Title
Lola vs. Court of Appeals
Case
G.R. No. L-46573
Decision Date
Nov 13, 1986
Dispute over Lot No. 5517: Petitioners claimed ownership via long possession and laches; Supreme Court ruled in their favor, citing intent and 32-year delay.
parol evidence rule
equitable principle of laches
deed of conveyance

Case Summary (G.R. No. L-47745)

Factual Background

Zabala asserted that she was the registered owner of two adjacent parcels, Lots Nos. 5516 and 5517, and that by the June 29, 1936 deed of sale, she sold only Lot No. 5516, the interior lot, excluding Lot No. 5517, which fronted Sto. Nino Street. She alleged that the petitioners, despite knowledge that the sale covered only Lot No. 5516, entered and occupied Lot No. 5517. She further alleged bad faith and claimed that petitioners constructed improvements on Lot No. 5517, including a balcony and part of their main residential house, thereby depriving her of rental use, and that they unlawfully caused her to sign an affidavit of transfer relating to a tax declaration covering another parcel. Zabala claimed that despite demands, petitioners refused to vacate.

Petitioners denied the material allegations and advanced a narrative of written offer, sketch-based acceptance, and long-standing possession. They maintained that when Zabala offered the residential lot by written correspondence, she did not mention any particular lot number, and that when Lola requested a description, Zabala provided a sketch showing the area offered along Sto. Nino Street, which petitioners understood to encompass the lot shown, including Lot No. 5517. Petitioners stressed that the deed of sale was executed after Zabala and the purchaser’s side proceeded with the transaction, that if Zabala mistakenly excluded Lot No. 5517, she should execute the proper conveyance, and that more than thirty (30) years had passed. They also relied on their peaceful, public, adverse, and concept of owner possession and on the equitable doctrine of laches due to Zabala’s extended inaction.

Trial Court Proceedings

After trial, the Court of First Instance of Leyte dismissed Zabala’s complaint. The trial court found that Zabala testified that she sold only Lot No. 5516, and that after the execution of the deed of sale, the purchaser took possession of Lot No. 5516 while she stopped living at Sto. Nino Street and transferred to Cebu. She further testified that Lot No. 5517 was left to her brother’s care, and that in 1958 she discovered that Fr. Lola had constructed a house on Lot No. 5517. She claimed she confronted him, but that he proposed compensation through rental payments. She continued to assert that she did not thereafter persist in recovering the lot, returning to Cebu for business reasons, and only decided to file the action later.

Fr. Lola, for his part, testified that in 1936 he requested his lawyer to find a residential lot in Tacloban. He said he received letters offering a lot along Sto. Nino Street with an attached sketch, and that after the letters, he sent money to the lawyer for the purchase. He claimed that only after the present case was filed did he discover that the land described by the sketch involved two lots, Nos. 5516 and 5517, and that he had believed the offer related to a single lot. He also testified that he constructed improvements from May 1938 and completed them by December 1938, with the balcony and part of the main house built on Lot No. 5517. He asserted that Zabala never disturbed his possession from the time of sale until the filing of the complaint.

The trial court treated the core issue as whether Lot No. 5517 was included in what was sold under the June 29, 1936 deed of sale. It examined the letters and noted that they lacked any clear indication of falsification. It observed that the deed mentioned only Lot No. 5516, but reasoned that because the sketch had earlier been sent, it was plausible that both parties proceeded under the impression that what was sold involved the lot adjoining Sto. Nino Street. The trial court further found Zabala’s claim that she intended to sell only the interior portion to be a belated afterthought, pointing to the sketch evidence and to Zabala’s subsequent inaction while Fr. Lola constructed improvements extending to Lot No. 5517.

The trial court also relied on testimonial admissions and conduct. It noted that in cross-examination, Zabala’s brother Ramon Santillan admitted that at the time of the sale, Fr. Lola did not request a right of way to Sto. Nino Street. The trial court viewed this as consistent with the vendee’s understanding that he had purchased the portion fronting the street. It also rejected Zabala’s asserted efforts to confront petitioners in 1958 and 1966 as inconsistent with the record, and it emphasized that from January 28, 1938, Zabala executed a transferor’s affidavit for the parcel under tax declaration No. 16187, which included the disputed land and bounded it on the west by Sto. Nino Street. The trial court regarded this as a signification by Zabala that she had sold her Sto. Nino Street lot to Fr. Lola.

Appellate Proceedings and Turning Point

Zabala appealed to the Court of Appeals. The Court of Appeals initially affirmed the trial court’s decision but modified it by ordering Zabala to execute the necessary deed of conveyance covering Lot No. 5517 in favor of petitioners. It reasoned that although the land remained registered in Zabala’s name and therefore title could not be acquired against her by petitioners as registered owner, the equitable defense of laches, in lieu of prescription, should apply. Petitioners were therefore entitled to the relief ordered.

Zabala filed a motion for reconsideration. On reconsideration, the Court of Appeals reversed its earlier disposition and held Zabala to be the absolute owner of Lot No. 5517 under OCT No. 10782. It ordered petitioners to vacate and to demolish improvements that encroached. The reversal was based on conclusions that: there was no encumbrance on the title of the disputed lot; the deed of “Escritura de Venta Absoluta” should be the sole repository of the terms of the agreement; the sketch relied upon by petitioners was merely evidence of an offer to sell; the deed was prepared by petitioners’ lawyer; it was improbable that petitioners did not examine the deed; and the transferor’s affidavit contained inaccurate statements.

Petitioners moved for reconsideration, which was denied. They then came to the Court by petition for review on certiorari, asserting that the Court of Appeals erred in disregarding evidence of sale perfected by written offer and acceptance and in failing to apply laches due to Zabala’s unjustified long inaction.

Legal Issues Framed for Review

The petition placed in controversy whether Lot No. 5517 had been included in the transaction evidenced by Zabala’s letters, the sketch attached to the offers, and the final Escritura de Venta Absoluta executed on June 29, 1936, notwithstanding that the deed expressly mentioned only Lot No. 5516. It likewise involved whether, assuming registered title in Zabala’s name, petitioners could invoke the equitable doctrine of laches to bar Zabala from recovering the lot after decades of delay and petitioners’ long-standing possession and improvements.

Legal Basis and Reasoning

The Court held that the Court of Appeals’ final reversal rested on an overly strict application of the parol evidence rule and on sole reliance on the terms appearing in the Escritura de Venta Absoluta. The Court found it necessary to apply an exception: when the issue squarely presented is that a contract does not express the true intention of the parties, courts may admit parol evidence after proper foundation to ascertain that true intention. In invoking Premiere Insurance & Surety Corporation v. Intermediate Appellate Court (141 SCRA 423, 434), the Court explained that the evidence does not reform the instrument as written but enables the court to determine how the parties actually bound themselves.

The Court treated petitioners’ challenge as an allegation that the drafted deed, based on the title presented by Zabala, omitted part of what the parties had previously agreed upon through written offer and acceptance. It found that Zabala’s two letters and the sketch attached to the offer indicated that the offered parcel comprised not only Lot No. 5516 but also Lot No. 5517, the latter being the exterior portion fronting Sto. Nino Street. It underscored that the authenticity of these letters was not impugned. It also treated the parties’ subsequent conduct as confirmatory, particularly the improvements petitioners constructed and the fact that petitioners’ occupation was consistent with having purchased the street-front portion.

In addition, the Court reiterated contract interpretation rules. It cited Sy v. Court of Appeals (131 SCRA 116, 124) for the principle that when literal wording appears contrary to the evident intention of the contracting parties, the latter controls, and that contemporaneous and subsequent acts are principally considered to judge intention. It further cited Philippine National Railways v. CIR of Albay, Br. I (83 SCRA 569, 576) and related authorities for the proposition that if a party asserts that a contract does not express the true agreement, parol evidence may be admissible to prove the true agreement of the parties.

The Court also relied on subsequent acts attributable to Zabala. Aside from the letters, it noted that after the sale Zabala executed a transferor’s affidavit that included the disputed lot, and it stressed the longer pattern of abandonment. It found that Zabala moved to Cebu, leaving petitioners in continuous, open, adverse, and peaceful occupation for thirty-two (32) years, during which petitioners paid taxes on the entire property.

The Court viewed the trial court’s finding on Zabala’s alleged attempts to confront Fr. Lola as unsupported. It found the tim

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