April 2005 - Philippine Supreme Court Decisions/Resolutions
G.R. No. 122904 - ADORACION E. CRUZ, ET AL. v. THE HONORABLE COURT OF APPEALS, ET AL.
[G.R. NO. 122904 : April 15, 2005]
ADORACION E. CRUZ, THELMA DEBBIE E. CRUZ, GERRY E. CRUZ and NERISSA CRUZ-TAMAYO, Petitioner, v. THE HONORABLE COURT OF APPEALS, SUMMIT FINANCING CORP., VICTOR S. STA. ANA, MAXIMO C. CONTRERAS, RAMON G. MANALASTAS, and VICENTE TORRES, Respondents.
D E C I S I O N
This is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure. Petitioners are assailing the Decision1 of the Court of Appeals in CA-G.R.CV No. 41298 which reversed and set aside the Decision2 of the Regional Trial Court (RTC), Branch CLXIII, Pasig in Civil Case No. 49466 and dismissed petitioners' complaint therein for annulment of certain deeds, and the November 21, 1995 Resolution,3 which denied petitioners' motion for reconsideration.
Herein petitioner Adoracion Cruz is the mother of her co-petitioners Thelma Cruz, Gerry Cruz and Nerissa Cruz Tamayo, as well as Arnel Cruz, who was one of the defendants in Civil Case No. 49466. Petitioners filed said case on February 11, 1983 against Arnel Cruz and herein private respondents Summit Financing Corporation ("Summit"), Victor S. Sta. Ana and Maximo C. Contreras, the last two in their capacities as deputy sheriff and ex-officio sheriff of Rizal, respectively, and Ramon G. Manalastas in his capacity as Acting Register of Deeds of Rizal.
The Complaint4 alleged that petitioners and Arnel Cruz were co-owners of a parcel of land situated in Taytay, Rizal. Yet the property, which was then covered by Transfer Certificate of Title (TCT) No. 495225, was registered only in the name of Arnel Cruz. According to petitioners, the property was among the properties they and Arnel Cruz inherited upon the death of Delfin Cruz, husband of Adoracion Cruz.
On August 22, 1977, petitioners and Arnel Cruz executed a Deed of Partial Partition,5 distributing to each of them their shares consisting of several lots previously held by them in common. Among the properties adjudicated to defendant Cruz was the parcel of land covered at the time by TCT No. 495225. It is the subject of this case.
Subsequently, the same parties to the Deed of Partial Partition agreed in writing to share equally in the proceeds of the sale of the properties although they had been subdivided and individually titled in the names of the former co-owners pursuant to the Deed of Partial Partition. This arrangement was embodied in a Memorandum of Agreement6 executed on August 23, 1977 or a day after the partition. The tenor of the Memorandum of Agreement was annotated at the back of TCT No. 495225 on September 1, 1977.
Sometime in January 1983, petitioner Thelma Cruz discovered that TCT No. 495225 had already been cancelled by TCT No. 514477 which was issued on October 18, 1982 in the name of Summit. Upon further investigation, petitioners learned that Arnel Cruz had executed a Special Power of Attorney7 on May 16, 1980 in favor of one Nelson Tamayo, husband of petitioner Nerissa Cruz Tamayo, authorizing him to obtain a loan in the amount of One Hundred Four Thousand Pesos (
P104,000.00) from respondent Summit, to be secured by a real estate mortgage on the subject parcel of land.
On June 4, 1980, a Real Estate Mortgage8 was constituted on the disputed property then covered by TCT No. 495225 to secure the loan obtained by Arnel Cruz thru Nelson Tamayo from respondent Summit. Since the loan had remained outstanding on maturity, Summit instituted extrajudicial foreclosure proceedings, and at the foreclosure sale it was declared the highest bidder. Consequently, Sheriff Sta. Ana issued a Certificate of Sale9 to respondent Summit, which more than a year later consolidated its ownership of the foreclosed property. Upon presentation of the affidavit of consolidation of ownership, the Acting Register of Deeds of Rizal cancelled TCT No. 495225 and issued, in lieu thereof, TCT No. 514477 in the name of respondent Summit.
In their complaint before the RTC, petitioners asserted that they co-owned the properties with Arnel Cruz, as evidenced by the Memorandum of Agreement. Hence, they argued that the mortgage was void since they did not consent to it.
In ruling in favor of petitioners, the trial court declared that with the execution of the Memorandum of Agreement, petitioners and Arnel Cruz had intended to keep the inherited properties in a state of co-ownership. The trial court stated that respondent Summit should suffer the consequences of incorrectly assuming that Arnel Cruz was the exclusive owner of the mortgaged property. It found respondent Summit negligent in its failure to inquire further into the limitations of defendant Cruz's title. Thus, the trial court declared that only the undivided share of Cruz in the mortgaged property was validly transferred to respondent Summit although it granted petitioners' prayer for nullification, per the dispositive portion of its Decision, thus:
WHEREFORE, judgment is hereby rendered, in favor of plaintiff and against defendants, as follows:
1. Declaring the "Special Power of Attorney," the Real Estate Mortgage, the "Public Auction Sale," the "Certificate of Sale," the "Affidavit of Consolidation," executed by defendant Summit Financing Corporation, and the Consolidation of Ownership null and void ab initio;
2. Ordering the Register of Deeds of Rizal, to cancel TCT No. 514477, and to issue, in lieu thereof another TCT, in the name of Arnel E. Cruz, with the same annotations on the Real Estate Mortgage inscribed on September 16, 1980 and thereafter.
3. Ordering defendants, jointly and severally, to pay to plaintiffs, the amount of
P10,000.00, as reasonable attorney's fees, plus costs.
4. Dismissing defendants (sic) counterclaims, for lack of merit.
With the exception of Arnel Cruz, the other defendants, who are herein private respondents, elevated the case to the Court of Appeals. Private respondents as appellants therein argued, among others, that the trial court erred in not holding Arnel Cruz as the sole and exclusive owner of the mortgaged property, in not holding petitioners in estoppel, and in not finding that under the Memorandum of Agreement the parties thereto merely agreed to share in the proceeds of the sale of the properties. Private respondents also questioned the trial court's nullification of the special power of attorney and its declaration that respondent Summit was grossly negligent in not verifying the capacity of Arnel Cruz.11
In the assailed Decision, the Court of Appeals reversed the trial court's decision. The appellate court stressed that the Memorandum of Agreement does not contain any proscription against the mortgage of the subject property although it provides that the parties thereto are entitled to share in the proceeds of the sale of the properties covered by it. In that regard, the appellate court noted that petitioner Adoracion Cruz had executed two other real estate mortgages on the other parcels of land, which were not objected to by her supposed co-owners. Thus, it upheld the validity of the real estate mortgage executed by Nelson Tamayo on behalf of Arnel Cruz, without prejudice to petitioners' right of action against Arnel Cruz for the collection of the proceeds of the loan.12
Petitioners moved for the reconsideration of the decision, but the Court of Appeals denied it in the assailed Resolution dated November 21, 1995.
Hence, the present petition which at the bottom presents the issue whether or not the real estate mortgage on the property then covered by TCT No. 495225 is valid. Resolution of the issue in turn depends on the determination of whether the mortgaged property was the exclusive property of Arnel Cruz when it was mortgaged. If answered in the affirmative, then there was nothing to prevent him from exercising ownership over the said property.
Petitioners insist that the Memorandum of Agreement "expressly created a pro-indiviso co-ownership over the property."13 Thus, petitioners argue that the Court of Appeals erred in upholding the validity of the mortgage considering that it was executed without their knowledge and consent.
On the other hand, private respondents rely on the provisions of the Deed of Partial Partition in claiming that defendant Cruz was already the exclusive owner of the disputed property at the time it was mortgaged. To further bolster their claim, private respondents assert that each of petitioners also executed real estate mortgages on the properties allocated to them in the partition deed as absolute owners in fee simple.
This Court finds no merit in the petition.
Co-ownership is terminated upon judicial or extra-judicial partition of the properties owned in common. Partition, in general, is the separation, division and assignment of a thing held in common among those to whom it may belong.14 Every act which is intended to put an end to indivision among co-heirs and legatees or devisees is deemed to be a partition, although it should purport to be a sale, an exchange, a compromise, or any other transaction.15
From a reading of the following provisions of the Deed of Partial Partition, no other meaning can be gathered other than that petitioners and Arnel Cruz had put an end to the co-ownership, to wit:
That the parties hereto are common co-owners pro-indiviso in equal shares of the following registered real properties . . .
That there are no liens and encumbrance of whatsoever nature and kind on the above-described real properties except . . .;
That the said liability was actually inscribed and annotated in the aforesaid titles on July 19, 1967 . . .;
That since July 19, 1967 and up to this writing two years have already lapsed and no claim has been filed against the estate of said Delfin I. Cruz . . .;
That the parties hereto mutually decided to end their common ownership pro-indiviso over the above-described properties and agreed to partition the same as follows:
(1) To be adjudicated to THELMA E. CRUZ: . . .
(2) To be adjudicated to NERISSA CRUZ-TAMAYO: . . .
(3) To be adjudicated to ARNEL E. CRUZ:
(a) . . .
(b) Lot 1-C-2-B-2-B-4-P-4, (LRC) PSD-264936
(c) . . .
(d) . . .
(4) To be adjudicated to GERRY E. CRUZ: . . .
(5) To be adjudicated to ADORACION E. CRUZ: . . .
That the contracting parties warrant unto each other quiet and peaceful possession as owners and possessors of their respective shares in the partition . . .16 (emphasis supplied)
In the aforesaid deed, the shares of petitioners and Arnel Cruz's in the mass of co-owned properties were concretely determined and distributed to each of them. In particular, to Arnel Cruz was assigned the disputed property. There is nothing from the words of said deed which expressly or impliedly stated that petitioners and Arnel Cruz intended to remain as co-owners with respect to the disputed property or to any of the properties for that matter. It is well-settled in both law and jurisprudence, that contracts are the law between the contracting parties and should be fulfilled, if their terms are clear and leave no room for doubt as to the intention of the contracting parties.17
To be considered a co-owner, one "must have a spiritual part of a thing which is not physically divided, or each of them is an owner of the whole, and over the whole he exercises the right of dominion, but he is at the same time the owner of a portion which is truly abstract."18 In Dela Cruz v. Cruz, et al.,19 this Court denied the prayer for legal redemption of plaintiff-appellant therein because "the portions of appellant-plaintiff and of the defendant spouses are concretely determined and identifiable, for to the former belongs the northern half, and to the latter belongs the remaining southern half, of the land."20
Petitioners do not question the validity or efficacy of the Deed of Partial Partition. In fact, they admitted its existence in their pleadings and submitted it as part of their evidence. Thus, the deed should be accorded its legal dire effect. Since a partition legally made confers upon each heir the exclusive ownership of the property adjudicated to him,21 it follows that Arnel Cruz acquired absolute ownership over the specific parcels of land assigned to him in the Deed of Partial Partition, including the property subject of this case. As the absolute owner thereof then, Arnel Cruz had the right to enjoy and dispose of the property,22 as well as the right to constitute a real estate mortgage over the same without securing the consent of petitioners.
On the other hand, there is absolutely nothing in the Memorandum of Agreement which diminishes the right of Arnel Cruz to alienate or encumber the properties allotted to him in the deed of partition. The following provisions of the agreement, which recognize the effects of partition, negate petitioner's claim that their consent is required to make the mortgage in favor of respondent Summit valid, to wit:
That the parties hereto are common co-owners pro-indiviso in equal shares of the following registered real properties . . .
That as a result of said partial partition, the properties affected were actually partitioned and the respective shares of each party, adjudicated to him/her;
That despite the execution of this Deed of Partial Partition and the eventual disposal or sale of their respective shares, the contracting parties herein covenanted and agreed among themselves and by these presents do hereby bind themselves to one another that they shall share alike and receive equal shares from the proceeds of the sale of any lot or lots allotted to and adjudicated in their individual names by virtue of this deed of partial partition;
That this Agreement shall continue to be valid and enforceable among the contracting parties herein up to and until the last lot is covered by the deed of partial partition above adverted to shall have been disposed of or sold and the proceeds thereof equally divided and their respective shares received by each of them.23 (emphasis supplied)
As correctly held by the Court of Appeals, the parties only bound themselves to share in the proceeds of the sale of the properties. The agreement does not direct reconveyance of the properties to reinstate the common ownership of the parties. To insist that the parties also intended to re-establish co-ownership after the properties had been partitioned is to read beyond the clear import of the agreement and to render nugatory the effects of partition, which is not the obvious or implied intent of the parties.
Moreover, to ascertain the intent of the parties in a contractual relationship, it is imperative that the various stipulations provided for in the contracts be construed together, consistent with the parties' contemporaneous and subsequent acts as regards the execution of the contract.24 Subsequent to the execution of the Deed of Partition and Memorandum of Agreement, the properties were titled individually in the names of the co-owners to which they were respectively adjudicated, to the exclusion of the other co-owners. Petitioners Adoracion Cruz and Thelma Cruz separately sold the properties distributed to them as absolute owners thereof. Being clear manifestations of sole and exclusive dominion over the properties affected, the acts signify total incongruence with the state of co-ownership claimed by petitioners. Thus, this Court holds that the real estate mortgage on the disputed property is valid and does not contravene the agreement of the parties.
WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 41298 are hereby AFFIRMED. Costs against petitioners.
Puno, (Chairman), Austria-Martinez, and Chico-Nazario, JJ.,concur
1 Penned by J. Pacita CaĆ±izares-Nye and concurred in by JJ. Jorge S. Imperial, Chairman, and Romeo J. Callejo, Sr. (now an Associate Justice of this Court); Rollo, pp. 24-32.
2 Dated June 4, 1992 and penned by Judge Willelmo C. Fortun; Id. at 45-71.
3 Id. at 41.
4 RTC Records, p. 1.
5 Exhibit "25," RTC Records.
6 RTC Records, p. 7.
7 Exhibit "13-A," RTC Records.
8 Exhibit "6," RTC Records.
9 Exhibit "12," RTC Records.
10 RTC Decision, p. 26; Rollo, pp. 70-71.
11 CA Decision, p. 5; Rollo, p. 28.
12 Id. at 30.
13 Id. at 15.
14 Article 1079, Civil Code.
15 Article 1082, Civil Code; Sanchez v. Court of Appeals, 345 Phil. 157, 184 (1997).
16 Exhibit "25," RTC Records.
17 Carceller v. Court of Appeals, 362 Phil. 332, 340 (1999).
18 De la Cruz v. Cruz, 143 Phil. 230, 234 (1970).
21 Article 1091, Civil Code.
22 Article 428, Civil Code.
23 Rollo, p. 125.
24 De la Cruz v. Cruz, supra note 18 at 340.