Heirs of Durano v. Uy
REITERATIONFacts
The Antecedents: This case involves a 128-hectare parcel of land in Danao City, where petitioners, the Heirs of Ramon Durano, Sr., Ramon Durano III, and Elizabeth Hotchkiss Durano, filed an action for damages against respondents, alleging a "hate campaign" initiated by respondents through baseless complaints of petitioners' alleged "invasion" of respondents' properties, which were dismissed by the Department of Justice and Philippine Constabulary. Respondents counterclaimed for damages, alleging that petitioners, through Durano & Co., Inc., forcibly took possession of their lands, bulldozed improvements, and planted sugar cane, while intimidating respondents with the Durano family's power and prestige. The disputed property was originally owned by Cebu Portland Cement Company (Cepoc), then sold to Durano & Co., Inc., and subsequently to petitioner Ramon Durano III, who registered the land under TCT Nos. T-103 and T-104, while respondents asserted prior possession and ownership through inheritance or purchase, supported by tax declarations and improvements. Procedural History: The petitioners' initial complaint for damages was dismissed without prejudice to the respondents' counterclaim, and the trial proceeded on the counterclaim. The Regional Trial Court (RTC) ruled in favor of the respondents, ordering petitioners to pay actual damages, litigation expenses, and attorney's fees, and directing the return of certain properties. The Court of Appeals (CA) affirmed the RTC decision with modification, ordering the return of properties to all respondents, finding the issuance of TCT Nos. T-103 and T-104 to Ramon Durano III to be fraudulent, and deeming the alleged Deed of Absolute Sale between Cepoc and Durano & Co. to be unregistrable. The Petition: Petitioners seek the reversal of the CA decision, raising several errors, including the CA's modification of the RTC decision regarding the return of properties to all respondents, its collateral attack on the validity of Ramon Durano III's title, the classification of respondents as builders in good faith, the personal liability of petitioners for damages, the alleged excessive awards for damages, the direction to return properties to specific respondents, and the award of litigation expenses and attorney's fees, arguing they are not possessors in bad faith and should not be held personally liable due to separate corporate personality.
Issue(s)
Whether the Court of Appeals erred in granting affirmative relief to respondents who did not appeal the RTC decision. Whether the Court of Appeals erred in collaterally attacking the validity of petitioner Ramon Durano III's title. Whether respondents should have been adjudged builders in good faith. Whether petitioners should be held personally liable for damages, considering the doctrine of separate corporate personality. Whether respondents proved the existence of improvements and the awarded damages by a preponderance of evidence, and if the damages were excessive. Whether it was error to direct the return of the properties to respondents Venancia Repaso, Hermogenes Tito, and Marcelino Gonzales. Whether the award of litigation expenses and attorney's fees was erroneous. Whether petitioners are possessors in bad faith.
Ruling
The Supreme Court denied the petition and modified the Court of Appeals decision. It declared respondents with claims to the properties covered by TCT Nos. T-103 and T-104 as owners by acquisitive prescription to the extent of their respective claims. In all other respects, the decision of the Court of Appeals was affirmed.
Ratio Decidendi
On the issue of affirmative relief granted by the CA to non-appealing respondents: The Court held that the petitioners' argument is untenable. Rule 51, Section 8 of the New Rules of Civil Procedure allows the Court of Appeals to consider matters not explicitly assigned as errors if they are closely related to or dependent on an assigned error, or if necessary for a complete and just resolution. The CA's order for the return of properties to all respondents was a legal consequence of its finding that respondents had a better right of possession as possessors in the concept of owner. The Court distinguished this from the cited cases of Madrideo and Medida, where the appellate court granted affirmative relief to parties who were third parties to the appeal or who failed to appeal themselves. In this case, all respondents were impleaded in the appeal, and the return of properties was an independent determination based on the evidence, not an affirmative relief sought by respondents. On the collateral attack on the validity of petitioner Ramon Durano III's title: The Court agreed that fraud in the issuance of a Torrens title can only be raised in an action expressly instituted for that purpose, not collaterally. However, it noted that the circumstances presented—the lack of registered title of Cepoc, the non-production of alleged reconstituted titles of Cepoc, and the unregistrable, unnotarized deed of sale between Cepoc and Durano & Co.—clearly indicated the weakness of petitioners' claim of ownership. The non-production of evidence gave rise to a presumption adverse to petitioners, and the unregistrable deed of sale was a serious defect. The Court concluded that petitioners could not invoke the defense of indefeasibility of title due to these defects and the fact that they were aware of respondents' adverse possession. On whether respondents should have been adjudged builders in good faith: The Court affirmed the finding that petitioners were builders in bad faith. This was based on the fact that respondents were in open possession of the properties when Durano & Co. supposedly purchased them, and petitioners made no attempt to investigate the nature of respondents' possession before ordering demolition. Petitioner Ramon Durano III's acquisition of the property was also not in good faith, as he knew of the respondents' occupancy, and the conveyance was made with haste while bulldozing operations were ongoing. Consequently, petitioners could not claim reimbursement for useful expenses. On the personal liability of petitioners and the doctrine of separate corporate personality: The Court applied the principle of "piercing the corporate veil." It found that Durano & Co. was used by petitioners merely as an instrumentality to appropriate the disputed property. The Court applied the three-part test for piercing the corporate veil: (1) control of the corporation, (2) use of such control to commit fraud or wrong, and (3) proximate causation of the injury. The facts showed that Durano & Co. was quickly used to transfer the property to Ramon Durano III shortly after its purported purchase from Cepoc, indicating no separate corporate existence for that transaction. On the proof of improvements and the award of damages: The Court found the issue to be factual and sustained the lower courts' findings. While there were discrepancies between respondents' affidavits and tax declarations, the RTC noted that petitioners failed to present controverting evidence to disprove the existence of the improvements. The Court also invoked Article 2224 of the Civil Code on temperate damages, acknowledging that while pecuniary loss was suffered, its exact amount could not be proved with certainty. On the return of properties to specific respondents (Repaso, Tito, and Gonzales): The Court affirmed the RTC's finding, sustained by the CA, that these properties were outside the lands claimed by petitioners under TCT Nos. T-103 and T-104. This factual finding was deemed final and binding. On the award of litigation expenses and attorney's fees: The Court found the award proper, citing Article 2208 of the Civil Code, as petitioners' actions necessitated litigation and expenses for respondents to regain possession and ownership. Whether petitioners are possessors in bad faith: This issue is addressed within the discussion of whether respondents should have been adjudged builders in good faith. The court found that petitioners were builders in bad faith because respondents were in open possession of the properties, and petitioners made no attempt to investigate the nature of respondents' possession before ordering demolition. Petitioner Ramon Durano III's acquisition of the property was also not in good faith, as he knew of the respondents' occupancy, and the conveyance was made with haste while bulldozing operations were ongoing.
Main Doctrine
Possession in the concept of owner, coupled with just title and good faith for the required period, ripens into ownership by ordinary acquisitive prescription, even if the title is subsequently found to be defective, provided the property has not passed to an innocent purchaser for value. In such cases, an action for reconveyance is the proper remedy.