Duran v. Inoferio, Sr.

THIRD DIVISION

[G.R. No. 217608. December 10, 2018.]

ANTONIO DURAN AND EMMA DURAN, plaintiffs-appellees, vs.ARCADIO B. INOFERIO, SR., ET AL., accused-appellants.

[G.R. No. 217609. December 10, 2018.]

ARCADIO INOFERIO AND JUSTINIANA JALALON-INOFERIO, SUBSTITUTED BY THEIR COMPULSORY HEIRS, NAMELY: JULIA J. INOFERIO-ALABASTRO, CRISTINA J. INOFERIO-AGOT, ET AL., plaintiffs-appellees, vs.ANTONIO DURAN AND EMMA DURAN, RURAL BANK OF PAGADIAN, INC., REYNALDO B. REYES AND ERNESTO AGUILAR, accused-appellants.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, Third Division, issued a Resolution datedDecember 10, 2018, which reads as follows:

"G.R. No. 217608 (Antonio Duran and Emma Duran v. Arcadio B. Inoferio, Sr., et al.); and G.R. No. 217609 (Arcadio Inoferio and Justiniana Jalalon-Inoferio, substituted by their compulsory heirs, namely: Julia J. Inoferio-Alabastro, Cristina J. Inoferio-Agot, et al. v. Antonio Duran and Emma Duran, Rural Bank of Pagadian, Inc., Reynaldo B. Reyes and Ernesto Aguilar). — Before us are consolidated 1 petitions for review on certiorari, filed under Rule 45 of the Rules of Court, assailing the October 22, 2014 Decision 2 and March 9, 2015 Resolution 3 of the Court of Appeals (CA), which declared null and void the Original Certificate of Title (OCT) No. 2,262, registered in the name of Antonio Duran (Duran), on the ground that it was acquired through fraud and false representations.

The CA affirmed with modification the August 1, 2008 Decision 4 of the Regional Trial Court of Pagadian City, Branch 18 (RTC), in Civil Case No. 3844, and amended the amount of moral and exemplary damages.

Antecedent Facts

The property in dispute was part of a three (3)-hectare parcel of land originally owned by Roberto G. Cabrera (Roberto). Roberto acquired the land through a Homestead Application No. V-73069 filed on May 15, 1953, which the Bureau of Lands approved on October 6, 1953, and later built his house thereon.

Even prior to the grant of a patent, Roberto sold portions of his land to several persons. Sometime in 1948, Roberto sold 72 square meters of his land to Arcadio Inoferio, Sr. (Inoferio), 5 which sale was confirmed only on July 13, 1980, through a notarized Affidavit executed by Roberto. On August 31, 1977, Inoferio, again bought 18 square meters of land from Roberto, evidenced by a notarized Deed of Absolute Sale. For the third time, on July 7, 1980, Inoferio bought 60 square meters of land from Roberto, evidenced by a notarized Deed of Absolute Sale. All in all, Inoferio bought 150 square meters of land from Roberto and paid the real property taxes (RPT) thereon.

On July 29, 1977, Francisco Cabrera (Cabrera), 6 the son of Roberto, sold 298 square meters of land to Duran through a Deed of Absolute Sale.

Just three years thereafter, or on July 9, 1980, Roberto sold 150 square meters of his land to Cabrera.

The dispute arose when Duran filed a Miscellaneous Sales Application (MSA) on 465 square meters of land before the Department of Environment and Natural Resources (DENR) on April 14, 1994, which application included Cabrera's and Inoferio's lands. On December 31, 1995, the application was granted and a patent was issued in Duran's favor. Subsequently, the land was registered in his name and OCT No. 2,262 was issued. 7 SDAaTC

Upon learning of the issuance of the title to Duran, Inoferio filed a Notice of Adverse Claim on July 30, 1996. 8

The following day, on July 31, 1996, Duran executed a real estate mortgage (REM) over the property in favor of Rural Bank of Pagadian, Inc. (Rural Bank). 9

To protect his interest, Inoferio filed a complaint before the barangay on July 30, 1996 for barangay conciliation. Cabrera followed suit on October 1, 1996. Despite notice and repeated promise to attend, Duran failed to appear. Duran instead filed a complaint for Quieting of Title with Preliminary Injunction before the RTC against Inoferio on August 29, 1996. 10

Inoferio, by way of compulsory counterclaim, argued that OCT No. 2,262 was null and void on the ground that Duran was disqualified to acquire the disputed land pursuant to Section 1 11 of Republic Act (R.A.) No. 730. Inoferio posited that Duran, in violation of the proviso of the aforesaid law, was prohibited from applying for ownership of the land because the latter already owned other lots in Pagadian City. Moreover, Duran was ineligible to acquire the subject lot for failure to construct a house on the land and actually reside therein. Inoferio also filed a Third Party Complaint against Rural Bank on December 2, 1997 to enjoin Rural Bank and the sheriff from foreclosing the subject property. 12

While not impleaded as a party to the Quieting of Title case, Cabrera intervened by filing his Answer-in-Intervention to the aforesaid case on November 3, 1997, claiming ownership over the 150-square meter portion thereof. 13

The RTC issued a Temporary Restraining Order (TRO) and subsequently issued a writ of preliminary injunction on December 11, 1998. 14

For failure to appear during the pre-trial and failure to file a pre-trial brief, the RTC declared Rural Bank in default. 15

Ruling of the RTC

On August 1, 2008, the RTC rendered judgment declaring OCT No. 2,262 as null and void.

The RTC determined that the complaint was barred because Duran failed to comply with the requisites of R.A. No. 7160, or the "Local Government Code of 1991." The law required Duran to first submit the case to the jurisdiction of the barangay for conciliation before filing the complaint to the trial court. The RTC explained that the counterclaim of Inoferio survived and remained standing as the dismissal of Duran's complaint was without prejudice to the prosecution of Inoferio's counterclaim. 16

The RTC concluded that Duran's patent was acquired through fraud and misrepresentation. Duran was not qualified to apply for a sales patent because he neither occupied the property nor constructed a house thereon. Moreover, the MSA was suffering from several infirmities. Aside from the fact that a notice was never posted in compliance with the procedure on sales patent application, the MSA also failed to specify the lots applied for.

While the RTC found Duran's title null and void, it declared that the REM Duran entered into with Rural Bank was valid. According to the trial court, there was nothing in the title that would arouse Rural Bank's suspicion that the same was irregularly issued and would require Rural Bank to inquire further beyond the face of the title.

Anent the amount of damages, the RTC found that Inoferio and Cabrera suffered actual damages because they were deprived of their rights of the attributes of an owner. The dispositive portion of the RTC decision reads: acEHCD

WHEREFORE, based on the aforegoing findings and discourse of the Court[,] Judgment is hereby rendered, viz.:

a) Miscellaneous Sales Application No. 097322-33 and Original Certificate of Title No. 2,262 are declared NULL and void and are hereby ordered CANCELLED,

b) The 150 square meters and 198 square meters lots respecting (sic) owned by Francisco Cabrera and Arcadio Inoferio are ordered RECONVEYED respectively to the registered lot owners,

c) The Deed of Real Estate Mortgage covering Original Certificate of Title No. 2,262 is declared null and void, 17

d) The Writ of Preliminary Injunction issued by the Court (RTC 22) is declared permanent.

Plaintiffs Spouses Antonio and Emma Duran are ordered to pay the following:

To the defendant Arcadio Inoferio and Justiniana Jalalon Inoferio:

a) The sum of (P200,000.00) Two Hundred Thousand Pesos as Moral damages;

b) The sum of (P100,000.00) One Hundred Thousand Pesos as Exemplary Damages;

To the Intervenor/Third Party Plaintiff, FRANCISCO [B. CABRERA, Sr.]:

a) The sum of Two Hundred Thousand Pesos (P200,000.00) as Moral Damages;

b) The sum of One Hundred Thousand (P100,000.00) Pesos as Exemplary Damages.

ATTORNEY'S FEES in the sum of One Hundred Thousand Pesos (P100,000.00) is ordered paid to Atty. Bernabe B. Alabastro.

Cost against Plaintiffs.

SO ORDERED. 18

Aggrieved, Duran interposed an appeal to the CA.

Ruling of the CA

On October 22, 2014, the CA affirmed with modification the ruling of the RTC.

The CA held that the complaint was validly filed because it was exempt from the coverage of the Katarungang Pambarangay Law since it prayed for the issuance of a TRO or a preliminary injunction.

On the MSA, the CA resolved that it was replete with fraud: (1) Duran failed to notify Cabrera, who was already in possession of the property; (2) Duran knew that Inoferio had been occupying the 150-square meter portion thereof since 1970 even before Duran filed an MSA; (3) the MSA did not give due notice as required by Sec. 24 of Commonwealth Act No. 141; (4) the MSA failed to specify the lots being applied for; and (5) there was no proof of compliance with publication as required by the same law.

Based on the foregoing, the CA determined that the patent and the corresponding title issued pursuant thereto were void.

The appellate court echoed the rule that claimants have one year from the entry of decree to dispute the title. A year after the entry of decree, the title becomes indefeasible, provided that no innocent purchaser for value had acquired an interest over the property. SDHTEC

In resolving the validity of the title, the appellate court reckoned the date when the sales patent was issued. Here, the sales patent was entered in the Registry of Deeds on January 29, 1996. The complaint was filed on August 29, 1996. Inoferio filed his Answer with Counterclaim on September 11, 1996. Cabrera, on the other hand, filed his Answer-in-Intervention on November 3, 1997. Based on the foregoing, Inoferio timely disputed the patent and title within the 1-year prescription period. While Cabrera, unfortunately, disputed the same beyond the prescribed time.

The CA declared null and void Duran's title, OCT No. 2,262, insofar as the 150-square meter portion owned by Inoferio was concerned. Hence, it ordered the property be reconveyed to Inoferio and a new title be issued in his favor.

As regards the claim of Cabrera whose failure to seasonably dispute Duran's title rendered the latter's title, as to him, indefeasible, was not without remedy. The CA determined that Cabrera was still entitled to damages.

Anent the award of damages, the CA reduced the same for being excessive. It modified the amount of moral damages from P200,000.00 to P50,000.00, and the exemplary damages from P100,000.00 to P30,000.00.

Finally, the CA found the REM valid and binding insofar as Duran was concerned but without prejudice to Inoferio's property. According to the CA, Rural Bank was in good faith when it relied on Duran's title.

The decretal portion of the CA Decision reads:

WHEREFORE, the Decision dated 1 August 2008 of Branch 18, Regional Trial Court of Pagadian City is hereby modified as follows:

1. The Miscellaneous Sales Application No. 097322-33 was fraudulently filed by Antonio M. Duran.

2. OCT No. 2,262 in the name of Antonio M. Duran married to Emma S. Dinsay is hereby annulled and declared cancelled in so far as the 150-square meter portion belonging to Arcadio B. Inoferio, Sr. and his children, which is hereby ordered reconveyed to Arcadio B. Inoferio, Sr. and his children.

3. The Register of Deeds of Pagadian City is hereby directed to issue a new certificate of title in favor of Arcadio B. Inoferio, Sr. for the said 150-square meter lot.

4. The appellants Antonio M. Duran and Emma S. Dinsay are held jointly and severally liable to pay appellees Arcadio B. Inoferio, Sr. and his children as a group, and Francisco B. Cabrera, Sr. the following amounts:

a. Php50,000.00 each as moral damages; and

b. Php30,000.00 each as exemplary damages.

5. The appellants Antonio M. Duran and Emma S. Dinsay are held jointly and severally liable to pay appellee Francisco B. Cabrera, Sr. the present market value of his 150-square meter portion covered by OCT No. 2,262. AScHCD

6. The real estate mortgage executed on 31 July 1996 between Emma Dinsay as Attorney-in-Fact of Antonio M. Duran and the Rural Bank of Pagadian, Inc. is declared valid and binding between the parties thereto save for the portion of the property covered by OCT No. 2,262 which belongs to Arcadio B. Inoferio, Sr. and his children. 19

Aggrieved, Duran filed a motion for reconsideration, 20 while Cabrera filed a motion for substitution and a motion for partial reconsideration. 21

In resolving Inoferio's motion, the CA explained that Inoferio was entitled only to 150 square meters of the 198 square meters he claimed for failure to prove his acquisition of the remaining 48 square meters. In detail, Inoferio acquired the 150 square meters of land with the following details:

1. 72 square meters in 1948;

2. 18 square meters on August 31, 1977; and

3. 60 square meters on July 7, 1980.

As regards Duran's motion for reconsideration, the CA clarified that indeed, while a title becomes indefeasible and incontrovertible in favor of the person whose name appears therein, this rule admits of an exception: titles acquired through fraud and misrepresentation are subject to cancellation. Therefore, since Duran's title was acquired through fraud and misrepresentation, the CA reiterated its ruling that the same was void.

All the parties filed their petitions for review before the Court: Duran filed his petition on April 27, 2015, docketed as G.R. No. 217608, while Inoferio and Cabrera jointly filed their petition on even date, docketed as G.R. No. 217609.

Arguments of Duran

In the main, Duran argues that his title, OCT No. 2,262, is valid and was never acquired through fraud. Absent any proof of any irregularity, his title should be accorded respect because it was legally presumed to have been regularly issued. Duran explains that even before he acquired the title, he had been paying the real property taxes thereon. In fact, he had always been the actual occupant of the property and had built a carport, canteen, and a hollow block fence on the lot's perimeter, and planted trees.

Duran posits that the claims of Inoferio and Cabrera are baseless and cannot prevail over his title for they are deemed to have waived their right over the property when they failed to interpose an objection when he filed an MSA. Tersely put, Inoferio and Cabrera are now estopped from disputing his title.

Duran propounds that Cabrera has no right over the property because the former has long sold the same to Duran; and that Inoferio and Cabrera failed to prove by clear and convincing evidence the presence of fraud and misrepresentation he purportedly committed. AcICHD

Assignment of Errors of Duran

1. THE COURT OF APPEALS GRAVELY ERRED IN ISSUING ITS RESOLUTION — promulgated on 22 October 2014 AND RESOLUTION — promulgated on 09 March 2015 relative to CA-G.R. CV NO. 01927-MIN

2. THE TRIAL COURT GRAVELY ERRED IN ORDERING THE RECONVEYANCE OF PORTIONS OF [DURAN'S] SUBJECT TITLED LOT IN FAVOR OF [INOFERIO] AND INTERVENOR [CABRERA]

3. THE TRIAL COURT AND THE COURT OF APPEALS GRAVELY COURT ERRED IN GRANTING EXORBITANT MONETARY AWARDS IN FAVOR OF [INOFERIO] AND [CABRERA]

4. THE TRIAL COURT GRAVELY ERRED IN DECIDING THE CASE IN FAVOR OF [INOFERIO] ON ONE HAND AND AGAINST [DURAN] ON THE OTHER HAND 22

Arguments of Inoferio and Cabrera

Inoferio and Cabrera assign a fatal procedural error in Duran's complaint. They maintain that Duran's complaint should be dismissed because it failed to comply with a condition precedent: to first submit the case to barangay conciliation. Duran blatantly circumvented the Katarungang Pambarangay Law by directly filing his complaint to the trial court by praying for a provisional remedy of preliminary injunction.

Inoferio and Cabrera aver that the CA exceeded its jurisdiction when it ruled on the validity of the REM in favor of Rural Bank. They opine that Rural Bank has ceased to be a party to the case as early as the pre-trial stage when it was declared in default for failure to appear during the pre-trial and file a pre-trial brief. Moreover, the decision of the RTC, which ruled that the mortgage was null and void, had long become final and executory because Rural Bank failed to appeal the same.

They posit that the CA's pronouncement that Rural Bank was a mortgagee in good faith was incorrect. The fact that Duran included Inoferio's property in the mortgage is an indicium of bad faith. More importantly, Rural Bank cannot feign ignorance of the defect in Duran's title. As a bank, Rural Bank is required to exercise extraordinary diligence in conducting its business.

To support their claim, Inoferio and Cabrera referred to the records, showing that the title was issued on January 29, 1996 and immediately the following day, it was mortgaged to Rural Bank. The unusual haste should have raised suspicion on Rural Bank's part and prompted it to conduct an ocular inspection, which it apparently ignored.

Inoferio and Cabrera also put forth that the CA committed a reversible error when it partially declared Duran's title indefeasible in relation to Cabrera's claim for failure of the latter to timely dispute it. As a rule, the indefeasibility of titles does not apply to titles acquired through fraud. Hence, in accordance with the ruling of the CA that Duran acquired the title through fraud and misrepresentation, the title, therefore, will never attain indefeasibility even vis-à-vis Cabrera, whose opposition thereto was purportedly filed out of time.

Anent Inoferio's claim of ownership, he submits that his open, actual, continuous, and uninterrupted occupation of the land for more than 30 years since 1948 has ripened into extraordinary prescription. TAIaHE

Finally, Inoferio and Cabrera assert that the CA gravely erred in reducing the amount of damages granted by the trial court as similar cases, in fact, have awarded higher damages.

Assignment of Errors of Inoferio and Cabrera

(1) THE HONORABLE COURT OF APPEALS HAS EXCEEDED ITS JURISDICTION IN GRANTING A "FAVOR" TO RURAL BANK OF PAGADIAN, INC. [ALTHOUGH] IT HAS CEASED TO BE A PARTY TO THE INSTANT CASE AS EARLY AS DURING THE PRE-TRIAL OF THE CASE AND IT HAS NEITHER APPEALED FROM THE DECISION RENDERED BY THE TRIAL COURT.

(2) THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE NULL AND VOID O.C.T. NO. 2,262 IS INDEFEASIBLE BECAUSE SUCH A CONCLUSION DOES NOT CONFORM WITH THE LONG-ESTABLISHED RULINGS OF THIS HONORABLE COURT THAT "INDEFEASIBILITY OF A TITLE DOES NOT ATTACH TO TITLES SECURED BY FRAUD AND MISREPRESENTATION."

(3) THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT APPLYING THE BASIC RULES OF EVIDENCE.

(4) THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT UPHOLDING THE FINDINGS OF THE TRIAL COURT REGARDING [DURAN'S] CIRCUMVENTION OF ADMINISTRATIVE CIRCULAR NO. 14-93 (GUIDELINES TO PREVENT CIRCUMVENTION OF THE REVISED KATARUNGANG PAMBARANGAY LAW) ICHDca

(5) THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN REDUCING EXCESSIVELY THE DAMAGES GRANTED BY THE TRIAL COURT IN FAVOR OF THE [DURAN], [CABRERA], AND [RURAL BANK]. 23

Stripped to the essentials, the Court limits the issues for resolution to the following:

I.

WHETHER DURAN'S COMPLAINT IS EXEMPT FROM THE AMBIT OF THE KATARUNGANG PAMBARANGAY LAW AS HIS COMPLAINT SOUGHT FOR A PROVISIONAL REMEDY OF PRELIMINARY INJUNCTION;

II.

WHETHER CABRERA TIMELY INTERVENED;

III.

WHETHER DURAN'S TITLE, OCT 2,262, HAS ATTAINED INDEFEASIBILITY;

IV.

WHETHER RURAL BANK HAS CEASED TO BE A PARTY TO THE CASE FOR ITS FAILURE TO APPEAR DURING THE PRE-TRIAL AND FOR FAILURE TO FILE A PRE-TRIAL BRIEF BEFORE THE RTC;

V.

WHETHER THE REAL ESTATE MORTGAGE ENTERED INTO BETWEEN DURAN AND RURAL BANK IS VALID; and

VI.

WHETHER THE CA ERRED IN REDUCING THE AWARD OF MORAL AND EXEMPLARY DAMAGES GRANTED BY THE RTC.

The Court's Ruling

Actions coupled with provisional remedies,

R.A. No. 7160, otherwise known as the "Local Government Code of 1991," does not enumerate the disputes that are required to be filed before the barangay; it, however, enumerates those that are excluded from the coverage of the law. 24 Sec. 412 25 of R.A. 7160 commands that all disputes subject to barangay conciliation must first be submitted to the barangay as a pre-condition before filing a complaint in court or any tribunal. Administrative Circular No. 14-93 (AC No. 14-93), issued on July 15, 1993, enumerates the cases that are exempt from barangay conciliation:

8. Disputes where urgent legal action is necessary to prevent injustice from being committed or further continued, specifically the following:

xxx xxx xxx

c. Actions coupled with provisional remedies such as preliminary injunction, attachment, delivery of personal property and support during the pendency of the action; x x x26 (emphasis supplied) TCAScE

It appears that the dispute falls squarely under paragraph 8 (c) of AC No. 14-93 as the present action is coupled with a provisional remedy of a preliminary injunction. Thorough scrutiny of the present complaint, however, reveals otherwise. A reading of the complaint demonstrates that the prayer for preliminary injunction is baseless — there is no actual relief for preliminary injunction prayed for. 27 Not only did Duran fail to prove the presence of the elements of preliminary injunction, worse, he failed to even recite the presence of the following requisites of a preliminary injunction: (1) the complainant has a clear legal right; (2) such right has been violated and the invasion by the other party is material and substantial; and (3) there is an urgent and permanent necessity for the writ to prevent serious damage. 28 No act requiring a party or a court, agency or a person to refrain from doing a particular act or acts was specified. The complaint for quieting of title also failed to mention what particular act or acts were requested to be performed. Conversely, there was no recital of the basis of extreme urgency of the provisional remedy sought for or showing of grave and irreparable injury, that is, injury that would warrant the issuance of a preliminary injunction. 29 Simply put, the prayer for preliminary injunction was but a recitation of general allegations. Indeed, it was a mere ploy to avoid going under the ambit of the Katarungang Pambarangay Law. 30

Hence, without complying with the conditional precedent of first submitting the case to barangay conciliation, the complaint for quieting of title was premature and must be dismissed.

Notwithstanding the dismissal of Duran's complaint, however, the counterclaim of Inoferio survived. As held in Padilla v. Globe Asiatique Realty Holdings Corp., et al., 31 the dismissal of a complaint due to fault of the plaintiff is without prejudice to the right of the defendant to prosecute any pending counterclaims of whatever nature in the same or separate action.

Cabrera's Answer-in-Intervention

Intervention is a remedy by which a third party, not originally impleaded in the proceedings, is permitted by the court to participate as a litigant in the case to enable such intervenor to protect or preserve a right or interest that may be affected by those proceedings. 32 Intervention is merely a "collateral or accessory or ancillary to the principal action and not an independent proceeding; an interlocutory proceeding dependent on and subsidiary to, the case between the original parties." 33

Depending on the cause of action of the intervenor, the intervention shall be made by complaint filed and served in regular form and may be answered as if it were an original complaint. 34 In such a case, for the intervention to survive, being ancillary to the original complaint, it must rest on a valid original complaint. However, when the intervenor unites with the defendant, the intervention may be made in the form of an answer to the complaint. 35 Parallel to an intervention auxiliary to an original complaint of the plaintiff, an intervention ancillary to the case of the defendant lies on the propriety of the defendant's claim and counterclaim.

In the case at bench, Cabrera, the intervenor, joined the defendant in resisting the claims of the plaintiff and in asserting for counterclaims against the plaintiff by filing an answer-in-intervention.

Akin to appeals, intervention is not a matter of absolute right and its allowance is subject to the discretion of the court. 36 Rule 19 of the Rules of Court sets forth the procedure for the allowance of intervention, which commands that the motion to intervene must be filed before the rendition of judgment, to wit:

SEC. 2. Time to intervene. — The motion to intervene may be filed at any time before rendition of judgment by the trial court. A copy of the pleading-in-intervention shall be attached to the motion and served on the original parties. 37 cTDaEH

In the case at bar, the motion for intervention was filed before rendition of judgment. Duran, however, submits that besides that the motion for intervention should be filed before rendition of judgment, it should also be filed within the period prescribed by the applicable statute as if it were an original action. Here, considering that the intervention assailed the issuance of the patent and title, the motion for intervention must also be filed within one year from the patent's issuance, otherwise, the patent shall become incontrovertible.

Duran's argument is not meritorious.

The law is clear. Nowhere in Rule 19 of the Rules of Intervention does it state that the motion for intervention, besides that it must be filed before the rendition of judgment, should also comply with the applicable provisions as if it were an initiatory pleading. To add a provision not written in the law constitutes judicial legislation. The Court cannot enlarge or restrict statutes; it cannot arrogate unto itself the function of adding a requirement not written in the law.

To reiterate, an intervention is merely ancillary and supplemental to the original complaint. Such that, where the right of the original plaintiff to sue the defendant had ceased to exist, no intervention could arise as there was nothing to aid or fight under the circumstances. 38 Simply put, in case the original complaint is dismissed, the intervention shall also be dismissed. Conversely, an answer-in-intervention, which depends on the propriety of the defendant's counterclaim, will also cease to exist upon the dismissal of the counterclaim. The propriety of the intervention and/or answer-in-intervention, besides that it must comply with the requisites of Rule 19, rests on the validity of the original complaint or counterclaim.

In the extant case, Cabrera's answer-in-intervention stands valid and effective because the counterclaim of Inoferio, the main action from whence the intervention is ancillary, is beyond dispute, valid and standing.

Moreover, to rule that the motion for intervention should be filed within one year from the issuance of the patent without considering the peculiar circumstances of the case would result in grave injustice and would put premium on Duran's devious scheme in circumventing the Katarungang Pambarangay Law. To recall, the patent was issued on December 31, 1995. To protect his interest, Inoferio filed a complaint before the barangay on July 30, 1996. 39 Cabrera, on the other hand, followed suit and filed his complaint before the barangay on October 1, 1996. 40 But both barangay conciliations failed. Inoferio's complaint was dismissed because Duran refused to attend the barangay conciliation despite due notice. With regard to Cabrera's complaint, the same was dismissed for failure of the parties to reach an amicable settlement. Despite that the cause of the dismissal of Inoferio's and Cabrera's complaints was mainly due to Duran's own doing, it was Duran who initiated and filed a complaint before the RTC against Inoferio, excluding Cabrera from the proceedings, who eventually intervened on November 3, 1997.

Needless to state, Inoferio's and Cabrera's complaints were timely filed. Were it not for Duran's ploy to evade the Katarungang Pambarangay Law by directly filing a complaint before the RTC and not appearing in the barangay conciliation, Cabrera's complaint, in the ordinary course of procedure, would have been heard in an independent action and Cabrera would not have had to intervene in a complaint filed by Duran.

In Mago, et al. v. Court of Appeals, et al. (Mago), 41 the Court ruled that an intervenor's interest over the subject litigation is supreme over mere technicalities and that an intervention questioning the validity of a patent, as a mere ancillary and supplementary action to the original complaint and not an original and initiatory pleading, is not required to be filed within the one-year period. 42 As in this case, the Court allowed the belated intervention despite the finality of the assailed judgment because the intervenor would be unduly deprived of his own property. To paint a backdrop, the Court recites a summary of the facts. cSaATC

Francisco Mago (Francisco) was the original owner of the disputed property who transferred all his rights to his brother Antonio Mago (Antonio). In 1979, the National Housing Authority (NHA) started a reblocking plan of the area and on October 30, 1980, it mistakenly awarded the entire property of Antonio to Rolando Asis (Asis). Upon discovery, Francisco complained to the NHA, which admitted its mistake. To resolve the impasse, Francisco and Asis agreed to equally divide the property. Upon learning of the agreement, Antonio, the real owner, filed a complaint to the NHA. Asis, on the other hand, despite the pendency of the case before the NHA, filed a complaint before the RTC, which proceedings ensued without Antonio's knowledge. Initially, the RTC dismissed the complaint in its Order dated March 8, 1998. In its Amended Order dated March 30, 1998, the RTC ruled in favor of Asis and upheld the award issued in his favor and the title registered in his name. It was only on May 24, 1998 when Antonio learned of the case. On August 2, 1998, Antonio filed a motion for intervention and petition for relief from judgment although the assailed March 30, 1998 judgment was already rendered and had in fact attained finality.

The trial court and the appellate court unanimously ruled on the prescription of the intervention and petition for relief. The Court, however, found that the intervention should have been granted on account of the "indisputable admission of the NHA, the grantor-agency itself, that the intervenor was the rightful awardee of half of the lot mistakenly awarded. Thus, the intervenor stood to be deprived of his rightful award when the trial court enjoined the cancellation of the mistakenly awarded title and the subdivision of the lot covered by the title. The intervenor's legal interest, in other words, was directly affected." 43 Notwithstanding the finality of the assailed judgment and despite the lapse of the one-year period from the issuance of the title under Asis' name, the Court granted the motion to intervene. To be sure, the title was issued on October 30, 1980, while the motion for intervention assailing the title was filed only on August 2, 1988, eight years since the title was issued. 44 CHTAIc

Similar to the factual circumstances in Mago, Cabrera, as a claimant of the property in dispute stands to be benefited or injured by the trial court's judgment. Cabrera filed a complaint before the barangay, but the case did not proceed due to Duran's ploy. Unknown to Cabrera and despite notice of the pendency of the two separate complaints initiated by Inoferio and Cabrera before the barangay, Duran directly filed a complaint before the RTC against Inoferio, completely excluding Cabrera from the case. Upon knowledge of the pendency of the case and before a judgment was rendered, Cabrera, 11 months since the complaint was filed and more than a year after the title was issued in Duran's name, filed an answer-in-intervention.

From the foregoing, therefore, the law tilts in Cabrera's favor. Cabrera, as an owner, has an interest in the controversy or subject matter that a final adjudication cannot be made in his absence without affecting, nay injuring, such interest. 45 Cabrera, as the rightful owner whose right to participate in court proceedings was unduly deprived, cannot be expelled from his land by the erroneous award of the land to Duran. To rule otherwise is to give premium to litigants who devise deceits and exploit rules to circumvent the law.

A patent granted over a private

Upon expiration of the period of one (1) year from the time a certificate of title is issued, the decree of registration and the certificate of title issued pursuant thereto shall become incontrovertible. 46 Any person aggrieved by such decree of registration may file an action for damages against the applicant or any other person responsible for the fraud. 47 The rule, however, admits some exceptions. It does not apply where an action for the cancellation of a patent and a certificate of title issued pursuant thereto is instituted on the ground that they are null and void because the Director of Lands has no jurisdiction to issue them at all, the land in question having been withdrawn from the public domain prior to the subsequent award of the patent and the grant of a certificate of title to another person. 48

The power of the Director of Lands to effect survey, classification, lease, sale or any other form of concession or disposition and management of the lands is limited to lands of the public domain. 49 Simply stated, the Director of Lands has no authority to grant free patent to lands that have ceased to be public in character and have passed to private ownership, and consequently, a free patent issued over a private land is null and void and produces no legal effects whatsoever. 50

The rule on incontrovertibility does not apply to the extant case simply because Duran's patent is null and void for being issued by the Director of Lands on a private land. In retrospect, before Duran was issued a title, the property in dispute had long been granted to Cabrera since 1953, removing the land beyond the jurisdiction of the Director of Lands and effectively rendering any subsequent title issued therefrom null and void. The fact that a year had passed since Duran's title was issued is of no moment. The passage of time did not render his title that was issued by the Director of Lands on a private land incontrovertible.

Rural Bank's failure to file a pre-trial brief

Once again, the Court has to clarify that the failure of a defendant to file a pre-trial brief and/or attend the pre-trial result in the presentation of evidence of the plaintiff ex parte and will not cause the default of the defendant. 51

Sec. 5, Rule 18 of the Rules of Court provides for the effect of failure of a party to appear at the pre-trial, thus: EATCcI

Section 5. Effect of failure to appear. — The failure of the plaintiff to appear when so required pursuant to the next preceding section shall be cause for dismissal of the action. The dismissal shall be with prejudice, unless [otherwise] ordered by the court. A similar failure on the part of the defendant shall be cause to allow the plaintiff to present his evidence ex parte and the court to render judgment on the basis thereof. 52 (emphasis supplied)

Clearly, nowhere in the aforementioned provision is the word "default" mentioned. Perhaps a discussion on the passage of the law on the failure of the defendant to file a pre-trial brief or attend the pre-trial is enlightening.

In the old rules, specifically Rule 20, the phrase "as in default" was originally included in the provision, which reads as follows:

Section 2. Failure to Appear at Pre-Trial Conference. — A party who fails to appear at a pre-trial conference may be non-suited or considered as in default. 53 (emphasis supplied)

The enactment of the 1997 Revised Rules of Civil Procedure, however, amended Rule 20 of the old rules. The revised rules explicitly deleted the word "default" from the provision. In "The Philippine American Life & General Insurance Company v. Enario," 54 the Court, citing Justice Regalado in his book Remedial Law Compendium, explained the rationale for the deletion of the phrase "as in default" in the amended provision, to wit:

x x x. While actually the procedure remains the same, the purpose is one of semantical propriety or terminological accuracy as there were criticisms on the use of the word default in the former provision since that term is identified with the failure to file a required answer, not appearance in court. 55 (emphasis supplied)

Based on the foregoing, the use of the term "default" applies to a defendant's failure to file an answer. As to the defendant's failure to appear during pre-trial or attend the pre-trial, the accurate term is that the defendant shall forfeit his right to present evidence as the plaintiff shall present evidence ex parte.

Therefore, Rural Bank's failure to file a pre-trial brief and attend the pre-trial would neither result in its removal as a party from the case nor cause the issuance of a default order against it. Instead, Rural Bank would not be allowed to present evidence and the judgment would only be based on the evidence presented by the other party. Inoferio and Cabrera will be given the privilege to present their evidence without objection from Rural Bank, whose opportunity to rebut or present its own evidence was forfeited. As properly done by the RTC in the instant case, the presentation of the other parties' evidence ex parte by Inoferio and Cabrera was allowed to proceed, to the exclusion of Rural Bank, and the case was decided based on the evidence presented.

Despite losing its opportunity to present its own evidence and controvert evidence against it, Rural Bank, retained its right to appeal.

The real estate mortgage entered into

Basic is the rule that a decision becomes final and executory upon the lapse of 15 days or upon failure of the adverse litigant to file an appeal within the reglementary period. 56 Generally, for a case involving multiple parties, an appeal by one party from such judgment does not inure to the benefit of the other party who has not appealed nor can it be deemed to be an appeal of such other party from the judgment against him.

In Government of the Republic of the Philippines v. Tizon, et al., 57 however, the Court clarified that the appeal of a co-party will inure to the benefit of a party, whose interest is derived from the title of the party who appealed, thus:

As we have already said, whether an appeal by one of several judgment debtors will affect the liability of those who did not appeal must depend upon the facts in each particular case. If the judgment can only be sustained upon the liability of the one who appeals and the liability of the other co-judgment debtors depends solely upon the question whether or not the appellant is liable, and the judgment is revoked as to that appellant, then the result of his appeal will inure to the benefit of all. . . . 58 (emphasis supplied) DHITCc

The Court further stated:

A reversal of a judgment on appeal is binding on the parties to the suit, but does not inure to the benefit of parties against whom judgment was rendered in the lower court who did not join in the appeal, unless their rights and liabilities and those of the parties appealing are so interwoven and dependent as to be inseparable, in which case a reversal as to one operates as a reversal as to all. 59

As it stands, the interest of Rural Bank as a mortgagee is interwoven and depends on the right of Duran as a mortgagor — a mortgagee being merely a successor or transferee of the rights of the mortgagor. 60 Notwithstanding Rural Bank's failure to appeal, because Duran, a co-party, interposed an appeal, such appeal would inure to the benefit of Rural Bank. 61

Now, on the propriety of the REM.

In a REM contract, it is essential that the mortgagor is the absolute owner of the property to be mortgaged; otherwise, the mortgage is void. 62 No one can give what he does not have — nemo dat quod non habet. As succinctly discussed, Duran's title is void because it was acquired through fraud, rendering Duran without authority to mortgage the property. Therefore, the REM is void. The mortgage is also void on account of Rural Bank's bad faith in entering into the mortgage contract.

Indeed, the appellate court is correct in reciting the dictum, "a buyer or mortgagee dealing with lands are not required to look beyond the face of the title." Buyers and mortgagees have a right to rely in good faith on the title in the absence of any trace of irregularity or damage in the title. This rule, however, does not apply to banks dealing with properties.

Banks, unlike ordinary persons and entities, are required to exercise extraordinary diligence in their dealings. 63 This is due to the fiduciary nature of the banking business, which is impressed with public interest. It cannot simply assume that the title offered as security that is on its face free of any encumbrances or lien, it is relieved of the responsibility of ascertaining the genuineness of the title and inspecting the properties to be mortgaged. 64

In Rural Bank of Sariaya, Inc. v. Yacon, et al. (Rural Bank of Sariaya), 65 the Court determined that the REM was void because the mortgagee bank was in bad faith when it failed to duly investigate who the true owners of the collateral land were. That failure to look beyond the title constituted negligence on the part of the mortgagee banks. The Court also pronounced that the haste in the transaction should have aroused suspicion and prompted the bank to investigate on the propriety of the title.

The factual circumstances of the present case square with that of Rural Bank of Sariaya. In the case at bench, Rural Bank, despite its perfunctory duty to inquire further and in spite of the signs of a dubious title, failed to investigate on who the real owners of the property were and neglected the apparent haste in Duran's decision to mortgage the property only after a few months after the title was issued on July 31, 1996. Verily, not only did Rural Bank fail to exercise extraordinary diligence in its dealings with Duran's property, it closed its eyes on the facts and circumstances that required it to inquire further into the title of Duran. Thus, Rural Bank falls short of the requirements of a mortgagee in good faith.

The CA was correct in reducing

Contrary to Inoferio and Cabrera's contention that the CA committed a reversible error in reducing the award of damages granted by the RTC, the Court finds no cogent reason to reinstate the amount of damages awarded by the RTC. As held, civil damages, such as moral and exemplary damages, are granted to alleviate the moral suffering by a party and when the injurious act is attended by bad faith. 66 While moral suffering is not subject to pecuniary estimation, it is not intended to enrich the victim at the defendant's expense. It must be commensurate to the injury caused and is not meant to punish the erring party. In the case at bar, the amount of damages awarded by the CA is reasonable. cEaSHC

However, the CA committed a reversible error when it perfunctorily deleted the award of attorney's fees. As held, since exemplary damages were awarded, attorney's fees may also be awarded. 67

WHEREFORE, the Petition of Arcadio B. Inoferio, Sr. and Francisco Cabrera, Sr. in G.R. No. 217609 is PARTLY GRANTED. The Petition of Antonio M. Duran in G.R. No. 217608 is DENIED. The Decision and Resolution of the Court of Appeals, dated October 22, 2014 and March 9, 2015, respectively, are REVERSED and SET ASIDE. The Court hereby ORDERS the following:

1. The Miscellaneous Sales Application No. 097322-33 was FRAUDULENTLY filed by Antonio M. Duran.

2. OCT No. 2,262 registered in the name of Antonio M. Duran, married to Emma S. Dinsay, is hereby ANNULLED and declared CANCELLED in its entirety, and is hereby ordered RECONVEYED to Arcadio B. Inoferio, Sr. and Francisco B. Cabrera, Sr.

3. The Register of Deeds of Pagadian City is hereby DIRECTED to issue a new certificate of title in favor of Arcadio B. Inoferio, Sr. for the said one hundred fifty (150)-square meter lot and Francisco B. Cabrera, Sr. for the two hundred ninety-eight (298) square meters of land.

4. Antonio M. Duran and Emma S. Dinsay are held jointly and severally liable to PAY each of Arcadio B. Inoferio, Sr. and Francisco B. Cabrera, Sr., each of the following amounts:

a. P50,000.00 each as moral damages;

b. P30,000.00 each as exemplary damages; and

c. P100,000.00 each as attorney's fees.

5. The real estate mortgage executed on July 31, 1996 between Antonio M. Duran and the Rural Bank of Pagadian, Inc. is declared VOID.

SO ORDERED."

Very truly yours,

(SGD.) WILFREDO V. LAPITANDivision Clerk of Court

 

Footnotes

1.Rollo (G.R. No. 217609), p. 153; per Resolution dated February 29, 2016; rollo (G.R. No. 217608), p. 107.

2.Id. (G.R. No. 217608) pp. 55-78; penned by Associate Justice Maria Filomena D. Singh with Associate Justices Oscar V. Badelles and Henri Jean Paul B. Inting, concurring.

3.Id. at 90-96.

4.Id. at 33-52; penned by Judge Reinerio (Abraham) B. Ramas.

5.Id. at 8; upon Inoferio, Sr.'s demise, he was substituted by his compulsory heirs, Julia J. Inoferio-Alabastro, Cristina J. Inoferio-Agot, Victoria J. Inoferio-Miguel, Manuel J. Inoferio, Beta J. Inoferio-Maliao, Rosario J. Inoferio, Arcadio J. Inoferio, Jr., and Enrique J. Inoferio.

6.Id.; now substituted by his compulsory heirs, Juanita Edullantes vda. de Cabrera, Francisco E. Cabrera, Jr. and Francinita E. Cabrera-Conalla.

7.Rollo (G.R. No. 217609), p. 67.

8.Id. at 58.

9.Id.

10.Id. at 59.

11. SECTION 1. Notwithstanding the provisions of sections sixty-one and sixty-seven of Commonwealth Act Numbered One hundred forty-one, as amended by Republic Act Numbered Two hundred ninety-three, any Filipino citizen of legal age who is not the owner of a home lot in the municipality or city in which he resides and who has in good faith established his residence on a parcel of the public land of the Republic of the Philippines which is not needed for the public service, shall be given preference to purchase at a private sale of which reasonable notice shall be given to him not more than one thousand square meters at a price to be fixed by the Director of Lands with the approval of the Secretary of Agriculture and Natural Resources. It shall be an essential condition of this sale that the occupants has constructed his house on the land and actually resided therein. Ten per cent of the purchase price shall be paid upon the approval of the sale and the balance may be paid in full, or in ten equal annual installments.

12.Rollo (G.R. No. 217608), p. 59.

13.Id.

14.Id.

15.Id. at 13 & 46.

16.Supra note 12.

17. The Court is not unmindful of the rule that "the operative part in every decision is the dispositive portion or the fallo, and where there is conflict between the fallo and the body of the decision, the fallo controls. However, the rule is not without exception. Where the inevitable conclusion from the body of the decision is so clear as to show that there was a mistake in the dispositive portion, the body of the decision will prevail" as ruled in Santos-Yllana Realty Corp. v. Spouses Deang, G.R. No. 190043, June 21, 2017.

18. Rollo (G.R. No. 217608), pp. 51-52.

19. Rollo, (G.R. No. 217608) p. 77.

20. Rollo, (G.R. No. 217609) pp. 113-119.

21. Id. at 88-109.

22. Rollo (G.R. No. 217608), p. 20.

23. Rollo (G.R. No. 217609), p. 36.

24. Section 408. Subject Matter for Amicable Settlement; Exception Thereto. — 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:

   (a) Where one party is the government, or any subdivision or instrumentality thereof;

   (b) Where one party is a public officer or employee, and the dispute relates to the performance of his official functions;

   (c) Offenses punishable by imprisonment exceeding one (1) year or a fine exceeding Five thousand pesos (P5,000.00);

   (d) Offenses where there is no private offended party;

   (e) Where the dispute involves real properties located in different cities or municipalities unless the parties thereto agree to submit their differences to amicable settlement by an appropriate lupon;

   (f) Disputes involving parties who actually reside in barangays of different cities or municipalities, except where such barangay units adjoin each other and the parties thereto agree to submit their differences to amicable settlement by an appropriate lupon;

   (g) Such other classes of disputes which the President may determine in the interest of justice or upon the recommendation of the Secretary of Justice.

   The court in which non-criminal cases not falling within the authority of the lupon under this Code are filed may, at any time before trial, motu proprio refer the case to the lupon concerned for amicable settlement.

25. Section 412. Conciliation. —

   (a) Pre-condition to Filing of Complaint in Court. — No complaint, petition, action, or proceeding involving any matter within the authority of the lupon shall be filed or instituted directly in court or any other government office for adjudication, unless there has been a confrontation between the parties before the lupon chairman or the pangkat, and that no conciliation or settlement has been reached as certified by the lupon secretary or pangkat secretary as attested to by the lupon or pangkat chairman or unless the settlement has been repudiated by the parties thereto.

   (b) Where Parties May Go Directly to Court. — The parties may go directly to court in the following instances:

   (1) Where the accused is under detention;

   (2) Where a person has otherwise been deprived of personal liberty calling for habeas corpus proceedings;

   (3) Where actions are coupled with provisional remedies such as preliminary injunction, attachment, delivery of personal property and support pendente lite; and

   (4) Where the action may otherwise be barred by the statute of limitations.

   (c) Conciliation among members of indigenous cultural communities. — The customs and traditions of indigenous cultural communities shall be applied in settling disputes between members of the cultural communities.

26. Administrative Circular No. 14-93.

27. See Felizardo v. CA, et al., 303 Phil. 236, 242-243 (1994).

28. Heirs of Yu, et al. v. CA, et al., 717 Phil. 284, 295 (2013).

29. Id. at 301.

30. Felizardo v. CA, supra note 27 at 242.

31. 740 Phil. 754 (2014).

32. Ongco v. Dalisay, 691 Phil. 462, 468 (2012).

33. Barangay Matictic, Norzagaray, Bulacan v. Judge Elbinias, et al., 232 Phil. 90, 96 (1987).

34. Republic of the Phils. v. Sandiganbayan, et al., 261 Phil. 1078, 1092 (1990).

35. Id.

36. Ongco v. Dalisay, supra note 32 at 469.

37. RULES OF COURT, Rule 19, Sec. 2.

38. Clareza, et al. v. Rosales, et al., 112 Phil. 374, 377 (1961).

39. Rollo (G.R. No. 217609), p. 67.

40. Id.

41. 363 Phil. 225 (1999).

42. Id.

43. Ongco v. Dalisay, supra note 32 at 474.

44. Mago, et al. v. CA, et al., supra note 41.

45. Id. at 234.

46. Spouses De Guzman v. Agbagala, 569 Phil. 607, 613 (2008); citing Secs. 32 & 48 of PD 1529.

47. Id.

48. Id. at 614-615.

49. Commonwealth Act No. 141, Sec. 4 (1936).

50. Supra note 46 at 615; citing Heirs of Santiago v. Heirs of Santiago, 452 Phil. 238, 243, 248 (2003).

51. The Philippine American Life & General Insurance Company v. Enario, 645 Phil. 166, 175 (2010).

52. REVISED RULES OF COURT, Rule 18, Sec. 5.

53. RULES OF COURT, Rule 20, Sec. 2 (1964).

54. Supra note 51, citing Regalado, Remedial Law Compendium, Vol. I, Ninth Revised Edition, p. 309.

55. Id.

56. Dev. Bank of the Phils. v. Clarges Realty Corp., 793 Phil. 227, 246 (2016).

57. See Gov't. of the Republic of the Phils. v. Tizon, et al., 127 Phil. 607, 611-612 (1967).

58. Id. at 611.

59. Supra note 57, citing 4 C.J., 1206; Alling v. Wenzel, 133 Ill., 264-278.

60. Id.

61. Petilla v. CA, et al., 235 Phil. 1, 13 (1987).

62. CIVIL CODE, Art. 2085. The following requisites are essential to the contracts of pledge and mortgage:

   (1) That they be constituted to secure the fulfillment of a principal obligation;

   (2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;

   (3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.

63. Land Bank of the Phils. v. Poblete, 704 Phil. 610, 621-622 (2013).

64. Id. at 622.

65. 256 Phil. 513, 519 (1989).

66. See Lorzano v. Tabayag, Jr., 681 Phil. 39, 50 (2012).

67. Lim, et al. v. Tan, et al., 801 Phil. 13, 25 (2016).