Republic of the Philippines

Supreme Court

Manila

FIRST DIVISION

MARIA TORBELA, represented G.R. No. 140528

by her heirs, namely: EULOGIO
TOSINO, husband and children:
CLARO, MAXIMINO,
CORNELIO, OLIVIA and
CALIXTA, all surnamed TOSINO,
APOLONIA TOSINO VDA. DE
RAMIREZ and JULITA TOSINO
DEAN; PEDRO TORBELA,
represented by his heirs, namely:
JOSE and DIONISIO, both
surnamed TORBELA;
EUFROSINA TORBELA
ROSARIO, represented by her
heirs, namely: ESTEBAN T.
ROSARIO, MANUEL T.
ROSARIO, ROMULO T.
ROSARIO and ANDREA
ROSARIO-HADUCA; LEONILA
TORBELA TAMIN; FERNANDO
TORBELA, represented by his
heirs, namely: SERGIO T.
TORBELA, EUTROPIA T.
VELASCO, PILAR T. ZULUETA,
CANDIDO T. TORBELA,
FLORENTINA T. TORBELA and
PANTALEON T. TORBELA;
DOLORES TORBELA
TABLADA; LEONORA
TORBELA AGUSTIN,
represented by her heirs, namely:
PATRICIO, SEGUNDO,
CONSUELO and FELIX, all
surnamed AGUSTIN; and
SEVERINA TORBELA
ILDEFONSO,

Petitioners,
 - versus -

SPOUSES ANDRES T. ROSARIO

and LENA DUQUE-ROSARIO
and BANCO FILIPINO SAVINGS
AND MORTGAGE BANK,
Respondents.

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

LENA DUQUE-ROSARIO,

Petitioner,

- versus -

BANCO FILIPINO SAVINGS

AND MORTGAGE BANK,

Respondent.

G.R. No. 140553

Present:
 CORONA, C.J.,
Chairperson,

LEONARDO-DE CASTRO,

BERSAMIN,

DEL CASTILLO, and

VILLARAMA, JR., JJ.

Promulgated:

December 7, 2011

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

DECISION

LEONARDO-DE CASTRO, J.:

Presently before the Court are two consolidated Petitions for Review on Certiorari
under Rule 45 of the Rules of Court, both assailing the Decision1[1] dated June 29, 1999
and Resolution2[2] dated October 22, 1999 of the Court of Appeals in CA-G.R. CV No.
39770.
 The petitioners in G.R. No. 140528 are siblings Maria Torbela,3[3] Pedro
Torbela,4[4] Eufrosina Torbela Rosario,5[5] Leonila Torbela Tamin, Fernando
Torbela,6[6] Dolores Torbela Tablada, Leonora Torbela Agustin,7[7] and Severina
Torbela Ildefonso (Torbela siblings).

The petitioner in G.R. No. 140553 is Lena Duque-Rosario (Duque-Rosario), who

was married to, but now legally separated from, Dr. Andres T. Rosario (Dr. Rosario). Dr.
Rosario is the son of Eufrosina Torbela Rosario and the nephew of the other Torbela
siblings.

The controversy began with a parcel of land, with an area of 374 square meters,
located in Urdaneta City, Pangasinan (Lot No. 356-A). It was originally part of a larger
parcel of land, known as Lot No. 356 of the Cadastral Survey of Urdaneta, measuring
749 square meters, and covered by Original Certificate of Title (OCT) No. 16676,8[8] in
the name of Valeriano Semilla (Valeriano), married to Potenciana Acosta. Under
unexplained circumstances, Valeriano gave Lot No. 356-A to his sister Marta Semilla,
married to Eugenio Torbela (spouses Torbela). Upon the deaths of the spouses Torbela,
Lot No. 356-A was adjudicated in equal shares among their children, the Torbela siblings,
by virtue of a Deed of Extrajudicial Partition9[9] dated December 3, 1962.
 On December 12, 1964, the Torbela siblings executed a Deed of Absolute
Quitclaim10[10] over Lot No. 356-A in favor of Dr. Rosario. According to the said Deed,
the Torbela siblings for and in consideration of the sum of NINE PESOS (P9.00) x x x
transfer[red] and convey[ed] x x x unto the said Andres T. Rosario, that undivided portion
of THREE HUNDRED SEVENTY-FOUR square meters of that parcel of land embraced
in Original Certificate of Title No. 16676 of the land records of Pangasinan x x x.11[11]
Four days later, on December 16, 1964, OCT No. 16676 in Valerianos name was partially
cancelled as to Lot No. 356-A and TCT No. 5275112[12] was issued in Dr. Rosarios
name covering the said property.

Another Deed of Absolute Quitclaim13[13] was subsequently executed on

December 28, 1964, this time by Dr. Rosario, acknowledging that he only borrowed Lot
No. 356-A from the Torbela siblings and was already returning the same to the latter for
P1.00. The Deed stated:

That for and in consideration of the sum of one peso (P1.00), Philippine Currency
and the fact that I only borrowed the above described parcel of land from MARIA
TORBELA, married to Eulogio Tosino, EUFROSINA TORBELA, married to Pedro
Rosario, PEDRO TORBELA, married to Petra Pagador, LEONILA TORBELA, married
to Fortunato Tamen, FERNANDO TORBELA, married to Victoriana Tablada,
DOLORES TORBELA, widow, LEONORA TORBELA, married to Matias Agustin and
SEVERINA TORBELA, married to Jorge Ildefonso, x x x by these presents do hereby
cede, transfer and convey by way of this ABSOLUTE QUITCLAIM unto the said Maria,
Eufrosina, Pedro, Leonila, Fernando, Dolores, Leonora and Severina, all surnamed
Torbela the parcel of land described above.14[14] (Emphasis ours.)
 The aforequoted Deed was notarized, but was not immediately annotated on TCT
No. 52751.

Following the issuance of TCT No. 52751, Dr. Rosario obtained a loan from the
Development Bank of the Philippines (DBP) on February 21, 1965 in the sum of
P70,200.00, secured by a mortgage constituted on Lot No. 356-A. The mortgage was
annotated on TCT No. 52751 on September 21, 1965 as Entry No. 243537.15[15] Dr.
Rosario used the proceeds of the loan for the construction of improvements on Lot No.
356-A.

On May 16, 1967, Cornelio T. Tosino (Cornelio) executed an Affidavit of Adverse

Claim,16[16] on behalf of the Torbela siblings. Cornelio deposed in said Affidavit:

3. That ANDRES T. ROSARIO later quitclaimed his rights in favor of the

former owners by virtue of a Deed of Absolute Quitclaim which he executed before
Notary Public Banaga, and entered in his Notarial Registry as Dec. No. 43; Page No. 9;
Book No. I; Series of 1964;

4. That it is the desire of the parties, my aforestated kins, to register

ownership over the above-described property or to perfect their title over the same but
their Deed could not be registered because the registered owner now, ANDRES T.
ROSARIO mortgaged the property with the DEVELOPMENT BANK OF THE
PHILIPPINES, on September 21, 1965, and for which reason, the Title is still impounded
and held by the said bank;

5. That pending payment of the obligation with the DEVELOPMENT

BANK OF THE PHILIPPINES or redemption of the Title from said bank, I, CORNELIO
T. TOSINO, in behalf of my mother MARIA TORBELA-TOSINO, and my Aunts
EUFROSINA TORBELA, LEONILA TORBELA-TAMEN, DOLORES TORBELA,
LEONORA TORBELA-AGUSTIN, SEVERINA TORBELA-ILDEFONSO, and my
Uncles PEDRO TORBELA and FERNANDO, also surnamed TORBELA, I request the
Register of Deeds of Pangasinan to annotate their adverse claim at the back of Transfer
Certificate of Title No. 52751, based on the annexed document, Deed of Absolute
Quitclaim by ANDRES T. ROSARIO, dated December 28, 1964, marked as Annex A
and made a part of this Affidavit, and it is also requested that the DEVELOPMENT
BANK OF THE PHILIPPINES be informed accordingly.17[17]
 The very next day, on May 17, 1967, the Torbela siblings had Cornelios Affidavit
of Adverse Claim dated May 16, 1967 and Dr. Rosarios Deed of Absolute Quitclaim
dated December 28, 1964 annotated on TCT No. 52751 as Entry Nos. 27447118[18] and
274472,19[19] respectively.

The construction of a four-storey building on Lot No. 356-A was eventually

completed. The building was initially used as a hospital, but was later converted to a
commercial building. Part of the building was leased to PT&T; and the rest to Mrs.
Andrea Rosario-Haduca, Dr. Rosarios sister, who operated the Rose Inn Hotel and
Restaurant.

Dr. Rosario was able to fully pay his loan from DBP. Under Entry No. 520197 on
TCT No. 5275120[20] dated March 6, 1981, the mortgage appearing under Entry No.
243537 was cancelled per the Cancellation and Discharge of Mortgage executed by DBP
in favor of Dr. Rosario and ratified before a notary public on July 11, 1980.

In the meantime, Dr. Rosario acquired another loan from the Philippine National
Bank (PNB) sometime in 1979-1981. Records do not reveal though the original amount
of the loan from PNB, but the loan agreement was amended on March 5, 1981 and the
loan amount was increased to P450,000.00. The loan was secured by mortgages
constituted on the following properties: (1) Lot No. 356-A, covered by TCT No. 52751
in Dr. Rosarios name; (2) Lot No. 4489, with an area of 1,862 square meters, located in
Dagupan City, Pangasinan, covered by TCT No. 24832; and (3) Lot No. 5-F-8-C-2-B-2-
A, with an area of 1,001 square meters, located in Nancayasan, Urdaneta, Pangasinan,
covered by TCT No. 104189.21[21] The amended loan agreement and mortgage on Lot
No. 356-A was annotated on TCT No. 52751 on March 6, 1981 as Entry No.
520099.22[22]

Five days later, on March 11, 1981, another annotation, Entry No. 520469,23[23]
was made on TCT No. 52751, canceling the adverse claim on Lot No. 356-A under Entry
Nos. 274471-274472, on the basis of the Cancellation and Discharge of Mortgage
executed by Dr. Rosario on March 5, 1981. Entry No. 520469 consisted of both stamped
and handwritten portions, and exactly reads:

Entry No. 520469. Cancellation of Adverse Claim executed by Andres Rosario in favor
of same. The incumbrance/mortgage appearing under Entry No. 274471-72 is now
cancelled as per Cancellation and Discharge of Mortgage Ratified before Notary Public
Mauro G. Meris on March 5, 1981: Doc. No. 215; Page No. 44; Book No. 1; Series Of
1981.
Lingayen, Pangasinan, 3-11, 19981

[Signed: Pedro dela Cruz]

Register of Deeds 24[24]

On December 8, 1981, Dr. Rosario and his wife, Duque-Rosario (spouses Rosario),
acquired a third loan in the amount of P1,200,000.00 from Banco Filipino Savings and
Mortgage Bank (Banco Filipino). To secure said loan, the spouses Rosario again
constituted mortgages on Lot No. 356-A, Lot No. 4489, and Lot No. 5-F-8-C-2-B-2-A.
The mortgage on Lot No. 356-A was annotated on TCT No. 52751 as Entry No.
53328325[25] on December 18, 1981. Since the construction of a two-storey commercial
building on Lot No. 5-F-8-C-2-B-2-A was still incomplete, the loan value thereof as
collateral was deducted from the approved loan amount. Thus, the spouses Rosario could
only avail of the maximum loan amount of P830,064.00 from Banco Filipino.

Because Banco Filipino paid the balance of Dr. Rosarios loan from PNB, the
mortgage on Lot No. 356-A in favor of PNB was cancelled per Entry No. 53347826[26]
on TCT No. 52751 dated December 23, 1981.

On February 13, 1986, the Torbela siblings filed before the Regional Trial Court
(RTC) of Urdaneta, Pangasinan, a Complaint for recovery of ownership and possession
of Lot No. 356-A, plus damages, against the spouses Rosario, which was docketed as
Civil Case No. U-4359. On the same day, Entry Nos. 593493 and 593494 were made on
TCT No. 52751 that read as follows:

Entry No. 593494 Complaint Civil Case No. U-4359 (For: Recovery of Ownership and
Possession and Damages. (Sup. Paper).
Entry No. 593493 Notice of Lis Pendens The parcel of land described in this title is
subject to Lis Pendens executed by Liliosa B. Rosario, CLAO, Trial Attorney dated
February 13, 1986. Filed to TCT No. 52751
February 13, 1986-1986 February 13 3:30 p.m.

(SGD.) PACIFICO M. BRAGANZA

Register of Deeds27[27]

The spouses Rosario afterwards failed to pay their loan from Banco Filipino. As
of April 2, 1987, the spouses Rosarios outstanding principal obligation and penalty
charges amounted to P743,296.82 and P151,524.00, respectively.28[28]
 Banco Filipino extrajudicially foreclosed the mortgages on Lot No. 356-A, Lot No.
4489, and Lot No. 5-F-8-C-2-B-2-A. During the public auction on April 2, 1987, Banco
Filipino was the lone bidder for the three foreclosed properties for the price of
P1,372,387.04. The Certificate of Sale29[29] dated April 2, 1987, in favor of Banco
Filipino, was annotated on TCT No. 52751 on April 14, 1987 as Entry No.
610623.30[30]

On December 9, 1987, the Torbela siblings filed before the RTC their Amended
Complaint,31[31] impleading Banco Filipino as additional defendant in Civil Case No.
U-4359 and praying that the spouses Rosario be ordered to redeem Lot No. 356-A from
Banco Filipino.

The spouses Rosario instituted before the RTC on March 4, 1988 a case for
annulment of extrajudicial foreclosure and damages, with prayer for a writ of preliminary
injunction and temporary restraining order, against Banco Filipino, the Provincial Ex
Officio Sheriff and his Deputy, and the Register of Deeds of Pangasinan. The case was
docketed as Civil Case No. U-4667. Another notice of lis pendens was annotated on TCT
No. 52751 on March 10, 1988 as Entry No. 627059, viz:

Entry No. 627059 Lis Pendens Dr. Andres T. Rosario and Lena Duque Rosario, Plaintiff
versus Banco Filipino, et. al. Civil Case No. U-4667 or Annulment of ExtraJudicial
Foreclosure of Real Estate Mortgage The parcel of land described in this title is subject
to Notice of Lis Pendens subscribed and sworn to before Notary Public Mauro G. Meris,
as Doc. No. 21; Page No. 5; Book 111; S-1988. March 7, 1988-1988 March 10, 1:00 p.m.

(SGD.) RUFINO M. MORENO, SR.

Register of Deeds32[32]
The Torbela siblings intervened in Civil Case No. U-4667. Eventually, on October 17,
1990, the RTC issued an Order33[33] dismissing without prejudice Civil Case No. U-
4667 due to the spouses Rosarios failure to prosecute.

Meanwhile, the Torbela siblings tried to redeem Lot No. 356-A from Banco
Filipino, but their efforts were unsuccessful. Upon the expiration of the one-year
redemption period in April 1988, the Certificate of Final Sale34[34] and Affidavit of
Consolidation35[35] covering all three foreclosed properties were executed on May 24,
1988 and May 25, 1988, respectively.

On June 7, 1988, new certificates of title were issued in the name of Banco Filipino,
particularly, TCT No. 165812 for Lot No. 5-F-8-C-2-B-2-A and TCT No. 165813 for Lot
No. 356-A .36[36]

The Torbela siblings thereafter filed before the RTC on August 29, 1988 a
Complaint37[37] for annulment of the Certificate of Final Sale dated May 24, 1988,
judicial cancelation of TCT No. 165813, and damages, against Banco Filipino, the Ex
Officio Provincial Sheriff, and the Register of Deeds of Pangasinan, which was docketed
as Civil Case No. U-4733.
 On June 19, 1991, Banco Filipino filed before the RTC of Urdaneta City a Petition
for the issuance of a writ of possession. In said Petition, docketed as Pet. Case No. U-
822, Banco Filipino prayed that a writ of possession be issued in its favor over Lot No.
5-F-8-C-2-B-2-A and Lot No. 356-A, plus the improvements thereon, and the spouses
Rosario and other persons presently in possession of said properties be directed to abide
by said writ.

The RTC jointly heard Civil Case Nos. U-4359 and U-4733 and Pet. Case No. U-
822. The Decision38[38] on these three cases was promulgated on January 15, 1992, the
dispositive portion of which reads:

WHEREFORE, judgment is rendered:

1. Declaring the real estate mortgage over Lot 356-A covered by TCT
52751 executed by Spouses Andres Rosario in favor of Banco Filipino, legal and valid;

2. Declaring the sheriffs sale dated April 2, 1987 over Lot 356-A covered
by TCT 52751 and subsequent final Deed of Sale dated May 14, 1988 over Lot 356-A
covered by TCT No. 52751 legal and valid;

3. Declaring Banco Filipino the owner of Lot 356-A covered by TCT No.
52751 (now TCT 165813);

4. Banco Filipino is entitled to a Writ of Possession over Lot 356-A together

with the improvements thereon (Rose Inn Building). The Branch Clerk of Court is hereby
ordered to issue a writ of possession in favor of Banco Filipino;

5. [The Torbela siblings] are hereby ordered to render accounting to Banco

Filipino the rental they received from tenants of Rose Inn Building from May 14, 1988;

6. [The Torbela siblings] are hereby ordered to pay Banco Filipino the sum
of P20,000.00 as attorneys fees;

7. Banco Filipino is hereby ordered to give [the Torbela siblings] the right
of first refusal over Lot 356-A. The Register of Deeds is hereby ordered to annotate the
right of [the Torbela siblings] at the back of TCT No. 165813 after payment of the
required fees;
 8. Dr. Rosario and Lena Rosario are hereby ordered to reimburse [the
Torbela siblings] the market value of Lot 356-A as of December, 1964 minus payments
made by the former;

9. Dismissing the complaint of [the Torbela siblings] against Banco

Filipino, Pedro Habon and Rufino Moreno in Civil Case No. U-4733; and against Banco
Filipino in Civil Case No. U-4359.39[39]

The RTC released an Amended Decision40[40] dated January 29, 1992, adding
the following paragraph to the dispositive:

Banco Filipino is entitled to a Writ of Possession over Lot-5-F-8-C-2-[B]-2-A of

the subdivision plan (LRC) Psd-122471, covered by Transfer Certificate of Title 104189
of the Registry of Deeds of Pangasinan[.]41[41]

The Torbela siblings and Dr. Rosario appealed the foregoing RTC judgment before
the Court of Appeals. Their appeal was docketed as CA-G.R. CV No. 39770.

In its Decision42[42] dated June 29, 1999, the Court of Appeals decreed:

WHEREFORE, foregoing considered, the appealed decision is hereby

AFFIRMED with modification. Items No. 6 and 7 of the appealed decision are
DELETED. Item No. 8 is modified requiring [Dr. Rosario] to pay [the Torbela siblings]
actual damages, in the amount of P1,200,000.00 with 6% per annum interest from finality
of this decision until fully paid. [Dr. Rosario] is further ORDERED to pay [the Torbela
 siblings] the amount of P300,000.00 as moral damages; P200,000.00 as exemplary
damages and P100,000.00 as attorneys fees.

Costs against [Dr. Rosario].43[43]

The Court of Appeals, in a Resolution44[44] dated October 22, 1999, denied the
separate Motions for Reconsideration of the Torbela siblings and Dr. Rosario.

The Torbela siblings come before this Court via the Petition for Review in G.R.
No. 140528, with the following assignment of errors:

First Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT

FINDING THAT THE REGISTRATION OF THE DEED OF ABSOLUTE
QUITCLAIM EXECUTED BY [DR. ANDRES T. ROSARIO] IN FAVOR OF
THE [TORBELA SIBLINGS] DATED DECEMBER 28, 1964 AND THE
REGISTRATION OF THE NOTICE OF ADVERSE CLAIM EXECUTED BY
THE [TORBELA SIBLINGS], SERVE AS THE OPERATIVE ACT TO
CONVEY OR AFFECT THE LAND AND IMPROVEMENTS THEREOF IN
SO FAR AS THIRD PERSONS ARE CONCERNED.

Second Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING

THAT THE SUBJECT PROPERTY COVERED BY T.C.T. NO. 52751 IS
CLEAN AND FREE, DESPITE OF THE ANNOTATION OF
ENCUMBRANCES OF THE NOTICE OF ADVERSE CLAIM AND THE
DEED OF ABSOLUTE QUITCLAIM APPEARING AT THE BACK
THEREOF AS ENTRY NOS. 274471 AND 274472, RESPECTIVELY.

Third Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING

THAT THE NOTICE OF ADVERSE CLAIM OF THE [TORBELA SIBLINGS]
UNDER ENTRY NO. 274471 WAS VALIDLY CANCELLED BY THE
REGISTER OF DEEDS, IN THE ABSENCE OF A PETITION DULY FILED
IN COURT FOR ITS CANCELLATION.

Fourth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING

THAT RESPONDENT BANCO FILIPINO SAVINGS AND MORTGAGE
BANK IS A MORTGAGEE IN GOOD FAITH.
 Fifth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT

FINDING THAT THE FILING OF A CIVIL CASE NO. U-4359 ON
DECEMBER 9, 1987, IMPLEADING RESPONDENT BANCO FILIPINO AS
ADDITIONAL PARTY DEFENDANT, TOLL OR SUSPEND THE RUNNING
OF THE ONE YEAR PERIOD OF REDEMPTION.

Sixth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT

FINDING THAT THE OWNERSHIP OVER THE SUBJECT PROPERTY
WAS PREMATURELY CONSOLIDATED IN FAVOR OF RESPONDENT
BANCO FILIPINO SAVINGS AND MORTGAGE BANK.

Seventh Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING

THAT THE SUBJECT PROPERTY IS AT LEAST WORTH
P1,200,000.00.45[45]

The Torbela siblings ask of this Court:

WHEREFORE, in the light of the foregoing considerations, the [Torbela siblings]

most respectfully pray that the questioned DECISION promulgated on June 29, 1999
(Annex A, Petition) and the RESOLUTION dated October 22, 1999 (Annex B, Petition)
be REVERSED and SET ASIDE, and/or further MODIFIED in favor of the [Torbela
siblings], and another DECISION issue ordering, among other reliefs, the respondent
Banco Filipino to reconvey back Lot No. 356-A, covered by T.C.T. No. 52751, in favor
of the [Torbela siblings] who are the actual owners of the same.

The [Torbela siblings] likewise pray for such other reliefs and further remedies
as may be deemed just and equitable under the premises.46[46]

Duque-Rosario, now legally separated from Dr. Rosario, avers in her Petition for
Review in G.R. No. 140553 that Lot No. 4489 and Lot No. 5-F-8-C-2-B-2-A were
registered in her name, and she was unlawfully deprived of ownership of said properties
because of the following errors of the Court of Appeals:
 A
THE HON. COURT OF APPEALS PATENTLY ERRED IN NOT FINDING THAT
THE PERIOD TO REDEEM THE PROPERTY HAS NOT COMMENCED, HENCE,
THE CERTIFICATE OF SALE, THE CONSOLIDATION OF OWNERSHIP BY
[BANCO FILIPINO], ARE NULL AND VOID.

THE COURT OF APPEALS PATENTLY ERRED IN REFUSING TO RULE THAT

THE FILING OF THE COMPLAINT BEFORE THE COURT A QUO BY THE
[TORBELA SIBLINGS] HAD ALREADY BEEN PRESCRIBED.47[47]

Duque-Rosario prays that the appealed decision of the Court of Appeals be

reversed and set aside, and that Lot No. 4489 and Lot No. 5-F-8-C-2-B-2-A be freed from
all obligations and encumbrances and returned to her.

Review of findings of fact by the RTC and the

Court of Appeals warranted.

A disquisition of the issues raised and/or errors assigned in the Petitions at bar
unavoidably requires a re-evaluation of the facts and evidence presented by the parties in
the court a quo.

In Republic v. Heirs of Julia Ramos,48[48] the Court summed up the rules

governing the power of review of the Court:

Ordinarily, this Court will not review, much less reverse, the factual findings of the Court
of Appeals, especially where such findings coincide with those of the trial court. The findings of
facts of the Court of Appeals are, as a general rule, conclusive and binding upon this Court, since
this Court is not a trier of facts and does not routinely undertake the re-examination of the
evidence presented by the contending parties during the trial of the case.

The above rule, however, is subject to a number of exceptions, such as (1) when the
inference made is manifestly mistaken, absurd or impossible; (2) when there is grave abuse of
discretion; (3) when the finding is grounded entirely on speculations, surmises, or conjectures;
 (4) when the judgment of the Court of Appeals is based on misapprehension of facts; (5) when
the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings, went
beyond the issues of the case and the same is contrary to the admissions of both parties; (7) when
the findings of the Court of Appeals are contrary to those of the trial court; (8) when the findings
of fact are conclusions without citation of specific evidence on which they are based; (9) when
the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and
which, if properly considered, would justify a different conclusion; and (10) when the findings
of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by
the evidence on record.49[49]

As the succeeding discussion will bear out, the first, fourth, and ninth exceptions are
extant in these case.

Barangay conciliation was not a pre-requisite to

the institution of Civil Case No. U-4359.

Dr. Rosario contends that Civil Case No. U-4359, the Complaint of the Torbela
siblings for recovery of ownership and possession of Lot No. 356-A, plus damages,
should have been dismissed by the RTC because of the failure of the Torbela siblings to
comply with the prior requirement of submitting the dispute to barangay conciliation.

The Torbela siblings instituted Civil Case No. U-4359 on February 13, 1986, when
Presidential Decree No. 1508, Establishing a System of Amicably Settling Disputes at
the Barangay Level, was still in effect.50[50] Pertinent provisions of said issuance read:

Section 2. Subject matters for amicable settlement. The Lupon of each barangay
shall have authority to bring together the parties actually residing in the same city or
municipality for amicable settlement of all disputes except:

1. Where one party is the government, or any subdivision or instrumentality

thereof;

2. Where one party is a public officer or employee, and the dispute relates
to the performance of his official functions;
 3. Offenses punishable by imprisonment exceeding 30 days, or a fine
exceeding P200.00;

4. Offenses where there is no private offended party;

5. Such other classes of disputes which the Prime Minister may in the
interest of justice determine upon recommendation of the Minister of
Justice and the Minister of Local Government.

Section 3. Venue. Disputes between or among persons actually residing in the

same barangay shall be brought for amicable settlement before the Lupon of said
barangay. Those involving actual residents of different barangays within the same city
or municipality shall be brought in the barangay where the respondent or any of the
respondents actually resides, at the election of the complainant. However, all disputes
which involved real property or any interest therein shall be brought in the
barangay where the real property or any part thereof is situated.

The Lupon shall have no authority over disputes:

1. involving parties who actually reside in barangays of different cities

or municipalities, except where such barangays adjoin each other;
and

2. involving real property located in different municipalities.

xxxx

Section 6. Conciliation, pre-condition to filing of complaint. No complaint,

petition, action or proceeding involving any matter within the authority of the Lupon as
provided in Section 2 hereof shall be filed or instituted in court or any other government
office for adjudication unless there has been a confrontation of the parties before the
Lupon Chairman or the Pangkat and no conciliation or settlement has been reached as
certified by the Lupon Secretary or the Pangkat Secretary, attested by the Lupon or
Pangkat Chairman, or unless the settlement has been repudiated. x x x. (Emphases
supplied.)

The Court gave the following elucidation on the jurisdiction of the Lupong
Tagapayapa in Tavora v. Hon. Veloso51[51]:

The foregoing provisions are quite clear. Section 2 specifies the conditions under
which the Lupon of a barangay shall have authority to bring together the disputants for
amicable settlement of their dispute: The parties must be actually residing in the same
city or municipality. At the same time, Section 3 while reiterating that the disputants
must be actually residing in the same barangay or in different barangays within the same
city or municipality unequivocably declares that the Lupon shall have no authority over
disputes involving parties who actually reside in barangays of different cities or
municipalities, except where such barangays adjoin each other.

Thus, by express statutory inclusion and exclusion, the Lupon shall have no
jurisdiction over disputes where the parties are not actual residents of the same city
or municipality, except where the barangays in which they actually reside adjoin
each other.
 It is true that immediately after specifying the barangay whose Lupon shall take
cognizance of a given dispute, Sec. 3 of PD 1508 adds:

"However, all disputes which involve real property or any interest

therein shall be brought in the barangay where the real property or any
part thereof is situated."

Actually, however, this added sentence is just an ordinary proviso and should
operate as such.

The operation of a proviso, as a rule, should be limited to its normal function,

which is to restrict or vary the operation of the principal clause, rather than expand its
scope, in the absence of a clear indication to the contrary.

The natural and appropriate office of a proviso is . . . to except

something from the enacting clause; to limit, restrict, or qualify the statute
in whole or in part; or to exclude from the scope of the statute that which
otherwise would be within its terms. (73 Am Jur 2d 467.)

Therefore, the quoted proviso should simply be deemed to restrict or vary the rule
on venue prescribed in the principal clauses of the first paragraph of Section 3, thus:
Although venue is generally determined by the residence of the parties, disputes
involving real property shall be brought in the barangay where the real property or
any part thereof is situated, notwithstanding that the parties reside elsewhere within
the same city/municipality.52[52] (Emphases supplied.)

The original parties in Civil Case No. U-4359 (the Torbela siblings and the spouses
Rosario) do not reside in the same barangay, or in different barangays within the same
city or municipality, or in different barangays of different cities or municipalities but are
adjoining each other. Some of them reside outside Pangasinan and even outside of the
country altogether. The Torbela siblings reside separately in Barangay Macalong,
Urdaneta, Pangasinan; Barangay Consolacion, Urdaneta, Pangasinan; Pangil, Laguna;
Chicago, United States of America; and Canada. The spouses Rosario are residents of
Calle Garcia, Poblacion, Urdaneta, Pangasinan. Resultantly, the Lupon had no
jurisdiction over the dispute and barangay conciliation was not a pre-condition for the
filing of Civil Case No. U-4359.

The Court now looks into the merits of Civil Case No. U-4359.

There was an express trust between the Torbela

siblings and Dr. Rosario.
 There is no dispute that the Torbela sibling inherited the title to Lot No. 356-A
from their parents, the Torbela spouses, who, in turn, acquired the same from the first
registered owner of Lot No. 356-A, Valeriano.

Indeed, the Torbela siblings executed a Deed of Absolute Quitclaim on December

12, 1964 in which they transferred and conveyed Lot No. 356-A to Dr. Rosario for the
consideration of P9.00. However, the Torbela siblings explained that they only executed
the Deed as an accommodation so that Dr. Rosario could have Lot No. 356-A registered
in his name and use said property to secure a loan from DBP, the proceeds of which
would be used for building a hospital on Lot No. 356-A a claim supported by testimonial
and documentary evidence, and borne out by the sequence of events immediately
following the execution by the Torbela siblings of said Deed. On December 16, 1964,
TCT No. 52751, covering Lot No. 356-A, was already issued in Dr. Rosarios name. On
December 28, 1964, Dr. Rosario executed his own Deed of Absolute Quitclaim, in which
he expressly acknowledged that he only borrowed Lot No. 356-A and was transferring
and conveying the same back to the Torbela siblings for the consideration of P1.00. On
February 21, 1965, Dr. Rosarios loan in the amount of P70,200.00, secured by a
mortgage on Lot No. 356-A, was approved by DBP. Soon thereafter, construction of a
hospital building started on Lot No. 356-A.

Among the notable evidence presented by the Torbela siblings is the testimony of
Atty. Lorenza Alcantara (Atty. Alcantara), who had no apparent personal interest in the
present case. Atty. Alcantara, when she was still a boarder at the house of Eufrosina
Torbela Rosario (Dr. Rosarios mother), was consulted by the Torbela siblings as regards
the extrajudicial partition of Lot No. 356-A. She also witnessed the execution of the two
Deeds of Absolute Quitclaim by the Torbela siblings and Dr. Rosario.
 In contrast, Dr. Rosario presented TCT No. 52751, issued in his name, to prove his
purported title to Lot No. 356-A. In Lee Tek Sheng v. Court of Appeals,53[53] the Court
made a clear distinction between title and the certificate of title:

The certificate referred to is that document issued by the Register of Deeds known as the
Transfer Certificate of Title (TCT). By title, the law refers to ownership which is
represented by that document. Petitioner apparently confuses certificate with title.
Placing a parcel of land under the mantle of the Torrens system does not mean that
ownership thereof can no longer be disputed. Ownership is different from a certificate of
title. The TCT is only the best proof of ownership of a piece of land. Besides, the
certificate cannot always be considered as conclusive evidence of ownership. Mere
issuance of the certificate of title in the name of any person does not foreclose the
possibility that the real property may be under co-ownership with persons not
named in the certificate or that the registrant may only be a trustee or that other
parties may have acquired interest subsequent to the issuance of the certificate of
title. To repeat, registration is not the equivalent of title, but is only the best evidence
thereof. Title as a concept of ownership should not be confused with the certificate
of title as evidence of such ownership although both are interchangeably used. x x
x.54[54] (Emphases supplied.)

Registration does not vest title; it is merely the evidence of such title. Land
registration laws do not give the holder any better title than what he actually has.55[55]
Consequently, Dr. Rosario must still prove herein his acquisition of title to Lot No. 356-
A, apart from his submission of TCT No. 52751 in his name.

Dr. Rosario testified that he obtained Lot No. 356-A after paying the Torbela
siblings P25,000.00, pursuant to a verbal agreement with the latter. The Court though
observes that Dr. Rosarios testimony on the execution and existence of the verbal
agreement with the Torbela siblings lacks significant details (such as the names of the
parties present, dates, places, etc.) and is not corroborated by independent evidence.
 In addition, Dr. Rosario acknowledged the execution of the two Deeds of Absolute
Quitclaim dated December 12, 1964 and December 28, 1964, even affirming his own
signature on the latter Deed. The Parol Evidence Rule provides that when the terms of
the agreement have been reduced into writing, it is considered as containing all the terms
agreed upon and there can be, between the parties and their successors in interest, no
evidence of such terms other than the contents of the written agreement.56[56] Dr.
Rosario may not modify, explain, or add to the terms in the two written Deeds of Absolute
Quitclaim since he did not put in issue in his pleadings (1) an intrinsic ambiguity, mistake,
or imperfection in the Deeds; (2) failure of the Deeds to express the true intent and the
agreement of the parties thereto; (3) the validity of the Deeds; or (4) the existence of other
terms agreed to by the Torbela siblings and Dr. Rosario after the execution of the
Deeds.57[57]

Even if the Court considers Dr. Rosarios testimony on his alleged verbal agreement
with the Torbela siblings, the Court finds the same unsatisfactory. Dr. Rosario averred
that the two Deeds were executed only because he was planning to secure loan from the
Development Bank of the Philippines and Philippine National Bank and the bank needed
absolute quitclaim[.]58[58] While Dr. Rosarios explanation makes sense for the first
Deed of Absolute Quitclaim dated December 12, 1964 executed by the Torbela siblings
(which transferred Lot No. 356-A to Dr. Rosario for P9.00.00), the same could not be
said for the second Deed of Absolute Quitclaim dated December 28, 1964 executed by
Dr. Rosario. In fact, Dr. Rosarios Deed of Absolute Quitclaim (in which he admitted that
he only borrowed Lot No. 356-A and was transferring the same to the Torbela siblings
for P1.00.00) would actually work against the approval of Dr. Rosarios loan by the banks.
Since Dr. Rosarios Deed of Absolute Quitclaim dated December 28, 1964 is a declaration
against his self-interest, it must be taken as favoring the truthfulness of the contents of
said Deed.59[59]
 It can also be said that Dr. Rosario is estopped from claiming or asserting
ownership over Lot No. 356-A based on his Deed of Absolute Quitclaim dated December
28, 1964. Dr. Rosario's admission in the said Deed that he merely borrowed Lot No. 356-
A is deemed conclusive upon him. Under Article 1431 of the Civil Code, [t]hrough
estoppel an admission or representation is rendered conclusive upon the person making
it, and cannot be denied or disproved as against the person relying thereon.60[60] That
admission cannot now be denied by Dr. Rosario as against the Torbela siblings, the latter
having relied upon his representation.

Considering the foregoing, the Court agrees with the RTC and the Court of Appeals
that Dr. Rosario only holds Lot No. 356-A in trust for the Torbela siblings.

Trust is the right to the beneficial enjoyment of property, the legal title to which is
vested in another. It is a fiduciary relationship that obliges the trustee to deal with the
property for the benefit of the beneficiary. Trust relations between parties may either be
express or implied. An express trust is created by the intention of the trustor or of the
parties, while an implied trust comes into being by operation of law.61[61]

Express trusts are created by direct and positive acts of the parties, by some writing
or deed, or will, or by words either expressly or impliedly evincing an intention to create
a trust. Under Article 1444 of the Civil Code, [n]o particular words are required for the
creation of an express trust, it being sufficient that a trust is clearly intended.62[62] It is
possible to create a trust without using the word trust or trustee. Conversely, the mere
fact that these words are used does not necessarily indicate an intention to create a trust.
The question in each case is whether the trustor manifested an intention to create the kind
of relationship which to lawyers is known as trust. It is immaterial whether or not he
knows that the relationship which he intends to create is called a trust, and whether or not
he knows the precise characteristics of the relationship which is called a trust.63[63]

In Tamayo v. Callejo,64[64] the Court recognized that a trust may have a

constructive or implied nature in the beginning, but the registered owners subsequent
express acknowledgement in a public document of a previous sale of the property to
another party, had the effect of imparting to the aforementioned trust the nature of an
express trust. The same situation exists in this case. When Dr. Rosario was able to register
Lot No. 356-A in his name under TCT No. 52751 on December 16, 1964, an implied
trust was initially established between him and the Torbela siblings under Article 1451
of the Civil Code, which provides:

ART. 1451. When land passes by succession to any person and he causes the
legal title to be put in the name of another, a trust is established by implication of law for
the benefit of the true owner.

Dr. Rosarios execution of the Deed of Absolute Quitclaim on December 28, 1964,
containing his express admission that he only borrowed Lot No. 356-A from the Torbela
siblings, eventually transformed the nature of the trust to an express one. The express
trust continued despite Dr. Rosario stating in his Deed of Absolute Quitclaim that he was
already returning Lot No. 356-A to the Torbela siblings as Lot No. 356-A remained
registered in Dr. Rosarios name under TCT No. 52751 and Dr. Rosario kept possession
of said property, together with the improvements thereon.
The right of the Torbela siblings to recover Lot
No. 356-A has not yet prescribed.

The Court extensively discussed the prescriptive period for express trusts in the
Heirs of Maximo Labanon v. Heirs of Constancio Labanon,65[65] to wit:

On the issue of prescription, we had the opportunity to rule in Bueno v. Reyes that
unrepudiated written express trusts are imprescriptible:

While there are some decisions which hold that an action upon a
trust is imprescriptible, without distinguishing between express and
implied trusts, the better rule, as laid down by this Court in other
decisions, is that prescription does supervene where the trust is merely an
implied one. The reason has been expressed by Justice J.B.L. Reyes in
J.M. Tuason and Co., Inc. vs. Magdangal, 4 SCRA 84, 88, as follows:

Under Section 40 of the old Code of Civil

Procedure, all actions for recovery of real property
prescribed in 10 years, excepting only actions based on
continuing or subsisting trusts that were considered by
section 38 as imprescriptible. As held in the case of Diaz
v. Gorricho, L-11229, March 29, 1958, however, the
continuing or subsisting trusts contemplated in section 38
of the Code of Civil Procedure referred only to express
unrepudiated trusts, and did not include constructive trusts
(that are imposed by law) where no fiduciary relation
exists and the trustee does not recognize the trust at all.

This principle was amplified in Escay v. Court of Appeals this way: Express trusts
prescribe 10 years from the repudiation of the trust (Manuel Diaz, et al. vs. Carmen
Gorricho et al., 54 O.G. p. 8429, Sec. 40, Code of Civil Procedure).

In the more recent case of Secuya v. De Selma, we again ruled that the prescriptive
period for the enforcement of an express trust of ten (10) years starts upon the repudiation
of the trust by the trustee.66[66]

To apply the 10-year prescriptive period, which would bar a beneficiarys action to
recover in an express trust, the repudiation of the trust must be proven by clear and
convincing evidence and made known to the beneficiary.67[67] The express trust
disables the trustee from acquiring for his own benefit the property committed to his
management or custody, at least while he does not openly repudiate the trust, and makes
such repudiation known to the beneficiary or cestui que trust. For this reason, the old
Code of Civil Procedure (Act 190) declared that the rules on adverse possession do not
apply to continuing and subsisting (i.e., unrepudiated) trusts. In an express trust, the delay
of the beneficiary is directly attributable to the trustee who undertakes to hold the
property for the former, or who is linked to the beneficiary by confidential or fiduciary
relations. The trustee's possession is, therefore, not adverse to the beneficiary, until and
unless the latter is made aware that the trust has been repudiated.68[68]

Dr. Rosario argues that he is deemed to have repudiated the trust on December 16,
1964, when he registered Lot No. 356-A in his name under TCT No. 52751, so when on
February 13, 1986, the Torbela siblings instituted before the RTC Civil Case No. U-4359,
for the recovery of ownership and possession of Lot No. 356-A from the spouses Rosario,
over 21 years had passed. Civil Case No. U-4359 was already barred by prescription, as
well as laches.

The Court already rejected a similar argument in Ringor v. Ringor69[69] for the
following reasons:

A trustee who obtains a Torrens title over a property held in trust for him by
another cannot repudiate the trust by relying on the registration. A Torrens
Certificate of Title in Joses name did not vest ownership of the land upon him. The
Torrens system does not create or vest title. It only confirms and records title already
existing and vested. It does not protect a usurper from the true owner. The Torrens system
was not intended to foment betrayal in the performance of a trust. It does not permit one
to enrich himself at the expense of another. Where one does not have a rightful claim to
the property, the Torrens system of registration can confirm or record nothing. Petitioners
cannot rely on the registration of the lands in Joses name nor in the name of the Heirs of
Jose M. Ringor, Inc., for the wrong result they seek. For Jose could not repudiate a trust
by relying on a Torrens title he held in trust for his co-heirs. The beneficiaries are entitled
to enforce the trust, notwithstanding the irrevocability of the Torrens title. The intended
trust must be sustained.70[70] (Emphasis supplied.)
 In the more recent case of Heirs of Tranquilino Labiste v. Heirs of Jose
Labiste,71[71] the Court refused to apply prescription and laches and reiterated that:

[P]rescription and laches will run only from the time the express trust is repudiated. The
Court has held that for acquisitive prescription to bar the action of the beneficiary against
the trustee in an express trust for the recovery of the property held in trust it must be
shown that: (a) the trustee has performed unequivocal acts of repudiation amounting to
an ouster of the cestui que trust; (b) such positive acts of repudiation have been made
known to the cestui que trust, and (c) the evidence thereon is clear and conclusive.
Respondents cannot rely on the fact that the Torrens title was issued in the name of
Epifanio and the other heirs of Jose. It has been held that a trustee who obtains a
Torrens title over property held in trust by him for another cannot repudiate the
trust by relying on the registration. The rule requires a clear repudiation of the trust
duly communicated to the beneficiary. The only act that can be construed as repudiation
was when respondents filed the petition for reconstitution in October 1993. And since
petitioners filed their complaint in January 1995, their cause of action has not yet
prescribed, laches cannot be attributed to them.72[72] (Emphasis supplied.)

It is clear that under the foregoing jurisprudence, the registration of Lot No. 356-
A by Dr. Rosario in his name under TCT No. 52751 on December 16, 1964 is not the
repudiation that would have caused the 10-year prescriptive period for the enforcement
of an express trust to run.

The Court of Appeals held that Dr. Rosario repudiated the express trust when he
acquired another loan from PNB and constituted a second mortgage on Lot No. 356-A
sometime in 1979, which, unlike the first mortgage to DBP in 1965, was without the
knowledge and/or consent of the Torbela siblings.

The Court only concurs in part with the Court of Appeals on this matter.

For repudiation of an express trust to be effective, the unequivocal act of

repudiation had to be made known to the Torbela siblings as the cestuis que trust and
must be proven by clear and conclusive evidence. A scrutiny of TCT No. 52751 reveals
the following inscription:

Entry No. 520099

Amendment of the mortgage in favor of PNB inscribed under Entry No. 490658 in the
sense that the consideration thereof has been increased to PHILIPPINE PESOS Four
Hundred Fifty Thousand Pesos only (P450,000.00) and to secure any and all negotiations
with PNB, whether contracted before, during or after the date of this instrument,
acknowledged before Notary Public of Pangasinan Alejo M. Dato as Doc. No. 198, Page
No. 41, Book No. 11, Series of 1985.

Date of Instrument March 5, 1981

Date of Inscription March 6, 198173[73]

Although according to Entry No. 520099, the original loan and mortgage
agreement of Lot No. 356-A between Dr. Rosario and PNB was previously inscribed as
Entry No. 490658, Entry No. 490658 does not actually appear on TCT No. 52751 and,
thus, it cannot be used as the reckoning date for the start of the prescriptive period.

The Torbela siblings can only be charged with knowledge of the mortgage of Lot
No. 356-A to PNB on March 6, 1981 when the amended loan and mortgage agreement
was registered on TCT No. 52751 as Entry No. 520099. Entry No. 520099 is constructive
notice to the whole world74[74] that Lot No. 356-A was mortgaged by Dr. Rosario to
PNB as security for a loan, the amount of which was increased to P450,000.00. Hence,
Dr. Rosario is deemed to have effectively repudiated the express trust between him and
the Torbela siblings on March 6, 1981, on which day, the prescriptive period for the
enforcement of the express trust by the Torbela siblings began to run.

From March 6, 1981, when the amended loan and mortgage agreement was
registered on TCT No. 52751, to February 13, 1986, when the Torbela siblings instituted
before the RTC Civil Case No. U-4359 against the spouses Rosario, only about five years
had passed. The Torbela siblings were able to institute Civil Case No. U-4359 well before
the lapse of the 10-year prescriptive period for the enforcement of their express trust with
Dr. Rosario.

Civil Case No. U-4359 is likewise not barred by laches. Laches means the failure
or neglect, for an unreasonable and unexplained length of time, to do that which by
exercising due diligence could or should have been done earlier. It is negligence or
omission to assert a right within a reasonable time, warranting a presumption that the
party entitled to assert it either has abandoned it or declined to assert it. As the Court
explained in the preceding paragraphs, the Torbela siblings instituted Civil Case No. U-
4359 five years after Dr. Rosarios repudiation of the express trust, still within the 10-year
prescriptive period for enforcement of such trusts. This does not constitute an
unreasonable delay in asserting one's right. A delay within the prescriptive period is
sanctioned by law and is not considered to be a delay that would bar relief. Laches apply
only in the absence of a statutory prescriptive period.75[75]

Banco Filipino is not a mortgagee and buyer in

good faith.

Having determined that the Torbela siblings are the true owners and Dr. Rosario
merely the trustee of Lot No. 356-A, the Court is next faced with the issue of whether or
not the Torbela siblings may still recover Lot No. 356-A considering that Dr. Rosario had
already mortgaged Lot No. 356-A to Banco Filipino, and upon Dr. Rosarios default on
his loan obligations, Banco Filipino foreclosed the mortgage, acquired Lot No. 356-A as
the highest bidder at the foreclosure sale, and consolidated title in its name under TCT
No. 165813. The resolution of this issue depends on the answer to the question of whether
or not Banco Filipino was a mortgagee in good faith.
 Under Article 2085 of the Civil Code, one of the essential requisites of the contract
of mortgage is that the mortgagor should be the absolute owner of the property to be
mortgaged; otherwise, the mortgage is considered null and void. However, an exception
to this rule is the doctrine of mortgagee in good faith. Under this doctrine, even if the
mortgagor is not the owner of the mortgaged property, the mortgage contract and any
foreclosure sale arising therefrom are given effect by reason of public policy. This
principle is based on the rule that all persons dealing with property covered by a Torrens
Certificate of Title, as buyers or mortgagees, are not required to go beyond what appears
on the face of the title. This is the same rule that underlies the principle of innocent
purchasers for value. The prevailing jurisprudence is that a mortgagee has a right to rely
in good faith on the certificate of title of the mortgagor to the property given as security
and in the absence of any sign that might arouse suspicion, has no obligation to undertake
further investigation. Hence, even if the mortgagor is not the rightful owner of, or does
not have a valid title to, the mortgaged property, the mortgagee in good faith is,
nonetheless, entitled to protection.76[76]

On one hand, the Torbela siblings aver that Banco Filipino is not a mortgagee in
good faith because as early as May 17, 1967, they had already annotated Cornelios
Adverse Claim dated May 16, 1967 and Dr. Rosarios Deed of Absolute Quitclaim dated
December 28, 1964 on TCT No. 52751 as Entry Nos. 274471-274472, respectively.

On the other hand, Banco Filipino asseverates that it is a mortgagee in good faith
because per Section 70 of Presidential Decree No. 1529, otherwise known as the Property
Registration Decree, the notice of adverse claim, registered on May 17, 1967 by the
Torbela siblings under Entry Nos. 274471-274472 on TCT No. 52751, already lapsed
after 30 days or on June 16, 1967. Additionally, there was an express cancellation of
Entry Nos. 274471-274472 by Entry No. 520469 dated March 11, 1981. So when Banco
Filipino approved Dr. Rosarios loan for P1,200,000.00 and constituted a mortgage on Lot
No. 356-A (together with two other properties) on December 8, 1981, the only other
encumbrance on TCT No. 52751 was Entry No. 520099 dated March 6, 1981, i.e., the
amended loan and mortgage agreement between Dr. Rosario and PNB (which was
eventually cancelled after it was paid off with part of the proceeds from Dr. Rosarios loan
from Banco Filipino). Hence, Banco Filipino was not aware that the Torbela siblings
adverse claim on Lot No. 356-A still subsisted.

The Court finds that Banco Filipino is not a mortgagee in good faith. Entry Nos.
274471-274472 were not validly cancelled, and the improper cancellation should have
been apparent to Banco Filipino and aroused suspicion in said bank of some defect in Dr.
Rosarios title.

The purpose of annotating the adverse claim on the title of the disputed land is to
apprise third persons that there is a controversy over the ownership of the land and to
preserve and protect the right of the adverse claimant during the pendency of the
controversy. It is a notice to third persons that any transaction regarding the disputed land
is subject to the outcome of the dispute.77[77]

Adverse claims were previously governed by Section 110 of Act No. 496,
otherwise known as the Land Registration Act, quoted in full below:

ADVERSE CLAIM

SEC. 110. Whoever claims any part or interest in registered land adverse to the
registered owner, arising subsequent to the date of the original registration, may, if no
other provision is made in this Act for registering the same, make a statement in writing
setting forth fully his alleged right or interest, and how or under whom acquired, and a
reference to the volume and page of the certificate of title of the registered owner, and a
description of the land in which the right or interest is claimed.

The statement shall be signed and sworn to, and shall state the adverse claimants
residence, and designate a place at which all notices may be served upon him. This
statement shall be entitled to registration as an adverse claim, and the court, upon a
petition of any party in interest, shall grant a speedy hearing upon the question of the
validity of such adverse claim and shall enter such decree therein as justice and equity
may require. If the claim is adjudged to be invalid, the registration shall be cancelled. If
in any case the court after notice and hearing shall find that a claim thus registered was
frivolous or vexatious, it may tax the adverse claimant double or treble costs in its
discretion.
 Construing the aforequoted provision, the Court stressed in Ty Sin Tei v. Lee Dy
Piao78[78] that [t]he validity or efficaciousness of the [adverse] claim x x x may only be
determined by the Court upon petition by an interested party, in which event, the Court
shall order the immediate hearing thereof and make the proper adjudication as justice and
equity may warrant. And it is ONLY when such claim is found unmeritorious that the
registration thereof may be cancelled. The Court likewise pointed out in the same case
that while a notice of lis pendens may be cancelled in a number of ways, the same is not
true in a registered adverse claim, for it may be cancelled only in one instance, i.e., after
the claim is adjudged invalid or unmeritorious by the Court x x x; and if any of the
registrations should be considered unnecessary or superfluous, it would be the notice of
lis pendens and not the annotation of the adverse claim which is more permanent and
cannot be cancelled without adequate hearing and proper disposition of the claim.

With the enactment of the Property Registration Decree on June 11, 1978, Section
70 thereof now applies to adverse claims:

SEC. 70. Adverse claim. Whoever claims any part or interest in registered land
adverse to the registered owner, arising subsequent to the date of the original
registrations, may, if no other provision is made in this Decree for registering the same,
make a statement in writing setting forth fully his alleged right, or interest, and how or
under whom acquired, a reference to the number of the certificate of title of the registered
owner, the name of the registered owner, and a description of the land in which the right
or interest is claimed.

The statement shall be signed and sworn to, and shall state the adverse claimants
residence, and a place at which all notices may be served upon him. This statement shall
be entitled to registration as an adverse claim on the certificate of title. The adverse
claim shall be effective for a period of thirty days from the date of registration. After
the lapse of said period, the annotation of adverse claim may be cancelled upon
filing of a verified petition therefor by the party in interest: Provided, however, that
after cancellation, no second adverse claim based on the same ground shall be registered
by the same claimant.

Before the lapse of thirty days aforesaid, any party in interest may file a
petition in the Court of First Instance where the land is situated for the cancellation
of the adverse claim, and the court shall grant a speedy hearing upon the question
of the validity of such adverse claim, and shall render judgment as may be just and
equitable. If the adverse claim is adjudged to be invalid, the registration thereof shall be
ordered cancelled. If, in any case, the court, after notice and hearing, shall find that the
 adverse claim thus registered was frivolous, it may fine the claimant in an amount not
less than one thousand pesos nor more than five thousand pesos, in its discretion. Before
the lapse of thirty days, the claimant may withdraw his adverse claim by filing with the
Register of Deeds a sworn petition to that effect. (Emphases supplied.)

In Sajonas v. Court of Appeals,79[79]the Court squarely interpreted Section 70 of

the Property Registration Decree, particularly, the new 30-day period not previously
found in Section 110 of the Land Registration Act, thus:

In construing the law aforesaid, care should be taken that every part thereof be
given effect and a construction that could render a provision inoperative should be
avoided, and inconsistent provisions should be reconciled whenever possible as parts of
a harmonious whole. For taken in solitude, a word or phrase might easily convey a
meaning quite different from the one actually intended and evident when a word or
phrase is considered with those with which it is associated. In ascertaining the period of
effectivity of an inscription of adverse claim, we must read the law in its entirety.
Sentence three, paragraph two of Section 70 of P.D. 1529 provides:

The adverse claim shall be effective for a period of thirty days

from the date of registration.

At first blush, the provision in question would seem to restrict the effectivity of
the adverse claim to thirty days. But the above provision cannot and should not be treated
separately, but should be read in relation to the sentence following, which reads:

After the lapse of said period, the annotation of adverse claim may
be cancelled upon filing of a verified petition therefor by the party in
interest.

If the rationale of the law was for the adverse claim to ipso facto lose force and
effect after the lapse of thirty days, then it would not have been necessary to include the
foregoing caveat to clarify and complete the rule. For then, no adverse claim need be
cancelled. If it has been automatically terminated by mere lapse of time, the law would
not have required the party in interest to do a useless act.

A statute's clauses and phrases must not be taken separately, but in its relation to
the statute's totality. Each statute must, in fact, be construed as to harmonize it with the
pre-existing body of laws. Unless clearly repugnant, provisions of statutes must be
reconciled. The printed pages of the published Act, its history, origin, and its purposes
may be examined by the courts in their construction. x x x.

xxxx

Construing the provision as a whole would reconcile the apparent inconsistency

between the portions of the law such that the provision on cancellation of adverse claim
by verified petition would serve to qualify the provision on the effectivity period. The
law, taken together, simply means that the cancellation of the adverse claim is still
necessary to render it ineffective, otherwise, the inscription will remain annotated
and shall continue as a lien upon the property. For if the adverse claim has already
ceased to be effective upon the lapse of said period, its cancellation is no longer
necessary and the process of cancellation would be a useless ceremony.
 It should be noted that the law employs the phrase "may be cancelled," which
obviously indicates, as inherent in its decision making power, that the court may or may
not order the cancellation of an adverse claim, notwithstanding such provision limiting
the effectivity of an adverse claim for thirty days from the date of registration. The court
cannot be bound by such period as it would be inconsistent with the very authority vested
in it. A fortiori, the limitation on the period of effectivity is immaterial in determining
the validity or invalidity of an adverse claim which is the principal issue to be decided in
the court hearing. It will therefore depend upon the evidence at a proper hearing for the
court to determine whether it will order the cancellation of the adverse claim or not.

To interpret the effectivity period of the adverse claim as absolute and without
qualification limited to thirty days defeats the very purpose for which the statute provides
for the remedy of an inscription of adverse claim, as the annotation of an adverse claim
is a measure designed to protect the interest of a person over a piece of real property
where the registration of such interest or right is not otherwise provided for by the Land
Registration Act or Act 496 (now P.D. 1529 or the Property Registration Decree), and
serves as a warning to third parties dealing with said property that someone is claiming
an interest or the same or a better right than the registered owner thereof.

The reason why the law provides for a hearing where the validity of the
adverse claim is to be threshed out is to afford the adverse claimant an opportunity
to be heard, providing a venue where the propriety of his claimed interest can be
established or revoked, all for the purpose of determining at last the existence of
any encumbrance on the title arising from such adverse claim. This is in line with the
provision immediately following:

Provided, however, that after cancellation, no second adverse

claim shall be registered by the same claimant.

Should the adverse claimant fail to sustain his interest in the property, the adverse
claimant will be precluded from registering a second adverse claim based on the same
ground.

It was held that validity or efficaciousness of the claim may only be determined
by the Court upon petition by an interested party, in which event, the Court shall order
the immediate hearing thereof and make the proper adjudication as justice and equity
may warrant. And it is only when such claim is found unmeritorious that the registration
of the adverse claim may be cancelled, thereby protecting the interest of the adverse
claimant and giving notice and warning to third parties.80[80] (Emphases supplied.)

Whether under Section 110 of the Land Registration Act or Section 70 of the
Property Registration Decree, notice of adverse claim can only be cancelled after a party
in interest files a petition for cancellation before the RTC wherein the property is located,
and the RTC conducts a hearing and determines the said claim to be invalid or
unmeritorious.

No petition for cancellation has been filed and no hearing has been conducted
herein to determine the validity or merit of the adverse claim of the Torbela siblings.
Entry No. 520469 cancelled the adverse claim of the Torbela siblings, annotated as Entry
Nos. 274471-774472, upon the presentation by Dr. Rosario of a mere Cancellation and
Discharge of Mortgage.

Regardless of whether or not the Register of Deeds should have inscribed Entry
No. 520469 on TCT No. 52751, Banco Filipino could not invoke said inscription in
support of its claim of good faith. There were several things amiss in Entry No. 520469
which should have already aroused suspicions in Banco Filipino, and compelled the bank
to look beyond TCT No. 52751 and inquire into Dr. Rosarios title. First, Entry No.
520469 does not mention any court order as basis for the cancellation of the adverse
claim. Second, the adverse claim was not a mortgage which could be cancelled with Dr.
Rosarios Cancellation and Discharge of Mortgage. And third, the adverse claim was
against Dr. Rosario, yet it was cancelled based on a document also executed by Dr.
Rosario.

It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts
which should put a reasonable man upon his guard, and then claim that he acted in good
faith under the belief that there was no defect in the title of the vendor or mortgagor. His
mere refusal to believe that such defect exists, or his willful closing of his eyes to the
possibility of the existence of a defect in the vendor's or mortgagor's title, will not make
him an innocent purchaser or mortgagee for value, if it afterwards develops that the title
was in fact defective, and it appears that he had such notice of the defects as would have
led to its discovery had he acted with the measure of precaution which may be required
of a prudent man in a like situation.81[81]

While the defective cancellation of Entry Nos. 274471-274472 by Entry No.

520469 might not be evident to a private individual, the same should have been apparent
to Banco Filipino. Banco Filipino is not an ordinary mortgagee, but is a mortgagee-bank,
whose business is impressed with public interest. In fact, in one case, 82[82] the Court
explicitly declared that the rule that persons dealing with registered lands can rely solely
on the certificate of title does not apply to banks. In another case,83[83] the Court
adjudged that unlike private individuals, a bank is expected to exercise greater care and
prudence in its dealings, including those involving registered lands. A banking institution
is expected to exercise due diligence before entering into a mortgage contract. The
ascertainment of the status or condition of a property offered to it as security for a loan
must be a standard and indispensable part of its operations.

Banco Filipino cannot be deemed a mortgagee in good faith, much less a purchaser
in good faith at the foreclosure sale of Lot No. 356-A. Hence, the right of the Torbela
siblings over Lot No. 356-A is superior over that of Banco Filipino; and as the true owners
of Lot No. 356-A, the Torbela siblings are entitled to a reconveyance of said property
even from Banco Filipino.

Nonetheless, the failure of Banco Filipino to comply with the due diligence
requirement was not the result of a dishonest purpose, some moral obliquity, or breach
of a known duty for some interest or ill will that partakes of fraud that would justify
damages.84[84]

Given the reconveyance of Lot No. 356-A to the Torbela siblings, there is no more
need to address issues concerning redemption, annulment of the foreclosure sale and
certificate of sale (subject matter of Civil Case No. U-4733), or issuance of a writ of
possession in favor of Banco Filipino (subject matter of Pet. Case No. U-822) insofar as
Lot No. 356-A is concerned. Such would only be superfluous. Banco Filipino, however,
is not left without any recourse should the foreclosure and sale of the two other mortgaged
properties be insufficient to cover Dr. Rosarios loan, for the bank may still bring a proper
suit against Dr. Rosario to collect the unpaid balance.

The rules on accession shall govern the

improvements on Lot No. 356-A and the rents
thereof.

The accessory follows the principal. The right of accession is recognized under
Article 440 of the Civil Code which states that [t]he ownership of property gives the right
by accession to everything which is produced thereby, or which is incorporated or
attached thereto, either naturally or artificially.

There is no question that Dr. Rosario is the builder of the improvements on Lot
No. 356-A. The Torbela siblings themselves alleged that they allowed Dr. Rosario to
register Lot No. 356-A in his name so he could obtain a loan from DBP, using said parcel
of land as security; and with the proceeds of the loan, Dr. Rosario had a building
constructed on Lot No. 356-A, initially used as a hospital, and then later for other
commercial purposes. Dr. Rosario supervised the construction of the building, which
began in 1965; fully liquidated the loan from DBP; and maintained and administered the
building, as well as collected the rental income therefrom, until the Torbela siblings
instituted Civil Case No. U-4359 before the RTC on February 13, 1986.

When it comes to the improvements on Lot No. 356-A, both the Torbela siblings
(as landowners) and Dr. Rosario (as builder) are deemed in bad faith. The Torbela
siblings were aware of the construction of a building by Dr. Rosario on Lot No. 356-A,
while Dr. Rosario proceeded with the said construction despite his knowledge that Lot
No. 356-A belonged to the Torbela siblings. This is the case contemplated under Article
453 of the Civil Code, which reads:

ART. 453. If there was bad faith, not only on the part of the person who built,
planted or sowed on the land of another, but also on the part of the owner of such land,
 the rights of one and the other shall be the same as though both had acted in good
faith.

It is understood that there is bad faith on the part of the landowner whenever the
act was done with his knowledge and without opposition on his part. (Emphasis
supplied.)

When both the landowner and the builder are in good faith, the following rules
govern:

ART. 448. The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige
the one who built or planted to pay the price of the land, and the one who sowed, the
proper rent. However, the builder or planter cannot be obliged to buy the land if its value
is considerably more than that of the building or trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to appropriate the building or
trees after proper indemnity. The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms thereof.

ART. 546. Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until he has been reimbursed therefor.

Useful expenses shall be refunded only to the possessor in good faith with the
same right of retention, the person who has defeated him in the possession having the
option of refunding the amount of the expenses or of paying the increase in value which
the thing may have acquired by reason thereof.

ART. 548. Expenses for pure luxury or mere pleasure shall not be refunded to the
possessor in good faith; but he may remove the ornaments with which he has embellished
the principal thing if it suffers no injury thereby, and if his successor in the possession
does not prefer to refund the amount expended.

Whatever is built, planted, or sown on the land of another, and the improvements
or repairs made thereon, belong to the owner of the land. Where, however, the planter,
builder, or sower has acted in good faith, a conflict of rights arises between the owners
and it becomes necessary to protect the owner of the improvements without causing
injustice to the owner of the land. In view of the impracticability of creating what Manresa
calls a state of "forced co-ownership," the law has provided a just and equitable solution
by giving the owner of the land the option to acquire the improvements after payment of
the proper indemnity or to oblige the builder or planter to pay for the land and the sower
to pay the proper rent. It is the owner of the land who is allowed to exercise the option
because his right is older and because, by the principle of accession, he is entitled to the
ownership of the accessory thing.85[85]

The landowner has to make a choice between appropriating the building by paying
the proper indemnity or obliging the builder to pay the price of the land. But even as the
option lies with the landowner, the grant to him, nevertheless, is preclusive. He must
choose one. He cannot, for instance, compel the owner of the building to remove the
building from the land without first exercising either option. It is only if the owner
chooses to sell his land, and the builder or planter fails to purchase it where its value is
not more than the value of the improvements, that the owner may remove the
improvements from the land. The owner is entitled to such remotion only when, after
having chosen to sell his land, the other party fails to pay for the same.86[86]

This case then must be remanded to the RTC for the determination of matters
necessary for the proper application of Article 448, in relation to Article 546, of the Civil
Code. Such matters include the option that the Torbela siblings will choose; the amount
of indemnity that they will pay if they decide to appropriate the improvements on Lot
No. 356-A; the value of Lot No. 356-A if they prefer to sell it to Dr. Rosario; or the
reasonable rent if they opt to sell Lot No. 356-A to Dr. Rosario but the value of the land
is considerably more than the improvements. The determination made by the Court of
Appeals in its Decision dated June 29, 1999 that the current value of Lot No. 356-A is
P1,200,000.00 is not supported by any evidence on record.

Should the Torbela siblings choose to appropriate the improvements on Lot No.
356-A, the following ruling of the Court in Pecson v. Court of Appeals87[87] is relevant
in the determination of the amount of indemnity under Article 546 of the Civil Code:
 Article 546 does not specifically state how the value of the useful improvements
should be determined. The respondent court and the private respondents espouse the
belief that the cost of construction of the apartment building in 1965, and not its current
market value, is sufficient reimbursement for necessary and useful improvements made
by the petitioner. This position is, however, not in consonance with previous rulings of
this Court in similar cases. In Javier vs. Concepcion, Jr., this Court pegged the value of
the useful improvements consisting of various fruits, bamboos, a house and camarin
made of strong material based on the market value of the said improvements. In
Sarmiento vs. Agana, despite the finding that the useful improvement, a residential house,
was built in 1967 at a cost of between eight thousand pesos (P8,000.00) to ten thousand
pesos (P10,000.00), the landowner was ordered to reimburse the builder in the amount
of forty thousand pesos (P40,000.00), the value of the house at the time of the trial. In
the same way, the landowner was required to pay the "present value" of the house, a
useful improvement, in the case of De Guzman vs. De la Fuente, cited by the petitioner.

The objective of Article 546 of the Civil Code is to administer justice between
the parties involved. In this regard, this Court had long ago stated in Rivera vs. Roman
Catholic Archbishop of Manila that the said provision was formulated in trying to adjust
the rights of the owner and possessor in good faith of a piece of land, to administer
complete justice to both of them in such a way as neither one nor the other may enrich
himself of that which does not belong to him. Guided by this precept, it is therefore the
current market value of the improvements which should be made the basis of
reimbursement. A contrary ruling would unjustly enrich the private respondents who
would otherwise be allowed to acquire a highly valued income-yielding four-unit
apartment building for a measly amount. Consequently, the parties should therefore be
allowed to adduce evidence on the present market value of the apartment building upon
which the trial court should base its finding as to the amount of reimbursement to be paid
by the landowner.88[88] (Emphases supplied.)

Still following the rules of accession, civil fruits, such as rents, belong to the owner
of the building.89[89] Thus, Dr. Rosario has a right to the rents of the improvements on
Lot No. 356-A and is under no obligation to render an accounting of the same to anyone.
In fact, it is the Torbela siblings who are required to account for the rents they had
collected from the lessees of the commercial building and turn over any balance to Dr.
Rosario. Dr. Rosarios right to the rents of the improvements on Lot No. 356-A shall
continue until the Torbela siblings have chosen their option under Article 448 of the Civil
Code. And in case the Torbela siblings decide to appropriate the improvements, Dr.
Rosario shall have the right to retain said improvements, as well as the rents thereof, until
the indemnity for the same has been paid.90[90]
Dr. Rosario is liable for damages to the Torbela
siblings.

The Court of Appeals ordered Dr. Rosario to pay the Torbela siblings P300,000.00
as moral damages; P200,000.00 as exemplary damages; and P100,000.00 as attorneys
fees.

Indeed, Dr. Rosarios deceit and bad faith is evident when, being fully aware that
he only held Lot No. 356-A in trust for the Torbela siblings, he mortgaged said property
to PNB and Banco Filipino absent the consent of the Torbela siblings, and caused the
irregular cancellation of the Torbela siblings adverse claim on TCT No. 52751.
Irrefragably, Dr. Rosarios betrayal had caused the Torbela siblings (which included Dr.
Rosarios own mother, Eufrosina Torbela Rosario) mental anguish, serious anxiety, and
wounded feelings. Resultantly, the award of moral damages is justified, but the amount
thereof is reduced to P200,000.00.

In addition to the moral damages, exemplary damages may also be imposed given
that Dr. Rosarios wrongful acts were accompanied by bad faith. However, judicial
discretion granted to the courts in the assessment of damages must always be exercised
with balanced restraint and measured objectivity. The circumstances of the case call for
a reduction of the award of exemplary damages to P100,000.00.

As regards attorney's fees, they may be awarded when the defendant's act or
omission has compelled the plaintiff to litigate with third persons or to incur expenses to
protect his interest. Because of Dr. Rosarios acts, the Torbela siblings were constrained
to institute several cases against Dr. Rosario and his spouse, Duque-Rosario, as well as
Banco Filipino, which had lasted for more than 25 years. Consequently, the Torbela
siblings are entitled to an award of attorney's fees and the amount of P100,000.00 may
be considered rational, fair, and reasonable.

Banco Filipino is entitled to a writ of possession

for Lot No. 5-F-8-C-2-B-2-A.

The Court emphasizes that Pet. Case No. U-822, instituted by Banco Filipino for
the issuance of a writ of possession before the RTC of Urdaneta, included only Lot No.
5-F-8-C-2-B-2-A and Lot No. 356-A (Lot No. 4489, the third property mortgaged to
secure Dr. Rosarios loan from Banco Filipino, is located in Dagupan City, Pangasinan,
and the petition for issuance of a writ of possession for the same should be separately
filed with the RTC of Dagupan City). Since the Court has already granted herein the
reconveyance of Lot No. 356-A from Banco Filipino to the Torbela siblings, the writ of
possession now pertains only to Lot No. 5-F-8-C-2-B-2-A.

To recall, the Court of Appeals affirmed the issuance by the RTC of a writ of
possession in favor of Banco Filipino. Dr. Rosario no longer appealed from said judgment
of the appellate court. Already legally separated from Dr. Rosario, Duque-Rosario alone
challenges the writ of possession before this Court through her Petition in G.R. No.
140553.

Duque-Rosario alleges in her Petition that Lot No. 5-F-8-C-2-B-2-A had been
registered in her name under TCT No. 104189. Yet, without a copy of TCT No. 104189
on record, the Court cannot give much credence to Duque-Rosarios claim of sole
ownership of Lot No. 5-F-8-C-2-B-2-A. Also, the question of whether Lot No. 5-F-8-C-
2-B-2-A was the paraphernal property of Duque-Rosario or the conjugal property of the
spouses Rosario would not alter the outcome of Duque-Rosarios Petition.

The following facts are undisputed: Banco Filipino extrajudicially foreclosed the
mortgage constituted on Lot No. 5-F-8-C-2-B-2-A and the two other properties after Dr.
Rosario defaulted on the payment of his loan; Banco Filipino was the highest bidder for
all three properties at the foreclosure sale on April 2, 1987; the Certificate of Sale dated
April 2, 1987 was registered in April 1987; and based on the Certificate of Final Sale
dated May 24, 1988 and Affidavit of Consolidation dated May 25, 1988, the Register of
Deeds cancelled TCT No. 104189 and issued TCT No. 165812 in the name of Banco
Filipino for Lot No. 5-F-8-C-2-B-2-A on June 7, 1988.

The Court has consistently ruled that the one-year redemption period should be
counted not from the date of foreclosure sale, but from the time the certificate of sale is
registered with the Registry of Deeds.91[91] No copy of TCT No. 104189 can be found
in the records of this case, but the fact of annotation of the Certificate of Sale thereon was
admitted by the parties, only differing on the date it was made: April 14, 1987 according
to Banco Filipino and April 15, 1987 as maintained by Duque-Rosario. Even if the Court
concedes that the Certificate of Sale was annotated on TCT No. 104189 on the later date,
April 15, 1987, the one-year redemption period already expired on April 14, 1988.92[92]
The Certificate of Final Sale and Affidavit of Consolidation were executed more than a
month thereafter, on May 24, 1988 and May 25, 1988, respectively, and were clearly not
premature.

It is true that the rule on redemption is liberally construed in favor of the original
owner of the property. The policy of the law is to aid rather than to defeat him in the
exercise of his right of redemption.93[93] However, the liberal interpretation of the rule
on redemption is inapplicable herein as neither Duque-Rosario nor Dr. Rosario had made
any attempt to redeem Lot No. 5-F-8-C-2-B-2-A. Duque-Rosario could only rely on the
efforts of the Torbela siblings at redemption, which were unsuccessful. While the Torbela
siblings made several offers to redeem Lot No. 356-A, as well as the two other properties
mortgaged by Dr. Rosario, they did not make any valid tender of the redemption price to
effect a valid redemption. The general rule in redemption is that it is not sufficient that a
person offering to redeem manifests his desire to do so. The statement of intention must
be accompanied by an actual and simultaneous tender of payment. The redemption price
should either be fully offered in legal tender or else validly consigned in court. Only by
such means can the auction winner be assured that the offer to redeem is being made in
good faith.94[94] In case of disagreement over the redemption price, the redemptioner
may preserve his right of redemption through judicial action, which in every case, must
be filed within the one-year period of redemption. The filing of the court action to
enforce redemption, being equivalent to a formal offer to redeem, would have the effect
of preserving his redemptive rights and freezing the expiration of the one-year
period.95[95] But no such action was instituted by the Torbela siblings or either of the
spouses Rosario.

Duque-Rosario also cannot bar the issuance of the writ of possession over Lot No.
5-F-8-C-2-B-2-A in favor of Banco Filipino by invoking the pendency of Civil Case No.
U-4359, the Torbela siblings action for recovery of ownership and possession and
damages, which supposedly tolled the period for redemption of the foreclosed properties.
Without belaboring the issue of Civil Case No. U-4359 suspending the redemption
period, the Court simply points out to Duque-Rosario that Civil Case No. U-4359
involved Lot No. 356-A only, and the legal consequences of the institution, pendency,
and resolution of Civil Case No. U-4359 apply to Lot No. 356-A alone.

Equally unpersuasive is Duque-Rosarios argument that the writ of possession over

Lot No. 5-F-8-C-2-B-2-A should not be issued given the defects in the conduct of the
foreclosure sale (i.e., lack of personal notice to Duque-Rosario) and consolidation of title
(i.e., failure to provide Duque-Rosario with copies of the Certificate of Final Sale).

The right of the purchaser to the possession of the foreclosed property becomes
absolute upon the expiration of the redemption period. The basis of this right to
possession is the purchaser's ownership of the property. After the consolidation of title in
the buyer's name for failure of the mortgagor to redeem, the writ of possession becomes
a matter of right and its issuance to a purchaser in an extrajudicial foreclosure is merely
a ministerial function.96[96]

The judge with whom an application for a writ of possession is filed need not look
into the validity of the mortgage or the manner of its foreclosure. Any question regarding
the validity of the mortgage or its foreclosure cannot be a legal ground for the refusal to
issue a writ of possession. Regardless of whether or not there is a pending suit for the
annulment of the mortgage or the foreclosure itself, the purchaser is entitled to a writ of
possession, without prejudice, of course, to the eventual outcome of the pending
annulment case. The issuance of a writ of possession in favor of the purchaser in a
foreclosure sale is a ministerial act and does not entail the exercise of discretion.97[97]

WHEREFORE, in view of the foregoing, the Petition of the Torbela siblings in

G.R. No. 140528 is GRANTED, while the Petition of Lena Duque-Rosario in G.R. No.
140553 is DENIED for lack of merit. The Decision dated June 29, 1999 of the Court of
Appeals in CA-G.R. CV No. 39770, which affirmed with modification the Amended
Decision dated January 29, 1992 of the RTC in Civil Case Nos. U-4359 and U-4733 and
Pet. Case No. U-822, is AFFIRMED WITH MODIFICATIONS, to now read as
follows:

(1) Banco Filipino is ORDERED to reconvey Lot No. 356-A to the Torbela
siblings;
 (2) The Register of Deeds of Pangasinan is ORDERED to cancel TCT No.
165813 in the name of Banco Filipino and to issue a new certificate of title in the name
of the Torbela siblings for Lot No. 356-A;

(3) The case is REMANDED to the RTC for further proceedings to determine
the facts essential to the proper application of Articles 448 and 546 of the Civil Code,
particularly: (a) the present fair market value of Lot No. 356-A; (b) the present fair market
value of the improvements thereon; (c) the option of the Torbela siblings to appropriate
the improvements on Lot No. 356-A or require Dr. Rosario to purchase Lot No. 356-A;
and (d) in the event that the Torbela siblings choose to require Dr. Rosario to purchase
Lot No. 356-A but the value thereof is considerably more than the improvements, then
the reasonable rent of Lot No. 356-A to be paid by Dr. Rosario to the Torbela siblings;

(4) The Torbela siblings are DIRECTED to submit an accounting of the rents
of the improvements on Lot No. 356-A which they had received and to turn over any
balance thereof to Dr. Rosario;

(5) Dr. Rosario is ORDERED to pay the Torbela siblings P200,000.00 as moral
damages, P100,000.00 as exemplary damages, and P100,000.00 as attorneys fees; and

(6) Banco Filipino is entitled to a writ of possession over Lot-5-F-8-C-2-B-2-

A, covered by TCT No. 165812. The RTC Branch Clerk of Court is ORDERED to issue
a writ of possession for the said property in favor of Banco Filipino.

SO ORDERED.