0

eBecutionH 79 eBercise all the rights and actions of the detor,save those personal to hi0 7accion surogatoria9H and 7&9 seekrescission of the contracts eBecuted ) the detor in fraud of therights 7accion pauliana9.5

Gith respect to an accion pauliana, it is reuired that the ulti0atfacts constituting the following reuisites 0ust all e alleged in tco0plaint, vi-.=

19 That the plainti? asking for rescission, has credit prior to thealienation, although de0andale laterH

9 That the detor has 0ade a suseuent contract conve)ing a

patri0onial ene/t to a third personH

&9 That the creditor has no other legal re0ed) to satisf) his clai0ut would ene/t ) rescission of the conve)ance to the thirdpersonH

49 That act eing i0pugned is fraudulentH and

59 That the third person who received the propert) conve)ed, if onerous title, has een an acco0plice in the fraud.'

A cursor) reading of the allegations of A>*s co0plaint wouldshow that it failed to allege the ulti0ate facts constituting itscause of action and the prereuisites that 0ust e co0pliedefore the sa0e 0a) e instituted. A>*, without availing of the/rst and second re0edies, that is, eBhausting the properties of

CT>, enr) . 6uriga) and #enilda C. 6uriga) or their trans0issirights and actions, si0pl) undertook the third 0easure and /ledan action for annul0ent of the donation. This cannot e done. ThCourt here) uotes with approval the thorough discourse of theCA on this score=+

To answer the issue of prescription, the case of Mhe ong Chengvs. Court of Appeals 7#.R. %o. 1441'!, (arch , 2219 ispertinent. n said case, 3hila0 /led an action for collection againMhe ong Cheng. Ghile the case was still pending, or onDece0er 2, 1!!, Mhe ong Cheng, eBecuted deeds ofdonations over parcels of land in favor of his children, and onDece0er +, 1!!, said deeds were registered. Thereafter, newtitles were issued in the na0es of Mhe ong Chengs children. Then, the decision eca0e /nal and eBecutor). *ut uponenforce0ent of writ of eBecution, 3hila0 found out that Mhe onCheng no longer had an) propert) in his na0e. Thus, on 6eruar5, 1!!+, 3hila0 /led an action for rescission of the deeds ofdonation against Mhe ong Cheng alleging that such was 0ade ifraud of creditors. owever, Mhe ong Cheng 0oved for thedis0issal of the action averring that it has alread) prescried sinthe four")ear prescriptive period for /ling an action for rescissionpursuant to Article 1&! of the Civil Code co00enced to run fro0the ti0e the deeds of donation were registered on Dece0er +1!!. Mhe ong Cheng averred that registration a0ounts toconstructive notice and since the co0plaint was /led onl) on6eruar) 5, 1!!+, or 0ore than four 749 )ears after saidregistration, the action was alread) arred ) prescription. Thetrial court ruled that the co0plaint had not )et prescried sincethe prescriptive period egan to run onl) fro0 Dece0er !,1!!&, the date of the decision of the trial court. >uch decision wa

aFr0ed ) this court ut reckoned the accrual of 3hila0Os causeof action in Januar) 1!!+, the ti0e when it /rst learned that the udg0ent award could not e satis/ed ecause the udg0entcreditor, Mhe ong Cheng, had no 0ore properties in his na0e.ence, the case reached the >upre0e Court which ruled that theaction for rescission has not )et prescried, ratiocinating asfollows=

8:ssentiall), the issue for resolution posed ) petitioners is this=Ghen did the four 749 )ear prescriptive period as provided for inArticle 1&! of the Civil Code for respondent 3hila0 to /le itsaction for rescission of the suect deeds of donation co00encerunK

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The petition is without 0erit.

Article 1&! of the Civil Code si0pl) provides that, ZThe action toclai0 rescission 0ust e co00enced within four )ears. >ince thisprovision of law is silent as to when the prescriptive period wouldco00ence, the general rule, i.e, fro0 the 0o0ent the cause ofaction accrues, therefore, applies. Article 1152 of the Civil Code isparticularl) instructive=

ARTC;: 1152. The ti0e for prescription for all kinds of actions,when there is no special provision which ordains otherwise, shalle counted fro0 the da) the) 0a) e rought.

ndeed, this Court enunciated the principle that it is the legalpossiilit) of ringing the action which deter0ines the startingpoint for the co0putation of the prescriptive period for the action.Article 1&& of the Civil Code provides as follows=

ARTC;: 1&&. An action for rescission is susidiar)H it cannot einstituted eBcept when the part) su?ering da0age has no otherlegal 0eans to otain reparation for the sa0e.

t is thus apparent that an action to rescind or an accion pauliana0ust e of last resort, availed of onl) after all other legal re0edieshave een eBhausted and have een proven futile.1âwphi1 6or anaccion pauliana to accrue, the following reuisites 0ust concur=

19 That the plainti? asking for rescission, has a credit prior to thealienation, although de0andale laterH 9 That the detor has

0ade a suseuent contract conve)ing a patri0onial ene/t to athird personH &9 That the creditor has no other legal re0ed) tosatisf) his clai0, ut would ene/t ) rescission of theconve)ance to the third personH 49 That the act eing i0pugned isfraudulentH 59 That the third person who received the propert)conve)ed, if ) onerous title, has een an acco0plice in the fraud.

Ge uote with approval the following disuisition of the CA on the0atter=

An accion pauliana accrues onl) when the creditor discovers thathe has no other legal re0ed) for the satisfaction of his clai0against the detor other than an accion pauliana. The accionpauliana is an action of a last resort. 6or as long as the creditorstill has a re0ed) at law for the enforce0ent of his clai0 againstthe detor, the creditor will not have an) cause of action againstthe creditor for rescission of the contracts entered into ) andetween the detor and another person or persons. ndeed, anaccion pauliana presupposes a udg0ent and the issuance ) thetrial court of a writ of eBecution for the satisfaction of theudg0ent and the failure of the >heri? to enforce and satisf) theudg0ent of the court. t presupposes that the creditor haseBhausted the propert) of the detor. The date of the decision ofthe trial court against the detor is i00aterial. Ghat is i0portantis that the credit of the plainti? antedates that of the fraudulentalienation ) the detor of his propert). After all, the decision ofthe trial court against the detor will retroact to the ti0e when thedetor eca0e indeted to the creditor.

3etitioners, however, 0aintain that the cause of action ofrespondent 3hila0 against the0 for the rescission of the deeds of

donation accrued as earl) as Dece0er +, 1!!, when petitionerMhe ong Cheng registered the suect conve)ances with theRegister of Deeds. Respondent 3hila0 allegedl) had constructiveknowledge of the eBecution of said deeds under >ection 5 of3residential Decree %o. 15!, uoted infra, as follows=

>:CTince respondent 3hila0 /led its co0plaint for accionpauliana against petitioners on 6eruar) 5, 1!!+, arel) a 0onfro0 its discover) that petitioner Mhe ong Cheng had no otherpropert) to satisf) the udg0ent award against hi0, its action forescission of the suect deeds clearl) had not )et prescried.8

6ro0 the foregoing, it is clear that the four")ear prescriptive perico00ences to run neither fro0 the date of the registration of thdeed sought to e rescinded nor fro0 the date the trial courtrendered its decision ut fro0 the da) it has eco0e clear thatthere are no other legal re0edies ) which the creditor can satishis clai0s. Q:0phases in the original

n all, it is incorrect for A>* to argue that a co0plaint need notallege all the ele0ents constituting its cause of action since itwould si0pl) adduce proof of the sa0e during trial. 8%othing is0ore settled than the rule that in a 0otion to dis0iss for failure state a cause of action, the inuir) is 8into the suFcienc), not thveracit), of the 0aterial allegations.8 The inuir) is con/ned tothe four co0ers of the co0plaint, and no other. ! @nfortunatel) f

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A>*, the Court /nds the allegations of its co0plaint insuFcient inestalishing its cause of action and in apprising the respondents of the sa0e so that the) could defend the0selves intelligentl) ande?ectivel) pursuant to their right to due process. t is a rule ofuniversal application that courts of ustice are constituted toadudicate sustantive rights. Ghile courts should consider pulicpolic) and necessit) in putting an end to litigations speedil) the)0ust nevertheless har0oni-e such necessit) with the funda0entalright of litigants to due process. G:R:6<


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!OIDABLE CONTRACTS

G.R. No. 1043 %-< 1, 001

TIB'RCIO SAMONTE, petitioner,vs.CO'RT OF A""EALS, E'GENIA DANGO GADIANO, TEOFILOGADIANO, "ETRONILO DANGO FELICIANA DANGO, NONILOMARA!E a#$ GERONIMO DANGO, respondents.

A"'NAN, J.*

Tiurcio >a0onte 7petitioner9 /led this petition for review

on certiorari seeking to reverse and set aside the Decision, dated%ove0er !, 1!!1, of the Court of Appeals 7CA9 in CA"#.R C$ %o.1''45. e likewise seeks the reversal of CA Resolution, dated6eruar) 1, 1!!, which denied his 0otion for reconsideration.

The parcel of land 7;ot %o.1'9 suect of this dispute is situated in%asipit, Agusan del %orte, and originall) covered ) ale7:Bhiit D"19, a0onte9and TCT %o. RT"554, renea Tolero and %icolas Jadol for ;ot 1'"*

7:Bhiit *9H that on 6eruar) 1&, 1!5! ased on a sudivision plasudividing ;ot 1'"* to 1'"*"1 and 1'"*", TCT %o. RT"554 wacancelled and in its place TCT %o. RT"555 was issued in the na0eof Jaco *. Tagorda for ;ot 1'"*"1 and TCT %o. 55' in the na0e renea Tolero and %icolas Jadol for ;ot 1'" *".

3lainti?s in their evidence clai0 ownership over the entire lot, ;o1', as one"half71E9 of the area of 1, +5& suare 0eters wasregistered in the na0e of their 0other renea Tolero 7:Bhiit :9 tother half was registered in the na0e of their and grand0other,Apolonia Aao. After Apolonia Aao died during the Japaneseoccupation and renea Tolero died in 1!45, the) inherited andeca0e owners of ;ot 1'. 3lainti?s uestioned the series of

cancellation of the certi/cate of title starting fro0 a0onte9 and have paid thereal estate taBes thereon 7:Bhiit ' to '"M, inclusive >a0onte9. Tportions he ought is now covered ) TCT %o. RT"55& 7:Bhiit ">a0onte9 and TCT %o. RT"1'5 7:Bhiit 4">a0onte9.

Defendant Jadols clai0 that the) eca0e owners of one-hal$:1;


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e9 directing the defendants to vacate the pre0ises of ;ot 1' andto re0ove all their i0prove0ents therefro0 as the) are uilders inad faithH

f9 directing defendants Jadol and >a0onte to pa) ointl) andseverall) the plainti?s the su0 of 32,222.22 for the use andoccupation of the landH

g9 directing defendants Jadol and >a0onte to pa) 35,222.22 asattorne)Os feesH

h9 ordering the dis0issal of the counterclai0s of defendantsH and

i9 directing the defendants Jadol and >a0onte to pa) the costs.

>< ettle0ent andCon/r0ation >ale,8 adudicated unto hi0self one"half of ;ot 1') 0isrepresenting hi0self as the sole, heir of Apolonia Aao.Atupan, in said aFdavit, likewise con/r0ed the two deeds of saleallegedl) eBecuted ) hi0 and Aao on >epte0er 15 and 1',1!&!, covering the latterOs one"half lot in favor of %icolas Jadol.The trial court found AtupanOs aFdavit, dated August +, 1!5+, toe tainted with fraud ecause he falsel) clai0ed therein that hewas the sole heir of Aao when in fact, he 0erel) lived and grewup with her. Jadol and his wife, *eatri-, knew aout this fact.Despite this knowledge, however, the Jadol spouses still presented

the aFdavit of Atupan efore the Register of Deeds of the 3rovinceof Agusan when the) caused the cancellation of pouses, nowargues that the respondentsO action for reconve)ance, /led onl) 1!+5, had long prescried considering that the Jadol spousescaused the registration of a portion of the suect lot in theirna0es wa) ack in August , 1!5+. t is petitionerOs contentionthat since eighteen )ears had alread) lapsed fro0 the issuance o TCT %o. RT"4+' until the ti0e when respondents /led the action the court a quo in 1!+5, the sa0e was ti0e"arred.

3etitionerOs defense of prescription is untenale. The general rulethat the discover) of fraud is dee0ed to have taken place uponthe registration of real propert) ecause it is considered aconstructive notice to all persons812does not appl) in this case.nstead, the CA correctl) applied the ruling in *dille vs. Court o$

*ppeals11 which is sustantiall) on all fours with the present case

n *dille, petitioner therein eBecuted a deed of eBtraudicialpartition 0isrepresenting hi0self to e the sole heir of his 0othewhen in fact she had other children. As a conseuence, petitionetherein was ale to secure title to the land in his na0ealone. 6is silings then /led a case for partition on the ground thsaid petitioner was onl) a trustee on an i0plied trust of thepropert). A0ong the issues resolved ) the Court in that case waprescription. >aid petitioner registered the propert) in 1!55 andthe clai0 of private respondents therein was presented in 1!+4.

The CourtOs resolution of whether prescription had set in therein uite apropos to the instant case=

t is true that registration under the Torrens s)ste0 is constructivnotice of title, ut it has likewise een our holding that the Torren

title does not furnish a shield for fraud. t is therefore no argu0eto sa) that the act of registration is euivalent to notice ofrepudiation, assu0ing there was one, notwithstanding the long"standing rule that registration operates as a universal notice oftitle.

6or the sa0e reason, we cannot dis0iss private respondentsOclai0s co00enced in 1!+4 over the estate registered in 1!55.Ghile actions to enforce a constructive trust prescries in ten)ears, reckoned fro0 the date of the registration of the propert)we, as we said, are not prepared to count the period fro0 such adate in this case. Ge note the petitionerOs su& rosa e?orts to gethold of the propert) eBclusivel) for hi0self eginning with hisfraudulent 0isrepresentation in his unilateral aFdavit of


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eBtraudicial settle0ent that he is 8the onl) heir and child of his0other 6eli-a with the conseuence that he was ale to securetitle in his na0e Qalone.8 Accordingl), we hold that the right of theprivate respondents co00enced fro0 the ti0e the) actuall)discovered the petitionerOs act of defraudation. According to therespondent Court of Appeals, the) 8ca0e to know Qof itapparentl) onl) during the progress of the litigation.8 ence,prescription is not a ar. 1

n this case, the CA reckoned the prescriptive period fro0 the ti0erespondents had actuall) discovered the fraudulent act of Atupanwhich was, as orne out ) the records, onl) during the trial ofCivil Case %o. 1'+.1&Citing *dille, the CA rightfull) ruled that

respondentsO action for reconve)ance had not )et prescried.

a0onte was previousl)charged with the fact that Jadol lacked the capacit) to trans0ittitle over an) part of the suect propert) including that portionwhich the latter sold to Tagorda. Thus, >a0onte was clearl) in adfaith when he sought the registration of the deed of sale of Jul) 12,1!+ which e?ected the cancellation of TCT %o. RT"555 and theissuance of TCT %o. 1'5 in his favor. BBB 1

3etitioner cannot now clai0 that he alread) acuired valid title to

the propert). The inscription in the registr), to e e?ective, 0uste 0ade in good faith. The defense of indefeasiilit) of a TorrensTitle does not eBtend to a transferee who takes the certi/cate oftitle with notice of a \aw. A holder in ad faith of a certi/cate oftitle is not entitled to the protection of the law, for the law cannote used as a shield for, frauds. 1!

n /ne, there is no co0pelling reason to deviate fro0 the salutar)rule that /ndings and conclusions of the trial court, especiall) ifaFr0ed ) the appellate court, are accorded ut0ost respect )this Court.1âwphi1.nêt

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