Central Realty and Development Corporation vs. Solar Resources, Inc.

A judgment on the pleadings is improper where the answer, although admitting material allegations, raises affirmative defenses that tender issues. A trial court may not render summary judgment motu proprio; Rule 35 requires a motion and hearing, and dispensing with both violates due process.

Central Realty and Development Corporation is the registered owner of a 7,350-square-meter parcel in Binondo, Manila under TCT No. 198996, while Solar Resources, Inc. traces its claim to a deed of absolute sale executed by Dolores V. Molina. The dispute concerns the annotation and cancellation of an adverse claim under Section 70 of Presidential Decree No. 1529, which allows a person claiming an interest adverse to the registered owner to annotate a claim and provides for a speedy hearing on its validity. The case also requires application of the Rules of Court on judgment on the pleadings, summary judgment, and consolidation.

On December 15, 1989, the Philippine National Bank sold to Central Realty and Development Corporation a 7,350-square-meter parcel in Binondo, Manila covered by Original Certificate of Title No. 10964; OCT No. 10964 was cancelled and Transfer Certificate of Title No. 198996 was issued to Central. In May 2010, Dolores V. Molina caused the annotation of a notice of adverse claim on TCT No. 198996, claiming that Central had sold the property to her sometime in 1993. On February 4, 2011, Central filed with the RTC of Manila a petition for cancellation of the adverse claim, docketed as Civil Case No. P-11-726/LRC No. N-86/LRC REC No. N-60545 and raffled to Branch 4; Central disputed the alleged sale and claimed that its board of directors did not actually meet to confirm it.

While that petition was pending, Central, on September 23, 2011, entered into a joint venture agreement with Federal Land for the construction of a high-rise residential condominium project on the property, and the Housing and Land Use Regulatory Board granted them a permit to construct and to sell. By letter dated March 26, 2012, Molina demanded that Central cause the issuance of a new title in her name and deliver possession of the property to her, free from any liens and encumbrances; her demand went unheeded. On September 10, 2013, Molina filed with RTC-Manila a complaint for specific performance and declaration of nullity of real estate mortgage with injunctive relief against Central and Federal Land, docketed as Civil Case No. 13-130626 and raffled to Branch 6. On December 18, 2013, Solar purchased the property from Molina.

In Civil Case No. P-11-726, Branch 4 rendered its Decision dated April 11, 2014 ordering the Register of Deeds of Manila to cancel the notice of adverse claim inscribed on TCT No. 198996; it ruled that Central had proven that it did not sell the property to any third party, that Molina’s adverse claim had no basis, and that Central remained the owner. On June 9, 2014, Solar annotated its notice of adverse claim on TCT No. 198996. When Molina died in 2014, Solar moved to be substituted in Civil Case No. 13-130626 as party-plaintiff; the RTC granted the motion, but the CA subsequently reversed in its Decision dated May 11, 2018 in CA-G.R. SP No. 151032, and Solar’s motion for reconsideration remained pending.

Central initiated another petition for cancellation of Solar’s adverse claim, docketed as Civil Case No. P-14-0163 and assigned to RTC-Manila, Branch 16. Central alleged that Solar’s adverse claim was ripe for cancellation because the 30-day period had lapsed; that it was procedurally defective as a second adverse claim based on Molina’s already-cancelled claim, prohibited under Section 70 of PD 1529; that the annotation was improper because other remedies existed; that it was baseless because Molina’s claim had been declared false; and that Solar could not be an innocent purchaser for value because it knew of the falsity, with its counsel allegedly acting as Molina’s co-conspirators. Solar opposed, arguing that the lapse of the 30-day period did not ipso facto result in cancellation, that its adverse claim was separate and distinct from Molina’s, that it had a legitimate claim over the property, that the trial court was precluded from resolving ownership pending before Branch 6, and that its adverse claim could not be cancelled pending resolution of the separate ownership case. Solar then filed an Opposition with Motion to Dismiss on the ground of litis pendentia, arguing that judgment on the pleadings was improper because it raised factual matters—its adverse claim was separate, it was an innocent purchaser for value, Molina had presented proofs of her interest, and the deed of sale between Molina and Central had not been declared void or defective. Central opposed the motion to dismiss on the ground that it was filed beyond the prescribed period and that Solar was estopped from claiming litis pendentia.

Central moved for judgment on the pleadings, asserting that Solar admitted all the material allegations of the petition: that Solar purchased the property from Molina; that its claim rested on the Deed of Absolute Sale dated December 18, 2013; that Central appeared as the registered owner on the face of TCT No. 198996; and that Solar failed to deny matters including Central’s possession since its purchase from PNB, its payment of realty taxes, its leasing out of portions of the property, its mortgage of the property, its joint venture agreement with Federal Land, the declarations by the Office of the City Prosecutor, the NBI-QDD, and the LRA that Molina’s documents were fake, Molina’s lack of authority as a Central officer or director, Solar’s lack of verification or ocular inspection, the identity of Solar’s counsel with Molina’s counsel during the NBI investigation, Solar’s awareness of the fake documents, and the prior cancellation of Molina’s adverse claim. The parties marked their exhibits; Central’s motion to admit amended judicial affidavits was granted, while Solar, after obtaining additional time, filed the judicial affidavits of Rebecca M. Ubas and Theodore R. Sarmiento, which the trial court admitted by Resolution dated February 4, 2016. The trial court found that Solar practically admitted all the material allegations but asserted affirmative defenses—that Solar was an innocent purchaser for value, that its adverse claim was separate and distinct from Molina’s, and that no decision or order had declared the September 7, 1993 Deed of Absolute Sale in Molina’s favor void or defective—so judgment on the pleadings was improper. It also found that the 2010 Molina adverse claim and the 2014 Solar adverse claim were separate because they were based on different deeds. No party filed a motion for summary judgment; the trial court nonetheless rendered summary judgment in its May 30, 2016 Omnibus Resolution. Central’s partial motion for reconsideration was denied on January 3, 2017.

• Direct Resort under Rule 45: Central argued that its petition raises pure questions of law—whether the trial court could render summary judgment motu proprio, whether judgment on the pleadings should have been rendered despite Solar’s alleged admissions, and whether Solar’s adverse claim is barred by res judicata and PD 1529—and that direct recourse to the SC was proper.
• Impropriety of Summary Judgment: Central argued that the trial court could not render summary judgment motu proprio without a motion from either party.
• Judgment on the Pleadings: Central argued that Solar admitted all material allegations in the petition, leaving only questions of law, so judgment on the pleadings was proper.
• Cancellation of Solar’s Adverse Claim: Central argued that Solar’s adverse claim was ripe for cancellation because the 30-day period had lapsed; it was procedurally defective as a second adverse claim based on Molina’s already-cancelled claim, prohibited by Section 70 of PD 1529; it was baseless because Molina’s claim had been declared false; and Solar could not be an innocent purchaser for value.
• Ownership Declaration and Injunctive Relief: Central asked the SC to declare it the true and lawful owner and to enjoin Solar and all other persons from claiming rights over the property, to finally dismiss all pending related cases.

• Direct Resort and Factual Issues: Solar countered that Central’s direct resort was improper because the issues were not pure questions of law and involved factual evaluation of evidence.
• Summary Judgment: Solar defended the trial court’s motu proprio summary judgment, arguing that the Rules of Court are merely suppletory in land registration cases under PD 1529.
• Judgment on the Pleadings: Solar argued that judgment on the pleadings was improper because it raised affirmative defenses and factual matters.
• Adverse Claim: Solar asserted that its adverse claim is separate and distinct from Molina’s, based on its deed of sale from Molina; it is an innocent purchaser for value; the lapse of the 30-day period does not ipso facto cancel the adverse claim; and the claim cannot be cancelled pending resolution of the ownership case before Branch 6.
• Litis Pendentia: Solar moved to dismiss on the ground of litis pendentia because ownership was being litigated in Civil Case No. 13-130626.
• Forum Shopping: Solar asserted that Central was guilty of forum shopping by asking the SC to direct other courts and tribunals to dismiss all pending cases involving the property.

• Pure Questions of Law and Direct Resort: Whether the petition raises pure questions of law and, if so, whether direct resort to the SC under Rule 45 is warranted.
• Legal Implications of the Omnibus Resolution: Whether the trial court correctly denied Central’s motion for judgment on the pleadings and Solar’s motion to dismiss, and whether it properly rendered summary judgment motu proprio, in light of the Omnibus Resolution dated May 30, 2016.
• Declaration of Ownership: Whether the SC may, in this proceeding, declare Central as the lawful owner of the property.

• Pure Questions of Law and Direct Resort: Yes. The petition raises pure questions of law, and direct resort under Rule 45 is proper because the resolution rests solely on what the law or rules provide on the given circumstances.
• Legal Implications of the Omnibus Resolution: The denial of judgment on the pleadings and of Solar’s motion to dismiss was affirmed, but the summary judgment was set aside. Solar’s opposition tendered issues through affirmative defenses, while the trial court rendered summary judgment without any motion and without hearing the parties, violating Rule 35 and due process.
• Declaration of Ownership: No. The SC cannot declare Central the owner in this proceeding because jurisdiction over ownership is with the lower courts handling pending cases; consolidation is the proper course.

• Pure Questions of Law and Direct Resort: Section 2, Rule 41 of the Rules of Court provides that where only questions of law are raised, the appeal shall be to the SC by petition for review on certiorari under Rule 45. In Heirs of Garcia vs. Burgos, the SC explained that a question of law exists when the doubt or difference arises as to what the law is on a certain state of facts and does not call for the probative value of the evidence presented by the parties-litigants; a question of fact exists when the doubt or difference arises as to the truth or falsity of alleged facts. The denial of Central’s motion for judgment on the pleadings, the question whether Solar’s action for specific performance is barred by res judicata, and the propriety of summary judgment are questions that rest solely on what the law or rules provide on the given circumstances; they do not require examination of evidence. Hence, the petition raises pure questions of law and Central’s direct resort under Rule 45 is justified. Although Central also raised whether Solar is an innocent purchaser for value—a factual issue—the trial court correctly treated that as subsumed in Civil Case No. 13-130626 pending before Branch 6. The only issue in a petition for cancellation of adverse claim is the propriety of the adverse claim, as Torbela vs. Spouses Rosario teaches that the hearing on the validity of the adverse claim affords the claimant an opportunity to be heard and determines the existence of any encumbrance on the title arising from the adverse claim.

• Legal Implications of the Omnibus Resolution: Under Section 1, Rule 34, judgment on the pleadings is proper where the answer fails to tender an issue or otherwise admits the material allegations of the adverse party’s pleading. When the answer does not deny the material allegations or admits their truthfulness and/or omits to deal with them at all, judgment on the pleadings is appropriate; the essential question is whether the pleadings generate issues, and in a proper case there is no ostensible issue because the defending party’s answer failed to raise one. Judgment on the pleadings is based exclusively on the allegations in the pleadings and annexes, without evidence aliunde. Here, the trial court did not err in denying Central’s motion because Solar’s opposition, the functional equivalent of an answer, practically admitted all material allegations but asserted affirmative defenses—that Solar is an innocent purchaser for value, that its adverse claim is separate and distinct from Molina’s, and that no competent court had declared the September 7, 1993 deed in Molina’s favor void or defective. These affirmative defenses tendered issues, so judgment on the pleadings was improper. However, the trial court then rendered summary judgment motu proprio. Sections 1, 2, and 3 of Rule 35 require a motion for summary judgment, supported by affidavits, depositions, or admissions, and a hearing; the adverse party may serve opposing affidavits at least three days before the hearing, and judgment may be rendered if the pleadings and supporting papers show no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. In Calubaquib vs. Republic, the SC set aside a summary judgment rendered without any motion filed by either party, stressing that the filing of a motion and the conduct of a hearing are important because they enable the court to determine whether the parties’ pleadings, affidavits, and exhibits are sufficient to overcome the opposing papers and justify the finding that the claim is clearly meritorious or there is no defense. The non-observance of the procedural requirements of filing a motion and conducting a hearing warrants setting aside the summary judgment. Here, no motion was filed, and the parties were not heard on the propriety of summary judgment, violating their right to due process. Diona vs. Balangue, citing Development Bank of the Philippines vs. Teston, holds that courts cannot grant a relief not prayed for in the pleadings or in excess of what is sought, and cannot grant a relief without first ascertaining the evidence presented in support; due process requires that judgments conform to and be supported by the pleadings and evidence. Macias vs. Macias found a failure of due process when the trial court, after denying a motion to dismiss, immediately allowed ex parte evidence and resolved the case with undue haste even though an answer could still be filed. As in Diona and Macias, the trial court here acted with undue haste and unprocedural tact when it lumped the pending incidents and summary judgment in one Omnibus Resolution; none of the parties sought summary judgment, nor did they expect it motu proprio while several incidents remained unresolved. This amounted to denial of due process and nullified the summary judgment. Section 70 of PD 1529 speaks of a speedy hearing in a petition for cancellation of adverse claim, but speedy hearing should not be done with undue haste, let alone in violation of due process and utter disregard of the rules.

• Declaration of Ownership: Central asked the SC to declare it the true and lawful owner to close all pending cases involving conflicting ownership claims allegedly emanating from Molina’s dispositions. The SC has no jurisdiction to do so. Various cases are pending before different courts on conflicting ownership claims over the property; those courts have acquired jurisdiction, and jurisdiction stays with them until the cases are finally terminated. The SC cannot, by Central’s plea, wrest that jurisdiction from the lower courts, because jurisdiction is vested by law alone. Instead, Section 1, Rule 31 of the Rules of Court allows consolidation of actions involving a common question of law or fact pending before the court; the RTC may order a joint hearing or trial, consolidate the actions, and make orders to avoid unnecessary costs or delay. In Deutsche Bank AG vs. Court of Appeals, citing Steel Corporation of the Philippines vs. Equitable PCI Bank, Inc., the SC laid down that when two or more cases involve the same parties and affect closely related subject matters, they must be consolidated and jointly tried to serve the best interests of the parties and settle expeditiously the issues involved; consolidation is proper wherever the subject matter involved and relief demanded in the different suits make it expedient for the court to determine all issues and adjudicate the rights of the parties by hearing the suits together. The petition for cancellation of adverse claim in Civil Case No. P-14-0163 and Civil Case No. 13-130626 involve closely related issues affecting the same parties and property, so consolidation is proper for judicious and expedient disposition.

• Appeal by certiorari under Rule 45 — Where only questions of law are raised, the appeal to the SC is by petition for review on certiorari under Rule 45; a question of law exists when the doubt arises as to what the law is on a certain state of facts and does not call for the probative value of evidence. Applied: the SC treated Central’s direct petition as proper because the issues on judgment on the pleadings, res judicata, and summary judgment were pure questions of law.
• Judgment on the pleadings — Under Section 1, Rule 34, judgment on the pleadings is proper when the answer fails to tender an issue or otherwise admits the material allegations of the adverse party’s pleading. The answer fails to tender an issue if it does not deny the material allegations or admits their truthfulness and/or omits to deal with them; there is no ostensible issue, and the judgment is based exclusively on the pleadings and annexes, without evidence aliunde. Applied: the RTC correctly denied Central’s motion because Solar’s opposition, though admitting many material allegations, raised affirmative defenses that tendered issues.
• Summary judgment requires a motion and hearing — Under Sections 1 to 3, Rule 35, summary judgment may be rendered only upon motion by a party, with supporting affidavits, depositions, or admissions, and after hearing; the RTC cannot render it motu proprio. Applied: the RTC’s summary judgment was set aside because no party moved for it and the parties were not heard.
• Due process limits on relief and speedy hearing — Courts cannot grant a relief not prayed for or in excess of what is sought, and judgments must conform to and be supported by the pleadings and evidence; due process requires notice and opportunity to be heard. Section 70 of PD 1529’s speedy hearing does not authorize undue haste. Applied: the RTC lumped pending incidents and summary judgment in one Omnibus Resolution without a motion or hearing, nullifying the summary judgment.
• Adverse claim and scope of cancellation proceeding — Under Section 70 of PD 1529, an adverse claim may be annotated on the certificate of title, is effective for 30 days, and may be cancelled upon verified petition; before lapse, any party in interest may file a petition for cancellation, and the RTC shall grant a speedy hearing on the validity of the adverse claim. The only issue in a petition for cancellation is the propriety of the adverse claim, not ownership. Applied: the trial court correctly avoided ruling on ownership, which was pending in Civil Case No. 13-130626.
• Consolidation of related actions — Under Section 1, Rule 31, when actions involving a common question of law or fact are pending before the court, the RTC may order a joint hearing or trial, consolidate the actions, and make orders to avoid unnecessary costs or delay. Jurisprudence holds that when two or more cases involve the same parties and closely related subject matters, they must be consolidated and jointly tried to serve the best interests of the parties and settle expeditiously the issues involved. Applied: the SC ordered consolidation of Civil Case No. P-14-0163 with Civil Case No. 13-130626.

• "The reason why the law provides for a hearing where the validity of the adverse claim is to be threshed out is to afford the adverse claimant an opportunity to be heard, providing a venue where the propriety of his claimed interest can be established or revoked, all for the purpose of determining at last the existence of any encumbrance on the title arising from such adverse claim." — The SC quotes Torbela vs. Spouses Rosario to explain that a cancellation proceeding determines only the propriety of the adverse claim, not ownership.
• "When the Answer fails to tender any issue, that is, if it does not deny the material allegations in the complaint or admits said material allegations of the adverse party's pleadings by admitting the truthfulness thereof and/or omitting to deal with them at all, a judgment on the pleadings is appropriate." — The SC uses this to define when judgment on the pleadings is proper; applied to deny Central’s motion because Solar’s opposition tendered issues.
• "The non-observance of the procedural requirements of filing a motion and conducting a hearing on the said motion warrants the setting aside of the summary judgment." — The SC quotes Calubaquib vs. Republic to set aside the RTC’s motu proprio summary judgment.
• "It is settled that courts cannot grant a relief not prayed for in the pleadings or in excess of what is being sought by the party. They cannot also grant a relief without first ascertaining the evidence presented in support thereof. Due process considerations require that judgments must conform to and be supported by the pleadings and evidence presented in court." — The SC quotes Diona vs. Balangue to hold that the RTC’s summary judgment, rendered without a motion, violated due process.

• Heirs of Garcia vs. Burgos, G.R. No. 236173, March 4, 2020 — Relied on for the modes of appeal and the distinction between a question of law and a question of fact; used to justify direct resort under Rule 45.
• Torbela vs. Spouses Rosario, 678 Phil. 1 (2011) — Relied on for the rule that the only issue in a petition for cancellation of adverse claim is the propriety of the adverse claim.
• Calubaquib vs. Republic, 667 Phil. 653 (2011) — Controlling precedent; a summary judgment rendered without any motion filed by either party was set aside.
• Diona vs. Balangue, 701 Phil. 19 (2013) — Relied on for the rule that courts cannot grant a relief not prayed for and that due process requires judgments to conform to the pleadings and evidence.
• Development Bank of the Philippines vs. Teston, 569 Phil. 137 (2008) — Cited in Diona; due process requires that judgments conform to and be supported by the pleadings and evidence.
• Macias vs. Macias, 457 Phil. 463 (2003) — Relied on for the rule that undue haste in resolving a case amounts to a denial of due process.
• Deutsche Bank AG vs. Court of Appeals, 683 Phil. 80 (2012) — Relied on for the requisites of consolidation of actions.
• Steel Corporation of the Philippines vs. Equitable PCI Bank, Inc., 649 Phil. 692 (2010) — Cited in Deutsche Bank; consolidation is proper where cases involve the same parties and closely related subject matters.

• Section 2, Rule 41, Rules of Court — Modes of appeal; where only questions of law are raised, the appeal shall be to the SC by petition for review on certiorari under Rule 45. Applied: the SC treated Central’s direct petition as proper because the issues were pure questions of law.
• Section 1, Rule 34, Rules of Court — Judgment on the pleadings; proper where the answer fails to tender an issue or admits material allegations. Applied: denial of Central’s motion was correct because Solar’s opposition tendered issues through affirmative defenses.
• Sections 1, 2, and 3, Rule 35, Rules of Court — Summary judgment; requires a motion, supporting affidavits, depositions, or admissions, and a hearing. Applied: the RTC’s motu proprio summary judgment was set aside for lack of a motion and hearing.
• Section 70, Presidential Decree No. 1529 — Adverse claim; provides for annotation, 30-day effectivity, cancellation upon verified petition, prohibition on a second adverse claim based on the same ground, and a speedy hearing on the validity of the adverse claim. Applied: the SC recognized that only the propriety of the adverse claim is at issue in a cancellation proceeding; speedy hearing does not justify undue haste.
• Section 1, Rule 31, Rules of Court — Consolidation; allows joint hearing or trial and consolidation of actions involving a common question of law or fact. Applied: the SC ordered consolidation of Civil Case No. P-14-0163 with Civil Case No. 13-130626.