Velarde vs. Heirs of Concepcion Candari

A notarized deed of conveyance enjoys the presumption of regularity and constitutes prima facie evidence of the facts stated therein, which can be overturned only by clear and convincing evidence of fraud — not by mere inference, construction, or bare denials — and in a pacto de retro sale, title and ownership vest immediately in the vendee a retro subject only to the resolutory condition of repurchase, such that failure to redeem transfers absolute ownership by operation of law without need of judicial consolidation under Article 1607.

Petitioners are the legal heirs of Isagani S. Velarde, who acquired several parcels of land in Aklan from Concepcion Candari through a notarized Deed of Sale with Right of Repurchase dated April 20, 1978, with a five-year redemption period, and from Concepcion's sister Rizalina C. Villamon through a notarized Deed of Absolute Sale dated July 1, 1982. After Concepcion failed to redeem within the stipulated period, she executed a notarized Deed of Quitclaim and Waiver of Rights on February 11, 1986, relinquishing ownership in favor of Isagani and petitioners. Original Certificate of Titles and Tax Declarations were subsequently issued in petitioners' names. Isagani died on February 22, 1987, after which Concepcion began asserting ownership over the properties, prompting petitioners to file suit.

Petitioners — Adolfo B. Velarde (married to Antonina), Romulo B. Velarde (married to Jean), Bella B. Velarde, Benedicto B. Velarde, Isabelle V. Diaz, and Carmelita B. Velarde — are the legal heirs of Isagani S. Velarde. On April 20, 1978, Concepcion Candari sold seven parcels of land located in Aklan to Isagani through a notarized Deed of Sale with Right of Repurchase, granting Concepcion the right to repurchase within five years. Concepcion failed to redeem the lots within the stipulated period. On February 11, 1986, Concepcion executed a notarized Deed of Quitclaim and Waiver of Rights, relinquishing absolute ownership of the lots in favor of Isagani and petitioners, with the lots distributed as follows: lots under TD Nos. 2318 and 2319 for Isagani; TD No. 2315 for Carmelita; TD No. 2316 for Adolfo; TD No. 2317 for Romulo; and TD No. 10028 for Benedicto. In 1982, three of the lots were registered under Original Certificate of Titles: Lot No. 287 under OCT No. P-17480 (Adolfo), Lot No. 290 under OCT No. P-17483 (Romulo), and Lot No. 4280 under OCT No. P-17481 (Carmelita). Corresponding Tax Declarations were issued in Isagani's and petitioners' names. Separately, Isagani acquired another parcel of land from Concepcion's sister, Rizalina C. Villamon, through a notarized Deed of Absolute Sale dated July 1, 1982, on which Concepcion's signature appears as a witness.

After Isagani's death on February 22, 1987, Concepcion began representing herself as the owner of the parcels of land by instituting tenants on portions of the vast lands, collecting rentals, and appropriating the lands' produce. Petitioners demanded that Concepcion desist from usurping their proprietary rights, but she refused, prompting them to file a complaint for quieting of title and damages. Concepcion denied having sold or relinquished ownership and possession of the properties to Isagani or petitioners. She claimed she inherited the disputed properties from her father in 1977, that she had never shared rentals or produce with Isagani or petitioners, and that Isagani was merely her lessee to whom she entrusted the Tax Declarations of all her properties for safekeeping and payment of realty taxes. She accused Isagani and petitioners of having obtained the deeds of conveyances, OCTs, and TDs by fraudulent means. She also claimed that her sister Rizalina never sold her property to Isagani. As counterclaim, Concepcion sought damages and reconveyance of the properties.

The RTC of Culasi, Antique, Branch 13, in its Decision dated July 5, 2001, granted the complaint, finding that Concepcion's claims were unsubstantiated while petitioners sufficiently proved their title through testimonial and documentary evidence. The RTC observed that Concepcion's entire testimony was interlaced with stereotyped negative answers and bare denials — that she never sold the properties, that she could not remember executing the Deed of Quitclaim, that she did not know the properties had been titled in petitioners' names — none of which could prevail over the affirmative testimonies of petitioners and their witnesses, supported by public instruments. The RTC declared petitioners as the true and rightful owners entitled to possession of the six parcels of land and ordered Concepcion to vacate and deliver material possession.

On appeal, the CA sustained Concepcion's allegations of fraud, identifying three circumstances as "hints of fraud and irregularity": (1) there was no proper consolidation of ownership over the lots subject of the pacto de retro sale through judicial order as required under Article 1607 of the Civil Code; (2) the Deed of Quitclaim and Waiver of Rights was executed more than two years after the expiration of the redemption period and in favor of petitioners who are not the vendees a retro; and (3) petitioners' OCTs were issued in 1982, before the expiration of the agreed redemption period in 1983 and before Concepcion's quitclaim in 1986. The CA declared both deeds null and void, ordered reconveyance of the five parcels subject of the pacto de retro sale to Concepcion, and directed the cancellation of petitioners' OCTs and TDs. As for the lot acquired from Rizalina, the CA held it was not the proper subject of an action for quieting of title since there was no showing that Concepcion's claim over it was "apparently valid."

• Ownership and Cloud on Title: Petitioners asserted ownership over the disputed properties and insisted that Concepcion's acts of instituting tenants and receiving share from the produce of the land clouded their title. They invoked the OCTs and TDs issued in their names and argued that their legal title cannot be collaterally attacked in an action for quieting of title by unsupported allegations of fraud.

• Procedural Defect — Verification and Certification Against Forum Shopping: Concepcion argued that the Petition should be dismissed for failure to comply with Rule 7, Section 5 of the Rules, since only three out of eight petitioners signed the Verification and Certification against Forum Shopping, with no showing that the signatories were authorized by the other petitioners to sign on their behalf.
• Non-compliance with Article 1607: Concepcion argued that the consolidation of ownership with regard to the properties subject of the pacto de retro sale without compliance with Article 1607 of the NCC was illegal.
• Fraud: Concepcion maintained her imputation of fraud against Isagani and petitioners in obtaining title to the properties, denying the very existence and due execution of the deeds of conveyance.

• Verification and Certification Against Forum Shopping: Whether the petition should be dismissed for failure of all the petitioners to sign the Verification and Certificate against Forum Shopping.
• Nature of the Action and Ownership: Whether the action for quieting of title should prosper.

• Verification and Certification Against Forum Shopping: No. The Petition is not dismissible, petitioners sharing a common interest and invoking a common cause of action, such that the signature of only some of them in the certification against forum shopping substantially complies with the Rule.
• Nature of the Action and Ownership: Yes, in favor of petitioners. The complaint, though captioned as quieting of title, actually constitutes an accion reivindicatoria, and petitioners sufficiently proved their ownership through duly notarized deeds of conveyance enjoying the presumption of regularity, which Concepcion's bare allegations of fraud failed to overcome.

• Verification and Certification Against Forum Shopping: Verification is deemed substantially complied with when one who has ample knowledge to swear to the truth of the allegations in the petition signs the verification. When all petitioners share a common interest and invoke a common cause of action, the signature of only one of them in the certification against forum shopping substantially complies with the Rule. Here, petitioners share a common interest and have similar claims on the properties, their claims of ownership hinging upon the same set of documents — the Deed of Sale with Right of Repurchase, the Deed of Quitclaim and Waiver of Rights, and the OCTs and corresponding TDs in their names. The signature of only three of the eight petitioners was therefore sufficient.

• Nature of the Action and Ownership: The complaint, though captioned as quieting of title, actually constitutes an accion reivindicatoria. An action to quiet title under Rule 63 is declaratory in nature and presupposes no breach or violation of the instruments involved; the issue is the validity or construction of documents and the relief sought is a declaration of the parties' rights. Here, petitioners allege a violation of their right of ownership through Concepcion's physical intrusion — instituting tenants and collecting rentals and produce. Physical intrusion is not a ground for quieting of title, as held in Titong vs. Court of Appeals. Because petitioners ultimately seek to recover full possession of the properties as an element of their ownership disturbed by Concepcion's physical intrusion, the action is properly an accion reivindicatoria. The true nature of the action is determined by the allegations, not the caption, and the court should grant the relief warranted by the allegations even if a different relief is prayed for.

As to ownership of the properties subject of the pacto de retro sale, the CA erred in finding fraud from three circumstances. First, mere non-compliance with Article 1607 is not proof of fraud. Article 1607 requires a judicial order before the consolidated title in a pacto de retro sale may be recorded in the Registry of Property, but this requirement was devised as a countermeasure against simulated pacto de retro sales to circumvent usury laws or pactum commissorium arrangements. Without judicial determination, it is premature to conclude that fraud attended the execution of a pacto de retro sale. The Court itself proceeded with the required determination under Article 1607, noting that Concepcion was duly heard and the records were sufficient, and that the case had been pending for more than 28 years, such that further delay would cause undue prejudice.

Second, the essence of a pacto de retro sale is that title and ownership are immediately vested in the vendee a retro, subject only to the resolutory condition of repurchase by the vendor a retro within the stipulated period. Once the vendor a retro fails to redeem, absolute ownership vests in the vendee a retro by operation of law. Concepcion had five years or until 1983 to repurchase but failed to do so, as she admitted in the Deed of Quitclaim and Waiver of Rights. The recording of consolidation under Article 1607 is not a condition sine qua non to the transfer of ownership; it is merely for the purpose of registering the consolidated title. Isagani's irrevocable title was automatically transferred in 1983 since the resolutory condition was not fulfilled.

Third, the notarized Deed of Sale with Right of Repurchase and the Deed of Quitclaim and Waiver of Rights enjoy the presumption of regularity and are prima facie evidence of the facts stated therein, overturnable only by clear and convincing evidence — even preponderant evidence does not suffice. Concepcion's claim of fraud lacked specificity and proof. Her testimony was punctuated by bare denials and unsubstantiated responses of not knowing or not remembering, which cannot prevail over the affirmative testimonies of petitioners and their witnesses, supported by public instruments. Fraud is not presumed; it cannot be demonstrated by mere construction but must be proven by the party alleging it in all cases.

Fourth, the Deed of Quitclaim and Waiver of Rights, though executed more than two years after the redemption period and in favor of petitioners who are not vendees a retro, was a mere surplusage. Ownership had already automatically vested in Isagani by operation of law when Concepcion failed to redeem. The vendor a retro no longer owns the property at that point, making the subsequent quitclaim improper, unnecessary, and a mere surplusage. Isagani's irrevocable title remained intact with or without such quitclaim.

Fifth, the premature issuance of OCTs in 1982, before the expiration of the redemption period, was irrelevant. Registration does not create or vest title; it is merely evidence of title. Land registration laws do not give the holder any better title than what he or she actually has, and registration is not a convenient means to divest ownership rights duly vested through legal modes of acquiring ownership such as by operation of law. Isagani's irrevocable title remained undefeated by such premature registration.

Sixth, as to the property acquired from Rizalina through the Deed of Absolute Sale, Concepcion's bare allegation against the existence and due execution of the deed cannot prevail over the prima facie full faith and credit accorded to it as a notarial document. Notably, while Concepcion denies the execution of the deed, her signature appears on its face as a witness to the sale.

In all, the duly executed deeds of conveyances, not overturned by Concepcion's unfounded allegations of fraud, proved Isagani's title over the properties. As Isagani's heirs, petitioners are entitled to full ownership over the disputed properties.

• Presumption of Regularity of Notarized Documents — Notarial documents are entitled to full faith and credit upon their face, enjoy the presumption of regularity, and constitute prima facie evidence of the facts stated therein, which can be overturned only by clear and convincing evidence to the contrary — even preponderant evidence does not suffice. The Court applied this doctrine to uphold the notarized Deed of Sale with Right of Repurchase, the Deed of Quitclaim and Waiver of Rights, and the Deed of Absolute Sale, finding that Concepcion's bare denials and unsubstantiated allegations of fraud were insufficient to overcome the presumption.

• Essence of Pacto de Retro Sale — Title and ownership of the property sold are immediately vested in the vendee a retro, subject only to the resolutory condition of repurchase by the vendor a retro within the stipulated period. Failure of the vendor a retro to perform the resolutory condition vests upon the vendee a retro by operation of law absolute title and ownership over the property sold. The Court applied this to hold that Isagani acquired irrevocable title in 1983 when Concepcion failed to redeem within the five-year period, without need of judicial consolidation.

• Article 1607 as a Registration Requirement, Not a Condition for Transfer of Ownership — Article 1607 requires a judicial order before the consolidation of ownership in the vendee may be recorded in the Registry of Property, after the vendor has been duly heard. The requirement was devised as a countermeasure against simulated pacto de retro sales to circumvent usury laws or pactum commissorium. Non-compliance with Article 1607 does not impair the vendee a retro's title or ownership, as the method prescribed is merely for the purpose of registering the consolidated title — it is not a condition sine qua non to the transfer of ownership.

• Fraud Must Be Specifically Alleged and Proved — Fraud is not presumed; it cannot be demonstrated by mere construction but must be proven by the party alleging it in all cases. The party who impugns the regularity of a duly executed instrument bears the burden of presenting clear and convincing evidence of irregularity. The Court applied this to reject the CA's resort to inference and construction to sustain Concepcion's claim of fraud.

• Substantial Compliance with Verification and Certification Against Forum Shopping — Verification is deemed substantially complied with when one who has ample knowledge to swear to the truth of the allegations in the petition signs the verification. When all petitioners share a common interest and invoke a common cause of action, the signature of only one of them in the certification against forum shopping substantially complies with the Rule.

• True Nature of Action Determined by Allegations, Not Caption — The true nature of the action is not determined by the caption of the pleading but by the allegations it contains. The court should grant the relief warranted by the allegations, substantiated by proof, even if no such relief or a different relief is prayed for. The Court applied this to reclassify the complaint from quieting of title to accion reivindicatoria.

• Registration Does Not Vest Title — Registration is not a mode of acquiring ownership; it is merely evidence of title. Land registration laws do not give the holder any better title than what he or she actually has, and registration is not a convenient means to divest ownership rights duly vested through legal modes of acquiring ownership.

• "A duly executed contract [or instrument] carries with it the presumption of validity." — The opening principle of the decision, establishing the presumption that governs all duly executed instruments and framing the burden placed on the party impugning their regularity.

• "fraud is not presumed; it cannot be demonstrated by mere construction, but must be proven by the party alleging it in all cases." — States the rule on fraud that defeated Concepcion's claims and reversed the CA's resort to inference, articulating the evidentiary standard required to overcome the presumption of regularity of notarized documents.

• "The essence of a pacto de retro sale is that title and ownership of the property sold are immediately vested in the vendee a retro, subject [only] to the resolutory condition of repurchase by the vendor a retro within the stipulated period." — Defines the canonical formulation of the nature of a pacto de retro sale, establishing that ownership transfers by operation of law upon failure to redeem, without need of judicial consolidation.

• "notwithstanding Article 1607, the recording in the Registry of Property of the consolidation of ownership of the vendee is not a condition sine qua non to the transfer of ownership." — Quoted from Spouses Cruz vs. Leis, clarifying that Article 1607 is merely a registration requirement and does not impair title already vested in the vendee a retro by operation of law.

• Titong vs. Court of Appeals, 350 Phil. 544 (1998) — Controlling precedent on the distinction between quieting of title and accion reivindicatoria; followed for the proposition that physical intrusion is not a ground for quieting of title, leading to the reclassification of petitioners' complaint.
• Spouses Cruz vs. Leis, 384 Phil. 303 (2000) — Controlling precedent on Article 1607; followed for the holding that non-compliance with Article 1607 does not impair the vendee a retro's title or ownership, as the method prescribed is merely for registering the consolidated title.
• Delfin vs. Billones, 519 Phil. 720 (2006) — Cited for the presumption of validity of duly executed contracts and the requirement that fraud must be specifically alleged and proved; applied to uphold the notarized deeds and reject Concepcion's unsubstantiated fraud claims.
• Altres vs. Empleo, 594 Phil. 246 (2008) — Cited for the rule on substantial compliance with verification and certification against forum shopping when petitioners share a common interest and invoke a common cause of action; applied to uphold the sufficiency of three signatories out of eight petitioners.

• Article 1607, Civil Code — Provides that consolidation of ownership in the vendee by virtue of the vendor's failure to repurchase shall not be recorded in the Registry of Property without a judicial order, after the vendor has been duly heard. The Court clarified that this is merely a registration requirement, not a condition sine qua non to the transfer of ownership, and that non-compliance therewith is not proof of fraud.
• Articles 476 and 477, Civil Code — Govern actions for quieting of title. Article 476 defines a cloud on title and authorizes an action to remove it; Article 477 requires the plaintiff to have legal or equitable title to or interest in the real property. The Court parsed these provisions to identify two indispensable requisites for quieting of title and to distinguish it from accion reivindicatoria.
• Article 1601, Civil Code — Defines conventional redemption as taking place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with Article 1616 and other stipulations agreed upon. Cited in support of the pacto de retro sale framework.
• Article 712, Civil Code — Enumerates the modes of acquiring ownership, including by operation of law. Cited to support the proposition that registration is not a mode of acquiring ownership and that Isagani's title vested by operation of law.
• Article 2088, Civil Code — Prohibits the creditor from appropriating things given by way of pledge or mortgage (pactum commissorium). Cited to explain the rationale behind Article 1607 as a countermeasure against simulated pacto de retro sales.
• Rule 7, Section 5, Rules of Court — Governs the certification against forum shopping. The Court found substantial compliance where only three of eight petitioners signed, given their common interest and common cause of action.
• Rule 63, Rules of Court — Governs the special civil action for quieting of title and declaratory relief. The Court distinguished this remedy from ordinary civil actions, noting its declaratory nature and the prerequisite that no breach or violation has occurred.
• Rule 45, Revised Rules of Court — Governs Petition for Review on Certiorari, the mode of review invoked by petitioners. The Court noted that while it is not a trier of facts, it may review factual questions when the RTC and CA findings conflict.

Leonen, SAJ. (Chairperson), Lazaro-Javier, J. Lopez, and Kho, Jr., JJ., concurred.