Something into Nothing: The Peril of Not Accepting A Donation Promptly

The donee’s non-acceptance (or belated acceptance) of a donation will make the donation invalid.

Sometime in 1985, a certain Esperanza Maglunob-Dalisan executed an Affidavit dated June 9, 1986 (the Affidavit) whereby she “renounced, relinquished, waived and quitclaimed all her rights, share, interest and participation whatsoever” over a parcel of land in favor of Elvira Arangote and her husband, Ray.  The Arangotes built a house on the property.  Elvira was able to subsequently obtain an Original Certificate of Title over the property.

Subsequently, certain heirs of Martin Maglunob (the Heirs) entered the property, which compelled the Arangotes to file an action for Quieting of Title, Declaration of Ownership and Possession, Damages with Preliminary Injunction, and Issuance of Temporary Restraining Order before the Municipal Circuit Trial Court (MCTC).

In their Complaint, the Arangotes claim that:

  • Esperanza inherited the property from her uncle Victorino Sorrosa by virtue of a notarized Partition Agreement dated 29 April 1985, executed by the latter’s heirs.
  • Esperanza executed an Affidavit renouncing her rights over the property in favor of Elvira.
  • Esperanza declared the property in her name for real property tax purposes, as evidenced by Tax Declaration No. 16218 (1985).

On the other hand, in their answer to the Complaint, the Heirs claim that:

  • they co-owned the property with Esperanza. They claim that Esperanza and her siblings, Tomas and Inocencia, inherited the property, in equal shares, from their father Martin Maglunob (Martin I). When Tomas and Inocencia passed away, their shares passed on by inheritance to respondents Martin II and Romeo, respectively. Hence, the property was co-owned by Esperanza, respondent Martin II (together with his wife Lourdes), and respondent Romeo, each holding a one-third pro-indiviso share therein. Thus, Esperanza could not validly waive her rights and interest over the entire subject property in favor of the Arangotes.
  • the Arangotes, by means of fraud, undue influence and deceit were able to make Esperanza, who was already old and illiterate, affix her thumbmark to the Affidavit, wherein she renounced all her rights and interest over the subject property in favor of the Arangotes.

The Heirs therefore asked the court to declare the OCT issued in Elvira’s name be declared null and void insofar as their two-thirds shares are concerned.

The MCTC rendered a decision in favor the Arangotes, but the Regional Trial Court (RTC) reversed the MCTC.  On appeal to the Court of Appeals (CA), the CA affirmed the RTC decision.

Before the Supreme Court, Elvira contends that:

  • OCT No. CLOA-1748 was issued in her name on 26 March 1993 and was registered in the Registry of Deeds of Aklan on 20 April 1993. From 20 April 1993 until the institution of Civil Case No. 156 on 10 June 1994 before the MCTC, more than one year had already elapsed. Considering that a Torrens title can only be attacked within one year after the date of the issuance of the decree of registration on the ground of fraud and that such attack must be through a direct proceeding, it was an error on the part of the RTC and the Court of Appeals to declare OCT No. CLOA-1748 null and void;
  • the RTC and the Court of Appeals committed a mistake in declaring null and void the Affidavit dated 9 June 1986 executed by Esperanza, waiving all her rights and interest over the subject property in favor of Elvira and her husband. Esperanza’s Affidavit is a valid and binding proof of the transfer of ownership of the subject property in Elvira’s name, as it was also coupled with actual delivery of possession of the property to Elvira and her husband. The Affidavit is also proof of good faith on the part of Elvira and her husband;
  • assuming for the sake of argument, that Esperanza’s Affidavit is null and void, Elvira and her husband had no knowledge of any flaw in Esperanza’s title when the latter relinquished her rights to and interest in the property in their favor. Hence, Elvira and her husband can be considered as possessors in good faith and entitled to the rights provided under Articles 448 and 546 of the Civil Code.
The Supreme Court agreed with the RTC and the CA and held that the petition filed by Elvira is not meritorious.

Invalidity of the OCT

According to the Supreme Court, the judicial action required to challenge the validity of title is a direct attack, not a collateral attack. Section 48 of Presidential Decree No. 1529 states: “A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law.”

The Court noted that in the Heir’s Answer to the Complaint for Quieting of Title filed by the Arangotes before the MCTC, the Heirs included a Counterclaim wherein they repleaded all the material allegations in their affirmative defenses, the most essential of which was their claim that Elvira and her husband — by means of fraud, undue influence and deceit — were able to make their grand aunt, Esperanza, who was already old and illiterate, affix her thumbmark to the Affidavit.  In addition, the Heirs maintained in their Answer that as the Arangotes were not tenants either of Esperanza or of the Heirs, the Department of Agrarian Reform could not have validly issued in favor of Elvira OCT No. CLOA-1748. Thus, the Heirs prayed, in their counterclaim in Civil Case No. 156 before the MCTC, that OCT No. CLOA-1748 issued in the name of Elvira be declared null and void, insofar as their two-thirds shares in the property are concerned.

The Court ruled that a “counterclaim is considered a new suit in which the defendant is the plaintiff and the plaintiff in the complaint becomes the defendant. It stands on the same footing as, and is to be tested by the same rules as if it were, an independent action.” Given the allegations in the counterclaim, the Court ruled that: “respondents’ Answer with Counterclaim was a direct attack on petitioner’s certificate of title.”

In this regard, the Supreme Court affirmed the findings of the RTC and the Court of Appeals as regards the origin of the subject property and the fact that the Heirs, with their grand aunt Esperanza, were co-heirs and co-owners of the property. According to the Court:

“it is clear from the records that the subject property was not Esperanza’s exclusive share, but also that of the other heirs of her father, Martin I. Esperanza expressly affixed her thumbmark to the Deed of Extrajudicial Settlement of July 1981 not only for herself, but also on behalf of the other heirs of Martin I. Though in the Partition Agreement dated 29 April 1985 Esperanza affixed her thumbmark without stating that she was doing so not only for herself, but also on behalf of the other heirs of Martin I, this does not mean that Esperanza was already the exclusive owner thereof. The evidence shows that the subject property is the share of the heirs of Martin I.”

The Court also stated that the language of the affidavit shows that the Affidavit she executed in favor of Elvira and her husband on 6 June 1985 was worded as follows:

” That I hereby renounce, relinquish, waive and quitclaim all my rights, share, interest and participation whatsoever in the [subject property] unto the said Sps. Ray Mars Arangote and Elvira T. Arangote, their heirs, successors, and assigns including the improvement found thereon. . .”

According to the Court:

Logically, if Esperanza fully owned the subject property, she would have simply waived her rights to and interest in the subject property, without mentioning her “share” and “participation” in the same. By including such words in her Affidavit, Esperanza was aware of and was limiting her waiver, renunciation, and quitclaim to her one-third share and participation in the subject property.

Invalidity of the Affidavit

The Court also ruled that the affidavit executed by Esperanza is really a donation and did not comply with the requirements for a valid donation.  Citing Article 749 of the Civil Code, the Court stated:

there are three requisites for the validity of a simple donation of a real property, to wit: (1) it must be made in a public instrument; (2) it must be accepted, which acceptance may be made either in the same Deed of Donation or in a separate public instrument; and (3) if the acceptance is made in a separate instrument, the donor must be notified in an authentic form, and the same must be noted in both instruments. . .
In the present case, the said Affidavit, which is tantamount to a Deed of Donation, met the first requisite, as it was notarized; thus, it became a public instrument. Nevertheless, it failed to meet the aforesaid second and third requisites. The acceptance of the said donation was not made by the petitioner and her husband either in the same Affidavit or in a separate public instrument. As there was no acceptance made of the said donation, there was also no notice of the said acceptance given to the donor, Esperanza. Therefore, the Affidavit executed by Esperanza in favor of petitioner and her husband is null and void.
The subsequent notarized Deed of Acceptance dated 23 September 2000, as well as the notice of such acceptance, executed by the petitioner did not cure the defect. Moreover, it was only made by the petitioner several years after the Complaint was filed in court, or when the RTC had already rendered its Decision dated 12 September 2000, although it was still during Esperanza’s lifetime. Evidently, its execution was a mere afterthought, a belated attempt to cure what was a defective donation.

It is true that the acceptance of a donation may be made at any time during the lifetime of the donor. And granting arguendo that such acceptance may still be admitted in evidence on appeal, there is still need for proof that a formal notice of such acceptance was received by the donor and noted in both the Deed of Donation and the separate instrument embodying the acceptance. At the very least, this last legal requisite of annotation in both instruments of donation and acceptance was not fulfilled by the petitioner. Neither the Affidavit nor the Deed of Acceptance bears the fact that Esperanza received notice of the acceptance of the donation by petitioner. For this reason, even Esperanza’s one-third share in the subject property cannot be adjudicated to the petitioner.

No Possession in Good Faith

The Court also ruled that the Arangotes cannot be deemed possessors in food faith under the Civil Code, which provides:

Art. 526. He is deemed a possessor in good faith who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.

He is deemed a possessor in bad faith who possesses in any case contrary to the foregoing.

Mistake upon a doubtful or difficult question of law may be the basis of good faith.

Art. 1127. The good faith of the possessor consists in the reasonable belief that the person from whom he received the thing was the owner thereof, and could transmit his ownership

The Court explained:

Possession in good faith ceases from the moment defects in the title are made known to the possessor by extraneous evidence or by a suit for recovery of the property by the true owner. Every possessor in good faith becomes a possessor in bad faith from the moment he becomes aware that what he believed to be true is not so.

In the present case, when respondents came to know that an OCT over the subject property was issued and registered in petitioner’s name on 26 March 1993, respondents brought a Complaint on 7 August 1993 before the Lupon of Barangay Maloco, Ibajay, Aklan, challenging the title of petitioner to the subject property on the basis that said property constitutes the inheritance of respondent, together with their grandaunt Esperanza, so Esperanza had no authority to relinquish the entire subject property to petitioner. From that moment, the good faith of the petitioner had ceased.

The Court also held that the Arangotes are not builders in good faith.

Moreover, the petitioner cannot be considered a builder in good faith of the house on the subject property. In the context that such term is used in particular reference to Article 448 of the Civil Code, a builder in good faith is one who, not being the owner of the land, builds on that land, believing himself to be its owner and unaware of any defect in his title or mode of acquisition.

The various provisions of the Civil Code, pertinent to the subject, read:

Article 448. The owner of the land on which anything has been built, sown, or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such a case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof.

Article 449. He who builds, plants, or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity.

Article 450. The owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of the work, or that the planting or sowing be removed, in order to replace things in their former condition at the expense of the person who built, planted or sowed; or he may compel the builder or planter to pay the price of the land, and the sower the proper rent.

Under the foregoing provisions, the builder in good faith can compel the landowner to make a choice between appropriating the building by paying the proper indemnity or obliging the builder to pay the price of the land. The choice belongs to the owner of the land, a rule that accords with the principle of accession, i.e., that the accessory follows the principal and not the other way around. Even as the option lies with the landowner, the grant to him, nevertheless, is preclusive. He must choose one. He cannot, for instance, compel the owner of the building to instead remove it from the land. In order, however, that the builder can invoke that accruing benefit and enjoy his corresponding right to demand that a choice be made by the landowner, he should be able to prove good faith on his part.

Good faith, here understood, is an intangible and abstract quality with no technical meaning or statutory definition, and it encompasses, among other things, an honest belief, the absence of malice and the absence of design to defraud or to seek an unconscionable advantage. An individual’s personal good faith is a concept of his own mind and, therefore, may not conclusively be determined by his protestations alone. It implies honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry. The essence of good faith lies in an honest belief in the validity of one’s right, ignorance of a superior claim, and absence of intention to overreach another. Applied to possession, one is considered in good faith if he is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.

In this case, the subject property waived and quitclaimed by Esperanza to the petitioner and her husband in the Affidavit was only covered by a tax declaration in the name of Esperanza. Petitioner did not even bother to look into the origin of the subject property and to probe into the right of Esperanza to relinquish the same. Thus, when petitioner and her husband built a house thereon in 1989 they cannot be considered to have acted in good faith as they were fully aware that when Esperanza executed an Affidavit relinquishing in their favor the subject property the only proof of Esperanza’s ownership over the same was a mere tax declaration. This fact or circumstance alone was enough to put the petitioner and her husband under inquiry. Settled is the rule that a tax declaration does not prove ownership. It is merely an indicium of a claim of ownership. Payment of taxes is not proof of ownership; it is, at best, an indicium of possession in the concept of ownership. Neither tax receipts nor a declaration of ownership for taxation purposes is evidence of ownership or of a right to possess realty when not supported by other effective proofs.

Elvira T. Arangote vs Sps. Martin and Lourdes S. Maglunob and Romeo Salido, G.R. No. 178906,  February 18, 2009.