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FIRST DIVISION

[G.R. No. 103959.  August 21, 1997]

SPOUSES REGALADO SANTIAGO and ROSITA PALABYAB, JOSEFINA ARCEGA, petitioners, vs. THE HON. COURT OF APPEALS; THE HON. CAMILO C. MONTESA, JR., Presiding Judge of the RTC of Malolos, Bulacan, Branch 19, and QUIRICO ARCEGA, respondents.

D E C I S I O N

HERMOSISIMA, JR., J.:

Assailed in this petition for review under Rule 45 is the November 8, 1991 Decision of respondent Court of Appeals in CA-G.R. CV No. 25069.  It affirmed in toto the judgment of Branch 19, Regional Trial Court of Malolos, Bulacan, in Civil Case No. 8470-M.  The action therein sought to declare null and void the “Kasulatan ng Bilihang Tuluyan ng Lupa” executed on July 18, 1971 by the late Paula Arcega, sister of private respondent, in favor of herein petitioners over a parcel of land consisting of 927 square meters, situated in Barangay Tabing Ilog, Marilao, Bulacan.

Paula Arcega was the registered owner of that certain parcel of land covered by Transfer Certificate of Title No. T-115510.  Her residential house stood there until 1970 when it was destroyed by a strong typhoon.

On December 9, 1970, Paula Arcega executed what purported to be a deed of conditional sale over the land in favor of Josefina Arcega and the spouses Regalado Santiago and Rosita Palabyab, the petitioners herein, for and in consideration of P20,000.00.  The vendees were supposed to pay P7,000.00 as downpayment.  It was expressly provided that the vendor would execute and deliver to the vendees an absolute deed of sale upon full payment by the vendees of the unpaid balance of the purchase price of P13,000.00.

Subsequently, on July 18, 1971, supposedly upon payment of the remaining balance, Paula Arcega executed a deed of absolute sale of the same parcel of land in favor of petitioners. Thereupon, on July 20, 1971, TCT No. T-115510, in the name of Paula Arcega, was cancelled and a new title, TCT No. T-148989 was issued in the name of petitioners.

On April 10, 1985, Paula Arcega died single and without issue, leaving as heirs her two brothers, Narciso Arcega[1] and private respondent Quirico Arcega.

Incidentally, before Paula Arcega died, a house of four bedrooms with a total floor area of 225 square meters was built over the parcel of land in question.  Significantly, the master's bedroom, with toilet and bath, was occupied by Paula Arcega until her death despite the execution of the alleged deed of absolute sale.  The three other bedrooms, smaller than the master's bedroom, were occupied by the petitioners who were the supposed vendees in the sale.

Private respondent Quirico Arcega, as heir of his deceased sister, filed on October 24, 1985 Civil Case No. 8470-M before the RTC of Malolos, Bulacan, seeking to declare null and void the deed of sale executed by his sister during her lifetime in favor of the petitioners on the ground that said deed was fictitious since the purported consideration therefor of P20,000.00 was not actually paid by the vendees to his sister.

Answering the complaint before the RTC, petitioner spouses averred that private respondent's cause of action was already barred by the statute of limitations considering that the disputed deed of absolute sale was executed in their favor on July 18, 1971, by which TCT No. 148989 was issued on July 20, 1971, while private respondent's complaint was filed in court only on October 24, 1985 or more than fourteen (14) years from the time the cause of action accrued.  Petitioners also deny that the sale was fictitious.  They maintain that the purchase price was actually paid to Paula Arcega and that said amount was spent by the deceased in the construction of her three-door apartment on the parcel of land in question.

Josefina Arcega, the other petitioner, was declared in default for failure to file her answer within the reglementary period.

After trial, the RTC rendered judgment in favor of private respondent Quirico Arcega, viz.:

"(a)    Declaring as null and void and without legal force and effect the 'Kasulatan Ng Bilihang Tuluyan ng Lupa' dated July 18, 1971 executed by the deceased Paula Arcega covering a parcel of land embraced under TCT No. T-115510 in favor of the defendants;

(b)      Declaring TCT No. T-148989 issued and registered in the names of defendants Josefina Arcega and spouses Regalado Santiago and Rosita Palabyab as null and void;

(c)      Ordering the reconveyance of the property including all improvements thereon covered by TCT No. T-115510, now TCT No. T-148989, to the plaintiff, subject to real estate mortgage with the Social Security System; and

(d)      To pay jointly and severally the amount of P10,000.00 as attorney's fees.

On the counterclaim, the same is hereby dismissed for lack of legal and/or factual basis (p. 6, decision, pp. 295-300, rec.)."[2]

In ruling for private respondent, the trial court, as affirmed in toto by the public respondent Court of Appeals, found that:

"On the basis of the evidence adduced, it appears that plaintiff Quirico Arcega and his brother Narciso Arcega are the only surviving heirs of the deceased Paula Arcega who on April 10, 1985 died single and without issue. Sometime in 1970, a strong typhoon destroyed the house of Paula Arcega and the latter together with the defendants decided to construct a new house. All the defendants[3] being members of the SSS, Paula deemed it wise to lend her title to them for purposes of loan with the SSS. She executed a deed of sale to effect the transfer of the property in the name of the defendants and thereafter the latter mortgaged the same for P30,000.00 but the amount actually released was only P25,000.00. Paula Arcega spent the initial amount of P30,000.00 out of her savings for the construction of the house sometime in 1971 and after the same and the proceeds of the loan were exhausted, the same was not as yet completed. Paula Arcega and her brothers sold the property which they inherited for P45,000.00 and the same all went to the additional construction of the house, however, the said amount is not sufficient. Thereafter, Paula Arcega and her brothers sold another property which they inherited for P805,950.00 and one-third (1/3) thereof went to Paula Arcega which she spent a portion of which for the finishing touches of the house. The house as finally finished in 1983 is worth more than P100,000.00 with a floor area of 225 square meters consisting of four bedrooms . A big master's bedroom complete with a bath and toilet was occupied by Paula Arcega up to the time of her death on April 10, 1985 and the other three smaller bedrooms are occupied by spouses, defendants Regalado Santiago and Rosita Palabyab, and Josefina Arcega. After the death of Paula Arcega defendant Josefina Arcega and Narciso Arcega constructed their own house at back portion of the lot in question.

There is clear indication that the deed of sale, which is unconscionably low for 937 square meters in favor of the defendants sometime on July 18, 1971 who are all members of SSS, is merely designed as an accommodation for purposes of loan with the SSS. Paula Arcega cognizant of the shortage of funds in her possession in the amount of P30,000.00, deemed it wise to augment her funds for construction purposes by way of a mortgage with the SSS which only defendants could possibly effect they being members of the SSS.  Since the SSS requires the collateral to be in the name of the mortgagors, Paula Arcega executed a simulated deed of sale (Kasulatan ng Bilihang Tuluyan ng Lupa) for P20,000.00 dated July 18, 1971 in favor of the defendants and the same was notarized by Atty. Luis Cuvin who emphatically claimed that no money was involved in the transaction as the parties have other agreement. The allegations of the defendants that the property was given to them (Kaloob) by the deceased has no evidentiary value.  While it is true that Rosita Palabyab stayed with the deceased since childhood, the same cannot be said with respect to defendant Josefina Arcega, distant relative and a niece of the wife of Narciso Arcega, who stayed with deceased sometime in 1966 at the age of 19 years and already working as a saleslady in Manila.  Did the deceased indeed give defendant Josefina Arcega half of her property out of love and gratitude?  Such circumstance appears illogical if not highly improbable.  As a matter of fact defendant Josefina Arcega in her unguarded moment unwittingly told the truth that couple (Regalado Santiago and Rosita Palabyab) had indeed borrowed the title and then mortgaged the same with the SSS as shown in her direct testimony which reads:

'Atty Villanueva:

Q-    Why did you say that the house is owned by spouses Santiago but the lot is bought by you and Rosita?

A-    Because at that time, the couple[4] borrowed the title and then mortgaged the property with the SSS. There is only one title but both of us owned it. (TSN dtd. 19 Oct. '88, p. 5)"[5]

On appeal, the public respondent Court of Appeals dismissed the same, affirming in all respects the RTC judgment.

Hence, this petition.

The petition is unmeritorious.

Verily, this case is on all fours with Suntay v. Court of Appeals.[6] There, a certain Federico Suntay was the registered owner of a parcel of land in Sto. Nino, Hagonoy, Bulacan. A rice miller, Federico applied on September 30, 1960 as a miller-contractor of the then National Rice and Corn Corporation (NARIC), but his application was disapproved because he was tied up with several unpaid loans.  For purposes of circumvention, he thought of allowing his nephew-lawyer, Rafael Suntay, to make the application for him.  To achieve this Rafael prepared a notarized Absolute Deed of Sale whereby Federico, for and in consideration of P20,000.00, conveyed to Rafael said parcel of land with all its existing structures.  Upon the execution and registration of said deed, Certificate of Title No. 0-2015 in the name of Federico was cancelled and, in lieu thereof, TCT No. T-36714 was issued in the name of Rafael.  Sometime in the months of June to August, 1969,[7] Federico requested Rafael to deliver back to him the owner's duplicate of the transfer certificate of title over the properties in question for he intended to use the property as collateral in securing a bank loan to finance the expansion of his rice mill.  Rafael, however, without just cause, refused to deliver the title insisting that said property was "absolutely sold and conveyed [to him] xxx for a consideration of P20,000.00, Philippine currency, and for other valuable consideration."  We therein ruled in favor of Federico Suntay and found that the deed of sale in question was merely an absolutely simulated contract for the purpose of accommodation and therefore void. In retrospect, we observed in that case:

"Indeed the most protuberant index of simulation is the complete absence of an attempt in any manner on the part of the late Rafael to assert his rights of ownership over the land and rice mill in question. After the sale, he should have entered the alnd and occupied the premises thereof. He did not even attempt to. If he stood as owner, he would have collected rentals from Federico for the use and occupation of the land and its improvements. All that the late Rafael had was a title in his name.

xxx  xxx                                       xxx

xxx The fact that, notwithstanding the title transfer, Federico remained in actual possession, cultivation and occupation of the disputed lot from the time the deed of sale was executed until the present, is a circumstance which is unmistakably added proof of the fictitiousness of the said transfer, the same being contrary to the principle of ownership." [8]

In the case before us, while petitioners were able to occupy the property in question, they were relegated to a small bedroom without bath and toilet,[9] while Paula Arcega remained virtually in full possession of the completed house and lot using the big master's bedroom with bath and toilet up to the time of her death on April 10, 1985.[10] If, indeed, the transaction entered into by the petitioner's and the late Paula Arcega on July 18, 1971 was a veritable deed of absolute sale, as it was purported to be, then Ms. Arcega had no business whatsoever remaining in the property and, worse, to still occupy the big master's bedroom with all its amenities until her death on April 10, 1985. Definitely, any legitimate vendee of real property who paid for the property with good money wil not accede to an arrangement whereby the vendor continues occupying the most favored room in the house while he or she, as new owner, endures the disgrace and absurdity of having to sleep in a small bedroom without bath and toilet as if he or she is a guest or a tenant in the house. In any case, if petitioners really stood as legitimate owners of the property, they would have collected rentals from Paula Arcega for the use and occupation of the master's bedroom as she would then be a mere lessee of the property in question. However, not a single piece of evidence was presented to show that this was the case. All told, the failure of petitioners to take exclusive possession of the property allegedly sold to them, or in the alternative, to collect rentals from the alleged vendee Paula Arcega, is contrary to the principle of ownership and a clear badge of simulation that renders the whole transaction void and without force and effect, pursuant to Article 1409 of the New Civil Code:

"The following contracts are inexistent and void from the beginning:

xxx  xxx                                       xxx

(2) Those which are absolutely simulated or fictitious;

xxx  xxx                                       xxx."

The conceded fact that subject deed of absolute sale executed by Paula Arcega in favor of petitioners is a notarized document does not justify the petitioners' desired conclusion that said sale is undoubtedly s true conveyance to which the parties thereto are irrevocably and undeniably bound. To be considered with great significance is the fact that Atty. Luis Cuvin who notarized the deed disclaimed the truthfulness of the document when he testified that "NO MONEY WAS INVOLVED IN THE TRANSACTION."[11] Furthermore, though the notarization of the deed of sale in question vests in its favor the presumption of regularity, it is not the intention nor the function of the notary public to validate and make binding an instrument never, in the first place, intended to have any binding legal effect upon the parties thereto. The intention of the parties still is and always will be the primary consideration in determining the true nature of a contract. Here, the parties to the "Kasulatan ng Bilihang Tuluyan ng Lupa," as shown by the evidence and accompanying circumstances, never intended to convey the property thereto from one party to the other for valuable consideration. Rather, the transaction was merely used to facilitate a loan with the SSS with petitioners-mortgagors using the property in question, the title to which they were able to register in their names through the simulated sale, as collateral.

The fact that petitioners were able to secure a title in their names, TCT No. 148989, did not operate to vest upon petitioners ownership over Paula Arcega's property. That act has never been recognized as a mode of acquiring ownership.  As a matter of fact, even the original registration of immovable property does not vest title thereto.[12] The Torrens system does not create or vest title. It only confirms and records title already existing and vested. It does not protect a usurper from the true owner. It cannot be a shield for the commission of fraud. It does not permit one to enrich himself at the expense of another.[13] Where one does not have any rightful claim over a real property, the Torrens system of registration can confirm or record nothing.

Petitioners, nevertheless, insist that both the trial court and the respondent court should have followed the Parole Evidence Rule and prevented evidence, like the testimony of Notary Public, Atty. Luis Cuvin, private respondent Quirico Arcega, among others, which impugned the two notarized deeds of sale.

The rule on parole evidence under Section 9, Rule 130 is qualified by the following exceptions:

“However, a party may present evidence to modify, explain or add to the terms of the written agreement if he puts in issue in his pleading;

(a)      An intrinsic ambiguity, mistake or imperfection in the written agreement;

(b)      The failure of the written agreement to express the true intent and agreement of the parties thereto;

(c)      The validity of the written agreement; or

(d)      The existence of other terms agreed to by the parties or their successors in interest after the execution of the written agreement.

The term ‘agreement’ includes wills.”

In this case, private respondent Quirico Arcega was able to put in issue in his complaint before the Regional Trial Court the validity of the subject deeds of sale for being a simulated transaction:

“6. That in 1971, the defendants, who by then were already employed in private firms and had become members of the Social Security System by virtue of their respective employments, decided among themselves to build a new house on the property of PAULA ARCEGA above described and to borrow money from the Social Security System to finance the proposed construction.

7. That in order to secure the loan from the Social Security System it was necessary that the lot on which the proposed house would be erected should be registered and titled in the names of the defendants.

xxx  xxx                                       xxx

9. That in conformity with the above plans and schemes of the defendants, they made PAULA ARCEGA execute and sign a fictitious, hence null and void “KASULATAN NG  BILIHANG TULUYAN NG LUPA” on July 18, 1971, before Notary Public LUIS CUVIN, of Bulacan and entered in his register as Doc. No. 253, Page No. 52, Book No. XIX, Series of 1971, by which PAULA ARCEGA purportedly convyed(sic) in favor of the defendants JOSEFINA ARCEGA and the spouses REGALADO SANTIAGO and ROSITA PALABYAB, the whole parcel of land above described for the sum of TWENTY THOUSAND (P20,000.00), as consideration which was not actually, then or thereafter paid either wholly or partially. A copy of said document is hereto attached as Annex ‘B’ and made integral part hereof.

10. That defendants pursuing their unlawful scheme registered the said void and inexistent “KASULATAN NG BILIHANG TULUYAN NG LUPA” with the office of the Register of Deeds of Bulacan, procured the cancellation of Transfer Certificate of Title No. 115510, in the name of PAULA ARCEGA and the issuance of Transfer Certificate of Title No. 148989, in their names, a xeroxed copy of which is hereto attached as Annex ‘C’ and made integral part hereof.

11. That still in furtherance of their unjust and unlawful schemes, defendants secured a loan from Social Security System in the amount of P30,000.00, securing the payment thereof with a Real Estate Mortgage on the above-described property then already titled in their names as aforestated (pp. 2-3, complaint, pp. 1-5, rec.).”[14]

Moreover, the parol evidence rule may be waived by failure to invoke it, as by failure to object to the introduction of parol evidence. And, where a party who is entitled to the benefit of the rule waives the benefit thereof by allowing such evidence to be received without objection and without any effort to have it stricken from the minutes or disregarded by the trial court, he cannot, after the trial has closed and the case has been decided against him, invoke the rule in order to secure a reversal of the judgment by an appellate court.[15] Here, the records are devoid of any indication that petitioners ever objected to the admissibility of parole evidence introduced by private respondent in open court. The court cannot disregard evidence which would ordinarily be incompetent under the rules but has been rendered admissible by the failure of  party to object thereto.[16] Petitioners have no one to blame but themselves in this regard.

Finally, petitioners argue that private respondent’s complaint filed before the trial court on October 24, 1985 is already barred by the statute of limitations and laches considering that the deed of absolute sale was executed in their favor by the deceased Paula Arcega on July 20, 1971. Indeed, more than fourteen (14) years had elapsed from the time his cause of action accrued to the time that the complaint was filed. Articles 1144 and 1391 of the New Civil Code provide:

“ART. 1144. The following actions must be brought within ten years from the time the right of action accrues:

(1)      Upon a written contract;

(2)      Upon an obligation created by law;

(3)      Upon a judgment.”

“ART. 1391. The action for annulment shall be brought within four years.

This period shall begin:

In cases of intimidation, violence or undue influence, from the time the defect of the consent ceases.

In cases of mistake or fraud, from the time of the discovery of the same.

And when the action refers to contracts entered into by minors or other incapacitated persons, from the time the guardianship ceases.”

This submission is utterly without merit, the pertinent provision being Article 1410 of the New Civil Code which provides unequivocably that “[T]he action or defense for the declaration of the inexistence of a contract does not prescribe.”[17]

As for laches, its essence is the failure or neglect, for an unreasonable and unexplained length of time to do that which, by exercising due diligence, could or should have been done earlier; it is the negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it.[18] But there is, to be sure, no absolute rule as to what constitutes laches or staleness of demand; each case is to be determined according to its particular circumstances. The question of laches is addressed to the sound discretion of the court, and since laches is an equitable doctrine, its application is controlled by equitable considerations. It cannot be worked to defeat justice or to perpetrate fraud and injustice.[19] In the case under consideration, it would not only be impractical but well-nigh unjust and patently inequitous to apply laches against private respondent and vest ownership over a valuable piece of real property in favor of petitioners by virtue of an absolutely simulated deed of sale never, in the first place, meant to convey any right over the subject property. It is the better rule that courts, under the principle of equity, will not be guided or bound strictly by the statute of limitations or the doctrine of laches when to do so, manifest wrong or injustice would result.[20]

WHEREFORE, premises considered, the petition is hereby DENIED with costs against petitioners.

SO ORDERED.

Padilla, (Chairman), Bellosillo, Vitug, and Kapunan, JJ., concur.



[1] Disauthorized his inclusion as party-plaintiff in Civil Case No. 8470-M.

[2] Rollo, pp. 20-21.

[3] Petitioners herein.

[4] Spouses Regalado Santiago and Rosita Palabyab.

[5] Rollo, pp. 22-24.

[6] 251 SCRA 430 [1995].

[7] Id., at 437.

[8] Id., at 450-451.

[9] Rollo, p. 25.

[10] Rollo, p. 22.

[11] Rollo, p. 23.

[12] Suntay v. Court of Appeals, supra., p. 450, citing Berico v. CA, 225 SCRA 469 [1993].

[13] Noblejas, Antonio H. & Noblejas, Edilberto H, Registration of Land Titles and Deeds, 1992 rev. ed., p. 47, citing Angeles v. Samia, 66 Phil. 4444 [1938]; Ayroso, et. al. v. Padiernos, CA-GR No. 17044-R, May 11, 1959; Danes, et. al. No. 27258-R, August 31, 1964, 62 O.G., No. 14, p. 2272.

[14] Rollo, pp. 27-29.

[15] Francisco Ricardo J., Evidence Rules 128-134, 1993 ed., p. 88, citing 32 C.J.S. 796.

[16] Cruz v. Court of Appeals, 192 SCRA 209, 220 [1990].

[17] Private Development Corporation of the Philippines v. Intermediate Appellate Court, 213 SCRA 282, 288 [1992]; Ortega v. Tan, 181 SCRA 350, 358 [1990].

[18] Felix v. Buenaseda, 240 SCRA 139, 152 [1995], citing Cristobal v. Melchor, 78 SCRA 175, 182 [1977].

[19] Jimenez v. Fernandez, 184 SCRA 190, 197 [1990].

[20] Raneses v. Intermediate Appellate Court, 187 SCRA 397, 404 [1990], citing Cristobal v. Melchor, supra.