G.R. No. 202632 - Dy vs. Yu

In 1936, Adriano Dy Chiao, the original owner of Lot 1519, conveyed the property to his wife Manuela Sta. Ana and their children (including petitioner Roberto), thereby establishing the family’s ownership.
Following the deaths of Dy Chiao and Manuela, the surviving children executed an Extrajudicial Settlement with Sale on October 4, 1982 to partition the estate, which comprised Lot 1519 and Lot 1531.
Under the settlement, both Carlos and Lilia sold their respective shares to Roberto, consolidating his interest in the property.

On the basis of the extrajudicial settlement, Roberto filed an application for the registration of Lot 1519 in 1984.
The Regional Trial Court (RTC) of Naga City, Branch 23, ruled in his favor on October 14, 1986.
The Office of the Register of Deeds for Naga City subsequently issued Original Certificate of Title (OCT) No. 511 on October 6, 1987, which incidentally included Lot 1519-A, a subdivided portion of Lot 1519.

First Case: Recovery of Possession and Damages (Civil Case No. RTC ’89-1782)

Roberto initiated a recovery of possession and damages suit on May 22, 1989 against Susana A. Tan and her husband Sixto Tan, asserting his title under OCT No. 511.
It was revealed that during the lifetime of Manuela, Rosario (who later became linked with Susana’s claim) was allowed temporary occupancy and subsequently took possession of an 80-square meter portion later identified as Lot 1519-A.
Susana and subsequently Rosario maintained adverse possession by constructing a residential house on the property and by declaring it for tax purposes under Rosario’s name.
Roberto alleged that his title was acquired through an Extrajudicial Settlement with Sale; in contrast, Susana claimed that Lot 1519-A was donated by Dy Chiao to Rosario in 1938.
In a decision rendered on March 30, 1990 by RTC Branch 24, Roberto’s complaint was dismissed and the court declared Rosario the lawful owner of Lot 1519-A by virtue of acquisitive prescription (open, continuous, and adverse possession for over ten years).

Roberto appealed the RTC decision to the Court of Appeals (CA), contesting the adverse finding on title.
While the CA eventually set aside the RTC’s preliminary ruling against Rosalio’s intervention, the core controversy regarding the inclusion of Lot 1519-A remained unresolved.
Subsequent motions for reconsideration by Rosario in a related petition were denied, and the case attained finality in the judgment record.

Prior to the resolution of Rosario’s motion for reconsideration in the Recovery Case, on August 3, 1998, Rosario filed a complaint for reconveyance with damages against Roberto.
In her complaint, Rosario reiterated her claims: that Lot 1519-A was donated to her in 1938, that she acquired ownership by continuous adverse possession, and that the extrajudicial settlement was a nullity because the Dy children were not the compulsory heirs.
Roberto, in his answer, raised the affirmative defense of forum shopping—highlighting that the same subject matter was already involved in a pending action—and interposed a counterclaim for damages.
RTC Branch 26 dismissed the Reconveyance Case on the grounds of litis pendentia and forum shopping, since a similar action was pending before the CA.

Third Case: Annulment and/or Rescission of Deed of Donation (Civil Case No. RTC ’98-4100)

On August 12, 1998, Rosario discovered that Roberto had executed a Deed of Donation dated June 28, 1994, transferring Lot 1519 (including Lot 1519-A) to his wife Chloe and their children, Jose and Alteza.
On September 4, 1998, Rosario filed a separate complaint for annulment and/or rescission of the Deed of Donation with damages against Roberto, Chloe, Jose, and Alteza.
She contended that since Roberto’s acquisition of the lot was allegedly procured through fraud (by concealing her adverse possession), the donation was illegal and void with respect to Lot 1519-A.
Despite a motion by petitioners to dismiss the complaint on the ground of litis pendentia (given its similarity with the prior cases), RTC Branch 26 reinstated the case on reconsideration on May 11, 2000.
After subsequent amendments and procedural developments—including Rosario’s death on October 10, 2000 and her substitution by her compulsory heirs (respondents Bonifacio, Susana, and Soledad)—the case advanced to trial.

The RTC ordered the annulment and/or rescission of the disputed Deed of Donation with respect to Lot 1519-A.
It based its ruling on the finding that Rosario had acquired ownership over Lot 1519-A by acquisitive prescription, having occupied it openly, continuously, and exclusively for more than 30 years.
The RTC also found that Roberto committed actual fraud in his registration application by concealing the adverse possession of Rosario and her successors, thus ordering the reconveyance of Lot 1519-A to the respondents.
Additionally, the RTC ordered Roberto to pay attorney’s fees and costs of suit.

On April 25, 2012, the CA affirmed the RTC ruling with modifications.
The CA held that neither res judicata nor the dismissed earlier actions barred the Annulment Case because those prior dismissals were not judgments on the merits.
It also recognized the element of forum shopping but, in deference to substantive justice, allowed the case to proceed.
The CA confirmed the findings on acquisitive prescription and fraudulent registration.
Ultimately, while the CA upheld the nullification of the deed with respect to Lot 1519-A and the order to reconvey the lot, it deleted the award of attorney’s fees, citing inadequate factual and legal basis.

Whether the CA erred in affirming the RTC’s decision on the annulment of the deed regarding Lot 1519-A in light of the arguments on res judicata and forum shopping.

Did the prior dismissals in the Recovery and Reconveyance Cases constitute final judgments on the merits sufficient to bar the Annulment Case?
Was the claim of forum shopping, already identified in the Reconveyance Case, a valid basis for dismissal?

Whether petitioners’ actions—specifically the transfer of Lot 1519 by way of donation—were properly scrutinized given the allegation of fraud in registration and the resulting issue of adverse possession.

Was Roberto’s omission in his registration application (failure to disclose Rosario’s adverse possession) legally sufficient to constitute fraud?
Does the continuous and adverse possession of Rosario (and subsequently her heirs) for over 30 years legally vest ownership via acquisitive prescription?

Whether the award of attorney’s fees against petitioners was properly justified given the trial court’s lack of detailed factual and legal findings to support the fee award.