G.R. No. 168387 - Marquez vs. Espejo

Case Summary (G.R. No. 168387)

Key Dates and Applicable Law

Decision date of Supreme Court: August 25, 2010 — therefore the 1987 Philippine Constitution governs.
Controlling statutory/regulatory framework and rules: Republic Act No. 6657 (Comprehensive Agrarian Reform Law), Civil Code provisions on contract interpretation (Articles 1370–1371), Rules of Court (Rule 130 provisions on evidence and interpretation, including Sections 3, 9 and 13), principles on the Best Evidence Rule and Parol Evidence Rule, and rules on res judicata and successors-in-interest.

Properties, Titles and Descriptions

Two parcels each of two hectares: the “Murong property” and the “Lantap property.”
TCT No. T-62096 (dated January 14, 1985) corresponds to the Murong property in the registry description.
TCT No. T-62836 (dated June 4, 1985) corresponds to the Lantap property in the registry description.
Both TCTs identify Lot numbers in Bagabag Townsite, K-27, without explicit reference to barangay names; certain conveyance instruments, however, intermixed title numbers and barangay descriptors, producing conflicting descriptions across documents.

Transactions and Conflicting Documentary Descriptions

Respondents executed a Deed of Sale dated February 26, 1985 reciting as subject the parcel under TCT No. T-62096 (Murong property) purchased from RBBI. That Deed of Sale was annotated on TCT No. T-62096 in 1994.
RBBI executed Deeds of Voluntary Land Transfer (VLTs) on June 20, 1990 in favor of petitioners, each VLT describing the land as situated in Barangay Murong but referencing TCT No. T-62836 (which, on its face, corresponds to the Lantap property). Petitioners paid the purchase price and DAR issued CLOAs in their favor dated September 5, 1991 that describe the land as situated in Barangay Murong (with reference to TCT No. T-62836 as the transfer reference).
Thus the documentary record contained an internal ambiguity: certain instruments paired a title number identifying one parcel with a barangay/location description identifying the other parcel.

Procedural History and Lower Decisions

Respondents filed a complaint (RARAD) in 1997 seeking cancellation of petitioners’ CLOAs and declaration of their (respondents’) ownership by virtue of the 1985 buy-back.
OIC-RARAD: favored literal title-number references and declared petitioners disqualified, treating apparent mismatches as typographical errors; ordered cancellation of petitioners’ CLOAs and other relief.
DARAB (Department of Agrarian Reform Adjudication Board): reversed RARAD, held respondents bore the burden to impeach validity of CLOAs, found petitioners to be bona fide tenant-farmers of the Murong property, and declared respondents to be owners of the Lantap property; reinstated petitioners’ CLOAs.
Court of Appeals: reversed DARAB, applied the Best Evidence Rule and gave primacy to the technical title numbers in the written instruments (Deed of Sale and VLTs), concluding respondents had repurchased the Murong property (TCT No. T-62096) while petitioners’ VLTs corresponded to TCT No. T-62836 (Lantap); denied motions for reconsideration.
Separate appeal by RBBI to the Supreme Court was dismissed earlier for lack of merit (G.R. No. 163320). Petitioners then filed the present petition assailing the CA ruling.

Issues Presented to the Supreme Court

(1) Effect of the earlier final judgment dismissing RBBI’s petition on the present petition by petitioners.
(2) Whether the CA correctly applied the Best Evidence Rule to resolve which parcel was intended in the parties’ contracts.
(3) Which parcel (Murong or Lantap) was actually intended as the subject of the Deed of Sale and the VLTs/CLOAs, taking into account contemporaneous and subsequent acts.

Standard of Review, Evidentiary Doctrines and Application

The CA invoked the Best Evidence Rule (Rule 130, Sec. 3) and effectively gave literal primacy to the written contract descriptions (title numbers). The Supreme Court clarified that:

The Best Evidence Rule is triggered where the contents of a document are in dispute and the original is required rather than secondary evidence; it is not a rule that fixes substantive meaning where parties admit the literal contents but dispute their legal effect or the true intention behind them.
The Parol Evidence Rule (Rule 130, Sec. 9) excludes extrinsic evidence only as between the parties and their successors-in-interest to contradict or vary a complete written agreement, but it admits exceptions. Crucially, the rule permits extrinsic evidence to show intrinsic ambiguity, mistake or failure of the written agreement to express the true intent of the parties.
Where contracting parties admit the contents of written documents but dispute whether those contents correctly express their true agreement, the trier of fact is authorized to look beyond the instruments and consider contemporaneous and subsequent acts of the parties to ascertain intention (Civil Code Articles 1370–1371; Rule 130, Sec. 13).

Analysis of Contemporaneous and Subsequent Acts to Determine Intention

The Court carefully examined the parties’ behavior after the transactions: possession, payment of rentals, who collected rentals, and who exercised acts of ownership. The key factual predicates, as found by DARAB and accepted by the Supreme Court, included:

Petitioners continuously occupied and tilled the Murong property, paid lease rentals to RBBI (the mortgagor/foreclosing bank) and later completed purchase payments to RBBI; DAR field investigation and DARAB proceedings recognized petitioners as actual tillers and duly issued CLOAs describing the land in Barangay Murong. Petitioners remained undisturbed in possession for years.
Respondents did not take possession of or assert ownership over the Murong property after the 1985 buy-back; instead, respondents’ household (including Nemi) continued to till and occupy the other parcel (Lantap) and did not remit landowner’s share or rents to RBBI, behavior consistent with respondents’ belief and exercise of ownership over Lantap.
The apparent mismatches in the instruments were therefore best explained as honest, consequential mistakes (e.g., transposition of title numbers or barangay descriptors) rather than demonstrable evidence that the parties intended the contrary transfers. Given the similarity of descriptions in the two technical TCTs and the absence of barangay names on the TCTs themselves, such confusion was plausible.

Legal Conclusions and Holdings

The Supreme Court reversed the CA and reinstated the DARAB decision. It held that:

The Deed of Sale dated February 26, 1985 between respondents and RBBI covered the Lantap property under TCT No. T-62836 (despite the Deed referring by number to T-62096), because respondents’ subsequent conduct and lack of possession of Murong demonstrated they intended and acted as owners of Lantap.
The Deeds of Voluntary Land Transfer executed by RBBI in favor of petitioners (and the subsequently issued CLOAs Nos. 395 and 396) covered the Murong property under TCT No. T-62096 (despite the VLTs’ numerical reference to T-62836), because petitioners were the actual tillers of Murong, paid rents to RBBI,

Case Syllabus (G.R. No. 168387)

Citation and Procedural Posture

Supreme Court First Division decision reported at 643 Phil. 341, G.R. No. 168387, August 25, 2010, penned by Justice Del Castillo, with Chief Justice Corona (Chairperson), Justices Velasco, Jr., Leonardo-De Castro, and Perez concurring.
Petition for Review on Certiorari filed by petitioners Salun-at Marquez and Nestor Dela Cruz assailing the Court of Appeals (CA) October 7, 2003 Decision and the CA May 11, 2005 Resolution in CA-G.R. SP No. 69981.
The CA had granted respondents’ petition and reinstated the Regional Agrarian Reform Adjudicator’s (RARAD) Decision of March 17, 1998; the Supreme Court reviewed that appellate ruling.
The Department of Agrarian Reform Adjudication Board (DARAB) had earlier reversed the OIC-RARAD and rendered a January 17, 2001 Decision favorable to petitioners; the Supreme Court ultimately reinstated the DARAB decision.
Rural Bank of Bayombong, Inc. (RBBI) separately filed a petition (G.R. No. 163320) challenging the CA decision; that petition was dismissed by the Supreme Court on July 26, 2004 for lack of merit, with final denial of motion for reconsideration and entry of judgment on December 15, 2004.
Following dismissal of RBBI’s separate petition, petitioners filed the instant petition; the Supreme Court considered issues of law (admissibility and interpretation rules) and the proper identification of the subject properties of the respective contracts.

Facts — Parties and Properties

Respondents Espejo family were original registered owners of two agricultural lots, each of two hectares: one in Barangay Lantap, Bagabag, Nueva Vizcaya ("Lantap property"), and the other in Barangay Murong, Bagabag, Nueva Vizcaya ("Murong property").
The Murong and Lantap lots were tenanted: petitioners Marquez and Nestor Dela Cruz were tenants of the Murong property; respondent Nemi Fernandez (husband of Elenita Espejo) was the tenant of the Lantap property.
Respondents mortgaged both parcels to Rural Bank of Bayombong, Inc. (RBBI); upon default, RBBI foreclosed, acquired and consolidated titles, and obtained Transfer Certificates of Title (TCTs) in RBBI’s name.
TCT No. T-62096 (issued January 14, 1985) contains the detailed technical metes-and-bounds description corresponding to the Murong property and describes the lot as Lot No. 79-A = Lot No. 159 of Bagabag Townsite, K-27, containing 2.000 hectares.
TCT No. T-62836 (issued June 4, 1985) contains the technical metes-and-bounds description corresponding to the Lantap property and describes the lot as Lot No. 119-A = Lot No. 225 of Bagabag Townsite, K-27, containing 2.0000 hectares.
Both TCTs describe location as "Bagabag Townsite, K-27" without explicit reference to Barangay Murong or Barangay Lantap.
On February 26, 1985, respondents executed a Deed of Sale repurchasing a lot from RBBI; the Deed of Sale described the sold parcel in terms corresponding to plan H-176292 and identified RBBI’s title as TCT No. T-62096 (the Murong title).
Respondents did not take possession of the Murong lot after the buy-back, did not demand rentals from the existing tenants (petitioners), nor otherwise exhibit acts of ownership over the Murong property.
RBBI executed Deeds of Voluntary Land Transfer (VLTs) on June 20, 1990, pursuant to Sections 20 and 21 of RA No. 6657, in favor of petitioners Marquez and Dela Cruz; both VLTs described the subject land as situated in Barangay Murong but incorrectly referred to OCT/TCT No. T-62836 (which technically corresponds to the Lantap property).
Petitioners paid RBBI the purchase price (P90,000.00) and DAR issued CLOAs (CLOA-395 and CLOA-396) to petitioners on September 5, 1991, explicitly stating the parcels were in Barangay Murong and referencing transfer from TCT No. T-62836.
Petitioners continuously occupied and tilled the Murong property, paid rentals to RBBI while RBBI held title, and were not disturbed in possession until respondents filed suit in 1997.

Procedural History at Administrative and Appellate Levels

Respondents filed a Complaint (February 10, 1997) before the Regional Agrarian Reform Adjudicator (RARAD) seeking cancellation of petitioners' CLOAs, deposit of leasehold rentals in favor of respondents, and for RBBI to execute a VLT in favor of respondent Nemi; respondents based claim on the 1985 Deed of Sale that referenced TCT No. T-62096.
OIC-RARAD Decision (March 17, 1998): relied on TCT numbers appearing on the instruments; concluded respondents’ Deed of Sale (referring to TCT No. T-62096) covered Murong property; petitioners’ VLTs and CLOAs (referring to TCT No. T-62836) referred to Lantap; treated discrepancies (e.g., VLT reference to "Murong") as typographical error; cancelled petitioners’ CLOAs and ordered RBBI to execute lease with actual tiller Nemi; recognized petitioners’ right to remain tenants of Murong subject to payment of rents.
DARAB Decision (January 17, 2001): upon petitioners’ appeal, DARAB reversed OIC-RARAD; held burden of proof on respondents to invalidate CLOAs; presumed regular performance by DAR field personnel issuing CLOAs; accepted petitioners as bona fide tenant-tillers of Murong property; held respondents repurchased Lantap (not Murong); ordered respondents to enter into lease with Nemi for Lantap; declared petitioners’ CLOAs valid and final.
CA Decision (October 7, 2003): granted respondents' petition, found reversible error by DARAB, annulled DARAB decision and reinstated the RARAD Decision of March 17, 1998; relied on Rule 130, Section 3 (Best Evidence Rule) and held TCT numbers on the Deed of Sale and VLTs to be conclusive as to identity of properties; treated apparent textual conflicts as typographical errors and prioritized literal contractual terms and technical descriptions on TCTs.
CA motions for reconsideration by RBBI and petitioners were denied; petitioners filed separate Petition for Review on Certiorari to the Supreme Court (G.R. No. 168387).
RBBI separately filed petition (G.R. No. 163320) contesting CA ruling; Supreme Court dismissed that petition for lack of merit on July 26, 2004 and later entered judgment on December 15, 2004.

Issues Presented to the Supreme Court

Whether the earlier final judgment dismissing RBBI’s Petition for Review (G.R. No. 163320) precludes petitioners’ separate petition and operates as binding precedent or preclusive res judicata against petitioners.
Whether the Court of Appeals properly applied the Best Evidence Rule (Rule 130, Section 3) to determine the subject of the Deed of Sale and the Deeds of Voluntary Land Transfer.
What are the proper subject properties of the parties’ respective contr