G.R. No. 203883 - Homeowners Association of Talayan Village, Inc. vs. J.M. Tuason and Co., Inc.

The subject property is a 22,012 square meter land parcel known as Block 494 of Talayan Village, part of the Sta. Mesa Heights Subdivision in Quezon City.
Originally covered by Transfer Certificate of Title (TCT) No. RT-110168, the land was owned by J.M. Tuason Co., Inc. (J.M. Tuason).
In the 1950s, J.M. Tuason, through its representative Gregorio Araneta, Inc. (Araneta), sold subdivision lots surrounding Block 494 pursuant to Subdivision Plan PSD-52256 approved by the Court of First Instance (CFI) of Rizal in 1958.
The subdivision plan designated a different block, Block 503, as the park/open space, while Block 494 remained undivided and was listed by Araneta as an open space in an undated certification.

Quezon City Ordinance No. 5095 (1962) required the turnover of open spaces (equivalent to at least 6% of subdivision land) to the city government.
J.M. Tuason, through Araneta, executed a Deed of Donation and Acceptance over subdivision open spaces, including Block 494, purportedly to comply with city ordinances.
However, the Deed of Donation was not notarized and there was no record of formal acceptance by Quezon City government.
Block 494 was developed as the site of the Talayan Village Barangay Hall, multipurpose hall, basketball, tennis and football courts, and a playground—developed and maintained by the Homeowners Association of Talayan Village, Inc. (HATVI) and Quezon City.

J.M. Tuason failed to pay realty taxes on Block 494, prompting Quezon City to schedule a tax delinquency sale in 1996.
Despite opposition letters from the Barangay Captain and homeowners, the sale proceeded, and Block 494 was sold for Php641,651.93 to J.M. Tuason as the highest bidder.
On July 9, 1996, J.M. Tuason executed a Unilateral Deed of Absolute Sale of Block 494 to Talayan Holdings, Inc. (THI) for Php33,018,000.00.
THI caused the cancellation of the old title and secured new titles for four subdivided lots from Block 494.
THI advertised the sale of the property and obtained a Phpl50,000,000.00 loan from Equitable Banking Corporation (now Banco de Oro, BDO) secured by mortgage on the subdivided lots.

On September 15, 1998, HATVI filed suit against J.M. Tuason, THI, Equitable Bank, and the Quezon City Mayor for annulment of sale, cancellation of titles and mortgage, acceptance of donation, and damages.
HATVI claimed it was unaware of the tax sale and that Block 494 was legally and practically reserved as an open space and public park—thus beyond commerce.
Defendants moved to dismiss on grounds including non-acceptance of the donation, valid tax sale, and Equitable Bank’s status as a mortgagee in good faith. Motions were denied.

Parties stipulated to several facts including the subdivision plan, identity of Block 494, non-acceptance of donation, and sufficiency of open space over the subdivision.
The Regional Trial Court (RTC) ruled on June 24, 2002 that Block 494 was not an open space nor park; the Deed of Donation was null and void for lack of notarization and acceptance; and Equitable Bank was a mortgagee in good faith.
The RTC dismissed the complaint and all counterclaims and cross-claims.

On March 5, 2012, the Court of Appeals (CA) affirmed the RTC decision with modification, declaring J.M. Tuason and THI owners in bad faith for allowing structures on Block 494 and held them accountable for damages to HATVI and Quezon City.
The damages were to be determined in a separate proceeding. The CA recognized Equitable Bank as a mortgagee in good faith and found tax delinquency sale valid.
Motions for reconsideration by all parties were denied on October 9, 2012.
The parties filed separate petitions for review before the Supreme Court.

Whether the CA erred in focusing on the applicable law at the time of development instead of whether Block 494 was reserved as an open space by J.M. Tuason.
Whether the CA erred in ruling that estoppel does not apply against J.M. Tuason and THI given the representation of Block 494 as open space.
Whether the CA erred in concluding that Block 494 remained private property due to lack of acceptance of the developer’s donation by Quezon City.
Whether the CA erred in ruling that the tax delinquency sale did not convert Block 494 into public property.
Whether the CA erred in finding Equitable Bank a mortgagee in good faith despite alleged negligence.

Issues raised by J.M. Tuason and THI (G.R. No. 203930) to reverse CA decision:

Whether the CA erred in declaring them owners in bad faith and liable for damages.
Whether the CA exceeded its jurisdiction by deciding a matter not raised or litigated by the parties on appeal.