G.R. No. 133547 - Heirs Pael vs. Court of Appeals

On December 9, 1993, Maria Destura filed a complaint before the Regional Trial Court (RTC) of Quezon City against her husband Pedro Destura, Jorge H. Chin, and Renato B. Mallari.
The complaint sought annulment of a Memorandum of Agreement (MOA) dated March 26, 1992, involving Chin and Mallari (first parties), Pedro Destura (second party), and Jaime Lumansag, Jr. (third party), concerning Lot Nos. 588-A and 588-B in Barrio Culiat, Quezon City, covered by TCT Nos. 52928 and 52929.
The complaint alleged that Chin and Mallari were former agents of Destura authorized to sell the lots, but titles were transferred to Chin and Mallari, and the MOA's payment conditions did not materialize, prejudicing the Desturas.
The complaint also sought annulment of TCT Nos. 52928 and 52929 as allegedly obtained fraudulently and prayed for issuance of new titles in the Desturas' names.

The case was dismissed against Pedro Destura after an amicable settlement with Maria Destura. Chin and Mallari were declared in default for failure to answer.
On January 24, 1995, the RTC rendered a judgment by default:

Annulled the MOA, as its condition (sale and payment of ₱100 million) did not materialize, rendering it null.
Nullified TCT Nos. 52928 and 52929, finding suspicious circumstances in the transfer of titles, including missing notarial records and absence of publication of extrajudicial settlement, and contradictions indicating the 1978 sales were fictitious.
Ordered cancellation of TCT Nos. 52928 and 52929 and reinstatement of TCT No. 36048 in the names of Spouses Antonio Pael and Andrea Alcantara and Crisanto Pael.

Chin and Mallari, through counsel Oliver Lozano, appealed, but after dismissal of the motion for new trial and abandonment of the appeal, the RTC judgment became final and executory.
In 1997, Chin and Mallari filed a Petition for Annulment of Judgment before the Court of Appeals, alleging extrinsic fraud due to their former counsel's gross negligence, and contesting the cancellation of their titles and the reinstatement of titles in favor of the Paels.
The Court of Appeals, on April 29, 1998, annulled the RTC judgment, ruling that Lozano’s negligence amounted to extrinsic fraud. It declared the MOA valid, reversed the cancellation and reinstatement orders, and upheld Chin and Mallari as true owners of the property covered by TCT Nos. 52928 and 52929.

The Heirs of Pael and Maria Destura separately appealed to the Supreme Court. The Supreme Court, on February 10, 2000, denied both petitions, affirming Chin and Mallari’s ownership.
While motions for reconsideration were pending, UP intervened, asserting that the parcels covered by TCT Nos. 52928 and 52929 form part of its Diliman Campus, covered by TCT No. 9462.
The Supreme Court granted UP’s motion to intervene and remanded the case to the Court of Appeals to receive evidence on property claims between Chin and Mallari and UP.

On July 30, 2003, the Court of Appeals reported that Chin and Mallari successfully refuted UP’s ownership claim based on:

Prior decisions affirming Chin and Mallari’s ownership over the properties.
A 2003 verification survey report by the DENR-NCR which initially stated that Chin and Mallari’s property was entirely within UP’s property, yet recommended returning the property to Chin and Mallari.
Supporting legal opinions and survey reports suggesting the properties claimed by Chin and Mallari should be respected and excluded from UP’s registered land.
The Court of Appeals further concluded Chin and Mallari’s TCTs originated from an earlier older title (OCT No. 730) dated May 5, 1914, while UP’s titles apparently originated from another title (OCT No. 735) registered later, on July 6, 1914, thereby supporting Chin and Mallari’s claim.

The Supreme Court, however, reversed the Court of Appeals, ruling in favor of UP after thoroughly examining the factual and legal issues regarding ownership.
It held that Chin and Mallari’s and Desturas’ claims stem from the Paels, who were already adjudicated as not having superior title over UP’s registered lands.
The Court took judicial notice of several prior final decisions affirming the indefeasibility of UP’s title over its Diliman Campus, including the parcels in question.
The Court emphasized the Doctrine of Res Judicata, holding that UP’s title had already been conclusively settled and upheld by previous rulings involving the Paels and others.
Accordingly, the Court annulled the February 10, 2000 decision that had declared Chin and Mallari as true owners and ordered cancellation of TCT Nos. 52928 and 52929 registered in their names.
The Court dismissed Civil Case No. Q-95-22961 filed by Chin and Mallari against UP for quieting of title.

Whether the Court of Appeals erred in annulling the RTC judgment and declaring Chin and Mallari as the true owners of the property.
Whether Chin and Mallari’s titles over Lot Nos. 588-A and 588-B are valid and superior against the claim of the University of the Philippines.
Whether the Doctrine of Res Judicata applies, thereby barring relitigation of UP’s title that had been upheld in prior cases involving the Paels and others.
Whether the overlapping of titles as revealed by survey reports affects the ownership claims.
Whether gross negligence of counsel constitutes extrinsic fraud sufficient to annul a judgment by default.