PHILIPPINE NATIONAL BANK, petitioner, vs. MEGA PRIME REALTY AND HOLDINGS CORPORATION, respondent. x-------------------------x G.R. No. 173456 October 6, 2008

MEGA PRIME REALTY AND HOLDINGS CORPORATION, petitioner, vs. PHILIPPINE NATIONAL BANK, respondent. x-------------------------x DECISION REYES, R.T., J.: IN sales of realty, a breach in the warranties of the seller entitles the buyer to a proportionate reduction of the purchase price.2 The principle is illustrated in these consolidated petitions for review on certiorari of the Decision1 and Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 66759, which reversed and set aside that of the Regional Trial Court (RTC) in Malabon City. Earlier, the RTC invalidated the sale of shares of stock in PNB Management and Development Corporation (PNB-Madecor) by and between Mega Prime Realty Corporation (Mega Prime), as vendee, and the Philippine National Bank (PNB), as vendor.

The Facts The facts, as summarized by the appellate court, are as follows: Mega Prime filed a complaint for annulment of contract before the RTC of Malabon on November 28, 1997. An amended complaint was subsequently filed on February 17, 1998. In its amended complaint, Mega Prime alleged, among others, that PNB operates a subsidiary by the name of PNB Management and Development Corporation. In line with PNB's privatization plan, it opted to sell or dispose of all its stockholdings over PNB-Madecor to Mega Prime. Thereafter, a deed of sale dated September 27, 1996 was executed between PNB (as vendor) and Mega Prime (as vendee) whereby PNB sold, transferred and conveyed to Mega Prime, on "As is where is" basis, all of its stockholdings in PNBMadecor for the sum of Five Hundred Five Million Six Hundred Twenty Thousand Pesos (P505,620,000.00). The pertinent portions of the deed of sale are hereunder quoted as follows: WHEREAS, PNB Management and Development Corporation (PNB-MADECOR), a corporation organized and existing under the laws of the Republic of the Philippines, with principal office at PNB Financial Center, Roxas Boulevard, Pasay City, Metro Manila, is a wholly-owned subsidiary of the vendor; WHEREAS, the Vendee has offered to buy all of the stockholdings of the Vendor in PNB-MADECOR with an authorized capital stock of P250,000,000.00 and the Vendor has accepted the said offer; WHEREAS, the parties have previously agreed for the Vendee to pay the Vendor the purchase price of all the said stockholdings of the Vendor, as follows: (i) P50,562,000.00 on or before July 18, 1996 which has been paid; (ii) P50,562,000.00 on or before September 27, 1996; and (iii) Balance of the purchase price through loan with the Vendor;

subject to the condition that if the Vendee fails to pay the second installment, the agreement to sell the said stockholdings will be cancelled and the initial 10% down payment will be forfeited in favor of the Vendor; NOW, THEREFORE, for and in consideration of the foregoing premises and the sum of PHILIPPINE PESOS: FIVE HUNDRED FIVE MILLION SIX HUNDRED TWENTY (P505,620,000.00), receipt of which in full is hereby acknowledged, the Vendor hereby sells, transfers and conveys, on "As is where is" basis, unto and in favor of the Vendee, its assigns and successors-ininterest, all of the Vendor's stockholdings in PNB-MADECOR, free from any liens and encumbrances, as evidenced by the following Certificates of Stock (the "Certificates of Stock"): Number 0010 0002 0003 0004 0005 0006 0008 0009 0012 0013 No. of Shares 313,871 1 1 1 1 1 1 1 1 1

hereto attached as Annex "A," and any subscription rights thereto, subject to the following terms and conditions: 1. The sale of the above stockholdings of the Vendor is on a clean balance sheet, i.e. all assets and liabilities are squared, and no deposits, furniture, fixtures and equipment, including receivables shall be transferred to the Vendee, except real properties and improvements thereon of PNB-MADECOR in Quezon City containing an area of 19,080 sq. m., situated at the corner of Quezon Boulevard (presently Quezon Avenue) and Roosevelt Avenue covered by five (5) titles, namely: TCT Nos. 87881, 87882, 87883, 87884, and 160470, per Annexes "B," "C," "D," "E," and "F" hereof. Leasehold rights of the Vendor on the Numancia property are excluded from this sale, however, lease of the Mandy Enterprises and sub-leases thereon shall be honored by the Vendor which shall become the sub-lessor of the said property. xxx Pursuant, therefore, to the terms of the above-quoted deed of sale, the parties also entered into a loan agreement on the same date (September 27, 1996) for P404,496,000.00 and Mega Prime executed in favor of PNB a promissory note for the P404,496,000.00. Mega Prime further alleged that one of the principal inducements for it to purchase the stockholdings of defendant PNB in PNBMadecor was to acquire assets of PNB-Madecor, specifically the 19,080 square-meter property located at the corner of Quezon Avenue and Roosevelt Avenue referred to as the Pantranco property. Mega Prime then entered into a joint venture to develop the Pantranco property. However, Mega Prime's joint venture partner pulled out of the agreement when it learned that the property covered by Transfer Certificate of Title (TCT) No. 160470 was likewise the subject matter of another title registered in the name of the City Government of Quezon City (TCT No. RT-9987 [266573]). Moreover, the lot plan of the Pantranco property shows that TCT No. 160470 covers real property located right in the middle of the Pantranco property rendering nugatory the plans set up by Mega Prime for the said property.

Mega Prime sought the annulment of the deed of sale on ground that PNB misrepresented that among the assets to be acquired by Mega Prime from the sale of shares of stock was the property covered by TCT No. 160470. However, the subject property was outside the commerce of man, the same being a road owned by the Quezon City Government. Mega Prime also sought reimbursement of the P150,000,000.00 plus legal interest incurred by Mega Prime as expenses for the development of the Pantranco property as actual damages and further sought moral and exemplary damages and attorney's fees. In its answer to the amended complaint, PNB maintains that the subject matter of the deed of sale was PNB's shares of stock in PNBMadecor which is a separate juridical entity, and not the properties owned by the latter as evidenced by the deed itself. The sale of PNB's shares of stock in PNB-Madecor to Mega Prime did not dissolve PNB-Madecor. PNB only transferred its control over PNBMadecor to Mega Prime. The real properties of PNB-Madecor did not change ownership, but remained owned by PNB-Madecor. Moreover, PNB denied that it is liable for P150,000,000.00 allegedly incurred by Mega Prime for the development of the Pantranco property since Mega Prime itself alleged in its amended complaint that no such development could be undertaken. According to PNB, Mega Prime's accusation that there was fraudulent misrepresentation on the former's part is without basis. The best evidence of their transaction is the subject deed of sale which clearly shows that what PNB sold to Mega Prime was PNB's stockholdings in PNB-Madecor. As stockholder of PNB-Madecor, PNB did not know nor was it in a position to know, that the Quezon City Government was able to secure another title over the lot covered by TCT No. 160470. Mega Prime, as buyer, bought the shares of stock at its own risk under the caveat emptor rule, more so considering that the sale was made on an "as is where is" basis. Moreover, the fact that the Quezon City Government was able to secure a title over the same lot does not necessarily mean that PNB-Madecor's title to it is void or outside the commerce of man. Only a proper proceeding may determine which of the two (2) titles should prevail over the other. Mega Prime, now as the controlling stockholder of PNB-Madecor, should have instead filed action to quiet PNB-Madecor's title over the said lot.3 RTC and CA Dispositions On December 21, 1999, the RTC gave judgment in favor of Mega Prime and against PNB. The fallo of the RTC decision states: WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff and against the defendant, as follows: (1) Declaring the Deed of Sale of 27 September 1996 as void and rescinded; (2) Ordering the defendant PNB to reimburse plaintiff the legal interest on the amount of ONE HUNDRED FIFTY MILLION PESOS (P150,000,000.00) loan intended by plaintiff in developing the Pantranco properties, as actual damages; (3) Ordering defendant PNB to pay plaintiff the sum of FIVE MILLION PESOS (P5,000,000.00) as exemplary damages; (4) Ordering defendant PNB to pay plaintiff the sum of ONE HUNDRED THOUSAND PESOS (P100,000.00) as attorney's fees; (5) Ordering defendant to restore to plaintiff the sum of ONE HUNDRED ONE MILLION ONE HUNDRED TWENTYFOUR THOUSAND PESOS (P101,124,000.00) representing the sum actually paid by plaintiff under the subject contract of sale with legal interest thereon reckoned from the date of extra judicial demand made by plaintiff; (6) Ordering plaintiff to return the five properties covered by T.C.T. Nos. 87881, 87882, 87883, 87884 and 160470 in favor of the defendant under the principle of mutual restitution; (7) Ordering plaintiff to return the stockholdings subject matter of the 27 September 1996 contract of sale in favor of defendant; (8) Ordering defendant to pay the costs of suit.

SO ORDERED.4 PNB elevated the matter to the CA via Rule 41 of the 1997 Rules of Civil Procedure. In its appeal, PNB contended, inter alia, that what was sold to Mega Prime were the bank's shares of stock in PNB-Madecor, a corporation separate and distinct from PNB; that the Pantranco property was never a consideration in the contract of sale; that Mega Prime is presumed to have undertaken due diligence in ascertaining the ownership of the disputed property, it being a reputable real estate company. Further, PNB claimed that Mega Prime bought its shares of stock at its own risk under the caveat emptorrule, as the sale was on an "as is where is" basis. That the Quezon City Government was able to secure title over the same lot does not necessarily mean that PNB-Madecor's title to it was void or outside the commerce of man. According to PNB, Mega Prime's remedy, as the new controlling owner of PNB-Madecor, is to file an action for quieting of its title to the questioned lot. On January 27, 2006, the CA reversed and nullified the RTC ruling, disposing as follows: WHEREFORE, based on the above premises, the assailed Decision dated 21 December 1999 of the Regional Trial Court of Malabon, Metro Manila, Branch 72, is hereby REVERSED and SET ASIDE and a new one entered DISMISSING the complaint in Civil Case No. 2793-MN. The counterclaim of PNB is likewise DISMISSED. SO ORDERED.5 Both parties moved for reconsideration of the CA decision. Both motions were, however, denied with finality on July 5, 2006. Hence, the present recourse by both PNB and Mega Prime. PNB first filed its petition for review, docketed as G.R. No. 173454, assailing only the CA's dismissal of its counterclaim. In its separate petition for review, docketed as G.R. No. 173456, Mega Prime challenged the reversal by the CA of the RTC decision. Issues PNB assigns solely that the CA committed a grave error, giving rise to a question of law, in concluding that Mega Prime's complaint was not a mere ploy to prevent the foreclosure of the pledge and in dismissing PNB's counterclaim, ignoring the documentary evidence proving that Mega Prime's complaint was intended to preempt the foreclosure of the pledge and evade payment of its P404,496,000.00 overdue debt. For its part, Mega Prime submits that the CA erred in ruling that Mega Prime did not have sufficient grounds to have the deed of sale dated September 27, 1996 annulled. Stripped to its bare essentials, the Court is tasked to resolve the following questions: A. Are there grounds for the annulment of the deed of sale between PNB and Mega Prime? and B. Are PNB and Mega Prime entitled to the damages they respectively claim against each other? Our Ruling A. There is no sufficient ground to annul the deed of sale. There is no basis for a finding of fraud against PNB to invalidate the sale. A perusal of the deed of sale reveals that the sale principally involves the entire shareholdings of PNB in PNB-Madecor, not the properties covered by TCT Nos. 87881, 87882, 87883, 87884 and 160740. Any defect in any of the said titles should not, therefore, affect the entire sale. Further, there is no evidence that PNB was aware of the existence of another title on one of the properties covered by TCT No. 160740 in the name of the Quezon City government before and during the execution of the deed of sale. Although it is expressly stated in the deed of sale that the transfer of the entire stockholdings of PNB in PNB-Madecor will effectively result in the transfer of the said properties, the discovery of the title under the name of the Quezon City government does not6

substantially affect the integrity of the object of the sale. This is so because TCT No. 160740 covers only 733.70 square meters of the entire Pantranco property which has a total area of 19,080 square meters. We quote with approval the CA observations along this line: Well-settled is the rule that the party alleging fraud or mistake in a transaction bears the burden of proof. The circumstances evidencing fraud are as varied as the people who perpetrate it in each case. It may assume different shapes and forms; it may be committed in as many different ways. Thus, the law requires that it be established by clear and convincing evidence. Fraud is never lightly inferred; it is good faith that is. Under the Rules of Court, it is presumed that "a person is innocent of crime or wrong" and that "private transactions have been fair and regular." While disputable, these presumptions can be overcome only by clear and preponderant evidence. Applied to contracts, the presumption is in favor of validity and regularity. In this case, it cannot be said that Mega Prime was able to adduce a preponderance of evidence before the trial court to show that PNB fraudulently misrepresented that it had title or authority to sell the property covered by TCT No. 160470. Nor was Mega Prime able to satisfactorily show that PNB should be held liable for damages allegedly sustained by it. First, PNB correctly argued that with Mega Prime as a corporation principally engaged in real estate business it is presumed to be experienced in its business and it is assumed that it made the proper appraisal and examination of the properties it would acquire from the sale of shares of stock. In fact, Mega Prime was given copies of the titles to the properties which were attached to the subject deed of sale. In other words, there was full disclosure on the part of PNB of the status of the properties of PNB-Madecor to be transferred to Mega Prime by reason of its purchase of all of PNB's shareholdings in PNBMadecor. The general rule is that a person dealing with registered land has a right to rely on the Torrens certificate of title and to dispense with the need of making further inquiries. This rule, however, admits of exceptions: when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation. A perusal of TCT No. 160470 would show that the property is registered under the name Marcris Realty Corporation and not under PNB or PNB-Madecor, the alleged owner of the said property. Moreover, TCT No. 160470 explicitly shows on its face that it covers a road lot. This fact notwithstanding, Mega Prime still opted to buy PNB's shares of stock, investing millions of pesos on the said purchase. Mega Prime cannot therefore claim that it can rely on the face of the title when the same is neither registered under the name of PNB, the vendor of the shares of stock in PNB-Madecor, nor of PNB-Madecor, the alleged owner of the property. This should have forewarned Mega Prime to inquire further into the ownership of PNB-Madecor with respect to TCT No. 160470. And it should not be heard to complain that the property covered by TCT No. 160470 is outside the commerce of man, it being a road, since this fact is evident on the face of TCT No. 160470 itself which describes the property it covers as a road lot. If, indeed, the principal inducement for Mega Prime to buy PNB's shares of stock in PNB-Madecor was the acquisition of the said properties, Mega Prime should have insisted on putting in writing, whether in the same deed of sale or in a separate agreement, any condition or understanding of the parties regarding the transfer of titles from PNB-Madecor to Mega Prime. In buying the shares of stock with notice of the flaw in the certificate of title of PNB-Madecor, Mega Prime assumed the risks that may attach to the said purchase or said investment. Clearly, under the deed of sale, Mega Prime purchased the shares of stock of PNB in PNB-Madecor on an "as is where is" basis, which should give Mega Prime more reason to investigate and look deeper into the titles of PNB-Madecor. Second, Mega Prime's remedy is not with PNB. It must be stressed that PNB only sold its shares of stock in PNB-Madecor which remains to be the owner of the lot in question. Although, admittedly, PNB-Madecor is a subsidiary of PNB, this does not necessarily mean that PNB and PNB-Madecor are one and the same corporation.

The mere fact that a corporation owns all of the stocks of another corporation, taken alone is not sufficient to justify their being treated as one entity. If used to perform legitimate functions, a subsidiary's separate existence shall be respected, and the liability of the parent corporation as well as the subsidiary will be confined to those arising in their respective business. The general rule is that as a legal entity, a corporation has a personality distinct and separate from its individual stockholders or members, and is not affected by the personal rights, obligations and transactions of the latter. Courts may, however, in the exercise of judicial discretion step in to prevent the abuses of separate entity privilege and pierce the veil of corporate fiction. The following circumstances are useful in the determination of whether a subsidiary is but a mere instrumentality of the parent-corporation and whether piercing of the corporate veil is proper: (a) The parent corporation owns all or most of the capital stock of the subsidiary. (b) The parent and subsidiary corporations have common directors or officers. (c) The parent corporation finances the subsidiary. (d) The parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its incorporation. (e) The subsidiary has grossly inadequate capital. (f) The parent corporation pays the salaries and other expenses or losses of the subsidiary. (g) The subsidiary has substantially no business except with the parent corporation or no assets except those conveyed to or by the parent corporation. (h) In the papers of the parent corporation or in the statements of its officers, the subsidiary is described as a department or division of the parent corporation, or its business or financial responsibility is referred to as the parent corporation's own. (i) The parent corporation uses the property of the subsidiary as its own. (j) The directors or executives of the subsidiary do not act independently in the interest of the subsidiary, but take their orders from the parent corporation. (k) The formal legal requirements of the subsidiary are not observed. Aside from the fact that PNB-Madecor is a wholly-owned subsidiary of PNB, there are no other factors shown to indicate that PNB-Madecor is a mere instrumentality of PNB. Therefore, PNB's separate personality cannot be merged with PNBMadecor in the absence of sufficient ground to pierce the veil of corporate fiction. It must be noted that at the outset, PNB presented to Mega Prime the titles to the properties. With the exception of one (1) title, TCT No. 160470, the four (4) titles are registered under PNB-Madecor's name and not PNB. PNB correctly observed that Mega Prime's remedy is not to go after PNB who merely sold its shares of stock in PNB-Madecor but to file the appropriate action to remove any cloud in PNB-Madecor's title over TCT No. 160470. Third, it is significant to note that the deed of sale is a public document duly notarized and acknowledged before a notary public. As such, it has in its favor the presumption of regularity, and it carries the evidentiary weight conferred upon it with respect to its due execution. It is admissible in evidence without further proof of its authenticity and is entitled to full faith and credit upon its face. Thus, It has long been settled that a public document executed and attested through the intervention of the notary public is evidence of the facts in clear, unequivocal manner therein expressed. It has in its favor the presumption of regularity. To contradict all these, there must be evidence that is clear, convincing and more than merely

preponderant. The evidentiary value of a notarial document guaranteed by public attestation in accordance with law must be sustained in full force and effect unless impugned by strong, complete and conclusive proof. Based on the above arguments, there is no reason to annul the said deed considering that both parties freely and fairly entered into the said contract presumptively knowing the consequences of their acts. Lastly, Mega Prime, using its business judgment, entered into a sale transaction with PNB respecting shares of stock in PNBMadecor, in anticipation of owning properties owned by PNB-Madecor. However, it was found out later that a title in the name of the Quezon City Government casts a cloud over PNB-Madecor's title to the so-called Pantranco Properties. This fact alone cannot justify annulment of a valid and consummated contract of sale. Mega Prime cannot be relieved from its obligation, voluntarily assumed, under the said contract simply because the contract turned out to be a poor business judgment or unwise investment. It should have been more prudent or careful in making such a huge investment worth millions of pesos. It should have conducted its own due diligence, so to speak. By signing the deed of sale, Mega Prime accepted the risk of an "as is where is" arrangement with respect to the sale of shares of stock therein. The contract has the force of law between the parties and they are expected to abide in good faith by their respective contractual commitments, not weasel out of them. Just as nobody can be forced to enter into a contract, in the same manner, once a contract is entered into, no party can renounce it unilaterally or without the consent of the other. It is a general principle of law that no one may be permitted to change his mind or disavow and go back upon his own acts, or to proceed contrary thereto, to the prejudice of the other party. Contrary to the trial court's finding, We find that there is no sufficient basis to annul the Deed of Sale dated 27 September 1996. Mega Prime failed to sufficiently prove that PNB was guilty of misrepresentation or fraud with respect to the said transaction.7 Nevertheless, the Court holds that there was a breach in the warranties of the seller PNB. Resultantly, a reduction in the sale price should be decreed. One of the express conditions in the deed of sale is the transfer of the properties under TCT Nos. 87881, 87882, 87883, 87884 and 160740 in the name of Mega Prime: 1. The Sale of the above stockholdings of the vendor is on a clean balance sheet, i.e., all assets and liabilities are squared, and no deposits, furniture, fixtures and equipment, including receivables shall be transferred to the vendee, except real properties and improvements thereon of PNB-Madecor in Quezon City containing an area of 19,080 sq. m., situated at the corner of Quezon Boulevard (presently Quezon Avenue) and Roosevelt Avenue covered by five (5) titles namely: TCT Nos. 8 87881, 87882, 87883, 87884, and 160470 x x x. Verily, an important sense of the deed of sale is the transfer of ownership over the subject properties to Mega Prime. Clearly, the failure of the seller PNB to effect a change in ownership of the subject properties amounts to a hidden defect within the contemplation of Articles 1547 and 1561 of the New Civil Code. The said provisions of law read: Art. 1547. In a contract of sale, unless a contrary intention appears, there is: (1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to pass, and that the buyer shall from that time have and enjoy the legal and peaceful possession of the thing; (2) An implied warranty that the thing shall be free from any hidden faults or defects, or any charge or encumbrance not declared or known to the buyer. This article shall not, however, be held to render liable a sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell by virtue of authority in fact or law, for the sale of a thing in which a third person has a legal or equitable interest.9 xxxx

Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them.10 Up to now, the title of the said property is still under the name of the former registered owner Marcris Realty Corporation. Mega Prime's subsequent discovery that the property covered by TCT No. 160740 is covered by a title pertaining to the City Government of Quezon City coupled with PNB's inability up to the present to submit a title in the name of PNB-Madecor constitutes a breach of warranty. Hence, a proportionate reduction in the consideration of the sale is justified, applying the Civil Code principle that "no person shall be enriched at the expense of another."11 The sale of shares of stock was undertaken to effect the transfer of the subject properties with a total area of 19,080 square meters. When PNB failed to deliver the title to the property covered by TCT No. 160740, with an area of 733.70 square meters, PNB violated an express warranty under the deed of sale. Thus, the total consideration in the Deed of Sale should be proportionately reduced equivalent to the value of the property covered by TCT No. 160740. Records bear out that the total consideration for the sale contract is P505,620,000.00. The object is the 19,080-square-meter Pantranco property. Simple division or mathematical computation yields that the property has a value of P26,500.00 per square meter. Considering that the area covered by TCT No. 160740 is 733.70 square meters, the purchase price should be proportionately reduced byP19,443,050.00, an amount arrived at after multiplying P26,500.00 by 733.70 or vice versa. Necessarily, Mega Prime cannot be considered in default with respect to its obligation to petitioner bank in view of the modification of the stipulated consideration. B. As to the parties' claims of damages against each other, the Court fully agrees with the CA that both should be dismissed for lack of factual and legal bases. The CA refused to award actual and exemplary damages to Mega Prime. Said the appellate court: Necessarily, therefore, PNB cannot be made liable for actual damages allegedly sustained by Mega Prime. The latter's allegation that it incurred expenses for the development of the Pantranco Property in the amount of P150,000,000.00 deserves scant consideration. Basic is the jurisprudential principle that in determining actual damages, the courts cannot rely on mere assertions, speculations, conjectures, or guesswork but must depend on competent proof or the best obtainable evidence of the actual amount of loss. Aside from the site development plan adduced by Mega Prime, no other proof was presented by Mega Prime to show that it had incurred expenses for the development of the Pantranco property. In fact, Mega Prime itself alleged that its partner pulled out from the project and the development of the Pantranco Property could not be undertaken after knowledge of the alleged defective title of PNB-Madecor. Without sufficient proof that Mega Prime incurred said expenses and that it was due to PNB's fault, then the latter cannot be held liable for such unsupported allegation. Regarding the award of exemplary damages, the Court likewise finds that PNB cannot be made liable for exemplary damages and attorney's fees, there being no adequate proof to show that PNB was in bad faith when it entered into the contract of sale with Mega Prime. It is a requisite in the grant of exemplary damages that the act of the offender must be accompanied by bad faith or done in wanton, fraudulent or malevolent manner. On the other hand, attorney's fees may be awarded only when a party is compelled to litigate or to incur expenses to protect his interest by reason of an unjustified act of the other party, as when the defendant acted in gross and evident bad faith in refusing the plaintiff's plainly valid, just and demandable claim. Such 12 circumstances were not proved in this case. Along the same vein, in dismissing PNB's counterclaims, the CA explained:

In the same vein, We find no reason to hold Mega Prime liable on the counterclaim of PNB for moral and exemplary damages and attorney's fees. PNB's counterclaim is anchored on the alleged bad faith and ill motive of Mega Prime in filing the complaint which allegedly was done by Mega Prime to preempt PNB's foreclosure of the pledge of its shares of stock in PNB-Madecor. According to PNB, Mega Prime filed its complaint against PNB after Mega Prime received PNB's letter dated December 11, 1997 reminding it of the maturity date on November 26, 1997 of itsP404,496,000.00 loan with PNB, evidently to prevent PNB from foreclosing the pledge. We are not persuaded. The records show that Mega Prime filed its complaint on November 28, 1997, and it was preceded by Mega Prime's demand letter dated November 3, 1997 addressed to PNB, informing PNB of Mega Prime's discovery that the property covered by TCT No. 160470 is actually owned by the Quezon City Government. In said letter, Mega Prime made a demand upon PNB to pay to Mega Prime the amounts of P101,124,000.00 as actual damages and P48,876,000.00 as other expenses, otherwise legal action shall be instituted against PNB. Clearly, Mega Prime's complaint was filed prior to PNB's letter dated December 11, 1997. Thus, PNB's allegation that Mega Prime filed its complaint as a mere ploy to prevent foreclosure of the pledge and thus evade payment of its overdue obligation is not quite true. Accordingly, in the absence of ample proof that Mega Prime acted in gross and evident bad faith in instituting the complaint against PNB, there is no justification to grant the counterclaim of PNB.13 WHEREFORE, premises considered, the appealed decision is AFFIRMED with MODIFICATION in that the consideration in the Deed of Sale dated September 27, 1996 shall be proportionately reduced by P19,443,050.00, the value corresponding to the property covered by TCT No. 160740.

JAIME D. ANG, Petitioner, - versus COURT OF APPEALS AND BRUNO SOLEDAD,Respondents.

G.R. No. 177874 Present: QUISUMBING, J., Chairperson, CARPIO MORALES, TINGA, VELASCO, JR., and BRION, JJ. Promulgated: September 29, 2008 x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION

CARPIO MORALES, J.: Under a "car-swapping" scheme, respondent Bruno Soledad (Soledad) sold his Mitsubishi GSR sedan 1982 model to petitioner Jaime Ang (Ang) by Deed of Absolute Sale1 dated July 28, 1992. For his part, Ang conveyed to Soledad his Mitsubishi Lancer model 1988, also by Deed of Absolute Sale2 of even date. As Ang s car was of a later model, Soledad paid him an additional P55,000.00. Ang, a buyer and seller of used vehicles, later offered the Mitsubishi GSR for sale through Far Eastern Motors, a second-hand auto 3 display center. The vehicle was eventually sold to a certain Paul Bugash (Bugash) for P225,000.00, by Deed of Absolute Sale dated August 14, 1992. Before the deed could be registered in Bugash s name, however, the vehicle was seized by virtue of a writ of replevin4 dated January 26, 1993 issued by the Cebu City Regional Trial Court (RTC), Branch 21 in Civil Case No. CEB-13503, "BA Finance Corporation vs. Ronaldo and Patricia Panes," on account of the alleged failure of Ronaldo Panes, the owner of the vehicle prior to Soledad, to pay the mortgage debt5 constituted thereon.

To secure the release of the vehicle, Ang paid BA Finance the amount of P62,038.47 on March 23, 1993. Soledad refused to reimburse the said amount, despite repeated demands, drawing Ang to charge him for Estafa with abuse of confidence before the 7 Office of the City Prosecutor, Cebu City. By Resolution of July 15, 1993, the City Prosecutor s Office dismissed the complaint for insufficiency of evidence, drawing Ang to file on November 9, 1993 the first8 of three successive complaints for damages against Soledad before the RTC of Cebu City where it was docketed as Civil Case No. Ceb-14883. Branch 19 of the Cebu City RTC, by Order9 dated May 4, 1995, dismissed Civil Case No. Ceb-14883 for failure to submit the controversy to barangay conciliation. Ang thereafter secured a certification to file action and again filed a complaint for damages, docketed as Ceb-17871, with the RTC of Cebu City, Branch 14 which dismissed it, by Order11 dated March 27, 1996, on the ground that the amount involved is not within its jurisdiction. Ang thereupon filed on July 15, 1996 with the Municipal Trial Court in Cities (MTCC) a complaint,12docketed as R-36630, the subject of the instant petition. After trial, the MTCC dismissed the complaint on the ground of prescription, vz: It appearing that the Deed of Sale to plaintiff o[f] subject vehicle was dated and executed on 28 July 1992, the complaint before the Barangay terminated 21 September 1995 per Certification to File Action attached to the Complaint, and this case eventually was filed with this Court on 15 July 1996, this action has already been barred since more than six (6) months elapsed from the delivery of 13 the subject vehicle to the plaintiff buyer to the filing of this action, pursuant to the aforequoted Article 1571." (Emphasis and underscoring supplied) His motion for reconsideration having been denied, Ang appealed to the RTC, Branch 7 of which affirmed the dismissal of the complaint, albeit it rendered judgment in favor of Ang "for the sake of justice and equity, and in consonance with the salutary principle of non-enrichment at another s expense." The RTC ratiocinated: xxxx [I]t was error for the Court to rely on Art. 1571 of the Civil Code to declare the action as having prescribed, since the action is not one for the enforcement of the warranty against hidden defects. Moreover, Villostas vs. Court of Appeals declared that the sixmonth prescriptive period for a redhibitory action applies only to implied warranties. There is here an express warranty. If at all, what applies is Art. 1144 of the Civil Code, the general law on prescription, which states, inter alia, that actions upon a written contract prescribes in ten (10) years [Engineering & Machinery Corporation vs. Court of Appeals, G.R. No. 52267, January 24, 1996]. More appropriate to the discussion would be defendant s warranty against eviction, which he explicitly made in the Deed of Absolute Sale: I hereby covenant my absolute ownership to (sic) the above-described property and the same is free from all liens and encumbrances and I will defend the same from all claims or any claim whatsoever " Still the Court finds that plaintiff cannot recover under this warranty. There is no showing of compliance with the requisites. xxxx Nonetheless, for the sake of justice and equity, and in consonance with the salutary principle of non-enrichment at another s expense, defendant should reimburse plaintiff the P62,038.47which on March 23, 1993 he paid BA Finance Corporation to release 14 the mortgage on the car. (Emphasis and underscoring supplied) The RTC thus disposed as follows: Wherefore, judgment is rendered directing defendant to pay plaintiff P62,038.47, the amount the latter paid BA Finance Corporation to release the mortgage on the vehicle, with interest at the legal rate computed from March 23, 1993. Except for this, the judgment 15 in the decision of the trial court, dated October 8, 2001 dismissing the claims of plaintiff is affirmed." (Underscoring supplied) Soledad s Motion for Reconsideration was denied by Order16 of December 12, 2002, hence, he elevated the case to the Court of Appeals, Cebu City.10

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The appellate court, by the challenged Decision of August 30, 2006, noting the sole issue to be resolved whether the RTC erred in directing Soledad to pay Ang the amount the latter paid to BA Finance plus legal interest, held that, following Goodyear Phil., Inc. v. 18 Anthony Sy, Ang "cannot anymore seek refuge under the Civil Code provisions granting award of damages for breach of warranty against eviction for the simple fact that three years and ten months have lapsed from the execution of the deed of sale in his favor prior to the filing of the instant complaint." It further held: It bears to stress that the deed of absolute sale was executed on July 28, 1992, and the instant complaint dated May 15, 1996 was received by the MTCC on July 15, 1996. While it is true that someone unjustly enriched himself at the expense of herein respondent, we agree with petitioner (Soledad) that it is not he. The appellate court accordingly reversed the RTC decision and denied the petition. By Resolution19 of April 25, 2007, the appellate court denied Ang s motion for reconsideration, it further noting that when Ang settled the mortgage debt to BA Finance, he did so voluntarily in order to resell the vehicle, hence, Soledad did not benefit from it as he was unaware of the mortgage constituted on the vehicle by the previous owner. The appellate court went on to hold that Soledad "has nothing to do with the transaction anymore; his obligation ended when he delivered the subject vehicle to the respondent upon the perfection of the contract of sale." And it reiterated its ruling that the action, being one arising from breach of warranty, had prescribed, it having been filed beyond the 6-month prescriptive period. The appellate court brushed aside Ang s contention that Soledad was the proximate cause of the loss due to the latter s failure to thoroughly examine and verify the registration and ownership of the previous owner of the vehicle, given that Ang is engaged in the business of buying and selling second-hand vehicles and is therefore expected to be cautious in protecting his rights under the circumstances. Hence, the present recourse petition for review on certiorari, Ang maintaining that his cause of action had not yet prescribed when he filed the complaint and he should not be blamed for paying the mortgage debt. To Ang, the ruling in Goodyear v. Sy is not applicable to this case, there being an express warranty in the herein subject Deed of Absolute Sale and, therefore, the action based thereon prescribes in ten (10) years following Engineering & Machinery Corp. v. CA20 which held that where there is an express warranty in the contract, the prescriptive period is the one specified in the contract or, in the absence thereof, the general rule on rescission of contract. Ang likewise maintains that he should not be blamed for paying BA Finance and should thus be entitled to reimbursement and 21 damages for, following Carrascoso, Jr. v. Court of Appeals, in case of breach of an express warranty, the seller is liable for damages provided that certain requisites are met which he insists are present in the case at bar. The resolution of the sole issue of whether the complaint had prescribed hinges on a determination of what kind of warranty is provided in the Deed of Absolute Sale subject of the present case. A warranty is a statement or representation made by the seller of goods, contemporaneously and as part of the contract of sale, having reference to the character, quality or title of the goods, and by which he promises or undertakes to insure that certain facts are or shall be as he then represents them.22 Warranties by the seller may be express or implied. Art. 1546 of the Civil Code defines express warranty as follows: "Art. 1546. Any affirmation of fact or any promise by the seller relating to the thing is an express warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchases the thing relying thereon. No affirmation of the value of the thing, nor any statement purporting to be a statement of the seller s opinion only, shall be construed as a warranty, unless the seller made such affirmation or statement as an expert and it was relied upon by the buyer."(Emphasis and underscoring supplied) On the other hand, an implied warranty is that which the law derives by application or inference from the nature of the transaction or the relative situation or circumstances of the parties, irrespective of any intention of the seller to create it.23 Among the implied

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warranty provisions of the Civil Code are: as to the seller s title (Art. 1548), against hidden defects and encumbrances (Art. 1561), as to fitness or merchantability (Art. 1562), and against eviction (Art. 1548). The earlier cited ruling in Engineering & Machinery Corp. states that "the prescriptive period for instituting actions based on a breach of express warranty is that specified in the contract, and in the absence of such period, the general rule on rescission of contract, which is four years (Article 1389, Civil Code)." As for actions based on breach of implied warranty, the prescriptive period is, under Art. 1571 (warrantyagainst hidden defects of or encumbrances upon the thing sold) and Art. 1548 (warranty against eviction), six months from the date of delivery of the thing sold. The following provision of the Deed of Absolute Sale reflecting the kind of warranty made by Soledad reads: xxxx I hereby covenant my absolute ownership to (sic) the above-described property and the same is free from all liens and encumbrances and I will defend the same from all claims or any claim whatsoever; will save the vendee from any suit by the government of the Republic of the Philippines. x x x x (Emphasis supplied) In declaring that he owned and had clean title to the vehicle at the time the Deed of Absolute Sale was forged, Soledad gave an implied warranty of title. In pledging that he "will defend the same from all claims or any claim whatsoever [and] will save the vendee from any suit by the government of the Republic of the Philippines," Soledad gave a warranty against eviction. Given Ang s business of buying and selling used vehicles, he could not have merely relied on Soledad s affirmation that the car was free from liens and encumbrances. He was expected to have thoroughly verified the car s registration and related documents. Since what Soledad, as seller, gave was an implied warranty, the prescriptive period to file a breach thereof is six months after the delivery of the vehicle, following Art. 1571. But even if the date of filing of the action is reckoned from the date petitioner instituted his first complaint for damages on November 9, 1993, and not on July 15, 1996 when he filed the complaint subject of the present petition, the action just the same had prescribed, it having been filed 16 months after July 28, 1992, the date of delivery of the vehicle. On the merits of his complaint for damages, even if Ang invokes breach of warranty against eviction as inferred from the second part of the earlier-quoted provision of the Deed of Absolute Sale, the following essential requisites for such breach, vz: "A breach of this warranty requires the concurrence of the following circumstances: (1) The purchaser has been deprived of the whole or part of the thing sold; (2) This eviction is by a final judgment; (3) The basis thereof is by virtue of a right prior to the sale made by the vendor; and (4) The vendor has been summoned and made co-defendant in the suit for eviction at the instance of the vendee. In the absence of these requisites, a breach of the warranty against eviction under Article 1547 cannot be declared." 24 (Emphasis supplied), have not been met. For one, there is no judgment which deprived Ang of the vehicle. For another, there was no suit for eviction in which Soledad as seller was impleaded as co-defendant at the instance of the vendee. Finally, even under the principle of solutio indebiti which the RTC applied, Ang cannot recover from Soledad the amount he paid BA Finance. For, as the appellate court observed, Ang settled the mortgage debt on his own volition under the supposition that he would resell the car. It turned out

that he did pay BA Finance in order to avoid returning the payment made by the ultimate buyer Bugash. It need not be stressed that Soledad did not benefit from Ang s paying BA Finance, he not being the one who mortgaged the vehicle, hence, did not benefit from the proceeds thereof. WHEREFORE, the petition is, in light of the foregoing disquisition, DENIED. SO ORDERED. BENNY GO, Petitioner, G.R. No. 159048 Present: Panganiban, J., - versus Chairman, Sandoval-Gutierrez Corona, Carpio Morales, and Garcia, JJ

Promulgated: ELIODORO BACARON, Respondent. October 11, 2005 x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - -- x DECISION PANGANIBAN, J.: T he present Contract, which purports to be an absolute deed of sale, should be deemed an equitable mortgage for the following reasons: (1) the consideration has been proven to be unusually inadequate; (2) the supposed vendor has remained in possession of the property even after the execution of the instrument; and (3) the alleged seller has continued to pay the real estate taxes on the property. The Case Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to set aside the October 17, 2002 [3] Decision and the May 20, 2003 Resolution of the Court of Appeals (CA) in CA-GR CV No. 67218. The assailed Decision disposed as follows:[2]

WHEREFORE, premises considered, the Decision dated February 24, 2000 of the Regional Trial Court of Davao City, Branch 12, in Civil Case No. 25,101-97 is hereby REVERSED and SET ASIDE and a new one is hereby rendered ordering the reformation of the subject instrument, such that the same must be considered a mortgage [4] contract and not a transfer of right. Costs against [petitioner].

The assailed Resolution denied Reconsideration.

The Facts The antecedents are narrated by the CA as follows: As evidenced by the Transfer of Rights dated October 1, 1993, Eliodoro Bacaron conveyed a 15.3955hectare parcel of land located in Langub, Talomo, Davao City, in favor of Benny Go for P20,000.00. About a year thereafter, Bacaron, seeking to recover his property, went to Go to pay his alleged P20,000.00 loan but the latter refused to receive the same and to return his property saying that the transaction between the two of them was a sale and not a mortgage as claimed by Bacaron.

Consequently, on March 5, 1997, Eliodoro Bacaron, as plaintiff [herein respondent], filed a Complaint for Reformation of Instrument with Damages and prayer for the issuance of a writ of preliminary injunction, with the Regional Trial Court of Davao City, Branch 12, against the [petitioner] Benny Go, which case was docketed as Civil Case No. 25,101-97. In his Complaint, [respondent] alleged that in the middle part of 1993, he suffered business reversals which prompted him, being in urgent need of funds, to borrow P20,000.00 from the [petitioner]. He however averred that prior to extending said loan to him, the [petitioner] required him to execute a document purporting to be a Transfer of Rights but was told that the same would only be a formality as he could redeem the unregistered land the moment he pays the loan. Admitting that he signed the instrument despite knowing that the same did not express the true intention of the parties agreement, i.e., that the transaction was a mere equitable mortgage, the [respondent] explained that he did so only because he was in a very tight financial situation and because he was assured by the [petitioner] that he could redeem his property. To support this claim, [respondent] stressed the fact that the consideration in the instrument was merely P20,000.00, which is grossly inadequate as the selling price of a 15-hectare land considering that, at that time, the market value of land in Davao City amounts to P100,000.00 per hectare. [Respondent] narrated that a year thereafter, or in a middle part of 1994, he was able to raise the P20,000.00 and went to the [petitioner] to pay his loan but the latter refused to accept his payment, insisting that the transaction entered into by the parties was not an equitable mortgage, as the [respondent] insists, but a real transfer of right over the property. Because of said refusal, [respondent] continued, he was compelled to refer the matter to his lawyer in order to request the [petitioner] to accept his payment otherwise he would file the necessary action in court. Despite said formal demand by the [respondent], however, [petitioner] allegedly continued to refuse to recognize the equitable mortgage , prompting [respondent] to consign the P20,000.00 with the Clerk of Court of the RTC of Davao City, Branch 12. He thus insisted that it is [petitioner] who is dead wrong in not recognizing the equitable mortgage since, aside from the fact that the consideration was unusually inadequate, [respondent] allegedly remained in possession of the property. [Respondent] thus prayed for an award for moral damages, in view of the [petitioner s] evident bad faith in refusing to recognize the equitable mortgage, and for attorney s fees as [petitioner s] alleged stubbornness compelled him to engage the services of counsel. He likewise sought an award for exemplary damages to deter others from committing similar acts and at the same time asked the court to issue a writ of preliminary injunction and/or temporary restraining order to prevent [petitioner] from dispossessing [respondent] of the subject property or from disposing of the same in favor of third parties as these acts would certainly work injustice for and cause irreparable damage to the [respondent]. The prayer for the issuance of a restraining order was however denied by the court in an Order. [Petitioner] filed his Answer on May 5, 1997, denying [respondent s] claim that the transaction was only an equitable mortgage and not an actual transfer of right. He asserted that the truth of the matter was that when [respondent] suffered business reverses, his accounts with the [petitioner], as evidenced by postdated checks, cash vouchers and promissory notes, remained unpaid and his total indebtedness, exclusive of interests, amounted to P985,423.70. [Petitioner] further averred that, in order to avoid the filing of cases against him, [respondent] offered to pay his indebtedness through dacion en pago, giving the land in question as full payment thereof. In addition, he stressed that considering that the property is still untitled and the [respondent] bought the same from one Meliton Bacarro for onlyP50,000.00, it is most unreasonable for him to agree to accept said land in exchange for over a million pesos of indebtedness. He claimed though that he was only forced to do so when [respondent] told him that if he did not accept the offer, other creditors would grab the same. By way of affirmative defenses, the [petitioner] pointed out that [respondent] has no cause of action against him as the [respondent] failed to comply with the essential requisites for an action for reformation of instrument. He moreover alleged that the [respondent] is in estoppel because, by his own admission, he signed the document knowing that the same did not express the true intention of the parties. Further, [petitioner] claimed that there was a valid transfer of the property herein since the consideration is not only the actual amount written in the instrument but it also includes the outstanding obligation of [respondent] to the [petitioner] amounting to almost P1 million. As counterclaim, [petitioner] averred that, because of this baseless complaint, he suffered mental anguish, wounded feelings and besmirched reputation, entitling him to moral damages amounting to P20,000.00, and that in order to deter others from doing similar acts, exemplary damages amounting to P20,000.00 should likewise be awarded in his favor. [Petitioner] also prayed for attorney s fees and litigation expenses claiming that, because he was constrained to litigate, he was forced to hire the services of counsel.

xxx

xxx

xxx

Trial ensued and thereafter the trial court rendered its Decision dated February 24, 2000 dismissing the complaint while finding the [petitioner s] counterclaim meritorious. In making said ruling, the lower court, citing Article 1350 (should be 1359) of the New Civil Code, found that [respondent] failed to establish the existence of all the requisites for an action for reformation by clear, convincing and competent evidence. Considering [respondent s] own testimony that he read the document and fully understood the same, signing it without making any complaints to his lawyer, the trial court held that the evidence on record shows that the subject instrument had been freely and voluntarily entered into by the parties and that the same expresses the true intention of the parties. The court further noted that the [respondent s] wife even signed the document and that the same had been duly acknowledged by the parties before a notary public as their true act and voluntary deed. The trial court likewise observed that, contrary to [respondent s] claim that the transaction was a mere mortgage of the property, the terms of the instrument are clear and unequivocable that the property subject of the document was sold, transferred, ceded and conveyed to the [petitioner] by way of absolute sale, and hence, no extrinsic aids are necessary to ascertain the intention of the parties as the same is determinable from the document itself. Moreover, said court emphasized that considering the fact that [respondent] is an educated person, having studied in an exclusive school like Ateneo de Davao, and an experienced businessman, he is presumed to have acted with due care and to have signed the instrument with full knowledge of its contents and import. [Respondent s] claim that he merely borrowed money from the [petitioner] and mortgaged the property subject of litigation to guarantee said loan was thus found to be specious by the court, which found that the [respondent] was actually indebted to the [petitioner] for almost a million pesos and that the true consideration of the sale was in fact said outstanding obligation. With respect to [respondent s] alleged possession of the property and payment of real estate taxes, both of which were relied upon by the [respondent] to boost his assertion that the transaction was merely an equitable mortgage, the trial court said that his claim of possession is belied by the fact that the actual occupants of the property recognize that the [petitioner] owns the same and in fact said occupants prevented [respondent s] wife from entering the premises. The court, noting that the [petitioner] also paid the realty taxes, was also of the opinion that [respondent] merely made such payments in order to lay the basis of his allegation that the contract was a mere equitable mortgage. Accordingly, the court held that [respondent] is also not entitled to his other claims and that his unfounded action caused [petitioner] to an award for moral damages, in addition to the expenses he incurred in defending his cause, i.e. services of a lawyer and transportation and other expenses, which justifies an award for the reimbursement of his expenses and attorney s fees. [5]

Ruling of the Court of Appeals Granting respondent s appeal, the appellate court ruled that the Contract entered into by the parties should be deemed an equitable mortgage, because the consideration for the sale was grossly inadequate. By continuing to harvest the crops and supervise his workers, respondent remained in control of the property. True, upon the institution of this case, petitioner paid the required real estate taxes that were still in arrears. Respondent, however paid the taxes for 1995, 1996 and 1997 -- the years between the dates when the alleged absolute sale was entered into on October 1, 1993, and when this case was instituted on March 5, 1997.[6] Granting respondent s prayer for reformation of the Contract, the CA ruled that the instrument failed to reflect the true [7] intention of the parties because of petitioner s inequitable conduct. Hence, this Petition.[8]

The Issues

Petitioner raises the following issues for this Court s consideration: I. Whether o[r] not the Court of Appeals erred in ruling that there was inadequate consideration. II. Whether o[r] not the Court of Appeals erred in ruling that the respondent remained in possession of the land in question. III. Whether or not the Court of Appeals erred in ruling that the taxes were not paid by the petitioner. IV. Whether or not the Court of Appeals erred in ruling that reformation is proper.[9]

Simply put, these are the issues to be resolved: (1) whether the agreement entered into by the parties was one for equitable mortgage or for absolute sale; and (2) whether the grant of the relief of contract reformation was proper.

The Court s Ruling The Petition has no merit.

First Issue: Equitable Mortgage

An equitable mortgage has been defined as one which although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law. [10] The instances in which a contract of sale is presumed to be an equitable mortgage are enumerated in Article 1602 of the Civil Code as follows: Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: (1) When the price of a sale with right to repurchase is unusually inadequate; (2) When the vendor remains in possession as lessee or otherwise; (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; (4) When the purchaser retains for himself a part of the purchase price; (5) When the vendor binds himself to pay the taxes on the thing sold; (6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws.

Furthermore, Article 1604 of the Civil Code provides that [t]he provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. In the present case, three of the instances enumerated in Article 1602 -- grossly inadequate consideration, possession of the property, and payment of realty taxes -- attended the assailed transaction and thus showed that it was indeed an equitable mortgage.

Inadequate Consideration

Petitioner Go avers that the amount of P20,000 was not unusually inadequate. He explains that the present parties entered into a Dacion en Pago, whereby respondent conveyed the subject property as payment for his outstanding debts to petitioner -debts supposedly amounting to P985,243.70.[11] To substantiate his claim, petitioner presented the checks that respondent had issued, as well as the latter s testimony purportedly admitting the genuineness and due execution of the checks and the existence of [12] the outstanding debts. Petitioner Go contends that respondent failed to establish by sufficient evidence that those debts had [13] already been paid. Petitioner relies on the trial court s finding that respondent knowingly and intentionally entered into a [14] contract of sale, not an equitable mortgage. On the other hand, Respondent Bacaron argues that the value of the property at the time of the alleged sale wasP120,000 per hectare, and that the indicated sale amount of P20,000 was thus grossly iniquitous.[15] Allegedly, the previous cash advances secured from petitioner s father had been settled, as evidenced by the fact that petitioner did not negotiate further or encash the checks; the latter could have done so, if the obligation was still extant.[16] Respondent points out that he paid for that obligation [17] Petitioner allegedly admitted this fact, though inadvertently, when he with the coprax he had previously delivered to the father. testified that respondent had already paid some of the latter s previous cash advances.[18] Otherwise, petitioner would have then set off his own debt to respondent (amounting to P214,000) against the amount of almost one million pesos that the latter supposedly owed him.[19] Checks have the character of negotiability. At the same time, they may constitute evidence of indebtedness.[20] Those presented by petitioner may indeed evince respondent s indebtedness to him in the amounts stated on the faces of those instruments. He, however, acknowledges (1) that respondent paid some of the obligations through the coprax delivered to petitioner s father; and (2) that petitioner owed and subsequently paid respondent P214,000.[21] The parties respective arguments show that the sum of P20,000, by itself, is inadequate to justify the purported absolute Transfer of Rights.[22] Petitioner s claim that there was a dacion en pago is not reflected on the instrument executed by the parties. That claim, however, confirms the inadequacy of the P20,000 paid in consideration of the Transfer of Rights; hence, the Contract does not reflect the true intention of the parties. As to what their true intention was -- whether dacion en pago or equitable mortgage -- will have to be determined by some other means. Possession According to Article 1602(2) of the New Civil Code, one of the instances showing that a purported contract of sale is presumed to be an equitable mortgage is when the supposed vendor remains in possession of the property even after the conclusion of the transaction. In general terms, possession is the holding of a thing or the enjoyment of a right, whether by material occupation or by the fact

that the right -- or, as in this case, the property -- is subjected to the will of the claimant. In Director of Lands v. Heirs of Abaldonado,[24] the gathering of the products of and the act of planting on the land were held to constitute occupation, possession and cultivation. In the present case, the witnesses of respondent swore that they had seen him gather fruits and coconuts on the property. Based on the cited case, the witnesses testimonies sufficiently establish that even after the execution of the assailed Contract, respondent has remained in possession of the property. The testimonies proffered by petitioner s witnesses merely indicated that they were tenants of the property. Petitioner only informed them that he was the new owner of the property. This attempt at a factual presentation hardly signifies that he exercised possession over the property. As held by the appellate court, petitioner s [25] other witness (Redoa) was unconvincing, because he could not even say whether he resided within the premises. The factual findings of the trial court and the CA are conflicting and, hence, may be reviewed by this Court.[26] Normally, the findings of the trial court on the credibility of witnesses should be respected. Here, however, their demeanor while testifying is not at issue. What is disputed is the substance of their testimonies -- the facts to which they testified. Assuming that the witnesses of petitioner were indeed credible, their testimonies were insufficient to establish that he enjoyed possession over the property. Payment of Realty Taxes Finally, petitioner asserts that the trial court s finding that he paid the realty taxes should also be given corresponding weight.[27] Respondent counters with the CA s findings that it was he who paid realty taxes on the property. The appellate court concluded that he had paid taxes for the years 1995, 1996 and 1997 within each of those years; hence, before the filing of the present controversy. In contrast, petitioner paid only the remaining taxes due on October 17, 1997, or after the case had been instituted. This fact allegedly proves that respondent has remained in possession of the property and continued to be its owner.[28] He argues that if he had really transferred ownership, he would have been foolish to continue paying for those taxes.[29] On this point, we again rule for respondent. Petitioner indeed paid the realty taxes on the property for the years 1980 to 1997. The records show that the payments were all simultaneously made only on October 31, 1997, evidently in the light of the Complaint respondent had filed before the trial court on March 5, 1997.[30] On the other hand, respondent continued to pay for the realty taxes due on the property for the years 1995, [31] 1996 and 1997. That the parties intended to enter into an equitable mortgage is bolstered by respondent s continued payment of the real property

[23]

taxes subsequent to the alleged sale. Payment of those taxes is a usual burden attached to ownership. Coupled with continuous possession of the property, it constitutes evidence of great weight that a person under whose name the realty taxes were declared [32] has a valid and rightful claim over the land. That the parties intended to enter into an equitable mortgage is also shown by the fact that the seller was driven to obtain the loan at a time when he was in urgent need of money; and that he signed the Deed of Sale, despite knowing that it did not [33] express the real intention of the parties. In the present proceedings, the collapse of his business prompted respondent to obtain [34] the loan. Petitioner himself admitted that at the time they entered into the alleged absolute sale, respondent had suffered from serious business reversals.[35] Second Issue: Reformation of Instrument

Petitioner claims that the CA erred in granting the remedy of reformation of contracts. He avers that the failure of the instrument to express the parties true agreement was not due to his mistake; or to fraud, inequitable conduct, or accident.[36] We rule for respondent. Ultimately, it is the intention of the parties that determines whether a contract is one of sale or of mortgage.[37] In the present case, one of the parties to the contract raises as an issue the fact that their true intention or agreement is not reflected in the instrument. Under this circumstance, parol evidence becomes admissible and competent evidence to prove the true nature of the [38] Hence, unavailing is the assertion of petitioner that the interpretation of the terms of the Contract is unnecessary, instrument. and that the parties clearly agreed to execute an absolute deed of sale. His assertion does not hold, especially in the light of the provisions of Article 1604 of the Civil Code, under which even contracts purporting to be absolute sales are subject to the provisions of Article 1602. Moreover, under Article 1605 of the New Civil Code, the supposed vendor may ask for the reformation of the instrument, should the case be among those mentioned in Articles 1602 and 1604. Because respondent has more than sufficiently established that the assailed Contract is in fact an equitable mortgage rather than an absolute sale, he is allowed to avail himself of the remedy of reformation of contracts. WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and Resolution AFFIRMED. SO ORDERED.

VIRGILIO A. CADUNGOG, Petitioner,

G.R. No. 161223

Present: PUNO, J., Chairman, AUSTRIA-MARTINEZ, CALLEJO, SR., TINGA, and CHICO-NAZARIO, JJ.

- versus -

JOCELYN O. YAP, Respondent.

Promulgated:

September 12, 2005 x------------------------------------ --------------x

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 72761 which reversed and set aside the Decision of the Regional Trial Court (RTC) of Oslob, Cebu, Branch 62, in Civil Case No. OS-96-46. The Antecedents

Franklin Ong and his sister, Jocelyn Ong-Yap, are first cousins of Virgilio Cadungog. Cresenciano Ong Aranas, the Municipal Mayor of Ginatilan, Cebu, from 1955 to 1978,[2] is their uncle.[3] On August 17, 1979, Virgilio executed a Deed of Sale with Right of Repurchase in which he sold to his cousin, Franklin Ong, the following six parcels of land located in Ginatilan, Cebu for P7,144.28:

Parcel Number 1 2 3 4 5 6

Tax Dec. No. 000821 4978 29586 5478 5486 5486

Area 1,170 square meters 1,444 square meters 4,257 square meters 1,140 square meters 980 square meters 1,020 square meters

Parcel Nos. 5 and 6 are located in Sitio Cayam, Ginatilan, Cebu.[4] Under the deed, Virgilio had the right to repurchase the property within 10 years from the said date.[5] Virgilio failed to redeem the property. Nevertheless, upon the prodding of Franklin, Virgilio, who was merely a lettercarrier, executed a Deed of Absolute Sale[6] in favor of Jocelyn in which it appears that he sold Parcel Nos. 1, 2 and 3 for the price ofP5,000.00. Virgilio declared therein that he inherited Parcel Nos. 2 and 3 from his mother, Soledad, who inherited the same from her parents, Jose Aranas and Basilia Rocaberte, under a Deed of Partition executed by their heirs. Franklin signed as one of the witnesses to the deed.[7] On December 23, 1996, Cresenciano Ong executed a Deed of Absolute Sale of Parcel No. 2 in favor of the APC Group, Inc. for P32,380.00. Cresenciano declared that he was the sole and absolute owner, in fee simple, of the said lot.[8] On January 23, 1997, Virgilio executed a Deed of Absolute Sale of Parcel No. 1 in favor of the APC Group, Inc. for P35,400.00, alleging therein that he was the sole and exclusive owner of the property.[9] When Franklin learned of the said sales, he objected. Virgilio, thus, delivered to Franklin Check No. 0000997[10] dated May 24, 1997, drawn and issued by Cresenciano against his account with the Prudential Bank, in the amount of P25,000.00. Virgilio also delivered to Franklin Check No. 0000999[11] drawn and issued by Cresenciano against his account with the same bank in the amount [12] In the of P25,000.00. On May 26, 1997, Franklin signed Receipts dated May 25 and 26, 1997, embodied in a piece of paper. Receipt dated May 26, 1997, Franklin acknowledged to have received the P25,000.00 check representing full payment for the [13] refund of the lot sold in Ginatilan. When Jocelyn learned that Virgilio had sold Parcel No. 1 to the APC Group, Inc., she filed a criminal complaint for estafaagainst him. After the requisite preliminary investigation, an Information for estafa was filed against Virgilio with the RTC. By way of riposte, Virgilio filed a Complaint before the RTC, on December 8, 1998, against Jocelyn for the declaration of nullity of the September 30, 1991 Deed of Absolute Sale. He alleged therein that he had executed the subject deed in favor of Jocelyn only because her brother, Franklin, had requested him to do so to lessen Jocelyn s tax liability in Canada. He also alleged that he agreed to execute the deed on the belief that it would not be notarized, as no consideration was involved. He further claimed that he informed Franklin s emissary (who brought the deed for his signature) that he owned Parcel No. 1, Cresenciano owned Parcel No. 2, and he did not know who owned Parcel No. 3. To his surprise, Jocelyn filed a criminal complaint for estafa against him before the Provincial Prosecutor s Office, and later an Information before the RTC of Oslob, Cebu. He further claimed that he and his wife signed a one-page document; the acknowledgment page was merely added to it, as it, in fact, did not contain their signatures.

Virgilio further stated that his uncle, Cresenciano Ong, sold Parcel No. 2, one of the lots included in the Deed of Sale dated September 30, 1991, to the APC Group, Inc. He himself then sold Parcel No. 1, with an area of 1,770 square meters, to the same vendee for P35,400.00. Virgilio prayed for the following reliefs: WHEREFORE, in view of the foregoing premises, it is most respectfully prayed of this Honorable Court that after notice and hearing judgment be rendered in favor of plaintiff and against the defendant declaring the aforesaid Deed of Absolute Sale as null and void from the very beginning for being without consideration and the defendant be ordered to pay the plaintiff the following: P200,000.00 as moral damages; 100,000.00 as exemplary damages; 20,000.00 as attorney s fee plus P1,500.00 per court appearance; 10,000.00 as litigation expenses; Other reliefs and remedies consistent with justice and equity are likewise prayed for.[14] In her answer with special and affirmative defenses, Jocelyn averred that the Deed of Absolute Sale dated September 30, 1991 was genuine, and reflected the true and correct intention of Virgilio as the vendor. She pointed out that the document was notarized, a public document which carried evidentiary weight. She further alleged that Virgilio had, in fact, previously sold the questioned lots through a Deed of Sale with Right of Repurchase in favor of her brother Franklin. Her brother then told her that, since Virgilio could no longer repurchase the subject properties, it would be better for him to execute a Deed of Absolute Sale in her favor. She denied Virgilio s allegations that the subject deed was fictitious, and averred that it was genuine in all respects and amply supported by valuable consideration. Jocelyn further averred that the filing of the instant case was a subterfuge or a mere afterthought on the part of Virgilio, as a defense in the criminal case for estafa she had filed against him. Moreover, Virgilio was in estoppel, and could not now be heard to negate the contents of the deed of absolute sale which he had previously executed in her favor. Alleging that the complaint was filed in evident gross bad faith and that she suffered untold mental anguish, sleepless nights, anxiety and besmirched reputation, Jocelyn prayed that the case be dismissed, and that the following amounts in damages be awarded to her: P500,000.00 as moral damages; P100,000.00 as exemplary damage; P50,000.00 as attorney s fees; and P100,000.00 as actual litigation expenses.[15] The Testimonies of the Witnesses

Cresenciano Ong Aranas testified that he was the owner of Parcel No. 2, which Virgilio had sold to Jocelyn. The said lot was part of a bigger parcel, with an area of 1,619 square meters situated in Malatbo, Ginatilan Cebu. He sold the said lot on December [16] 23, 1996 to the APC Group, Inc., a mining company, for P32,380.00 as evidenced by a Deed of Absolute Sale. He admitted that he allowed Virgilio to include the said lot in the Deed of Sale with Right of Repurchase which Virgilio executed in favor of Franklin on August 17, 1979. He, however, admitted that he did not execute any document authorizing Virgilio to sell Parcel No. 2 since the latter was his nephew.[17] Upon Virgilio s prodding, he issued two checks: Check No. 0000997[18] for P25,000.00 on May 24, 1997, and Check No. [19] 0000999 for P25,000.00 on May 26, 1997. These checks were issued to redeem Parcel Nos. 1, 2 and 3, the lots subject of the Deed of Sale dated September 30, 1991.[20] Franklin signed receipts for said checks.[21] Ricardo Acojedo, caretaker of Virgilio s properties and that of the Yap siblings, testified that he was in Virgilio s house when a certain Emok Dacillo brought a deed of sale to be signed by Virgilio and his wife. He saw the couple sign the document, but did not get to read it. There was no other person who signed the document. After Virgilio said the document should not be notarized, he immediately handed it over to Emok.[22] Virgilio testified that he and his wife, Rebecca, were in their house on the last week of September 1991, when Emok, an emissary of Franklin, arrived. Emok showed him the Deed of Absolute Sale dated September 30, 1991, and told him that Franklin wanted him and Rebecca to sign the deed. He read the document and was sure that it consisted of only one page. He told the emissary that he was the owner of Parcel No. 1; Parcel No. 2 was in the name of his uncle, Cresenciano; while the records of Parcel

No. 3 could no longer be found at the Municipal Assessor s Office. Nevertheless, he and his wife signed the deed. He also claimed that he was able to repurchase the lots subject of the Deed of Sale with Right of Repurchase on May 26, 1997 for P50,000.00 at the house of his aunt, Tasiana Belarmino. Virgilio admitted, however, that at the time he made the two payments, the period to repurchase the subject parcels of land had already expired.[23] The defendant did not testify in her behalf. Atty. Emmanuel P. Rama testified for the defendant and declared that he notarized the subject deed, which to his knowledge was prepared by Franklin Ong. He was then in the office of his brother, who was the Vice-Governor of Cebu, when Franklin and Virgilio and his wife, Rebecca, arrived to have the deed notarized.[24] However, Virgilio, his wife, and the witnesses to the deed failed to sign on the left margin of its second page. Franklin, a bachelor of laws graduate, testified that he was employed as an Interpreter in Branch 14 of the Court of First [25] Instance of Cebu; he prepared the deed of sale with right of repurchase which Virgilio executed on August 17, 1979 and the September 30, 1991 Deed of Absolute Sale which Virgilio and his wife executed.[26] According to him, the lots subject of the complaint, together with the other lots sold under the first deed of sale, were not repurchased by Virgilio.[27] Franklin further narrated that sometime in 1991, Virgilio sought financial help because his house was about to be foreclosed by the Development Bank of the Philippines. He then gave P7,000.00 to Virgilio,

and suggested that Parcel Nos. 1, 2 and 3 be sold to Jocelyn to augment his contribution. Franklin, however, agreed to buy Parcel Nos. 5 and 6 and inquired from Jocelyn if she was interested to buy Parcel Nos. 1, 2 and 3; Jocelyn replied that she was.[28] He then prepared a Deed of Absolute Sale over Parcel Nos. 1, 2 and 3, which Virgilio and his wife signed on September 30, 1991 before Notary Public Emmanuel P. Rama.[29] Virgilio agreed to sell the three lots for P5,000.00 only because the said amount was in addition to the P7,144.28 paid for the six parcels of land earlier sold to Franklin in 1979.[30] Franklin claimed he gave the P5,000.00 purchase price of the property to Virgilio on September 30, 1991.[31] Franklin declared that the receipts[32] for P50,000.00 which he signed (and which Virgilio adduced in evidence) were refunds for Parcel Nos. 5 and 6 which he bought from Virgilio and later sold by the latter to the APC Group, Inc.; they were not payments for the repurchase of the six parcels of land subject of the first sale as Virgilio claimed.[33] After Jocelyn purchased Parcel Nos. 1, 2 and 3, their sister Loreta and their mother took charge and administered the property, and paid the realty taxes thereon.[34] Taciana Aranas Belarmino, an aunt of Virgilio, Franklin and Jocelyn, testified that she and her son, Fermin Belarmino, as well as her brother Cresenciano, witnessed Franklin sign the receipts dated May 25 and 26, 1997, for the total amount of P50,000.00, in their house. The payment was made to redeem Parcel Nos. 5 and 6, which Virgilio sold to the APC Group, Inc.[35] Franklin [36] demanded P200,000.00, but Virgilio had only P50,000.00, (inclusive of the P25,000.00 Virgilio borrowed from Cresenciano). By way of rebuttal, Virgilio presented Federico Erac, the Postmaster of Ginatilan, who testified that he (Virgilio) was a lettercarrier and was at his place of work at the post office on September 30, 1991; hence, he could not have signed the Deed of Absolute Sale of Parcel Nos. 1, 2 and 3 in favor of Jocelyn in the Office of the Vice-Governor on the said date before Notary Public Emmanuel Rama.[37] He adduced in evidence his daily time record for September 30, 1991.[38] After the trial, the court rendered judgment in favor of Virgilio. The fallo of the decision reads: WHEREFORE, the Deed of Absolute Sale dated September 30, 1991 allegedly executed by plaintiff in favor of defendant is declared NULL and VOID. SO ORDERED.[39]

The trial court held that, since Franklin failed to consolidate his title to the parcels of land following the lapse of the 10-year period for Virgilio to redeem the same, the period for redemption was deemed extended until the said lots were repurchased on May 25 and 26, 1997, upon payment of P50,000.00 to Franklin. The trial court ruled that there was a need for Franklin to consolidate the title over the parcels of land by court proceedings. It also held that the Deed of Absolute Sale dated September 30, 1991 had no consideration because the P5,000.00 stated therein, as the price of the property, was insufficient. Since the deed was not supported by any consideration, it was null and void. Jocelyn appealed the decision to the CA, assailing the trial court s ruling on the following grounds: -IThe Honorable Trial Court erred in ruling that there was no action on the part of the defendant-appellant to consolidate the title in her name when plaintiff-appellee failed to repurchase the properties subject matter of the deed of sale with right to repurchase executed on August 17, 1979. -IIThe Honorable Trial Court erred in ruling that on May 25 and 26, 1997 the amount of P50,000.00 was paid to the defendant-appellant through Franklin Ong and upon acceptance of the latter the real properties subject matter of the deed of sale with right to repurchase was deemed repurchased. - III The Honorable Trial Court erred in ruling that the amount of P5,000.00 is not sufficient consideration for the [40] purchase of three parcels of land.

The CA reversed the ruling of the trial court. The dispositive portion reads: WHEREFORE, the foregoing considered, the May 4, 2001 Decision of the Regional Trial Court of Oslob, Cebu is REVERSED ANDSET ASIDE. A new one is entered declaring the Deed of Absolute Sale dated September 30, 1991 executed by Virgilio Cadungog in favor of Jocelyn Yap, valid and binding.

SO ORDERED.

[41]

The appellate court held that the period to redeem the subject properties had already elapsed as early as 1989, or 10 years after the execution of the Deed of Sale with Right of Repurchase on August 17, 1979. In view of Virgilio s failure to redeem the same, he lost ownership over the disputed lots. Jocelyn acquired ownership over the property when she purchased the same from Virgilio on September 30, 1991 under the Deed of Absolute Sale. Citing Cruz v. Leis,[42] the CA ruled that Jocelyn could not be faulted for not consolidating the title over the subject lots, as the act of consolidating title is not a condition sine qua non to the transfer of ownership. The appellate court declared that the P50,000.00 Franklin received from Virgilio on May 25 and 26, 1997 was the refund of the cost of Parcel Nos. 5 and 6 which Virgilio sold to the APC Group, Inc., the same lots sold to Franklin in 1999. The CA further stated that the inadequacy of the purchase price does not per se support the conclusion that the contract was a loan, or that the property was not at all sold. Citing Abapo v. Court of Appeals[43] and Article 1355 of the Civil Code, the CA ruled that such inadequacy of price is not sufficient to set aside the sale, unless it is grossly inadequate or purely shocking to the conscience. Moreover, except for his own self-serving testimony, Virgilio did not submit any other testimony to refute the said sale. Finally, the CA ruled that the subject deed of sale is a public document, having been executed and attested through the intervention of a notary public; as such, it is evidence of the facts therein expressed. While Virgilio s officemate testified that he could not have been present for the notarization of the said document because he was at work on the said date, such testimony could not negate the existence of the said deed. Virgilio filed a motion for reconsideration, which the CA denied. Virgilio, now the petitioner, assails the said ruling and ascribes to the appellate court the following errors: GROUND I THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ERRED IN REVERSING THE DECISION OF THE RTCBRANCH 62 OF OSLOB, CEBU, DECLARING THE DEED OF ABSOLUTE SALE DATED SEPTEMBER 30, 1991, COVERING THREE (3) PARCELS OF LAND VALID AND BINDING AND IN NOT TAKING INTO ACCOUNT ITS FINDINGS WHICH CONSIDERED THAT THE DEED OF ABSOLUTE SALE DATED SEPTEMBER 30, 1991, COVERING THREE (3) PARCELS OF LAND IS NOT SUPPORTED BY ANY CONSIDERATION AND DID NOT REFLECT THE TRUE INTENTION OF THE PARTIES, A FICTITIOUS ANDSIMULATED ONE, HENCE NON-EXISTENT AND VOID AB INITIO. GROUND II THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ALSO ERRED IN NOT TAKING INTO CONSIDERATION THAT THE DEED OF ABSOLUTE SALE DATED SEPTEMBER 30, 1991, COVERING THREE (3) PARCELS OF LAND WAS TAINTED WITH DECEPTION AS THE CONSENT WAS OBTAINED THROUGH DECEIT AND DISHONEST MEANS. GROUND III THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ERRED IN NOT TAKING INTO CONSIDERATION THAT SINCE THE DEED OF ABSOLUTE SALE DATED SEPTEMBER 30, 1991, COVERING THREE PARCELS OF LAND, WHICH WAS COMPOSED ORIGINALLY OF ONLY ONE (1) PAGE, WAS NOT INTENDED TO BE ACKNOWLEDGED AND NOTARIZED BY A NOTARY PUBLIC, WAS ALREADY COMPOSED OF TWO (2) PAGES AND ACKNOWLEDGED AND NOTARIZED BY A NOTARY PUBLIC, THE SECOND PAGE OF WHICH DID NOT CONTAIN THE SIGNATURES OF THE PARTIES AND THEIR INSTRUMENTAL WITNESSES. APPARENTLY, THIS INDICATES A FRAUDULENT ACT WORTHY OF CONSIDERATION OF THE HONORABLE COURT OF APPEALS.

GROUND IV THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ERRED IN NOT TAKING INTO ACCOUNT OVER THEFACT THAT RESPONDENT FAILED TO CONSOLIDATE HER OWNERSHIP OVER THE DISPUTED LAND SUBJECT TO THE FICTITIOUS AND SIMULATED SALE DATED SEPTEMBER 30, 1991, COVERING THREE (3) PARCELS OF LAND. APPARENTLY, INDICATING AN ACT CONTRADICTORY TO WHAT A NORMAL PERSON MIGHT HAVE ACTED UNDER SIMILAR CIRCUMSTANCE. GROUND V THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ERRED IN FAILING TO UPHOLD THE FACTUAL FINDINGS OF THE RTC BRANCH 62 OF OSLOB, CEBU WHICH WAS IN THE POSITION TO EVALUATE AND APPRECIATE THE MERITS OF THE CASE AND HAD THE OPPORTUNITY OF OBSERVING THE DEMEANOR AND SINCERITY OF THE WITNESSES.[44]

The petitioner reiterates that the subject deed is fictitious and simulated, having been executed merely to afford respondent Jocelyn Yap a claim for the reduction of her tax liabilities in Canada. The petitioner points out that the true intention of the parties was never that of sale, but only for accommodation purposes. The petitioner, likewise, points out that his cousin Franklin added a second page to the one-page agreement and had it notarized; the second page of the deed bore the acknowledgment of the notary public, which, however, did not contain the signatures of the supposed parties and their instrumental witnesses. According to the petitioner, Franklin, through false pretenses, succeeded in obtaining his consent in executing a simulated deed of sale over the subject parcel of land. Moreover, considering the clear and convincing evidence that he was at work on the date the deed of sale was purportedly executed, the notary public could not have notarized the document in his presence and the other parties concerned. The petitioner insists that the transaction subject of the dispute is wantonly devoid of any consideration, did not reflect the true intention of the parties, and was obtained through frau