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SECOND DIVISION

G. R. No. 153700 - November 27, 2002

ESTRELLA C. PABALAN, Petitioner, vs. ANASTACIA B. SANTARIN, Respondent.

D E C I S I O N

MENDOZA, J.:

This is a petition for review on certiorari of the decision,¹ dated November 23, 2001, and resolution, dated May 13, 2002, of the Court of Appeals, affirming the denial of petitioner's motion to dismiss by the trial court.

The facts are as follows:

On September 1, 1999, private respondent Anastacia B. Santarin filed a complaint (Civil Case No. Q-99-38618) against Tri-Lite Realty Management and Development Corporation (TRI-LITE) and its officers, Cesar Ravela, Pepito G. Salac, and Robert C. Britanico, for the annulment of transfer certificates of title and damages. In her complaint, which was filed in the Regional Trial Court, Branch 227, Quezon City, private respondent alleged

3. That plaintiff [Anastacia B. Santarin] is the absolute owner of a parcel of residential lot situated at Brgy. Talipapa (Bagbag) Quezon City, with an area of 429 square meters and covered by TCT No. 7589 of the Register of Deeds of Quezon City, with a building constructed thereon;

4. That sometime in July 1997, while the plaintiff was abroad and without the knowledge and consent of the plaintiff, defendants [Cesar Ravela, Pepito G. Salac, and Robert C. Britanico] thru trickery, stealth, and manipulation and undue influence on her daughter, Annielita Santarin Villaluna, and by forging plaintiff's signature, succeeded in drawing an undated Deed of Absolute Sale on said house and lot and making it to appear that plaintiff signed the same as vendor . . . ;

5. That by virtue of the forged deed of sale in favor of plaintiff's daughter [Annielita Santarin Villaluna], defendants [Cesar Ravela, Pepito G. Salac, and Robert C. Britanico] caused the cancellation of plaintiff's TCT No. 5975 and caused the issuance of TCT No. N-179523 of the Register of Deeds of Quezon City [in the name of Annielita Santarin] . . . ;

6. That later or on October 8, 1997, defendants [Cesar Ravela, Pepito G. Salac, and Robert C. Britanico], confederating and helping one another, caused plaintiff's daughter [Annielita Santarin Villaluna] to execute another deed of absolute sale dated October 8, 1997, in favor of defendant corporation [TRI-LITE] for an alleged consideration of P1,544,400.00 . . . ;

7. That [neither] plaintiff nor her above-named daughter ever received any amount as consideration on both deeds of sale;

8. That after the anomalous manipulation by the defendants [Cesar Ravela, Pepito G. Salac, and Robert C. Britanico] as above-stated on the deed of sale in their favor, defendants [Cesar Ravela, Pepito G. Salac, and Robert C. Britanico] immediately caused the cancellation of TCT No. N-179523 in the name of Annielita Santarin Villaluna, and caused the issuance of TCT Nos. N-183147, N-138148, N-183149, N-183150, N-183151, N-183152, and N-183153 of the Register of Deeds of Quezon City [in the name of Tri-Lite Realty Management and Development Corporation] . . . ;

. . . .

10. That due to this fraudulent manipulations by . . . defendants [Cesar Ravela, Pepito G. Salac, and Robert C. Britanico], plaintiff [Anastacia Santarin] suffered sleepless nights, wounded feelings, serious anxiety on the thought that she would lose her properties due to the manipulation of the defendants, thereby suffering moral damages which could be pecuniarily estimated at P2,000,000.00;

11. Defendants should be made liable solidarily for exemplary damages in the amount of P50,000.00 as an effective lessons to people who are similarly-minded;²

Private respondent later amended her complaint to implead petitioner Estrella C. Pabalan and the Register of Deeds of Quezon City as additional defendants. After reiterating the allegations in her original complaint, private respondent alleged that-

10. Plaintiff [Anastacia B. Santarin] has discovered that on July 20, 1998, defendant corporation [TRI-LITE], through its officers, namely defendants Ravela, and Salac, mortgaged the property, subject matter of this case, already subdivided into seven (7) lots with individual titles, to defendant ESTRELLA C. PABALAN for the sum of PHP ONE MILLION FIVE HUNDRED (P1,500,000.00) PESOS . . . ;

11. For failure of defendant corporation [TRI-LITE] to pay the mortgage loan after it became due, defendant Estrella Pabalan petitioned the Clerk of Court of Quezon City, in her capacity as Ex-Officio Sheriff, to foreclose the property and sell the property in public auction, which petition was granted. Thus, the Deputy Sheriff held the public auction sale on March 2, 1999, where the mortgagee, defendant Estrella Pabalan herself, came out as the winning bidder for the total sum of PHP TWO MILLION NINE HUNDRED THIRTY FOUR THOUSAND FIVE HUNDRED FIFTY FOUR (P2,934,554.00) PESOS . . . ;

12. To date, no title has as yet been issued in the name of defendant Estrella Pabalan since the documentary stamp and capital gains tax due by reason of the sale has remained unpaid, the same to become due upon the expiration of the one year redemption period, as per annotation on the memorandum of encumbrance of TCT Nos. N-183147 to 183153;³

Private respondent Santarin prayed for (1) the annulment of the deed of sale purporting to have been executed by her in favor of her daughter Annielita Santarin Villaluna and the deed executed by the latter in favor of TRI-LITE, the transfer certificates of title issued in the name of TRI-LITE and the foreclosure sale of the properties and (2) the restoration of TCT No. 7589 issued in her name. Private respondent reiterated her claim for damages against the defendant officers of TRI-LITE and also sought the issuance of a temporary restraining order and/or preliminary injunction enjoining the Registrar of Deeds of Quezon City from issuing transfer certificates of title over the properties in favor of petitioner Pabalan.⁴

In her Answer, petitioner claimed that she was an innocent purchaser for value of the seven parcels of land. She alleged that before extending a loan to TRI-LITE, she obtained certified true copies of the TCTs issued in TRI-LITE's name (which were unencumbered) and a certification from the Office of the City Assessor, Quezon City as to TRI-LITE's ownership of said parcels of land. She prayed for the dismissal of the complaint against her for lack of cause of action and sought payment of damages against TRI-LITE and its officers.⁵

The trial court treated petitioner's special defense as a motion to dismiss and, in its resolution, dated September 24, 2000, denied the same. Petitioner moved for reconsideration, but her motion was denied on November 10, 2000. The trial court held:

The complaint in this case states clearly the ultimate facts. No evidentiary matters are allowed to be presented in the case of motion to dismiss because of lack of cause of action in the complaint. The allegation that co-defendant Estrella C. Pabalan is an innocent purchaser in good faith is a defense the proper place for which is the Answer, not a Motion to Dismiss or affirmative defense to be treated as a Motion to Dismiss. The answer and all defenses of the defendant are not even considered. It is only the Amended Complaint as it stand[s]. A Motion to Dismiss based on failure of the allegations of the complaint to state a cause of action admits, if only hypothetically, the truth of the allegations in the complaint (Alguigue vs. de Leon L-15059, March 30, 1963). The Amended Complaint in this case, as hypothetically admitted in the Motion to Dismiss for failure to state a cause of action does not allege that defendant Estrella C. Pabalan is an innocent purchaser for value, as the defense alleges, but expressly taints the allegedly fraudulent two Deeds of Sale and resulting TCTs including the mortgage to Estrella Pabalan as void ab initio. That she is a purchaser at public auction is admitted, but the complaint alleges the title is still void ab initio.

WHEREFORE, premises considered, the Motion to Dismiss embodied as affirmative defense based on lack of cause of action, is hereby Denied for lack of merit, based solely on the Amended Complaint which clearly alleges in express terms the cause of action against defendant Estrella C. Pabalan; that her title derived as mortgagee and purchaser at auction sale is void ab initio because it proceeds from an equally void title of other defendants who allegedly derived title through a falsified signature of plaintiff as vendor in the original first sale because the affirmative defense of innocent purchaser for value is a defense which begs for evidentiary matters, the proper place for which should be in the trial on the merits of this case.⁶

Petitioner filed a special civil action for certiorari in the Court of Appeals. Again, she lost as her petition was dismissed on November 23, 2001.Her motion for reconsideration was likewise denied on May 13, 2002. In its decision, the Court of Appeals held:

If the . . . allegations of the Amended Complaint, . . . . are proven, then as alleged [therein] . . . "the conveyances which preceded the extrajudicial foreclosure", including that made to mortgagor TRI-LITE, would be null and void. There would thus be no property which TRI-LITE could encumber which would eventually be sold to petitioner at public auction.⁷

While petitioner Pabalan's petition was pending in the Court of Appeals, private respondent Santarin filed a "Third Amended Complaint" impleading as additional defendants her daughter Annielita Santarin Villaluna, the respective spouses of the defendant officers of TRI-LITE and other individuals whom she claimed to have connived with the latter in the transfer of her property.

In this petition, petitioner contends that

I. IN THE ABSENCE OF ANY ALLEGATION IN THE COMPLAINT A QUO (AND THE AMENDMENTS THERETO) INDICATING THE SUPPOSED PARTICIPATION OF PETITIONER IN THE PURPORTED FRAUD THEREIN ALLEGED, THE PRESUMPTION THAT PETITIONER IS AN INNOCENT MORTGAGEE (AND LATER PURCHASER) FOR VALUE AND IN GOOD FAITH BECOMES CONCLUSIVE AND INCONTROVERTIBLE.

II. HAVING FAILED TO STATE A CAUSE OF ACTION IN THE COMPLAINT A QUO (AND THE AMENDMENTS THERETO), THE INSTANT CASE SHOULD HAVE BEEN DISMISSED BY THE COURT A QUO AND THE COURT OF APPEALS.

III. THE REMEDY AVAILABLE TO RESPONDENT IS AN ACTION FOR DAMAGES AGAINST THE PERSONS RESPONSIBLE FOR THE FRAUD AND NOT THE CANCELLATION OF TRI-LITE REALTY'S TITLES TO THE PREJUDICE OF PETITIONER WHO IS AN INNOCENT MORTGAGEE (LATER PURCHASER) FOR VALUE AND IN GOOD FAITH.

IV. CONSIDERING THAT THE COMPLAINT A QUO (AND THE AMENDMENTS THERETO) FAILS TO STATE A CAUSE OF ACTION AGAINST PETITIONER, RESPONDENT HAS NO RIGHTS REQUIRING PROTECTION IN THE FORM OF A RECORDED NOTICE OF LIS PENDENS. THE SAID NOTICE OF LIS PENDENS SHOULD ACCORDINGLY BE CANCELLED.

V. EVEN ASSUMING ARGUENDO THAT RESPONDENT HAS A CAUSE OF ACTION AGAINST PETITIONER TO PROSECUTE THE COMPLAINT A QUO, JURISDICTION OVER THE PERSON OF DEFENDANT VILLALUNA CANNOT BE ACQUIRED BY SUMMONS BY PUBLICATION INASMUCH AS THE CASE A QUO IS AN ACTION IN PERSONAM; CONSEQUENTLY, THE COURT CANNOT VALIDLY PROCEED AGAINST THE OTHER DEFENDANTS FOR FAILURE TO ACQUIRE JURISDICTION OVER THE PERSON OF VILLALUNA, AN INDISPENSABLE PARTY.⁸

The test for determining the sufficiency of a complaint is whether, assuming the facts as they are alleged therein, a valid judgment can be rendered in accordance with the prayer in the complaint.⁹ In this case, the amended complaint, dated October 26, 1999, alleged that private respondent Anastacia Santarin is the registered owner of the lands in question; that by forging her signature, the defendant officers of TRI-LITE made it appear that she had sold the lands (which was then undivided) to her daughter, Annielita Santarin Villaluna; that her daughter, upon the inducement by the defendant officers of TRI-LITE, executed a fictitious deed of sale thereof in favor of TRI-LITE; that TRI-LITE subdivided the land into seven lots, secured the issuance of the corresponding titles to each portion, and mortgaged them to petitioner, who, upon default of TRI-LITE in the payment of its loan, foreclosed the mortgage and purchased the properties in the foreclosure sale. As a forged deed is null and void and conveys no title,¹⁰ all the transactions subsequent to the alleged sale between private respondent and her daughter are likewise void. Consequently, if the allegations in her complaint are true, private respondent would be entitled to a judgment annulling the sale purporting to have been executed by her in favor of Annielita Santarin Villaluna as well as the latter's sale of the said property to TRI-LITE, the transfer certificates of title issued to the aforesaid transferors, the mortgage executed by TRI-LITE in favor of petitioner, and the foreclosure sale of the properties in question.

Petitioner invokes the cases of Medina v. Chanco,¹¹ Republic v. Court of Appeals,¹² and Galvez v. Tuazon¹³ in support of her claim that the complaint in an action to annul title to property must allege that all the defendants are parties to the fraud attending the transfer of title or had notice of the defect in the title of their transferor and that no cause of action for cancellation of title will lie against innocent purchasers for value. However, none to these cases involved forged deeds, such as are alleged in the complaint in this case. Thus, in Medina vs. Chanco, what was alleged in the complaint was that the Medinas' predecessor-in-interest had fraudulently obtained title to a parcel of land through misinterpretation, insufficient consideration, and lack of compliance with formal requirements. The complaint, which was filed more than 50 years after the alleged fraudulent sale, was dismissed on the ground that the petitioner and his spouse were holders of title for value and in good faith. It was held that, under 55 of Act No. 496, while "an original owner of a registered land may seek the annulment of a transfer thereof on the ground of fraud, such a remedy, however, is without prejudice to the rights of any innocent holder for value' of a certificate of title."

On the other hand, in Republic v. Court of Appeals, which involved an action for the cancellation of a free patent, an original certificate of title, and the transfer certificate of title on the ground that the free patent and the original certificate of title had been obtained through a false claim of possession by private respondent's predecessor-in-interest, the Court ordered the dismissal of the same with respect to the private respondent for lack of cause of action as the latter had purchased the land in question in reliance on the title of its predecessor-in-interest and had registered the sale and obtained a transfer certificate of title in it's name. It was held that under the circumstances petitioner was an innocent purchaser for value and holder of an indefeasible title.

Nor can petitioner find support for her theory in Galvez v. Tuazon.¹⁴ That case involved a complaint for the annulment of the technical descriptions in an original certificate of title obtained by respondents' predecessor-in-interest. The complaint was alleged that the technical descriptions erroneously included a portion of the land owned by petitioners. However, the dismissal of the case was based primarily on the ground that the action was barred by prior judgment as the ownership of the land by respondents' predecessor-in-interest had been settled in three other cases.

In this case, petitioner can seek the dismissal of the action against her but only if she proves after appropriate proceedings that she is an innocent purchaser for value.¹⁵ This is a matter of defense which, taking into account the fact that the properties in question thrice changed hands within the span of only one year, should be determined during the trial, and not in a motion to dismiss. needless to say, such course of action results in no prejudice to petitioner and in fact affords her sufficient opportunity to prove her claim.

Anent the other matters raised by petitioner on the propriety of canceling the annotation of lis pendens on the titles of TRI-LITE and the acquisition by the trial court of jurisdiction over Annielita Santarin Villaluna, suffice it to say that these matters are not in issue in this review of the trial court's order of September 24, 2000. Moreover, petitioner is not the proper party to raise such questions.

WHEREFORE, the petition is DENIED for lack of showing that the Court of Appeals committed any reversible error.

SO ORDERED.

Bellosillo, (Chairman), Quisumbing, Austria-Martinez, and Callejo, Sr., JJ., concur.

¹ Per Justice Conchita Carpio Morales concurred in by Justices Martin S. Villarama, Jr. and Sergio L. Pestaño.

² Petition, Annex K; Rollo, pp. 106-107.

³ Id., Annex L; id., pp.112-113.

⁴ Rollo, pp. 36-42.

⁵ Id., pp. 69-73.

⁶ Petition, Annex N; Rollo, pp. 125-127.

⁷ CA Decision, pp. 5, 8; id., pp. 50, 53.

⁸ Petition, p. 10; Rollo, p. 19.

⁹ Suyom v. Collantes, 69 SCRA 515 (1976).

¹⁰ Director of Lands v. Addison, 49 Phil. 19 (1926).

¹¹ 117 SCRA 201 (1982).

¹² 306 SCRA (1999).

¹³ 10 SCRA 344 (1964).

¹⁴ 10 SCRA 344 (1964).

¹⁵ See De La Cruz v. Fabie, 35 Phil. 144 (1916).