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Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 190957 June 5, 2013

PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Petitioner,vs.APAC MARKETING CORPORATION, represented by CESAR M. ONG, JR., Respondents.

D E C I S I O N

SERRENO, CJ .:

In this Petition for Review on Certiorari under Rule 45 of the Revised Rules on Civil Procedures, theprimordial issue to be resolved is whether the Court of Appeals (CA)1correctly affirmed the court a

quo2in holding petitioner liable to respondent for attorneys fees.

The Antecedent Facts

Considering that there are no factual issues involved, as the Court of Appeals (CA) adopted thefindings of fact of the Regional Trial Court (RTC) of Quezon City, Branch 96, we hereby adopt theCAs findings, as follows:

The present case involves a simple purchase transaction between defendant-appellant PhilippineNational Construction Corporation (PNCC), represented by defendants-appellants Rogelio Espirituand Rolando Macasaet, and plaintiff-appellee APAC, represented by Cesar M. Ong, Jr., involvingcrushed basalt rock delivered by plaintiff-appellee to defendant-appellant PNCC.

On August 17, 1999, plaintiff-appellee filed with the trial court a complaint against defendants-appellees for collection of sum of money with damages, alleging that (i) in March 1998, defendants-appellants engaged the services of plaintiff-appellee by buying aggregates materials from plaintiff-appellee, for which the latter had delivered and supplied good quality crushed basalt rock; (ii) theparties had initially agreed on the terms of payment, whereby defendants-appellants would issue thecheck corresponding to the value of the materials to be delivered, or "Check Before Delivery," butprior to the implementation of the said payment agreement, defendants-appellants requested fromplaintiff-appellee a 30-day term from the delivery date within which to pay, which plaintiff-appelleeaccepted; and (iii) after making deliveries pursuant to the purchase orders and despite demands byplaintiff-appellee, defendants appellants failed and refused to pay and settle their overdue accounts.The complaint prayed for payment of the amount of P782,296.80 "plus legal interest at the rate ofnot less than 6% monthly, to start in April, 1999 until the full obligation is completely settled andpaid," among others.

On November 16, 1999, defendants-appellants filed a motion to dismiss, alleging that the complaintwas premature considering that defendant-appellant PNCC had been faithfully paying its obligationsto plaintiff-appellee, as can be seen from the substantial reduction of its overdue account as of

August 1999.
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In an Order dated January 17, 2000, the trial court denied the motion to dismiss. Thus, defendants-appellants filed their answer, alleging that the obligation of defendant-appellant PNCC was only withrespect to the balance of the principal obligation that had not been fully paid which, based on thelatest liquidation report, amounted to onlyP474,095.92.

After the submission of the respective pre-trial briefs of the parties, trial was held. However, only

plaintiff-appellee presented its evidence. For their repeated failure to attend the hearings,defendants-appellants were deemed to have waived the presentation of their evidence.

On July 10, 2006, the trial court rendered a Decision, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff, ordering defendants jointly andsolidarily to pay:

1. P782,296.80 as actual damages;

2. P50,000.00 as attorneys fees, plus P3,000.00 per court appearance;

3. Cost of suit.

SO ORDERED.

Defendants-appellants filed a motion for reconsideration, alleging that during the pendency of thecase, the principal obligation was fully paid and hence, the award by the trial court of actualdamages in the amount ofP782,269.80 was without factual and legal bases.

In an Order dated October 6, 2006, the trial court considered defendants-appellants claim of fullpayment of the principal obligation, but still it ordered them to pay legal interest of twelve per cent(12%) per annum. Thus:

"WHEREFORE, the decision dated July 10, 2006 is hereby modified, by ordering defendants jointlyand solidarily to pay plaintiff as follows, to wit:

1. P220,234.083

2. P50,000.00 as attorneys fees, plus P3,000.00 per court appearance;

3. Cost of Suit.

SO ORDERED."

Defendants-appellants filed the present appeal which is premised on the following assignment of

errors:

I. THE REGIONAL TRIAL COURT GRAVELY ERRED IN AWARDING INTEREST AT THE RATEOF 12% PER ANNUM AMOUNTING TO P220,234.083 AND ATTORNEYS FEES IN FAVOR OFPLAINTIFF-APPELLEE.


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II. THE REGIONAL TRIAL COURT GRAVELY ERRED IN HOLDING DEFENDANTS ROGELIOESPIRITU AND ROLANDO MACASAET JOINTLY AND SOLIDARILY LIABLE WITH DEFENDANTPNCC.

THE RULING OF THE COURT OF APPEALS

On 9 July 2009, the Special Fourth Division of the CA promulgated a Decision3in CA-G.R. CV No.88827, affirming with modification the assailed Decision of the court a quo. The dispositive portion ofthe CA Decision reads as follows:

WHEREFORE, the appealed Order dated October 6, 2006 is affirmed, subject to the modificationthat defendant-appellant PNCC is ordered to pay legal interest at six per cent (6%) per annum onthe principal obligation, computed from January 8, 1999 until its full payment in January 2001.Defendants-appellants Rogelio Espiritu and Rolando Macasaet are absolved from liability. The Orderdated October 6, 2006 is affirmed in all other respects.

On 29 July 2009, herein petitioner filed a Motion for Reconsideration, which raised the lone issue ofthe propriety of the award of attorneys fees in favor of respondent.4It should be noted that in said

motion, petitioner fully agreed with the CA Decision imposing 6% legal interest per annum on theprincipal obligation and absolving Rogelio Espiritu and Rolando Macasaet from any liability asmembers of the board of directors of PNCC. Thus, the main focus of the Motion for Reconsiderationwas on the CAs affirmation of the court a quos Decision awarding attorneys fees in favor ofrespondent. However, the appellate courts Former Special Fourth Division denied petitionersMotion for Reconsideration in a Resolution dated 18 January 2010.6

THE SOLE ISSUE

Aggrieved, petitioner now assails before us the 9 July 2009 Decision of the CA by raising the soleissue of whether the CA gravely erred in awarding attorneys fees to respondent.

THE COURTS RULING

The Petition is impressed with merit.

Article 2208 of the New Civil Code of the Philippines states the policy that should guide the courtswhen awarding attorneys fees to a litigant. As a general rule, the parties may stipulate the recoveryof attorneys fees. In the absence on such stipulation, this article restrictively enumerates theinstances when these fees may be recovered, to wit:

Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicialcosts, cannot be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendant's act or omission has compelled the plaintiff to litigate with thirdpersons or to incur expenses to protect his interest;

(3) In criminal cases of malicious prosecution against the plaintiff;

(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
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(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy theplaintiff's plainly valid, just and demandable claim;

(6) In actions for legal support;

(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;

(8) In actions for indemnity under workmen's compensation and employer's liability laws;

(9) In a separate civil action to recover civil liability arising from a crime;

(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and equitable that attorney's fees andexpenses of litigation should be recovered.

In all cases, the attorney's fees and expenses of litigation must be reasonable.

In ABS-CBN Broadcasting Corp. v. CA,7this Court had the occasion to expound on the policy behindthe grant of attorneys fees as actual or compensatory damages:

(T)he law is clear that in the absence of stipulation, attorneys fees may be recovered as actual orcompensatory damages under any of the circumstances provided for in Article 2208 of the CivilCode.

The general rule is that attorneys fees cannot be recovered as part of damages because of thepolicy that no premium should be placed on the right to litigate. They are not to be awarded everytime a party wins a suit. The power of the court to award attorneys fees under Article 2208 demandsfactual, legal, and equitable justification. Even when a claimant is compelled to litigate with thirdpersons or to incur expenses to protect his rights, still attorneys fees may not be awarded where no

sufficient showing of bad faith could be reflected in a partys persistence in a case other than anerroneous conviction of the righteousness of his cause.

In Benedicto v. Villaflores,8we explained the reason behind the need for the courts to arrive upon anactual finding to serve as basis for a grant of attorneys fees, considering the dual concept of thesefees as ordinary and extraordinary:

It is settled that the award of attorney's fees is the exception rather than the general rule; counsel'sfees are not awarded every time a party prevails in a suit because of the policy that no premiumshould be placed on the right to litigate. Attorney's fees, as part of damages, are not necessarilyequated to the amount paid by a litigant to a lawyer. In the ordinary sense, attorney's fees representthe reasonable compensation paid to a lawyer by his client for the legal services he has rendered to

the latter; while in its extraordinary concept, they may be awarded by the court as indemnity fordamages to be paid by the losing party to the prevailing party. Attorney's fees as part of damagesare awarded only in the instances specified in Article 2208 of the Civil Code. As such, it is necessaryfor the court to make findings of fact and law that would bring the case within the ambit of theseenumerated instances to justify the grant of such award, and in all cases it must be reasonable.

We can glean from the above ruling that attorneys fees are not awarded as a matter of course everytime a party wins. We do not put a premium on the right to litigate. On occasions that those fees areawarded, the basis for the grant must be clearly expressed in the decision of the court. 1wphi1
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Petitioner contends that the RTCs Decision has no finding that would fall under any of theexceptions enumerated in Article 2208 of the new Civil Code. Further, it alleges that the court a quohas not given any factual, legal, or equitable justification for applying paragraph 11 of Article 2208 asbasis the latters exercise of discretion in holding petitioner liable for attorneys fees.9

We agree with petitioner on these points.

We have consistently held that an award of attorneys fees under Article 2208 demands factual,legal, and equitable justification to avoid speculation and conjecture surrounding the grantthereof.10Due to the special nature of the award of attorneys fees, a rigid standard is imposed onthe courts before these fees could be granted. Hence, it is imperative that they clearly and distinctlyset forth in their decisions the basis for the award thereof. It is not enough that they merely state theamount of the grant in the dispositive portion of their decisions.11It bears reiteration that the award ofattorneys fees is an exception rather than the general rule; thus, there must be compelling legalreason to bring the case within the exceptions provided under Article 2208 of the Civil Code to justifythe award.12

We have perused the assailed CAs Decision, but cannot find any factual, legal, or equitable

justification for the award of attorneys fees in favor of respondent. The appellate court simply quotedthe portion of the RTC Decision that granted the award as basis for the affirmation thereof. Therewas no elaboration on the basis. There is therefore an absence of an independent CA finding of thefactual circumstances and legal or equitable basis to justify the grant of attorneys fees. The CAmerely adopted the RTCs rational for the award, which in this case we find to be sorely inadequate.

The RTC found as follows:

x x x since it is clear that plaintiff was compelled to hire the services of a counsel, to litigate and toprotect his interest by reason of an unjustified act of the other party, plaintiff is entitled to recoverattorneys fees in the amount ofP50,000.00 which it paid as acceptance fee and P3,000.00 asappearance fee.13

The only discernible reason proffered by the trial court in granting the award was that respondent, ascomplainant in the civil case, was forced to litigate to protect the latters interest. Thus, we find thatthere is an obvious lack of a compelling legal reason to consider the present case as one that fallswithin the exception provided under Article 2208 of the Civil Code. Absent such finding, we hold thatthe award of attorneys fees by the court a quo, as sustained by the appellate court, was improperand must be deleted.

WHEREFORE, the foregoing Petition is GRANTED. The assailed Decision dated 9 July 2009 of theCourt of Appeals in CA-G.R. CV No. 88827 is MODIFIED, in that the award of attorneys fees in theamount of P50,000 as acceptance fee and P3,000 as appearance fee, in favor of respondent APACMarketing Incorporated, is hereby DELETED.

No pronouncement as to costs.

SO ORDERED.
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8. Having made the annotated levy on distraint, respondent TREASURER caused the sale ofthe real properties at the auction sans the necessary publication and/or notice in at leastthree (3) public and conspicuous places;

9. Likewise, no notice of the sale has been served upon the petitioner;

10. To make matters worse, respondents caused the unlawful consolidation of title andownership to the above-mentioned real properties in the name of the respondent PROVINCEx x x;

11. It was only sometime in the first quarter of 1992, while petitioner was in the process ofnegotiating with the representatives of the Department of Agrarian Reform for the possibilityof exemption of its landholdings at Bagac, Bataan, did it learn that the aforesaid parcels ofland were included in the auction sale conducted by respondent TREASURER pursuant tothe provisions of Presidential Decree No. 464;

12. On several occasions petitioner requested and demanded the reconveyance of theabove-mentioned properties from the respondents but to no avail;

13. As a consequence of the anomalous and irregular distraint, levy, auction sale andconsolidation of title and ownership of the above-mentioned real properties in the name ofthe respondent PROVINCE, petitioner suffered actual damages in an amount to be proved atthe trial of this case; x x x8

In their Answer with Counterclaim, respondents denied petitioners allegations and, by way of specialand affirmative defenses, averred:

x x x x

8. That granting hypothetically that there was no distraint of personal property first of the petitioner

before proceeding with the distraint of real properties, Presidential Decree No. 464, the law thenprevailing, provides under Section 67, thus:

"SEC. 67. Remedies, cumulative, simultaneous and unconditional. Collection of real property taxmay be enforced through any or all of the remedies provided under this Code, and the use or non-use of one remedy shall not be a bar against the institution of the others. Formal demand for thepayment of the delinquent taxes and penalties due need not be made before any of such remediesmay be resorted to; notice of delinquency as required in Section sixty-five hereof shall be sufficientfor the purpose." (underlining supplied)

In fact, in the succeeding section, it is so provided that "payment may be enforced by distraining thepersonal property x x x" (underscoring supplied) which only means that distraint of personal propertyis not a condition sine qua non before real property could be distraint;

9. That all legal requirements under Presidential Decree No. 464 had been properly complied with inthe public auction sale of the delinquent properties;

10. That despite repeated demands, no attempt has been made by the petitioner to pay the taxdelinquency, much less, redeem the property from the respondent provincial government; x x x9
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It appearing that the subject lots were placed under the coverage of the Comprehensive AgrarianReform Program (CARP) and distributed to qualified beneficiaries under Republic Act (R.A.) No.6657, petitioner later on filed an Amended Complaint10dated September 10, 1998 impleading theSecretary of the Department of Agrarian Reform (DAR) and eight-five (85) individual beneficiaries asadditional defendants. Petitioner further alleged that: on December 2, 1994, it wrote a letter to theDAR Secretary through the OIC Regional Director of Region 3, San Fernando, Pampanga, objecting

to the operation of the CARP for the reason that the subject properties are pasture lands; thatinstead of answering said letter, the DAR Secretary unlawfully and unscrupulously awarded thesubject properties through the issuance of Certificates of Land Ownership Award (CLOA) No.00146060, 00146062, 00146065, and 00146071 in favor of the defendant beneficiaries; and thatpursuant to the decision of the Court in Luz Farms v. Secretary of the Department of AgrarianReform,11TCT No. CLOA-4464, CLOA-4465, CLOA-4466, CLOA-4467, and CLOA-4468 issued tothe beneficiaries should be cancelled for being null and void.

Meantime, on November 16, 1998, petitioner manifested that it deposited before the clerk of courtthe amount ofP70,762.90 and P62,271.00, which respectively represent the price the subjectproperties were sold at public auction and the two percent (2%) interest per month reckoned fromthe date of the sale until the filing of the complaint.12

In their Answer with Compulsory Counterclaim,13the CARP beneficiaries moved to dismiss theAmended Complaint. They asserted that petitioners claim does not state a cause of action for failureto exhaust administrative remedies prior to filing of the case; that the consolidation of title andtransfer of ownership in favor of respondent Province are in accordance with the law; that TCT Nos.CLOA-4464, CLOA-4465, CLOA- 4466, CLOA-4467, and CLOA-4468 are legal, valid and bindingconformably with RA 6657 and related laws; that petitioner is guilty of estoppel and is barred bylaches; and that they are the qualified and legal beneficiaries of the subject properties, which areagricultural in nature, hence, within the CARP coverage.

Likewise, the DAR Secretary sought the dismissal of the Amended Complaint. Invoking Section114(f) and (g), Rule II of the Department of Agrarian Reform Adjudication Board (DARAB) New Rulesof Procedure dated May 30, 1994, Sections 50 and 5715of RA 6657, Section 3416of Executive Order

No. 129-A dated July 26, 1987, and Supreme Court Administrative Circular No. 3-92, it was arguedthat the RTC has no jurisdiction over DAR because the ultimate relief prayed for by petitioner is thecancellation of the CLOAs issued to the qualified beneficiaries of the CARP under RA 6657, thedetermination of which is exclusively lodged before the DARAB.

On September 29, 1999, the trial court dismissed the Amended Complaint.17Subsequently,however, it reconsidered the resolution on February 8, 2000. The court ruled that, even if it lacks

jurisdiction over the DAR Secretary and the CARP beneficiaries, it still has jurisdiction to decide onthe validity or legality of the auction sale and the consolidation of ownership and/or transfer of title ofthe subject properties in favor of respondent Province.18

After trial on the merits, petitioners complaint was nonetheless dismissed. The dispositive portion of

the August 19, 2003 Decision reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered dismissing its complaint forlack of merit and ordering the petitioner to pay the Province of Bataan the sum of P50,000.00 asattorneys fees.

The clerk of court of the Regional Trial Court of Bataan is hereby ordered to refund the sumof P133,033.90 which petitioner deposited on November 13, 1998 as its cash deposit under O.R.1604701.
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SO ORDERED.19

Petitioner elevated the case to the CA, but its appeal was dismissed on October 24, 2005. The RTCDecision was affirmed except for the award of attorneys fees, which was deleted for lack of basis.On July 18, 2006, petitioners motion for reconsideration was also denied; hence, this petition.

The petition lacks merit.

While it has been ruled that the notices and publication, as well as the legal requirements for a taxdelinquency sale under Presidential Decree No. 464 (otherwise known as the Real Property TaxCode),20are mandatory and that failure to comply therewith can invalidate the sale in view of therequirements of due process, We have equally held that the claim of lack of notice is a factualquestion.21In a petition for review, the Court can only pass upon questions of law; it is not a trier offacts and will not inquire into and review the evidence presented by the contending parties during thetrial and relied upon by the lower courts to support their findings.22The issues raised in this petitionundeniably involve only questions of fact. On this ground alone, it should be dismissed outright.

Even if We dig deeper and scrutinize the entire case records, the same conclusion would be arrived

at. Indeed, petitioner utterly failed to present preponderant evidence to support its allegations thatthe auction sale of the subject properties due to tax delinquency was attended by irregularities. Thetwo witnesses it presented are neither competent nor convincing to attest with reasonable certaintythat respondents failed to observe the procedural requirements of PD 464.23The Court is thus,satisfied with the factual findings of the trial court, as affirmed by the CA, and sees no reason todisturb the same.

We cannot lend credence to the testimony of Gaudencio P. Juan, petitioners Forestry and TechnicalConsultant who claimed to have been an employee since 1964,24that no notice of tax delinquency,demand for tax payment or collection notice was received and that there was no publication andposting of notice of sale held. According to him, his duties and responsibilities include: bringing outsome technical matters to the company (e.g., use of grazing lands) and preparing plans forimplementation by the company (e.g., occupation of the area, the conversion of the area for pasture

purposes);25land and boundary disputes between petitioner and owners of adjoiningareas;26planning some other plans for the implementation in the area like reforestation and otherforestry cases;27and planning preparation of reports, uses of the land for forestry and agriculturalpurposes.28These, however, have nothing to do with the duty of ensuring the prompt and timelysettlement of petitioners realty taxes or of making any representation, for or in behalf of petitioner,with respondents in connection thereto. In fact, Juan categorically admitted that he is not thecustodian of petitioners corporate records:

ATTY. BANZON:

Q: It is not among your duties to keep records on file?

A: No, sir.

Q: Whose duties is it to keep in custody the records of the corporation?

A: Our records department, sir.

Q: Who heads the records department?
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A: It is now Gil Herpe, sir.

Q: When did Mr. Herpe assume his position as the custodian of the corporation?

A: From 1989, sir.

Q: Up to the present?

A: Yes, sir.29

Same thing can be said of Atty. Domingo Lalaquit, the second and last witness who professed to bethe legal counsel of petitioner since 1973. He noted that he handled petitioners legal problems onlywhen referred to him by Mr. Valeriano Bueno, then (but now deceased) President ofpetitioner.30With respect to the subject properties, at the time the matter was referred to him, hefound out that these were already sold at public auction.31There is no showing, based on his owntestimony, that he was involved in taking care of the legal concerns of the subject properties beforeor during its tax sale. No wonder, he is not aware of and did not receive any notices of assessmentor tax delinquency from respondent Province for and in behalf of petitioner.

The Court cannot simply rely on the representation of Juan and Atty. Lalaquit that there was nonotice of assessment and/or demand for payment of tax delinquency made by respondents becauseit was what Mr. Bueno told them so in a "conversation."32Conformably with the hearsay rule,33thetrial court correctly allowed the questions propounded by petitioners counsel to Juan and Atty.Lalaquit but only insofar as they testify that a "conversation" took place and not necessarily admittingas true the alleged utterance of Mr. Bueno.

Neither can We bank on Juans mere assumption and speculation nor on his inconsistency, if notconfused, testimony:

Q: When you said that the corporation was not notified by the Provincial Treasurer you are assuming

that must have been so because you could not find any record of any notice?

A: I have not seen any notice, sir.

Q: And so you presumed that there must have been no notice?

A: Precisely, sir.

Q: When you said ["]precisely[,"] you mean ["]yes["]?

A: Yes, sir.

Q: In the same manner that when you said that you have not received any notice of assessment yousurmised that there must have been no or you have no record of notice of assessment?

x x x

Thats why you assumed that there was no assessment?

A: Yes, sir.


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Q: In the same manner when you testified that there was no demand made by the ProvincialTreasurer you, according to you, you have not received any, you assumed that there was nodemand because according to you all records were lost?

A: Yes, sir.

Q: When you stated that there was no levy, distraint, you have to give the same reason because thatis your assumption and opinion on your part because you have no record of the levy?

A: We have not seen that, sir.

Q: You have not seen because according to you all records of the corporation were lost?

A: Not exactly, it must have been kept in the office, sir, but I have not noticed.

Q: What do you mean that you have no notice? In other words there must have been records butyou have no notice?

A: Yes, sir.34

x x x x

ATTY. BANZON:

Q: x x x Why do you have to ask Mr. Bueno regarding the assessment?

A: Because he is concerned about the property, sir.

Q: But, you were the one who asked[,] it is not Mr. Bueno?

A: No, sir I did not ask Mr. Bueno.

Q: In your testimony of June 4 of this year the question asked of you was "did you not ask thepresident if there was a notice of assessment?" and your answer was ["yes, sir."].

Do you recall that you have asked that question and you made that answer?

A: Yes, sir.

Q: So, you asked Mr. Bueno?

A: No, sir I did not ask Mr. Bueno. [He] was the one [who probably] told me, sir.

Q: So, your answer to the question is not correct?

A: I think so, sir.

Q: Do you recall of any other question which you answered is not correct (sic)?

A: No more, sir.
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Q: All are correct?

A: Maybe, sir.

Q: When you said "maybe", you are not sure that your answer is not correct?

A: Specifically yes I said maybe.

Q: Do you know the meaning of ["]maybe["]?

A: Not sure, sir.

Q: When you said ["]maybe["], you are not sure that your other previous answers were correct?

A: Yes, sir.35

Reading through the transcript of stenographic notes unveils two likely scenarios that could haveactually transpired in this case: either the notices sent by respondents were lost by petitioner, or thesame were sent to but not received by petitioner without the fault of respondents. In both instances,We cannot invalidate the public auction or nullify the consolidation and transfer of title in favor ofrespondent Province.

Similar to what happened on its copy of Certificate of Filing of Amended Articles of Incorporation andCertificate of Filing of By-laws, Juan confessed that the notices sent by respondent Province wereprobably one of those corporate documents lost due to the "several" transfer of petitioners office.During his cross-examination, he answered as follows:

Q: Why do you have to secure from the SEC[?] why you do not ask your (sic) secretary of thecorporation who is the legal custodian of this corporation?

A: The papers could no longer be located after we transferred office several times, sir.

Q: What other papers that you cannot locate?

x x x x

A: There are other titles and documents that could not be located so we requested for certified truecopy of these documents, sir.

Q: And these papers may include notices which must have been sent to Valbueco regarding thisproperty from the province of Bataan?

A: Yes, sir.

Q: And this may (sic) among those lost of the notices of assessment or levy?

A: We have not seen those documents, sir.

Q: You have not seen those documents because this (sic) was (sic) among those lost in yourrecords?
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x x x notices of the sale at public auction may be sent to the delinquent taxpayer, either (i) at theaddress as shown in the tax rolls or property tax record cards of the municipality or city where theproperty is located or (ii) at his residence, if known to such treasurer or barrio captain. Plainly,Section 73 gives the treasurer the option of where to send the notice of sale. In giving the treasurerthe option, nowhere in the wordings is there an indication of a requirement that notice must actuallybe received by the intended recipient. Compliance by the treasurer is limited to strictly following the

provisions of the statute: he may send it at the address of the delinquent taxpayer as shown in thetax rolls or tax records or to the residence if known by him or the barrio captain.39

In this case, it is reasonable to deduce that respondent Provincial Treasurer actually sent the noticesat the address uniformly indicated in TCT No. 47377, 47378, 47379, 47380, 47381, 47382, 47385and 47386, as well as in the tax declarations, which is 7th Floor, Bank of P.I. Bldg., Ayala Avenue,Makati, Rizal. The fault herein lies with petitioner, not with respondent Provincial Treasurer. It had anumber of years to amend its address and provide a more updated and reliable one. By neglectingto do so, it should be aware of the chances it was taking should notices be sent to it. RespondentProvincial Treasurer cannot be faulted for presumably sending the notices to petitioners addressindicated in the land titles and tax declarations of the subject properties.

The principle We enunciated in Valencia v. Jimenez,40Camo v. Riosa Boyco,41and Requiron v.Sinaban42that there can be no presumption of regularity of any administrative action which results indepriving a taxpayer of his property through a tax sale does not apply in the case at bar. By andlarge, these cases cited by petitioner involved facts that are way too different from the one found inthe instant case. More importantly, in the present case, respondent Province, through its witness,Josephine Espino, unequivocally attested that the procedural requisites mandated by PD 464 weredefinitely observed. During her presentation, Espino stated that she is a Local Treasury OperationOfficer IV of the Provincial Treasurers Office since March 2000 and that she had previously servedas Local Treasury Operations Officer and Local Revenue Collection Officer III of the ProvincialTreasurers Office, being in charge of collecting taxes.43Under oath, she declared to have personalknowledge ofthe fact that notice of tax delinquency was sent by the Provincial Treasurers Office topetitioner. She could not, however, show any documentary proof mainly because the exclusivefolder of petitioners properties are now missing despite exercise of all p ossible means to locate

them in other property files.44

Considering the long time that elapsed between the public sale heldsometime in 1987 or 1988 and the presentation of her testimony in 2002, it is also understandablethat Espino could no longer remember the minute details surrounding the notices, publication, andposting that respondent Provincial Treasurer observed relative to the auction sale of the subjectproperties.

The Court, therefore, affirms the RTCs opinion that petitioner was not able to establish its cause ofaction for its failure to submit convincing evidence to establish a case and the CAs position that itmust rely on the strength of its evidence and not on the weakness of respondents claim. Indeed, inSapu-an v. Court of Appeals,45We held:

The general rule in civil cases is that the party having the burden of proof must establish his case bya preponderance of evidence. By "preponderance of evidence" is meant that the evidence as awhole adduced by one side is superior to that of the other.

In determining where the preponderance or superior weight of evidence on the issues involved lies,the court may consider all the facts and circumstances of the case, the witnesses manner oftestifying, their intelligence, their means and opportunity of knowing the facts on which they aretestifying, the nature of such facts, the probability or improbability of their testimony, their interest orwant of interest, and also their personal credibility as far as the same may legitimately appear at the
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trial. The court may also consider the number of witnesses, although the preponderance is notnecessarily with the greatest number. 1wphi1

It is settled that matters of credibility are addressed basically to the trial judge who is in a betterposition than the appellate court to appreciate the weight and evidentiary value of the testimonies ofwitnesses who have personally appeared before him.46

What petitioner has accomplished is only to cast doubts by capitalizing on the absence ofdocumentary evidence on the part of respondents. While such approach would succeed if carriedout by the accused in criminal cases, plaintiffs in civil cases need to do much more to overturnfindings of fact and credibility by the trial court, especially when the same had been affirmed by theCA. It must be stressed that overturning judgments in civil cases should be based on preponderanceof evidence, and with the further qualification that, when the scales shall stand upon an equipoise,the court should find for the defendant.47The "equiponderance of evidence" rule states that when thescale shall stand upon an equipoise and there is nothing in the evidence which shall incline it to oneside or the other, the court will find for the defendant.48Under this principle, the plaintiff must rely onthe strength of his evidence and not on the weakness of the defendant's claim; even if the evidenceof the plaintiff may be stronger than that of the defendant, there is no preponderance of evidence onhis side if such evidence is insufficient in itself to establish his cause of action.49

WHEREFORE, the petition is DENIED. The assailed October 24, 2005 Decision and July 18, 2006Resolution of the Court of Appeals in CAG.R. CV No. 81191, which sustained the August 19,2003Decision of the Regional Trial Court, Branch 1, Balanga City, Bataan dismissing the case are hereby

AFFIRMED.
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Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 194846 June 19, 2013

*HOSPICIO D. ROSAROSO, ANTONIO D. ROSAROSO, MANUEL D. ROSAROSO, ALGERICA D.ROSAROSO, and CLEOFE R. LABINDAO, Petitioners,vs.LUCILA LABORTE SORIA, SPOUSES HAM SOLUTAN and **LAILA SOLUTAN, and MERIDIANREALTY CORPORATION, Respondents.

D E C I S I O N

MENDOZA, J .:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the December4, 2009 Decision1of the Court of Appeals (CA). in CA G.R. CV No. 00351, which reversed and setaside the July 30, 2004 Decision2of the Regional Trial Court, Branch 8, 7th Judicial Region, CebuCity (RTC), in Civil Case No. CEB-16957, an action for declaration of nullity of documents.

The Facts

Spouses Luis Rosaroso (Luis) and Honorata Duazo (Honorata) acquired several real properties inDaan Bantayan, Cebu City, including the subject properties. The couple had nine (9) childrennamely: Hospicio, Arturo, Florita, Lucila, Eduardo, Manuel, Cleofe, Antonio, and Angelica. On April25, 1952, Honorata died. Later on, Luis married Lourdes Pastor Rosaroso (Lourdes).

On January 16, 1995, a complaint for Declaration of Nullity of Documents with Damages was filed byLuis, as one of the plaintiffs, against his daughter, Lucila R. Soria (Lucila); Lucilas daughter, Laila S.Solutan (Laila); and Meridian Realty Corporation (Meridian). Due to Lu is untimely death, however,an amended complaint was filed on January 6, 1996, with the spouse of Laila, Ham Solutan (Ham);and Luis second wife, Lourdes, included as defendants.3

In the Amended Complaint, it was alleged by petitioners Hospicio D. Rosaroso, Antonio D. Rosaroso(Antonio), Angelica D. Rosaroso (Angelica), and Cleofe R. Labindao (petitioners) that on November4, 1991, Luis, with the full knowledge and consent of his second wife, Lourdes, executed the Deed of

Absolute Sale4(First Sale) covering the properties with Transfer Certificate of Title (TCT) No. 31852(Lot No. 8); TCT. No. 11155 (Lot 19); TCT No. 10885 (Lot No. 22); TCT No. 10886 (Lot No. 23); andLot Nos. 5665 and 7967, all located at Daanbantayan, Cebu, in their favor.5

They also alleged that, despite the fact that the said properties had already been sold to them,respondent Laila, in conspiracy with her mother, Lucila, obtained the Special Power of Attorney(SPA),6dated April 3, 1993, from Luis (First SPA); that Luis was then sick, infirm, blind, and ofunsound mind; that Lucila and Laila accomplished this by affixing Luis thumb mark on the SPAwhich purportedly authorized Laila to sell and convey, among others, Lot Nos. 8, 22 and 23, whichhad already been sold to them; and that on the strength of another SPA7by Luis, dated July 21,1993 (Second SPA), respondents Laila and Ham mortgaged Lot No. 19 to Vital Lending Investors,Inc. for and in consideration of the amount of P150,000.00 with the concurrence of Lourdes.8
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IN VIEW OF THE FOREGOING, the Court finds that a preponderance of evidence exists in favor ofthe plaintiffs and against the defendants. Judgment is hereby rendered:

a. Declaring that the Special Power of Attorney, Exhibit "K," for the plaintiffs and Exhibit "3"for the defendants null and void including all transactions subsequent thereto and allproceedings arising therefrom;

b. Declaring the Deed of Sale marked as Exhibit "E" valid and binding;

c. Declaring the Deed of Absolute Sale of Three (3) Parcels of Residential Land marked asExhibit "F" null and void from the beginning;

d. Declaring the Deed of Sale, Exhibit "16" (Solutan) or Exhibit "FF," null and void from thebeginning;

e. Declaring the vendees named in the Deed of Sale marked as Exhibit "E" to be the lawful,exclusive and absolute owners and possessors of Lots Nos. 8, 19, 22, and 23;

f. Ordering the defendants to pay jointly and severally each plaintiff P50,000.00 as moraldamages; and

g. Ordering the defendants to pay plaintiffs P50,000.00 as attorneys fees; and P20,000.00as litigation expenses.

The crossclaim made by defendant Meridian Realty Corporation against defendants Soria andSolutan is ordered dismissed for lack of sufficient evidentiary basis.

SO ORDERED."15

Ruling of the Court of Appeals

On appeal, the CA reversed and set aside the RTC decision. The CA ruled that the first deed of salein favor of petitioners was void because they failed to prove that they indeed tendered aconsideration for the four (4) parcels of land. It relied on the testimony of Lourdes that petitioners didnot pay her husband. The price or consideration for the sale was simulated to make it appear thatpayment had been tendered when in fact no payment was made at all.16

With respect to the validity of the Second Sale, the CA stated that it was valid because thedocuments were notarized and, as such, they enjoyed the presumption of regularity. Althoughpetitioners alleged that Luis was manipulated into signing the SPAs, the CA opined that evidencewas wanting in this regard. Dr. Arlene Letigio Pesquira, the attending physician of Luis, testified thatwhile the latter was physically infirmed, he was of sound mind when he executed the first SPA.17

With regard to petitioners assertion that the First SPA was revoked by Luis when he executed theaffidavit, dated November 24, 1994, the CA ruled that the Second Sale remained valid. The SecondSale was transacted on August 23, 1994, before the First SPA was revoked. In other words, whenthe Second Sale was consummated, the First SPA was still valid and subsisting. Thus, "Meridianhad all the reasons to rely on the said SPA during the time of its validity until the time of its actualfiling with the Register of Deeds considering that constructive notice of the revocation of the SPAonly came into effect upon the filing of the Adverse Claim and the aforementioned Letters addressedto the Register of Deeds on 17 December 1994 and 25 November 1994, respectively, informing the
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Register of Deeds of the revocation of the first SPA."18Moreover, the CA observed that the affidavitrevoking the first SPA was also revoked by Luis on December 12, 1994 .19

Furthermore, although Luis revoked the First SPA, he did not revoke the Second SPA whichauthorized respondent Laila to sell, convey and mortgage, among others, the property covered byTCT T-11155 (Lot No. 19). The CA opined that had it been the intention of Luis to discredit the

Second Sale, he should have revoked not only the First SPA but also the Second SPA. The latterbeing valid, all transactions emanating from it, particularly the mortgage of Lot 19, its subsequentredemption and its second sale, were valid.20Thus, the CA disposed in this wise:

WHEREFORE, the appeal is hereby GRANTED. The Decision dated 30 July 2004 is herebyREVERSED AND SET ASIDE, and in its stead a new decision is hereby rendered:

1. DECLARING the Special Power of Attorney, dated 21 July 1993, as valid;

2. DECLARING the Special Power of Attorney, dated 03 April 1993, as valid up to the time ofits revocation on 24 November 1994;

3. DECLARING the Deed of Absolute sale, dated 04 November 1991, as ineffective andwithout any force and effect;

4. DECLARING the Deed of Absolute Sale of Three (3) Parcels of Residential Land, dated23 August 1994, valid and binding from the very beginning;

5. DECLARING the Deed of Absolute Sale, dated 27 September 1994, also valid and bindingfrom the very beginning;

6. ORDERING the substituted plaintiffs to pay jointly and severally the defendant-appellantMeridian Realty Corporation the sum of Php100,000.00 as moral damages, Php100,000.00

as attorneys fee and Php100,000.00 as litigation expenses; and

7. ORDERING the substituted plaintiffs to pay jointly and severally the defendant-appellantsLeila Solutan et al., the sum of Php50,000.00 as moral damages.

SO ORDERED.21

Petitioners filed a motion for reconsideration, but it was denied in the CA Resolution,22datedNovember 18, 2010. Consequently, they filed the present petition with the following ASSIGNMENTOF ERRORS

I.

THE HONORABLE COURT OF APPEALS (19TH DIVISION) GRAVELY ERRED WHEN ITDECLARED AS VOID THE FIRST SALE EXECUTED BY THE LATE LUIS ROSAROSO IN FAVOROF HIS CHILDREN OF HIS FIRST MARRIAGE.

II.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT SUSTAINING ANDAFFIRMING THE RULING OF THE TRIAL COURT DECLARING THE MERIDIAN REALTY


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CORPORATION A BUYER IN BAD FAITH, DESPITE THE TRIAL COURTS FINDINGS THAT THEDEED OF SALE (First Sale), IS GENUINE AND HAD FULLY COMPLIED WITH ALL THE LEGALFORMALITIES.

III.

THE HONORABLE COURT OF APPEALS FURTHER ERRED IN NOT HOLDING THE SALE(DATED 27 SEPTEMBER 1994), NULL AND VOID FROM THE VERY BEGINNING SINCE LUISROSAROSO ON NOVEMBER 4, 1991 WAS NO LONGER THE OWNER OF LOTS 8, 19, 22 AND23 AS HE HAD EARLIER DISPOSED SAID LOTS IN FAVOR OF THE CHILDREN OF HIS (LUISROSAROSO) FIRST MARRIAGE.23

Petitioners argue that the second deed of sale was null and void because Luis could not have validlytransferred the ownership of the subject properties to Meridian, he being no longer the owner afterselling them to his children. No less than Atty. William Boco, the lawyer who notarized the first deedof sale, appeared and testified in court that the said deed was the one he notarized and that Luisand his second wife, Lourdes, signed the same before him. He also identified the signatures of thesubscribing witnesses.24Thus, they invoke the finding of the RTC which wrote:

In the case of Heirs of Joaquin Teves, Ricardo Teves versus Court of Appeals, et al., G.R. No.109963, October 13, 1999, the Supreme Court held that a public document executed [with] all thelegal formalities is entitled to a presumption of truth as to the recitals contained therein. In order tooverthrow a certificate of a notary public to the effect that a grantor executed a certain document andacknowledged the fact of its execution before him, mere preponderance of evidence will not suffice.Rather, the evidence must (be) so clear, strong and convincing as to exclude all reasonable disputeas to the falsity of the certificate. When the evidence is conflicting, the certificate will be upheld x x x.

A notarial document is by law entitled to full faith and credit upon its face. (Ramirez vs. Ner, 21SCRA 207). As such it must be sustained in full force and effect so long as he who impugns itshall not have presented strong, complete and conclusive proof of its falsity or nullity on account of

some flaw or defect provided against by law (Robinson vs. Villafuerte, 18 Phil. 171, 189-190).25

Furthermore, petitioners aver that it was erroneous for the CA to say that the records of the casewere bereft of evidence that they paid the price of the lots sold to them. In fact, a perusal of therecords would reveal that during the cross-examination of Antonio Rosaroso, when asked if therewas a monetary consideration, he testified that they indeed paid their father and their paymenthelped him sustain his daily needs.26

Petitioners also assert that Meridian was a buyer in bad faith because when its representative visitedthe site, she did not make the necessary inquiries. The fact that there were already houses on thesaid lots should have put Meridian on its guard and, for said reason, should have made inquiries asto who owned those houses and what their rights were over the same.27

Meridians assertion that the Second Sale was registered in the Register of Deeds was a falsity. Thesubject titles, namely: TCT No. 11155 for Lot 19, TCT No. 10885 for Lot 22, and TCT No. 10886 forLot 23 were free from any annotation of the alleged sale.28

After an assiduous assessment of the records, the Court finds for the petitioners.

The First Deed Of Sale Was Valid
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The fact that the first deed of sale was executed, conveying the subject properties in favor ofpetitioners, was never contested by the respondents. What they vehemently insist, though, is thatthe said sale was simulated because the purported sale was made without a valid consideration.

Under Section 3, Rule 131 of the Rules of Court, the following are disputable presumptions: (1)private transactions have been fair and regular; (2) the ordinary course of business has been

followed; and (3) there was sufficient consideration for a contract.29

These presumptions operateagainst an adversary who has not introduced proof to rebut them. They create the necessity ofpresenting evidence to rebut the prima facie case they created, and which, if no proof to the contraryis presented and offered, will prevail. The burden of proof remains where it is but, by thepresumption, the one who has that burden is relieved for the time being from introducing evidence insupport of the averment, because the presumption stands in the place of evidence unless rebutted.30

In this case, the respondents failed to trounce the said presumption. Aside from their bare allegationthat the sale was made without a consideration, they failed to supply clear and convincing evidenceto back up this claim. It is elementary in procedural law that bare allegations, unsubstantiated byevidence, are not equivalent to proof under the Rules of Court.31

The CA decision ran counter to this established rule regarding disputable presumption. It reliedheavily on the account of Lourdes who testified that the children of Luis approached him andconvinced him to sign the deed of sale, explaining that it was necessary for a loan application, butthey did not pay the purchase price for the subject properties.32This testimony, however, is self-serving and would not amount to a clear and convincing evidence required by law to dispute the saidpresumption. As such, the presumption that there was sufficient consideration will not be disturbed.

Granting that there was no delivery of the consideration, the seller would have no right to sell againwhat he no longer owned. His remedy would be to rescind the sale for failure on the part of the buyerto perform his part of their obligation pursuant to Article 1191 of the New Civil Code. In the case ofClara M. Balatbat v. Court Of Appeals and Spouses Jose Repuyan and Aurora Repuyan,33it waswritten:

The failure of the buyer to make good the price does not, in law, cause the ownership to revest tothe seller unless the bilateral contract of sale is first rescinded or resolved pursuant to Article 1191 ofthe New Civil Code. Non-payment only creates a right to demand the fulfillment of the obligation orto rescind the contract. [Emphases supplied]

Meridian is Not aBuyer in Good Faith

Respondents Meridian and Lucila argue that, granting that the First Sale was valid, the propertiesbelong to them as they acquired these in good faith and had them first recorded in the Registry ofProperty, as they were unaware of the First Sale.34

Again, the Court is not persuaded.

The fact that Meridian had them first registered will not help its cause. In case of double sale, Article1544 of the Civil Code provides:

ART. 1544. If the same thing should have been sold to different vendees, the ownership shall betransferred to the person who may have first possession thereof in good faith, if it should be movableproperty.
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Should it be immovable property, the ownership shall belong to the person acquiring it who in goodfaith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was firstin possession; and, in the absence thereof; to the person who presents the oldest title, providedthere is good faith.

Otherwise stated, ownership of an immovable property which is the subject of a double sale shall betransferred: (1) to the person acquiring it who in good faith first recorded it in the Registry ofProperty; (2) in default thereof, to the person who in good faith was first in possession; and (3) indefault thereof, to the person who presents the oldest title, provided there is good faith. Therequirement of the law then is two-fold: acquisition in good faith and registration in good faith. Goodfaith must concur with the registration. If it would be shown that a buyer was in bad faith, the allegedregistration they have made amounted to no registration at all.

The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significancein case of a double sale of immovable property. When the thing sold twice is an immovable, the onewho acquires it and first records it in the Registry of Property, both made in good faith, shall be

deemed the owner. Verily, the act of registration must be coupled with good faith that is, theregistrant must have no knowledge of the defect or lack of title of his vendor or must not have beenaware of facts which should have put him upon such inquiry and investigation as might be necessaryto acquaint him with the defects in the title of his vendor.)35[Emphases and underlining supplied]

When a piece of land is in the actual possession of persons other than the seller, the buyer must bewary and should investigate the rights of those in possession. Without making such inquiry, onecannot claim that he is a buyer in good faith. When a man proposes to buy or deal with realty, hisduty is to read the public manuscript, that is, to look and see who is there upon it and what his rightsare. A want of caution and diligence, which an honest man of ordinary prudence is accustomed toexercise in making purchases, is in contemplation of law, a want of good faith. The buyer who hasfailed to know or discover that the land sold to him is in adverse possession of another is a buyer inbad faith.36In the case of Spouses Sarmiento v. Court of Appeals,37it was written:

Verily, every person dealing with registered land may safely rely on the correctness of the certificateof title issued therefor and the law will in no way oblige him to go behind the certificate to determinethe condition of the property. Thus, the general rule is that a purchaser may be considered apurchaser in good faith when he has examined the latest certificate of title. An exception to this ruleis when there exist important facts that would create suspicion in an otherwise reasonable man to gobeyond the present title and to investigate those that preceded it. Thus, it has been said that aperson who deliberately ignores a significant fact which would create suspicion in an otherwisereasonable man is not an innocent purchaser for value. A purchaser cannot close his eyes to factswhich should put a reasonable man upon his guard, and then claim that he acted in good faith underthe belief that there was no defect in the title of the vendor. As we have held:

The failure of appellees to take the ordinary precautions which a prudent man would have takenunder the circumstances, specially in buying a piece of land in the actual, visible and publicpossession of another person, other than the vendor, constitutes gross negligence amounting to badfaith.

In this connection, it has been held that where, as in this case, the land sold is in the possession of aperson other than the vendor, the purchaser is required to go beyond the certificate of title to makeinquiries concerning the rights of the actual possessor. Failure to do so would make him a purchaserin bad faith. (Citations omitted).
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ASIDE. The July 30, 2004 Decision of the Regional Trial Court, Branch 8, 7th Judicial Region, CebuCity, in Civil Case No. CEB-16957, is hereby REINSTATED.

SO ORDERED.