G.R. No. 231721-22 - Jesus E. Ulay vs. Maranguyod Bustamante, Salome Bustamante-Sarol, Heirs of Adelaida Bustamante-Pedroroja, et al.

Case Summary (G.R. No. 231721-22)

Factual Background

During their lifetime, the Spouses Bustamante owned Lot No. 1089. Upon their death, the property was inherited by their only son, Eugenio Bustamante, who later married Juana Bustamante. Eugenio and Juana had five children: Victoria, Gregoria, Salome, Ramon, and Adelaida (collectively, the Bustamantes).

After Eugenio’s death, Juana and the Bustamantes executed a Deed of Extrajudicial Partition (DEP) dated November 15, 1977. The DEP involved a waiver by Juana and the Bustamantes of rights over a five-hectare portion of Lot No. 1089 in favor of Ramon Tajo, and an allocation of the remaining eleven hectares among the heirs into six portions of 1.9379 hectares each. The positions of the shares in relation to one another were shown in a sketch annexed to the DEP. A crucial discrepancy later arose: when a survey was conducted on December 7, 1979, the approved subdivision plan inadvertently interchanged the designations of the shares of Juana and Gregoria. Despite that error, Juana and Gregoria took possession consistent with the DEP. Juana continued possessing Lot No. 1089-E, while Gregoria possessed Lot No. 1089-F.

On January 12, 1981, OCT No. P-17509 was issued over Lot No. 1089-E in Gregoria’s name because of the mistaken designation in the subdivision plan. Even after registration, Juana and Gregoria continued to possess their respective lots as intended in the DEP.

Upon Gregoria’s death, Lot No. 1089-F was inherited by her eight children, the Gregoria Heirs. Meanwhile, Juana, after the death of Eugenio and later her own death, cohabited with Arturo Remillano, which resulted in two children: Emelita Remillano-Comendador and Felicitas Remillano-Boyles (collectively, the Remillanos). After Juana’s passing, events followed that led to the present controversy.

Deed of Exchange and Subsequent Sale to Jesus

On April 5, 1999, four of the Gregoria Heirs—Ernesto, Erlinda, Amelia, and Hilyn—executed, together with Emelita, a Deed of Exchange. The deed involved the cession of rights over Lot No. 1089-E (the title issued in Gregoria’s name) by the Gregoria heirs, and the cession by Emelita of the Remillanos’ rights over Lot No. 1089-F. The deed was said to be undertaken in conformity with the designations in the DEP.

Subsequently, on January 16, 2001, the same Gregoria heirs executed a Deed of Sale in favor of Jesus covering a specific portion described as 9,689 sq. m. of Lot No. 1089-F. The following day, May 3, 2001, Maranguyod Bustamante, the widow of Ramon, entered and possessed the purchased portion and constructed a pre-fabricated house. Jesus demanded that Maranguyod remove the improvements, but the demand was unsuccessful.

Jesus then filed an action for Recovery of Possession on April 8, 2003. During the pendency of that case, on September 17, 2004, the Remillanos executed an Affidavit of Waiver, purporting to waive participation over Lot No. 1089-F in favor of Jesus and two of the Gregoria heirs, Dionisia and Roger, while assigning specific portions to each. On December 23, 2004, OCT No. P-41507 was issued in Jesus’s name over the disputed portion.

In response, the Bustamantes filed an Annulment case for annulment of deeds, reconveyance, and damages, naming as defendants Jesus, the Gregoria heirs, and the Remillanos. The Bustamantes alleged that their rights were prejudiced when the Remillanos exchanged Lot No. 1089-F with four of the Gregoria heirs and later sold part of the same lot to Jesus. They further contended that Jesus was not a buyer in good faith because of his awareness that Juana had other children who did not participate in the transactions.

Trial Court Proceedings

The Regional Trial Court of Panabo City, Branch 4 (RTC) jointly tried the Recovery and Annulment cases. In a Joint Decision dated October 29, 2013, the RTC dismissed the Recovery case for lack of merit, declared the Deed of Sale in favor of Jesus null and void, and declared the Deed of Exchange null and void for being executed without the consent of the Bustamantes. It also declared OCT No. P-41507 void.

The RTC declared the Affidavit of Waiver valid only with respect to the ideal shares of Felicitas Remillano-Boyles and Emelita Remillano-Comendador, and ordered reimbursement to Jesus of P60,000.00 with legal interest at 12% per annum. It directed Jesus to reconvey the 9,689-sq. m. portion to the heirs of Juana, excluding the inchoate shares attributable to Felicitas and Emelita, and affirmed the annulment thrust of its reasoning.

Court of Appeals Ruling

On appeal, the Court of Appeals issued a Decision dated March 31, 2016 affirming the RTC in part, while modifying significant conclusions. The Court of Appeals emphasized that the DEP was a binding contract. It held that such contract remained enforceable not only against the parties thereto but also against their successors-in-interest.

On the erroneous subdivision plan, the CA reasoned that the error could have been corrected through a relocation survey, but the fact that the heirs did not correct the plan did not amount to acquiescence because Juana and Gregoria had continued possessing the lots consistent with the DEP during their lifetimes. The CA also held that Gregoria’s registration of Lot No. 1089-E in her name was not determinative, since Torrens registration does not create or vest ownership and a title is merely evidence of ownership; it did not foreclose co-ownership with persons not named in the certificate.

On the Deed of Exchange, the CA held it to be valid notwithstanding that it was signed by only some of Juana’s heirs. It viewed the deed as intended to correct the mistaken subdivision designations and to carry out the intent of the parties under the DEP, and it concluded that the deed redounded to the benefit of those co-owners who were not signatories.

However, the CA ruled that the Remillanos had no right to convey a specific portion of Lot No. 1089-F prior to partition. Consequently, it declared the Affidavit of Waiver void in its entirety. The CA also affirmed the RTC’s nullification of the Deed of Sale and OCT No. P-41507, reasoning that the sale of a specific portion of an unpartitioned and co-owned property required consent, and the deed purported to sell only a portion of property allegedly co-owned by all Gregoria heirs, not only by those who signed.

Finally, the CA dismissed the Recovery case as well, affirmed the reimbursement to Jesus of P60,000.00, and modified the interest rate to 6% per annum.

Jesus moved for reconsideration, which the CA denied through its Resolution dated October 25, 2016. Jesus then elevated the matter to the Supreme Court.

The Parties’ Contentions on Appeal

Jesus essentially contended that the Bustamantes had no cause of action against him because they allegedly held no interest over Lot No. 1089-F. He argued that the lot was designated to Gregoria under the DEP and that Gregoria had exclusively passed it on to her children after her death.

The Bustamantes, in contrast, anchored their claim on the interchanged designations in the subdivision plan and the subsequent exchange and sale that allegedly deprived them of their rights over Lot No. 1089-F, particularly through a series of instruments involving only some heirs and resulting in Jesus’s registration claim over the disputed portion.

Issues

The Supreme Court framed the sole issue as whether the CA erred in affirming the RTC insofar as it declared the Deed of Sale and OCT No. P-41507 null and void. This required determinations, among others, of: (i) whether the DEP or the later subdivision plan was binding; (ii) the validity of the Deed of Exchange; (iii) the validity of the Deed of Sale over a 9,689-sq. m. portion; and (iv) the validity of the Affidavit of Waiver.

Legal Basis and Reasoning

The Court first corrected Jesus’s framing of the claim. It held that Jesus’s position was incomplete. Although Jesus insisted that Lot No. 1089-F was not Juana’s share as such, the Bustamantes’ cause of action relied on the mistaken interchanged designations in the subdivision plan. The Bustamantes’ pleading in the Annulment case reflected their belief that Juana’s designated share became Lot No. 1089-F under the subdivision plan. From that premise, they alleged prejudice when the Remillanos exchanged Lot No. 1089-F with four Gregoria heirs and later sold a portion to Jesus.

With respect to the validity of subsequent transfers, the Court ruled that the DEP prevailed over the erroneous subdivision plan. The Court emphasized the clarity of the DEP’s text regarding the heirs, the size of each share, and the positions of shares as illustrated in the sketch. It also noted that although the subdivision plan contained an unintended error, it did not amend the DEP because the DEP was the binding contract and the subdivision plan reflected inadvertence. The Court further supported this conclusion by the fact that, after the subdivision plan, the parties continued to take possession consistent with the DEP.

On the Deed of Exchange, the Court held it invalid but treated it as immaterial in the context of the controversy. The deed, on its face, functioned as a disposition by Gregoria heirs of Lot No. 1089-E and by Emelita of Lot No. 1089-F. But because the DEP already governed the parties’ possession and ownership and because Juana and Gregoria never lost the lots consistent with the DEP, the exchange could not restore what had never been lost. The Court therefore viewed the exchange as redundant. It also reiterated that the issuance of OCT No. P-17509 over Lot No. 1089-E in Gregoria’s name did not make that issuance immutable because Torrens registration does not create or vest ownership in the registrant as a mode of acquiring ownership. The Court cited the principle that a certificate of title is evidence only and cannot protect an usurper or prevent the possibility that property may be co-owned or held in trust for others.

Given the same DEP-based analysis, the Affidavit of Waiver execu

Case Syllabus (G.R. No. 231721-22)

The case arose from a Petition for Review under Rule 45 assailing the Court of Appeals (CA) rulings in CA-G.R. CV No. 03521-MIN and CA-G.R. CV No. 03524-MIN.
The petition challenged the CA’s affirmance of the Regional Trial Court’s (RTC) disposition that invalidated the Deed of Sale and OCT No. P-41507, but the Supreme Court ultimately modified the outcome.
The Supreme Court treated the core controversy as involving the interplay between a Deed of Extrajudicial Partition (DEP) and a later subdivision plan, and the downstream effects on subsequent conveyances and possession.

Parties and Procedural Posture

Jesus E. Ulay filed the petition as the buyer-developer who obtained OCT No. P-41507 over the disputed portion.
Maranguyod Bustamante, Salome Bustamante-Sarol, the Heirs of Adelaida Bustamante-Pedroroja, and the Heirs of Ramon Bustamante, represented by Maranguyod Bustamante, opposed the petition as the heirs asserting rights derived from the DEP.
The dispute was jointly tried by the RTC, Branch 4, Panabo City in two consolidated actions: Civil Case No. 26-2003 for Recovery of Possession and Civil Case No. 37-2005 for Annulment of Deeds, Title, Reconveyance and Damages.
The RTC dismissed the recovery case for lack of merit, voided the Deed of Sale and the buyer’s title, ordered reimbursement with interest, declared the Deed of Exchange null and void, upheld the Affidavit of Waiver only for inchoate shares, and directed reconveyance with exclusions.
The CA affirmed the RTC in part, but corrected several aspects: it held the DEP was binding, treated the Deed of Exchange as valid, voided the Affidavit of Waiver in full, affirmed the nullity of the Deed of Sale and the title, and modified the interest rate to 6%.
The CA denied Jesus’s motion for reconsideration through its assailed Resolution, prompting recourse to the Supreme Court.

Nature of Dispute

The controversy centered on which document governed the allocation of land shares: the DEP or the later subdivision plan that contained an interchanged designation of lot shares.
The litigation further involved the validity and legal effects of: the Deed of Exchange, the Affidavit of Waiver, and the Deed of Sale that formed the basis for OCT No. P-41507.
The case also required the Court to determine the consequences for possession and the right to build or recover improvements.

Antecedent Ownership and Family Succession

Spouses Bustamante (Candido Bustamante and Candida Dela Cruz-Bustamante) owned a 19-hectare unregistered parcel designated as Lot No. 1089, under Homestead Application No. 46102 (E-35169).
Lot No. 1089 later passed to Eugenio Bustamante, the spouses’ only son.
After Eugenio’s death, his surviving spouse Juana Bustamante and the Bustamantes proceeded to partition Lot No. 1089 through the DEP executed in 1977.
The Bustamantes included Eugenio’s five children: Victoria, Gregoria, Salome, Ramon, and Adelaida.

Deed of Extrajudicial Partition (1977)

On November 15, 1977, Juana and the Bustamantes executed a Deed of Extrajudicial Partition dividing the remaining eleven (11) hectares of Lot No. 1089.
The DEP allocated pro-indiviso shares to Juana and the children, and it included a sketch indicating the positions of their shares in the land.
In the DEP, Juana and the Bustamantes waived their rights over a five-hectare portion in favor of Ramon Tajo, while the remaining eleven hectares were divided into six portions of 1.9379 hectares each.
The Supreme Court characterized the DEP as unequivocal as to the parties’ intention, the sizes of the allocated shares, and their positions as reflected in the DEP’s sketch.

Erroneous Subdivision Plan

A survey was conducted on December 7, 1979, and an approved subdivision plan issued thereafter contained an inadvertent interchanging of Juana’s and Gregoria’s designations.
Under the subdivision plan, the labels for the lots corresponding to Juana and Gregoria were reversed, producing a discrepancy when compared to the DEP’s allocations.
Despite the error, Juana and Gregoria continued to take possession according to the DEP’s designations, with Juana possessing Lot No. 1089-E and Gregoria possessing Lot No. 1089-F.
The Supreme Court treated the subdivision plan’s mistake as not altering the DEP because the DEP was binding and was neither amended nor effectively corrected by the parties.

Title Issuance Based on Subdivision Error

On January 12, 1981, OCT No. P-17509 was issued over Lot No. 1089-E in Gregoria’s name, reflecting the subdivision plan’s erroneous designation.
The Court emphasized that subsequent registration did not cure the underlying defect, because the Torrens issuance was based largely on an inadvertent error and did not reflect a mode of acquiring ownership against the true arrangement embodied in the DEP.

Post-Death Transfers and Exchange (1999)

After Gregoria’s death, Lot No. 1089-F that she possessed during her lifetime passed to her eight children as heirs, including Veneranda, Dionisia, Roger, Ernesto, Amelia, Erlinda, Hilyn, and Estelita.
After Juana’s passing, Juana’s cohabitation with Arturo Remillano produced two children: Emelita Remillano-Comendador and Felicitas Remillano-Boyles, the Remillanos.
On April 5, 1999, four of the Gregoria heirs (Ernesto, Erlinda, Amelia, and Hilyn) together with Emelita executed a Deed of Exchange.
The exchange was described as conforming to the original DEP designations, where the Gregoria heirs ceded Lot No. 1089-E while Emelita ceded the Remillanos’ rights over Lot No. 1089-F.
Pursuant to these transactions, Ernesto, Erlinda, Amelia, and Hilyn later executed a Deed of Sale on January 16, 2001, selling Jesus a specific 9,689 sq. m. portion.

Deed of Sale and Purchase; Possession and Improvements

On May 3, 2001, Maranguyod Bustamante, the widow of Ramon, entered the 9,689 sq. m. portion acquired by Jesus and erected a pre-fabricated house.
On the same date, Jesus demanded that Maranguyod remove the improvements, but she did not comply.
Jesus filed an action for Recovery of Possession against Maranguyod on April 8, 2003, which later proceeded jointly with the Bustamantes’ annulment action.

Affidavit of Waiver and Further Title Effects

During the pendency of the recovery case, on September 17, 2004, the Remillanos executed an Affidavit of Waiver.
The waiver purported to waive participation over Lot No. 1089-F in favor of Jesus and two Gregoria heirs (Dionisia and Roger) while assigning specific portions to each.
On December 23, 2004, OCT No. P-41507 covering the disputed portion was issued in Jesus’s name.

Claims in the Annulment Action

The Bustamantes sued for annulment of deeds, reconveyance, and damages, challenging the effect of the Remillanos’ exchange and subsequent sale.
They asserted that their rights were prejudiced because the parties swapped Lot No. 1089-F with Lot No. 1089-E through conveyances in which they did not participate.
They further contended that Jesus was not a buyer in good faith because of alleged knowledge that Juana had other children not participating in the sale.

RTC Rulings

The RTC dismissed Jesus’s Recovery case for lack of merit.
The RTC declared the Deed of Sale and Jesus’s title (OCT No. P-41507) null and void, ordered reimbursement of the purchase price with 12% interest per annum, and denied possession to Jesus.
The RTC declared the Deed of Exchange null and void for lack of consent of the Bustamantes.
The RTC ruled that the subdivision plan’s interchanged designations could not prevail over the DEP because the parties did not undertake correction efforts.
The RTC declared the Affidavit of Waiver valid only with respect to the inchoate shares of Felicitas Remillano-Boyles and Emelita Remillano-Comendador, not in full.
The RTC directed reconveyance of the disputed portion to the heirs of Juana, excluding Felicitas and Emelita’s inchoate shares.

CA Rulings

The CA held that the DEP constituted a binding contract enforceable not only against the original parties but also against successors-in-interest.
It emphasized that the subdivision plan’s error could have been corrected by a relocation survey, but that neither Juana nor Gregoria’s inaction amounted to acquiescence because they remained in possession according to the DEP during their lifetimes.
The CA dismissed the significance of Gregoria’s registration in her name on the ground that a Torrens certificate is evidence of ownership, not an automatic shield against the true ownership scheme.
The CA declared