Raymundo vs. Felipe

Where defendants in an accion publiciana assert ownership and fraud as a compulsory counterclaim against the plaintiff’s registered title, the trial court must allow the counterclaim or amended answer and must not force them into a separate action; if a separate annulment action is nonetheless filed, the two cases should be consolidated and tried jointly, and the annulment action cannot be dismissed without trial on the merits.

Raymundo, Garcia, and Feliciano Felipe were co-workers at San Francisco del Monte, Inc. and co-members of its employees’ mutual aid association, “Tiyaga at Pagtitipid,” which acquired subdivision lots from the company for resale to members. The dispute concerns Lots 2 and 3, Block 159, San Francisco del Monte Subdivision, and the competing claims of the member-purchasers and Felipe. The consolidated cases test how an accion publiciana should handle a defendant’s claim of ownership and fraud, and whether related actions must be consolidated and tried on the merits under the Revised Rules of Court.

Lot 3, Block 159, San Francisco del Monte Subdivision was bought by Felipe Raymundo from the association “Tiyaga at Pagtitipid,” while Lot 2 of the same block was bought by Pedro Garcia; both completed paying their respective lots before the last World War broke out. They built their houses on the lots and lived there for more than thirty years each, paying taxes, but they had not yet acquired certificates of title when the events giving rise to the litigation occurred. Feliciano Felipe knew these facts because he had been their neighbor in San Francisco del Monte since boyhood, their co-worker at San Francisco del Monte, Inc., and their co-member in the association; he knew the lots had been purchased and fully paid for by Raymundo and Garcia and that they had no certificates of title yet.

For Lot 3, Block 159, Felipe gathered close relatives and friends — his wife Faustina Contreras, his sister Ana Salonga, brother-in-law Ernesto Salonga, and nephews and trusted friends — and made it appear in a public instrument denominated “Deed of Quitclaim” that they were pre-war members of the association, even if they were not, and that they quitclaimed to him their supposed rights, interests, and participation in Lot 3. For Lot 2, Block 159, he used another public instrument captioned “Deed Assignment,” in which he allegedly as President of the association assigned Lot 2 to Alfredo G. Villanueva.

Armed with the Deed of Assignment and the Deed of Quitclaim, Feliciano Felipe and Alfredo G. Villanueva filed Civil Case No. Q-6882 in the CFI of Rizal, Quezon City Branch IV, for specific performance against San Francisco del Monte, Inc., which still held title to the lots, to compel the corporation to convey Lot 3 to Felipe and Lot 2 to Villanueva. Raymundo and Garcia, the owners and occupants of Lots 3 and 2 respectively, were not made parties, although Felipe knew of their ownership and possession; they did not learn of the action until they were brought to court in the present case. On March 14, 1963, the court rendered judgment ordering San Francisco del Monte, Inc. to execute final deeds of sale for Lot 3 to Felipe and Lot 2 to Villanueva at one peso per square meter, upon payment of P25.00 for each lot, without pronouncement as to costs. The deeds were executed, and the Register of Deeds for Quezon City issued Transfer Certificate of Title No. 68207 to Felipe for Lot 3 and Transfer Certificate of Title No. 68296 to Villanueva for Lot 2. Felipe mortgaged Lot 3 to the Rural Bank of San Juan, Rizal for P3,500.00, which mortgage remained in force. Villanueva transferred Lot 2 back to Felipe, and Transfer Certificate of Title No. 70981 was issued in Felipe’s name; Felipe then sold Lot 2 to the spouses Simeon B. Samson and Brigida V. Samson, who bought despite knowing that the lot belonged to Garcia, who had possessed it for over thirty years.

After the lapse of 104 days from the sale of Lot 2 to the Samsons, Felipe filed Civil Case No. Q-7668 in the same Branch IV for recovery of possession (accion publiciana) of Lots 2 and 3, Block 159, covered by TCT Nos. 70981 and 68207, respectively, asking that Raymundo, Garcia, and Obligacion be ordered to vacate. The defendants answered on December 19, 1963, denying the material allegations and claiming that they were the true owners of the lots they respectively occupied, having bought them from “Tiyaga at Pagtitipid,” and that they had been in possession peacefully and with the association’s knowledge and consent. On July 3, 1964, they moved for leave to amend their answer to allege fraud in Felipe’s securing of the certificates of title, and Garcia moved for leave to file a third-party complaint against Simeon B. Samson as a buyer in bad faith. On July 6, 1964, the trial court denied both motions, ruling that the certificates of title could not be attacked collaterally but only in a separate action; it proceeded with trial that day and, despite a plea for postponement, continued it to July 7, 1964. On July 7, 1964, the defendants filed Civil Case No. Q-8114 for annulment of title or reconveyance and moved to hold Q-7668 in abeyance and consolidate it with Q-8114; the motion was denied, trial proceeded on July 8, 1964, and Q-7668 was submitted for decision. On July 20, 1964, defendants moved to hold Q-7668 in abeyance until Q-8114 was resolved; Felipe opposed, calling the motion dilatory and without legal or factual basis. On August 12, 1964, Garcia moved to drop himself from Q-7668 because Felipe had already sold Lot 2. On October 18, 1964, the trial court rendered judgment for Felipe, finding him the registered owner under TCT Nos. 70981 and 68207 and finding that defendants showed only receipts for installment payments and tax declarations.

The defendants appealed Q-7668 to the CA, which on May 22, 1969 affirmed the trial court in toto. In Q-8114, Felipe moved to dismiss on the ground that the complaint stated no cause of action; the trial court denied the motion on September 28, 1964. Felipe answered on October 3, 1964, denying fraud and asserting that his titles were secured pursuant to court order. On February 2, 1965, plaintiffs filed an amended complaint alleging that they were the true owners through the association and that Felipe had obtained the titles by false quitclaim deeds in Q-6882, to which they were not parties. San Francisco del Monte, Inc. moved to dismiss on grounds of no cause of action and statute of limitations; the motion was denied on July 10, 1965. Several defendants were declared in default on January 28, 1966. On June 22, 1967, after pre-trial but without trial on the merits, Branch IX dismissed Q-8114; reconsideration was denied on December 8, 1967. The CA decision in Q-7668 was brought to the SC as L-30887, and the dismissal order in Q-8114 was appealed directly to the SC as L-29754.

• Compulsory Counterclaim and Amendment: Petitioners argued that the trial judge in Civil Case No. Q-7668 gravely exceeded his authority in denying their motion to amend their answer to allege with particularity the defense of fraud and their claim of ownership over the two lots, since these were compulsory counterclaims against Felipe’s claim of ownership and right to possession; under the Rules, a compulsory counterclaim not interposed in the answer would be barred, and the order to file a separate action for annulment or reconveyance was grave error.
• Consolidation of Related Cases: Petitioners argued that the trial court erred in refusing to consolidate Civil Case No. Q-7668 with Civil Case No. Q-8114, because both involved the same parties, subject matter, and issues of ownership and possession, and joint hearing was required under Rule 31 and controlling jurisprudence; the fact that Q-7668 had been partly tried did not justify refusal because the evidence already taken could be used in the consolidated cases.
• Dismissal Without Trial: Petitioners argued that Branch IX erred in dismissing Civil Case No. Q-8114 without a hearing on the merits on the ground that it had no jurisdiction because the matter had already been decided by a court of equal jurisdiction and was on appeal; Q-8114 was precisely filed pursuant to the Q-7668 court’s ruling that their claim for annulment or reconveyance should be brought in a separate action, and dismissing it without evidence denied them their day in court.

• Opposition to Suspension: Respondent Feliciano Felipe countered that the motion to hold Civil Case No. Q-7668 in abeyance was dilatory, that the defendants’ claim over the lots had no legal or factual basis, and that granting it would violate the constitutional precept of speedy administration of justice.
• No Cause of Action and Statute of Limitations: In Civil Case No. Q-8114, Feliciano Felipe moved to dismiss on the ground that the complaint stated no cause of action and asserted that his certificates of title were secured pursuant to court order, not through fraud; San Francisco del Monte, Inc. also moved to dismiss on the grounds of no cause of action and statute of limitations, while the Samsons alleged that no cause of action existed against them.

• Compulsory Counterclaim and Amendment: Whether the trial court in Civil Case No. Q-7668 erred in denying petitioners’ motion to amend their answer to allege fraud and ownership as a compulsory counterclaim and in requiring them to file a separate action.
• Consolidation of Related Cases: Whether the trial court erred in refusing to consolidate Civil Case No. Q-7668 with Civil Case No. Q-8114.
• Dismissal Without Trial: Whether the Branch IX court erred in dismissing Civil Case No. Q-8114 without trial on the merits on the ground that it had no jurisdiction because the subject had already been decided by a court of equal jurisdiction and was on appeal.

• Compulsory Counterclaim and Amendment: Yes. The trial court erred in denying the amendment and in requiring a separate action; ownership and fraud were compulsory counterclaims that should have been litigated in Q-7668.
• Consolidation of Related Cases: Yes. The refusal to consolidate was error; the cases involved the same parties, subject matter, and issues, and a joint hearing should have been ordered.
• Dismissal Without Trial: Yes. Branch IX erred in dismissing Q-8114 without trial; the action was filed pursuant to the Q-7668 court’s directive and could not be dismissed without giving plaintiffs a chance to prove their claim.

• Compulsory Counterclaim and Amendment: Under the Rules, counterclaims other than money claims are allowed, and a compulsory counterclaim must be interposed in the answer or is barred. The object is to prevent multiplicity of suits and settle the entire controversy in one action. Here, Raymundo and Garcia asserted ownership and fraud against Felipe’s claim of registered title and right to possession. Those were compulsory counterclaims that should have been allowed by amendment. The trial court’s order to file a separate action was grave error because it split the controversy, caused expense, anxiety, and delay, and risked barring the counterclaim. The SC cited Gojo vs. Goyala, J.M. Tuason & Co., Inc. vs. Sanvictores, Matela vs. Chua Tay, and Pongos vs. Hidalgo.
• Consolidation of Related Cases: Consolidation is generally discretionary, but joint hearing becomes a matter of duty where two or more cases are tried before the same judge, or even if filed with different branches of the same CFI, provided one case has not been partially tried. Here Q-7668 and Q-8114 involved the same parties, the same two lots, and the same issues of ownership and possession, and were handled by the same lawyers. The partial trial of Q-7668 did not justify refusal because the evidence already submitted could be used in the consolidated hearing. The SC cited PAL vs. Teodoro and Palanca vs. Querubin; liberal construction under Sec. 2, Rule 1 favored consolidation to avoid duplication, delay, and expense.
• Dismissal Without Trial: Branch IX misapprehended the nature of Q-8114. It was filed precisely because the Q-7668 court ruled that the claim for annulment of title or reconveyance should be brought in a separate action. The plaintiffs were not parties to Q-6882 and did not have notice of it; they alleged that Felipe secured the titles through fraud. Dismissing Q-8114 without trial on the ground that the matter had already been decided by a court of equal jurisdiction and was on appeal denied them the opportunity to prove ownership and fraud. The order was therefore set aside as null and void, and the case was remanded for trial on the merits.

• Compulsory Counterclaim — A counterclaim that arises out of or is connected with the transaction or occurrence that is the subject matter of the opposing party’s claim must be interposed in the same action; otherwise it is barred. Its purpose is to prevent multiplicity of suits and settle the entire controversy in one proceeding. In this case, the occupants’ claim of ownership and defense of fraud against Felipe’s registered title should have been allowed as a compulsory counterclaim in the accion publiciana, and the trial court’s order to file a separate action was grave error.
• Consolidation and Joint Hearing — Consolidation is addressed to the trial court’s discretion, but joint hearing becomes a matter of duty where the cases involve the same parties, subject matter, and issues and are before the same judge, or even different branches of the same court, provided one case has not been partially tried. Partial trial is not an obstacle where the evidence already taken can be used in the joint hearing. Here the refusal to consolidate Q-7668 and Q-8114 was error.
• Dismissal Without Trial After Court-Directed Separate Action — Where a court has itself directed a party to file a separate action for annulment of title or reconveyance, another branch of the same court cannot dismiss that action without trial on the ground that the matter was already decided, especially where the plaintiffs were not parties to the prior case and allege fraud. Such dismissal denies the plaintiffs their day in court and is null and void.

• “The object of a counterclaim is to prevent multiplicity of suits by allowing the determination in one action of the entire controversy between the parties, thus avoiding inconvenience, expense, waste of the court’s time and injustice.” — Explains the rationale for treating the occupants’ ownership and fraud claims as a compulsory counterclaim rather than splitting them into a separate suit.
• “In ordering the petitioners to file a separate action for annulment of title or reconveyance, the trial court in Civil Case No. Q-7668, committed a grave error; because under the rules the compulsory counterclaim would be barred if not interposed in the answer (Sec. 4, Rule 9, Revised Rules of Court).” — Directly holds that the separate-action directive was erroneous.
• “Although consolidation of several cases involving the same parties and subject-matter is a matter addressed to the discretion of the trial court, joint hearing becomes a matter of duty if two or more cases are tried before the same judge, or even if filed with the different branches of the same court of first instance, provided one of such cases has not been partially tried (PAL et al. vs. Teodoro, et al., G.R. No. L-6698, Aug. 30, 1955, 97 Phil. 461).” — States the consolidation rule applied to Q-7668 and Q-8114.
• “The herein plaintiffs-appellants (in L-29754) were again denied their day in Court in Civil Case No. Q-8114, for the simply reason that their complaint was dismissed without giving them the opportunity to submit evidence to demonstrate their claim of ownership and of fraud…” — Captures the SC’s reason for setting aside the dismissal of the annulment action.

• Gojo vs. Goyala, L-26768, Oct. 30, 1970, 35 SCRA 557, 563-564 — Cited for allowing non-money counterclaims and avoiding multiplicity; supports the ruling that the ownership and fraud defense should have been pleaded as a compulsory counterclaim.
• J.M. Tuason & Co., Inc. vs. Sanvictores, L-16836, Jan. 30, 1962, 4 SCRA 123 — Cited with Gojo on the propriety of counterclaims in the same action.
• Matela vs. Chua Tay, L-16407, May 30, 1962, 5 SCRA 163, 168-169 — Cited to show that counterclaims other than money claims are allowed under the Rules.
• Pongos vs. Hidalgo etc. et al., 47 O.G. 733 — Cited for the same counterclaim rule.
• PAL vs. Teodoro, G.R. No. L-6698, Aug. 30, 1955, 97 Phil. 461 — Cited for the rule that joint hearing becomes a duty where related cases are before the same judge or different branches, provided one case has not been partially tried.
• Palanca vs. Querubin, G.R. No. L-29510-31, Nov. 29, 1969, 30 SCRA 739, 745 — Cited for the purpose of consolidation: avoiding duplication, delay, congestion, and unnecessary expense.
• Sideco vs. Paredes, 74 Phil. 6, 7 — Cited for liberal construction of the rules on consolidation.

• Sec. 1, Rule 10, Rules of Court of 1940; Sec. 6, Rule 6, Revised Rules of Court of 1964 — Allow counterclaims other than money claims; applied to permit the occupants’ ownership and fraud claims as counterclaims in Q-7668.
• Sec. 4, Rule 9, Revised Rules of Court — A compulsory counterclaim not interposed in the answer is barred; applied to hold that the separate-action order was grave error.
• Sec. 1, Rule 31, Revised Rules of Court — Consolidation of related cases; applied to require joint hearing of Q-7668 and Q-8114.
• Sec. 2, Rule 1, Revised Rules of Court — Rules shall be liberally construed to promote just, speedy, and inexpensive determination; applied to favor consolidation and avoid multiplicity.