G.R. No. 152266 - Heirs of De Guzman vs. Perona

Case Summary (G.R. No. 152266)

Factual Background

On April 15, 1985, Pedro de Guzman filed in the RTC of Bataan a complaint with application for a temporary restraining order and preliminary injunction, praying for reconveyance of a parcel of land measuring about 300 square meters from the respondents. He alleged that through unlawful machination, fraud, deceit, and evident bad faith, the respondent spouses Rosauro and Angelina caused the cancellation of OCT No. 10075 and the subdivision of the property into three parcels covered by separate titles issued in their names. According to the records, OCT No. 10075 had been issued by the Office of the Register of Deeds for Bataan on July 25, 1933. The title covered an area of 3,242 square meters, more or less, with half registered under Andrea de Guzman and the other half under the names of Servando de Guzman’s children, namely Pablo, Jose, Canuto, Cirilo, Leopoldo, David, and Maximino.

The records further showed that Andrea, Cirilo, Leopoldo, and David died intestate in 1942. On July 26, 1950, a petition for the issuance of a new owner’s duplicate of OCT No. 10075 was filed by Jose de Guzman because the owner’s copy of OCT No. 10075 had been lost. Pursuant to an RTC order dated August 22, 1950, the Register of Deeds was directed to issue a new owner’s duplicate. Subsequently, through an Extrajudicial Settlement of Estate executed on October 16, 1952 by the heirs Pablo, Jose, Canuto, Veronica Cruz (as surviving spouse of Cirilo and legal administratrix of their minor children Ernesto, Rosauro, and Mercedita), Rogelio, and Maximino, the parties agreed to divide and adjudicate the property covered by OCT No. 10075 in equal parts. As a result, OCT No. 10075 was canceled and TCT No. T-3885 was issued in its stead.

TCT No. T-3885 was then divided into three parcels titled under TCT Nos. 78181, 78182, and 78183. TCT No. 78181, registered in the names of Rosauro and Angelina, was mortgaged to BD Bank on March 25, 1980. Because the spouses failed to pay their indebtedness, the mortgaged property was foreclosed and sold to the bank as the highest bidder. TCT No. 78182, also in the names of Rosauro and Angelina, was sold by the spouses to Carlito Pangilinan and Candida Ramos by virtue of a Kasulatan ng Bilihang Tuluyan dated August 12, 1982. Thus, TCT No. 78182 was canceled and replaced by TCT No. 105347. As to TCT No. 78183, it was canceled and superseded by TCT No. T-92048, which was thereafter registered in the names of Rosauro and Angelina. TCT No. 92048 was mortgaged to RP Bank on August 11, 1982 through a special power of attorney executed in favor of Rita A. Paguio.

In support of his claimed entitlement, Pedro alleged family relations tracing back to siblings Zacarias, Servando, and Andrea, with Pedro being the grandson of Zacarias and Servando being the grandfather of Rosauro. He claimed that he and Rosauro were related through their common ancestry and that he was entitled to share in the estate of Andrea. Pedro also averred that during Andrea’s lifetime, the house which he occupied had already been adjudicated in his favor, and that he took care of Andrea until her death in the house. He sought recognition as owner and legitimate possessor of the 300-square-meter parcel where his house stood. He further prayed for the cancellation of any title or titles affecting that portion and for damages, contending that BD Bank had accepted the property as collateral without the necessary investigation or verification of its status.

Pleadings and RTC Disposition

Service of summons on Angelina Perona and the heirs of Rosauro de Guzman was not met with responsive pleadings, and they were declared in default. BD Bank moved to dismiss by asserting in its Answer that the complaint stated no cause of action because Pedro failed to allege with clarity that the parcel covered by TCT No. 78181 was the same parcel over which he had any right or interest, and because he failed to show both that he was an heir of Andrea and that he acted in behalf of co-heirs. RP Bank, in its defense, alleged that Pedro had no cause of action against the bank, that it had acted in good faith, and that it had exercised due diligence by verifying that the mortgagor had good title over the property covered by TCT No. 92048.

In a Decision dated April 14, 1994, the RTC dismissed the complaint. Pedro then filed a Notice of Appeal, which the CA dismissed in a Resolution dated May 30, 2001, for lack of merit. A motion for reconsideration was denied by Resolution dated January 25, 2002. Pedro died in the interim, and his heirs and successors-in-interest prosecuted the case before the Supreme Court through a Petition for Review on Certiorari under Rule 45.

Issues Raised on Appeal and the Focus of Review

The petition presented two issues: first, whether the CA erred in not holding that petitioners acquired the land covered by TCT No. 78181 against Angelina Perona and Heirs of Rosauro de Guzman through oral partition; and second, whether the CA erred in not holding that the respondent banks were mortgagees in bad faith. The Supreme Court, however, treated the controlling question as narrower. It reasoned that on perusal of the petition, the only issue properly raised was whether BD Bank was a mortgagee in bad faith. It disregarded petitioners’ contention regarding oral partition because it had not been raised before the RTC. It likewise noted that petitioners’ attempt to press new theories on appeal failed to comply with the due process requirement that issues be ventilated in the trial court.

The Court’s Assessment of Petitioners’ Reconveyance Theory

The Court found that Pedro’s tax-payment claims did not establish ownership or right. Pedro had asserted that Andrea had transferred to him the parcel of land of about 300 square meters where his house stood. Yet the record showed he only paid real property taxes on March 13, 1984 and January 16, 1985. Prior to 1984, he had never paid taxes over the property which he claimed as his. The Court viewed the subsequent payment as an afterthought designed to lend appearance of right in preparation for the reconveyance complaint filed on April 15, 1985. It held that as between the respondents’ certificates of title and Pedro’s title supported merely by tax declarations, the former was superior, conclusive, and an indefeasible proof of ownership as against the latter.

The Court also rejected petitioners’ fraud allegations regarding the cancellation of OCT No. 10075 and the issuance of titles to Rosauro and Angelina. It emphasized that mere allegations of fraud were not enough. Intentional acts to deceive and deprive another required specific pleading and proof, and reconveyance based on fraud demanded clear and convincing evidence of both the claimant’s title and the fact of fraud. Petitioners failed to meet that evidentiary standard.

The Court further rejected petitioners’ theory that the default of Rosauro’s heirs and Angelina before the RTC constituted an admission of the complaint’s allegations. It reaffirmed civil procedural doctrine that the burden of proof remains on the party making the allegations and relief could be granted only to the extent warranted by evidence presented. It cited jurisprudence holding that a default judgment does not imply admission of facts or causes of action, because the Rules require the plaintiff to adduce evidence supporting the allegations before a final judgment may be rendered in the plaintiff’s favor.

Lastly, petitioners’ submission that respondents merely held title in trust for Pedro was denied. The Court found that Pedro failed to prove by clear and convincing evidence that Rosauro and Angelina obtained registration of the properties through fraud. In the absence of fraud, no implied trust arose under Article 1456 of the New Civil Code. Accordingly, the Court treated TCT Nos. 17181, 17182, and 17183 as having been fairly and regularly issued.

Mortgagee in Bad Faith: Rule 45 Limitation and Factual Findings

Turning to the main issue, petitioners argued that BD Bank was a mortgagee in bad faith because, at the time the spouses mortgaged the property, the spouses allegedly were not residing on the mortgaged land. The Court held that this line of reasoning did not prosper because questions of bad faith in the context alleged involved factual determinations, and appeals under Rule 45 lie only for questions of law. It held that whether BD Bank was a mortgagee in bad faith was a question of fact not proper for Rule 45 review.

The Court also pointed to the trial court’s factual finding that BD Bank had inspected the property later accepted as collateral, which undermined petitioners’ due diligence allegations. The Supreme Court accorded respect to the RTC’s factual findings, especially when supported by unrebutted testimonial and documentary evidence. It reviewed the record and confirmed that BD Bank had conducted an inspection and appraisal of the property covered by TCT No. 78181, together with its improvements, through its appraiser Oscar M. Ronquill

Case Syllabus (G.R. No. 152266)

The case reached the Supreme Court through a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse the Court of Appeals (CA) Decision and Resolution in CA-G.R. CV No. 46144.
The petition involved a land dispute anchored on reconveyance and the alleged bad faith of a mortgagee bank in accepting and foreclosing mortgaged property.
The controversy began at the Regional Trial Court (RTC) of Bataan in Civil Case No. 5247, where Pedro de Guzman filed a complaint for reconveyance with applications for temporary restraining order and preliminary injunction.
After Pedro died during the pendency of the appeal, his heirs and successors-in-interest, as petitioners, pursued the case before the Supreme Court.

Parties and Procedural Posture

Petitioners were the Heirs of Pedro de Guzman, who continued the suit after Pedro’s death.
Respondents included Angelina Perona and Heirs of Rosauro de Guzman, and the banking institutions Bataan Development Bank (BD Bank) and Republic Planters Bank (RP Bank).
The RTC dismissed Pedro’s complaint in a Decision dated April 14, 1994.
Pedro filed a Notice of Appeal, but the CA dismissed it in a Resolution dated May 30, 2001.
Pedro’s motion for reconsideration was denied by the CA in a Resolution dated January 25, 2002.
Petitioners then filed a Rule 45 petition raising issues focused on ownership and the alleged bad faith of BD Bank.

Key Factual Allegations

Pedro alleged that the respondents unlawfully used “machination, fraud, deceit, and evident bad faith” to cancel Original Certificate of Title (OCT) No. 10075 and subdivide the property into three parcels under titles issued in their names.
Pedro sought reconveyance of a parcel “measuring about 300 square meters,” asserting that this was the portion where his house stood and that he was entitled to it as an heir.
The narrative of title history showed that OCT No. 10075 was issued on July 25, 1933, and later a new owner’s duplicate was issued after a petition for loss.
Pedro alleged that an Extrajudicial Settlement of Estate executed on October 16, 1952 resulted in cancellation of OCT No. 10075 and issuance of TCT No. T-3885, which later divided into TCT Nos. 78181, 78182, and 78183.
TCT No. 78181, registered in the names of spouses Rosauro and Angelina, was mortgaged to BD Bank on March 25, 1980.
Upon default and foreclosure, BD Bank acquired the mortgaged property as highest bidder after extrajudicial foreclosure.
TCT No. 78182 was sold by the spouses to Carlito Pangilinan and Candida Ramos through a deed of sale dated August 12, 1982, leading to cancellation and issuance of TCT No. 105347.
TCT No. 78183 was canceled and superseded by TCT No. T-92048, which was registered in the names of the spouses Rosauro and Angelina.
TCT No. 92048 was mortgaged to RP Bank on August 11, 1982 through a mortgage executed by Rita A. Paguio, as attorney-in-fact.
Pedro claimed family relationship through Zacarias de Guzman and Servando de Guzman, asserting that his father and Rosauro’s father were first cousins and that Zacarias, Servando, and Andrea were siblings.
Pedro maintained that Andrea’s house was adjudicated to him during Andrea’s lifetime and that he took care of Andrea until Andrea’s death in Andrea’s house.

Default and Responsive Pleadings

Angelina Perona and the heirs of Rosauro did not answer despite service of summons and were declared in default.
In its Answer, BD Bank asserted that the complaint stated no cause of action due to lack of clear allegation that the parcel covered by TCT No. 78181 was the same parcel over which Pedro had rights.
BD Bank also argued that Pedro failed to show he was an heir of Andrea and failed to establish that he acted on behalf of co-heirs.
In its defense, RP Bank argued that Pedro had no cause of action against the bank, contending that the bank acted in good faith and exercised due diligence by verifying the mortgagors’ title over the property covered by TCT No. 92048.

RTC Ruling

The RTC dismissed the complaint in its Decision dated April 14, 1994.
The Supreme Court later treated the principal controversy on appeal as focusing on whether BD Bank was a mortgagee in bad faith.

CA Treatment of the Appeal

The CA dismissed Pedro’s Notice of Appeal for lack of merit in a Resolution dated May 30, 2001.
The CA denied reconsideration in a Resolution dated January 25, 2002.
The Supreme Court observed that, among the issues raised, it was not inclined to consider petitioners’ added theories absent proper presentation before the RTC.

Issues Raised on Certiorari

Petitioners framed two principal issues: whether the CA erred in not ruling that petitioners acquired the land through oral partition, and whether the CA erred in not holding the banks as mortgagees in bad faith.
The Supreme Court narrowed the matter for resolution to whether BD Bank was a mortgagee in bad faith, as the only issue supported by the petition was thus framed.

Scope of Rule 45 Review

The Supreme Court held that Rule 45 petitions may raise only questions of law, not questions of fact.
The Court treated the determination of whether a bank was a mortgagee in bad faith as a question of fact.
The Court also relied on the principle that factual findings of the trial court deserve great respect when