Delos Santos vs. Abejon (G.R. No. 215820, March 20, 2017) (CASE DIGEST)

Facts – 

Erlinda Delos Santos and her late husband, Pedro, secured a P100,000 loan from Erlinda’s sister, Teresita Abejon, via a mortgage annotated on their property (TCT No. 131753). After Pedro’s death, a Deed of Sale and Release of Mortgage were executed in 1992, resulting in the cancellation of TCT No. 131753 and issuance of TCT No. 180286 to Teresita. Respondents (Abejon) subsequently constructed a three-storey building on the land. Respondents sued Petitioners (Delos Santos) to collect the loan and construction costs.

Crucially, during the pre-trial proceedings, the parties stipulated and admitted that: (a) the Deed of Sale and Release of Mortgage were forged and null and void; (b) TCT No. 180286 must be cancelled and TCT No. 131753 reinstated; (c) the P100,000 loan still subsists; and (d) respondents paid for the P2,000,000 building, which petitioners currently occupy. Due to these stipulations, the RTC limited the issue to damages and attorney’s fees.

Issues – Identify the main legal questions resolved by the Supreme Court.

1. Whether the parties are bound by the admissions and stipulations made during the mandatory pre-trial proceedings.
2. Whether the courts a quo (RTC and CA) correctly awarded specific liabilities (loan, construction costs, attorney’s fees) without proper factual determination, particularly regarding the application of the rules on accession.
3. Whether the award of attorney’s fees was justified.

Ruling – 

“WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated March 19, 2014 and the Resolution dated December 11, 2014 of the Court of Appeals in CA-G.R. CV No. 96884 are hereby AFFIRMED with MODIFICATIONS as follows: ( a ) The Deed of Sale and the Release of Mortgage both dated July 8, 1992 are declared NULL and VOID; ( b ) The Register of Deeds of Makati City is ordered to CANCEL Transfer Certificate of Title No. 180286 in the name of Teresita D. Abejon, married to Alberto S. Abejon, and REINSTATE Transfer Certificate of Title No. 131753 in the name of Pedro Delos Santos and Erlinda Dinglasan-Delos Santos, and restore the same to its previous state before its cancellation, i.e., with the mortgage executed by the parties annotated thereon; and ( c ) The entire fourth paragraph of the dispositive portion of the Decision dated March 19, 2014 of the Court of Appeals is hereby SET ASIDE, and in lieu thereof: I. The P100,000.00 loan obligation is DECLARED to be the liability of the conjugal partnership of petitioner Erlinda Dinglasan Delos Santos and her deceased husband Pedro Delos Santos which may be recovered by herein respondents in accordance with this Decision; II. Petitioner Erlinda Dinglasan Delos Santos is ORDERED to return to respondents the amount of P50,000.00 representing the additional consideration Teresita D. Abejon paid for in the sale, with legal interest of six percent (6%) per annum from the finality of this Decision until fully paid; III. For the purpose of determining the proper indemnity for the 3-storey building, the case is REMANDED to the Regional Trial Court of Makati City, Branch 132 for further proceedings consistent with the proper application of Articles 448, 453, 546, and 548 of the Civil Code, as applied in existing jurisprudence; and IV. The award of attorney’s fees and litigation expenses in the amount of P100,000.00 is DELETED. SO ORDERED.“

Essential Elements of Jurisprudence – 

1. Binding Nature of Pre-Trial Stipulations: A pre-trial is a mandatory procedural device intended to clarify and limit the basic issues raised by the parties, paving the way for a less cluttered trial and the speedy disposition of cases. The parties are bound to honor the admissions and/or stipulations they made during the pre-trial.
2. Requirement for Remand: When the proper application of substantive law (such as the rules on accession under the Civil Code, where both parties acted in bad faith, treated as good faith) requires the determination of necessary and useful expenses (Articles 546 and 548) or the relative value of the land versus the improvement (Article 448), and these facts are not yet established, the case must be remanded to the court a quo (the RTC) for further proceedings to gather the necessary data.
3. Attorney’s Fees (Remedial/Damages): The general rule is that attorney’s fees cannot be recovered as part of damages because no premium should be placed on the right to litigate. The power to award attorney’s fees under Article 2208 of the Civil Code demands factual, legal, and equitable justification, and the award must be deleted when such justification is absent.

Sample Q&A – Create one exam-style question and answer that captures the core rationale of the case, tying it to several provisions of law (cite the provisions when applicable).

Question:

A dispute involving property was filed before the RTC. During the mandatory pre-trial conference, the parties admitted to the nullity of the Deed of Sale forming the basis of the title dispute, stipulated that a loan obligation subsists, and acknowledged the existence of the improvements made by one party on the land of the other. Based on these stipulations, the RTC issued a final monetary award for the improvements. The Supreme Court later reviewed the case and found that although both parties were in bad faith concerning the improvements, the RTC prematurely fixed the indemnity award.

What is the controlling procedural principle regarding admissions during pre-trial, and what is the proper action the Supreme Court must take regarding the indemnity award, citing the relevant remedial and substantive laws?

Answer:

Controlling Procedural Principle (Rules of Court): A pre-trial is a mandatory procedural innovation aimed at the speedy disposition of cases and simplifying issues. Once made, the parties are bound to honor the admissions and/or stipulations they made during the pre-trial. In this case, the nullity of the title and the existence of the loan were settled facts, preventing surprise and maneuver.

Proper Action by the Supreme Court (Remedial Law and Civil Law): The Supreme Court must REMAND the case to the Regional Trial Court for further proceedings. This is necessary because while the substantive law governing the situation—Articles 448 and 453 of the Civil Code (Rules on Accession, treating both bad faith parties as if they were in good faith)—gives the landowner (Petitioners) the option to either appropriate the improvements after indemnification or compel the builder (Respondents) to buy the land, the exercise of this option requires factual determinations. The RTC must determine the necessary and useful expenses (pursuant to Articles 546 and 548 of the Civil Code) or the current market value of the land relative to the improvements to properly implement the judicial decree. Remand is required when further factual findings are essential for the proper application of substantive law.

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