PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES, PELAGIO TOLOSA, in his capacity as Register of Deeds, General Santos City, and ATANACIO M. VILLEGAS,
- versus -
THE COURT OF APPEALS and GENERAL SANTOS DOCTORS HOSPITAL, INC.,
G.R. No. 136897
PANGANIBAN, J., Chairman
CARPIO MORALES, and
November 22, 2005
D E C I S I O N
In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioners Private Development Corporation of the Philippines and Atanacio M. Villegas seek the reversal and setting aside of the following issuances of the Court of Appeals in CA-G.R. CV No. 52542, to wit:
1. Decision dated July 16, 1998, affirming an earlier decision of the Regional Trial Court at General Santos City which ordered the petitioners, in particular petitioner Atanacio M. Villegas, to present before the Register of Deeds of General Santos City TCT No. T-32610 covering Lot 908-B-6-L-4-B for the annotation thereon of a Memorandum of Agreement establishing an easement of right-of-way in favor of private respondent General Santos Doctors Hospital, Inc.; and
2. Resolution dated January 8, 1999, denying petitioners motion for reconsideration.
Culled from the records are the following factual antecedents:
The spouses Agustin Narciso and Aurora Narciso (the Narcisos, for short) were the original owners of two (2) lots situated at Barrio Lagao, General Santos City, Cotabato.
The first lot, which is a portion of a bigger parcel of land known as Lot No. 908-B-6-L-3 and covered by TCT No. 22608, is identified as Lot No. 908-B-6-L-3-A, hereinafter referred to as the interior lot, with an area of one (1) hectare. Adjacent to this lot and abutting the national highway is the second lot, Lot No. 908-B-6-L-4-B, hereinafter referred to as the exterior lot, covered by TCT No. 13550.
On September 6, 1968, the Narcisos executed in favor of herein respondent, General Santos Doctors Hospital, Inc. (GSDHI) an Option to Buy the interior lot, subject, among others, to the condition that:
5. The vendors shall construct a 10 meter wide road commencing from the National Highway, traversing the property of the Vendors and terminating perpendicularly at the mid-point of the Southern boundary of the property subject of this Option, facing the national highway. Additionally, the vendors shall also construct a 10 meter wide road alongside the same southern boundary of the subject land, forming a right angle with the road first above described. The Vendors shall also provide drainage facilities.
True enough, on September 25, 1968, the interior lot was bought by GSDHI, as evidenced by a Deed of Absolute Sale.
On the same day of the sale, a Memorandum of Agreement was executed by and between the Narcisos and GSDHI, paragraph 7 of which practically reproduced the same condition, supra, appearing in the earlier Option to Buy, thus:
7. The vendors [Narcisos] also known as Party of the First Part, shall construct a ten (10) meter wide road commencing from the National Highway, traversing the property of the vendors and terminating perpendicularly at the mid-point of the Southern boundary of the property subject of the sale facing the National Highway. Additionally, the vendors or party of the first part, shall also construct a ten (10) meter wide road alongside the same Southern boundary of the subject land, forming a right angle with the road first above-described. The vendors shall also provide drainage facilities.
Years later, or on September 30, 1977, the exterior lot was mortgaged by the Narcisos to one of the petitioners herein, Private Development Corporation of the Philippines (PDCP). Upon the Narcisos failure to pay the mortgage obligation, the mortgage was foreclosed and the mortgaged property (exterior lot) sold at a public auction on June 21, 1982 with PDCP as the lone bidder. Accordingly, the Narcisos title covering the exterior lot was cancelled and in lieu thereof TCT No. 23202 was issued in the name of PDCP.
On April 18, 1988, in the Regional Trial Court at General Santos City, respondent GSDHI, claiming that it has an easement of right-of-way over the foreclosed property (exterior lot), filed a complaint for specific performance against PDCP, therein impleading the Register of Deeds of General Santos City, Pelagio T. Tolosa, as a nominal party-defendant, to compel PDCP to present before the Register of Deeds its duplicate copy of TCT No. 23202 over the exterior lot for the annotation thereon of the Memorandum of Agreement establishing an easement of right-of-way in favor of GSDHI.
In its complaint, docketed with the trial court as Civil Case No. 4128, respondent GSDHI, as plaintiff, alleged that the easement was a condition and primary consideration for its purchase from the Narcisos of the interior lot so that the hospital it intends to build thereat would have an access to the national highway; that the grant is evidenced by two (2) public documents executed between it and the Narcisos, i.e., Option to Buy the interior lot dated September 6, 1968 and Memorandum of Agreement dated September 25, 1968; that the portion covered by the easement was inadvertently and erroneously included in the mortgage of the exterior lot as the same was not segregated from the mother title; that upon informing PDCP of the easement on January 27, 1983, it (respondent) even offered to buy the whole exterior lot so as to avoid future litigation but although negotiations lasted until August of 1988, no agreement was reached on the price, hence, it (respondent) opted to continue and preserve the easement of right-of-way established in its favor since 1968.
In its Answer, PDCP denied any knowledge of the alleged easement of right-of-way, averring that it was not a party to any of the transactions between respondent and the Narcisos. PDCP argued that the Option to Buy and Memorandum of Agreement cannot by themselves constitute a valid agreement to create and vest in favor on respondent an easement of right-of-way in the absence of terms providing for, among others, the amount of consideration therefor. And, even assuming that the Memorandum of Agreement created such an easement, PDCP contended that it cannot be bound thereby because said agreement was not duly inscribed and registered with the Registry of Deeds. Furthermore, PDCP asserted that it is an innocent purchaser for value and in good faith, hence, the alleged easement cannot be enforced against it.
Meanwhile, during the pendency of the case, or sometime in January, 1989, PDCP sold the exterior lot to the other petitioner herein, Atanacio M. Villegas. On account thereof, PDCPs title over the exterior lot was cancelled and TCT No. 32610 issued in the name of Villegas.
Consequently, respondent GSDHI amended its complaint by impleading Villegas as additional party-defendant. For his part, Villegas formally adopted PDCPs aforementioned allegations and defenses in its Answer.
Eventually, in a decision dated December 15, 1998, the trial court rendered judgment for plaintiff GSDHI and against defendants PDCP and Villegas, to wit:
Accordingly, judgment is rendered for the plaintiff and against the defendants ordering the latter, particularly Atanacio M. Villegas to present before the Register of Deeds of General Santos City Transfer Certificate of Title No. T-32610 for annotation of the Memorandum of Agreement establishing the casement of right-of-way in favor of the plaintiff.
Explains the trial court in its decision:
The long and short of the seeming complexity of the issues raised by the parties is summed up by the question of whether or not the plaintiff under the circumstances is entitled to compel the defendants particularly Atanacio M. Villegas to respect and annotate in the certificate of title the easement of right of way, or conversely whether the defendants are innocent mortgagor or purchaser for value, hence not bound by it.
The dominion of the plaintiff over the disputed road that virtually cut into two lot 908-B-6-L-4-B comprising a total area of 1,000 square (10 m x 100m) was elucidated and clarified by Agustin N. Narciso, the source of plaintiffs rights. (Exhibits A and B) When Lot 908-B-L-3-A was sold by Narciso to GSDHI way back on September 25, 1963 the imperfection of the document of absolute sale was discovered at once. (Exhibit D) So a Memorandum of Agreement was executed that same day to rectify the omission and put in black and white the agreement regarding the direct access road to the national highway passing through the adjoining lot 908-B-6-L-4-B then owned by Narciso. (Exhibit E) The relevant portion of the agreement provides:
xxx 7. The vendors also known as Party of the First Part, shall construct a ten (10) meter wide road commencing from the National Highway, traversing the property of the vendors and terminating perpendicularly at the mid-point of the Southern boundary of the property subject of the sale facing the National Highway. Additionally, the vendors or party of the first part, shall also construct a ten (10) meter wide road alongside the same Southern boundary of the subject land, forming a right angle with the road first above-described. The vendors shall also provide drainage facilities. xxx
Prior to the execution of the Deed of Absolute Sale and the Memorandum of Agreement, the Narcisos and the plaintiff executed a document denominated Option to Buy on September 6, 1968, the pertinent portion of which provides:
xxx 5. The vendors shall construct a 10 meter wide road commencing from the National Highway, traversing the property of the Vendors and terminating perpendicularly at the mid-point of the Southern boundary of the property subject of this Option, facing the national highway. Additionally, the vendors shall also construct a 10 meter wide road alongside the same southern boundary of the subject land, forming a right angle with the road first above described. The Vendors shall also provide drainage facilities. xxx
In keeping with their agreement with the plaintiff, the Narcisos caused to be constructed a 10 meter wide road starting from the National Highway passing through Lot 908-B-6-L-4-B until the mid-point of the Southern boundary of Lot 908-B-L-3-A which was the property sold to the plaintiff. He also had a 10 meter wide road alongside the southern boundary of the land sold to the plaintiff forming an angle with the road that commenced from the national highway.
These undertakings of the Narcisos were in compliance with their agreement with the plaintiff to guarantee direct access to the national highway from the hospital that was to be constructed by the plaintiff on inner Lot 908-B-L-3-A. The total consideration for the sale of Lot 908-B-L-3-A covering an area of one hectare was P100,000.00 and an additional of P10,000.00 was paid for the 10 meter wide road right-of-way from the southern boundary of the property straight to the national highway with an approximate length of 100 meters. This was not specifically mentioned in the Deed of Absolute Sale but this was in pursuance of their agreement that the one hectare lot was priced at P10.00 per square meter, or for P100,000.00. Narcisos agreement with the plaintiff for the construction of the road right-of-way was for its use in perpetuity by the plaintiff as well as the public. The road right-of-way was constructed immediately upon execution of the Deed of Sale but it is being maintained ever since by the plaintiff. The road was located in the shortest distance between the national highway and the hospital of the plaintiff and because of it the property over which the easement of road right-of-way passing through at the middle was substantially benefited making it commercial.
Sometime in 1976 or 1977, the Narcisos mortgaged Lot 908-B-6-L-4-B which was the servient estate to PDCP thru its branch office in Davao City. As a requirement, the Narcisos submitted to PDCP the title of the land, the map and the sketch on the easement that was granted by the plaintiff to the CSDHI. When the property was inspected, Agustin Narciso showed the extent of the property offered as collateral and together with the manager and other officers of the PDCP even passed through the road right-of-way in question. The metes and bounds of the Narcisos property was also shown to the officers of the PDCP including the signboard along the national highway leading to the hospital. Thereafter the loan was approved.
On cross-examination, Agustin Narciso admitted having mortgaged the property covered by his title but excluding the 10 X 100 meter road which was paid for by the plaintiff. The Memorandum of Agreement, however, and the Option to Buy which embodied the meeting of minds of the plaintiff and the Narcisos regarding the easement of right-of-way over Lot 908-B-6-L-4-B was not registered or annotated. Agustin Narciso reiterated that when the property mortgaged to PDCP was verified, several personnel of PDCP came, a certain Mr. Rey Feria, Mr. Lim, Mr. Alcantara and a certain Mr. Delgado. He did not, however, furnish them copies of the Option to Buy and the Memorandum of Agreement.
The importance of the road right-of-way to the plaintiff was underscored by officers of the plaintiff. Acquisition of the hospital site was premised on the grant by the then owner and seller Agustin Narciso of the ten meter wide access road through the servient property owned by the seller. It was a condition sine qua non of the contract between plaintiff and the Narcisos because the plaintiff wanted the site to be a bit far from the national highway but with easy and direct access to the highway because of the nature of the business they were putting up. The hospital having been constructed sometime in 1968, plaintiff maintained the 10 x 100 meters road to the highway and used it including the public openly, continuously and notoriously without being challenged by any party.
When the Narcisos failed to pay their account with the defendant PDCP Lot 908-B-L-3-B which was put up as guarantee thereof was foreclosed and in the subsequent public auction sale the defendant PDCP was the lone bidder and therefore it became the owner.
The plaintiff learned of the acquisition by PDCP of the property previously owned by the Narcisos and steps were taken by the plaintiff to buy peace when it was realized that the Memorandum of Agreement as well as the Option to Buy evidencing their ownership of the road right-of-way of 10 x 100 meters was only duly recorded with the Register of Deeds. Negotiations were had with the defendant PDCP but no agreement was reached because of the wide gap between the offers and counter offers made.
In the meantime, the defendant PDCP never asserted that it is the rightful owner of the road right-of-way, neither did it interrupt the continued use by the plaintiff and the general public of the road in question.
Requests were made of the defendant PDCP to allow the plaintiff to have its right over the road right-of-way annotated in the title of the said defendant but it was ignored. Overtures were made by the plaintiff to buy peace or as gesture of compromise to the defendant PDCP but those were fruitless.
The defendants, particularly the original and one of the principal defendants, did not challenge the genuiness and authenticity of the documents in the possession of the plaintiff and presented in evidence like the Option to Buy, Memorandum of Agreement and the Deed of Absolute Sale. The centerpiece of PDCPs defense was the nonregistration of the Option to Buy and Memorandum of Agreement embodying the right of the plaintiff over the contested road right of way.
The defendant Atanacio M. Villegas relied entirely on the defenses put up by its predecessor-in-interest PDCP.
It was the contention also of the defendant PDCP that had it known of the existence of the road right-of-way over the property mortgaged and subsequently acquired by it in a public auction sale, they would not have paid the big amount for the property considering that with the existence of the road right-of-way the value of the property was very much diminished.
Considering, however, that the defendant PDCP is a banking institution and it is normal business practice that when loan is granted the property offered as security is invariably inspected, it would be unlikely cr unrealistic that the defendant PDCP accepted Lot-908-B-6-L-4-B without knowing its actual state. The evidence also disclosed that when the loan was contracted by the previous owner Agustin Narciso several officers of the bank repaired to the area and made an on-the-spot verification of the land.
On the part of Atanacio Villegas, his attorney-in-fact who took the witness stand affirmed that the road right-of-way has been in existence way back in the late 1960s and he noticed it when he frequently traveled to General Santos City even when this was still a rustic community as reflected in his testimony.
In the light of the undisputed facts obtaining that the road right-of-way is conspicuously situated and has been in existence and in constant use for a long period of time, or for over 25 years failure of the plaintiff to cause the registration of its road right-of-way did not in the face of reality militate against its right over the casement.
From the trial courts decision, petitioners went to the Court of Appeals (CA) whereat their appellate recourse was docketed as CA-G.R. CV No. 52542.
In the herein assailed Decision dated July 16, 1998, the CA affirmed that of the trial court.
With their motion for reconsideration having been denied by the appellate court in its equally challenged Resolution of January 8, 1999, petitioners are now with us via this petition for review, imputing error to the CA: (1) in affirming the lower courts decision without first resolving the issue of whether or not respondent is entitled to an easement of right-of-way; (2) in finding and concluding that petitioners are not innocent mortgagees or purchasers for value; and (3) in not holding that respondent GSDHI is not entitled to a legal easement of right-of-way.
The petition is bereft of merit.
At bottom, the issues are: (1) whether or not respondent GSDHI has an easement of right-of-way over the exterior lot (Lot No. 908-B-6-L-4-B); and (2) whether or not petitioners are innocent mortgagees/purchasers for value of the same lot.
We resolve both issues in favor of respondent.
As defined, an easement is a real right on anothers property, corporeal and immovable, whereby the owner of the latter must refrain from doing or allow somebody else to do or something to be done on his property, for the benefit of another person or tenement. Easements are established either by law or by the will of the owner. The former are called legal, and the latter, voluntary easements.
As correctly found by the trial court, the easement of right-of-way over the exterior lot in favor of respondent GSDHI was voluntarily constituted by agreement between the latter and the original owner thereof, the Narcisos.
It is beyond cavil that the Narcisos did intend to establish an easement of right-of-way over the exterior lot for the respondents benefit. This is very evident from the fact that in the Option to Buy in connection with the interior lot, one of the conditions stipulated upon is that the Narcisos will construct two (2) ten-meter wide roads along the exterior lot from the interior lot leading to the national highway.
True, the Deed of Absolute Sale between respondent and the Narcisos covering the interior lot did not embody the aforementioned condition. It was precisely to cure this deficiency, however, that on the very same day the deed of sale was executed, the Narcisos and respondent forged a Memorandum of Agreement to reflect what they failed to state in the document of sale. In the precise words of the trial court: xxx the imperfection of the document of absolute sale was discussed at once (Exhibit D). So a Memorandum of Agreement was executed that same day to rectify the omission and put in black and white the agreement regarding the direct access road to the national highway passing through the adjoining lot 908-B-6-L-4-B then owned by Narciso.
Moreover, contrary to the petitioners assertion, the Narcisos grant of the easement to respondent was for a valuable consideration. Again, we quote from the trial courts decision:
The total consideration for the sale of Lot 908-B-L-3-A covering an area of one hectare was P100,000.00 and an additional of P10,000.00 was paid for the 10 meter wide road right-of-way from the southern boundary of the property straight to the national highway with an approximate length of 100 meters. This was not specifically mentioned in the Deed of Absolute Sale but this was in pursuance of their agreement that the one hectare lot was priced at P10.00 per square meter, or for P100,000.00.
In any event, it bears stressing that the two courts below are one in their common factual finding about the existence of the conventional easement of right of way in favor of respondent. Absent, as here, of any credible evidence to the contrary, the Court is not inclined to disturb such a finding. After all, this Court is not a trier of facts.
Having ruled on the existence of an easement of right of way, we now come to the second issue.
It is petitioners posture that they cannot be bound by the subject easement because the Memorandum of Agreement establishing the same was not annotated in the certificate of title of the exterior lot and registered with the Registry of Deeds. Having relied on a title which does not reflect any easement thereon, petitioner PDCP contends that it was an innocent mortgagee and later an innocent purchaser for value. Chanting the same tone, petitioner Villegas insists that he, too, is an innocent purchaser of said lot.
We are unimpressed.
Concededly, a person, be he a buyer or mortgagee, dealing with a titled property, as the exterior lot is, is not required to go beyond what appears on the face of the covering title itself. Section 39 of Act 496 or the Land Registration Decreesays as much.
xxx Banks, indeed, should exercise more care and prudence in dealing even with registered lands, than private individuals, for their business is one affected with public interest, keeping in trust money belonging to their depositors, which they should guard against loss by not committing any act of negligence which amounts to lack of good faith by which they would be denied the protective mantle of land registration statute, Act 496, extended only to purchasers for value and in good faith, as well as to mortgagees of the same character and description. xxx
Considering the foregoing, and bearing in mind that judicial notice is taken of the standard practice for banks, before approving a loan, to send representatives to the premises of the land offered as collateral, PDCPs feigned ignorance of the road right-of-way, much less of the existence of the road itself along the exterior lot, is simply ridiculous, to say the least, more so in the light of the factual findings of the two courts below that PDCP, contrary to its assertion, had indeed sent its personnel to inspect the land when the same was mortgaged to it by the Narcisos. For sure, as found by the appellate court, no less than PDCPs own Legal Officer, Virgilio Lagunilla, admitted that an appraisal was conducted by the bank on the exterior lot before accepting the mortgage thereof. Says the appellate court in this respect:
We have the confirmation on cross examination of the PDCP Legal Officer, Virgilio Lagunilla, in the matter of PDCPs practice of appraising the property, being offered as collateral, which calls for an actual examination of the condition of the property. He even admitted that an appraisal was conducted by the bank on the exterior lot before the mortgage, the reason being that it is the Central Banks requirement to limit the loans of commercial banks to only 70% of the appraise value of the security being offered. As for PDCP, there was an uncharacteristic silence on the result of the appraisal of the exterior lot which presupposes the observation that the bank, at the time of the mortgage, knew about the existence of the easement. The nature alone of the easement of right-of-way, which is ten meters wide and open to the public for its use continuously supports the observation that its easement was never overlooked by the bank at the time of the propertys appraisal. We cannot allow actual notice of knowledge of the burden on the property to be denied on the mere pretension alone that the title does not bear any annotation of such burden.
Equally unworthy of belief is petitioner Villegas protestation of innocence of the easement in question.
It is a matter of record that prior to his purchase of the exterior lot, Villegas, through his attorney-in-fact, Benjamin Miranda, was very much aware of the existence of a road over said lot since the 1960s. Again, to quote from the assailed decision of the appellate court:
xxx His (Mirandas) other admission was that Villegas knew of the easement before purchasing the property. He even added that he was consulted by Villegas himself before the purchase and he told him (Villegas) that there was an existing road from the hospital leading to the national highway.
In Lagandaon vs. CA, we said:
As a general rule, every buyer of a registered land who takes a certificate of title for value and in good faith shall hold the same free of all encumbrances except those noted on said certificate. It has been held, however, that where the party has knowledge of a prior existing interest which is unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him. xxx
WHEREFORE, the assailed issuances of the appellate court are AFFIRMED and this petition DISMISSED for lack of merit.
Costs against petitioners.
CANCIO C. GARCIA
ARTEMIO V. PANGANIBAN
RENATO C. CORONA
CONCHITA CARPIO MORALES
A T T E S T A T I O N
I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.
ARTEMIO V. PANGANIBAN
Chairman, Third Division
C E R T I F I C A T I O N
Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairman's Attestation, it is hereby certified that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.
HILARIO G. DAVIDE, JR.
 Penned by Associate Justice Bernardo LL. Salas (ret.) and concurred in by Associate Justices, (now both ret.) Fermin Martin, Jr. and Candido V. Rivera; Rollo, pp. 149-161.
 Rollo, p. 163.
 Mistakenly referred to as TCT No. 3550 in the RTC Decision.
 Rollo, pp. 48-50.
 Ibid at p. 49.
 Rollo, pp. 46-47.
 Rollo, pp. 51-52.
 Ibid at p. 52.
 Rollo, pp. 62-69.
 Ibid at pp. 64-68.
 3 Sanchez Roman 472; Quimen vs. CA, 257 SCRA 163, 169 .
 Art. 619, Civil Code.
 See par. 5, Option to Buy, supra at p. 49.
 RTC DECISION, supra at p. 65.
 Cavite Development Bank vs. Lim, 324 SCRA 346, 358 .
 Sec. 39. Every person receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser of registered land who takes a certificate of title for value in good faith shall hold the same free of all encumbrance except those noted on said certificate, and any of the following encumbrances which may be subsisting, namely:
First. Liens, claims, or rights arising or existing under the laws or Constitution of the United States or of the Philippine Islands which the statutes of the Philippine Islands cannot require to appear of record in the Registry.
Second. Taxes within two years after the same became due and payable.
Third. Any public highway, way, private way established by law, or any Government irrigation canal or lateral thereof, where the certificate of title does not state that the boundaries of such highway, way, or irrigation canal or lateral thereof, have been determined. But if there are easements or other rights appurtenant to a parcel of registered land which for any reason have failed to be registered, such easements or rights shall remain so appurtenant notwithstanding such failure, and shall be held to pass with the land until cut off or extinguished by the registration of the servient estate, or in any other manner.; now Section 44 of PD 1529 or The Property Registration Decree.
 Robles vs. CA, 328 SCRA 97, 113 .
 98 SCRA 267 .
 DBP vs. CA, 331 SCRA 267, 289 .
 Supra at pp. 342-343 .