SPOUSES SEGUNDO RAMOS AND FELISA VALDEZ, PETITIONERS, VS. HON. COURT OF APPEALS, LEILA VALDEZ-PASCUAL, ARACELI VALDEZ, GLICERIA VALDEZ, JUANA VALDEZ, SIMEON VALDEZ, CONRADA VALD…

Ramos versus Valdez

The Case

This is a dispute over a parcel of land in Urdaneta, Pangasinan. Spouses Segundo Ramos and Felisa Valdez, the petitioners, bought the land from Gregorio Valdez in 1948. The private respondents are Gregorio's children. They sued to quiet title, recover ownership and possession, and claim damages, insisting that their father's old sale had been undone by a compromise agreement signed in 1977 in which the spouses supposedly renounced their rights. The spouses answered that the agreement concerned a different lot altogether, and that it now casts a cloud on their own title. The case matters because it shows how a compromise agreement binds only its parties, and how a cloud on title is removed under the Civil Code.

Procedural History

The private respondents filed a complaint for quieting of title, ownership, possession, and damages, with a prayer for a writ of preliminary injunction, before the Regional Trial Court of Urdaneta, Pangasinan, Branch 48. The trial court ruled for the spouses, declaring them the lawful owners of the land by virtue of the absolute deed of sale of January 1948. The private respondents appealed, and the Court of Appeals reversed the trial court. It declared the private respondents the owners and ordered the spouses to vacate. The spouses moved for reconsideration, which the Court of Appeals denied. The spouses then came to the Supreme Court through a petition for review on certiorari.

Facts

In 1948, Gregorio Valdez sold a northern portion of his titled land, with an area of 3,036 square meters and covered by Original Certificate of Title Number 48824, to the spouses Segundo Ramos and Felisa Valdez. The absolute deed of sale was annotated at the back of the title as Entry Number 377847. Years later, the spouses bought a separate, untitled parcel from Alejandro Alcantara and applied for its registration. A certain Felipe Cabero opposed the application, claiming the southern portion of that untitled land, which Gregorio had earlier sold to him by mistake, believing it to be his own.

To untangle the problem he had created, Gregorio persuaded the spouses to give up the 3,036 square meter portion they had bought from him, in exchange for Cabero's withdrawal of his opposition. In June 1977, the spouses and Cabero signed a compromise agreement in the land registration case. The agreement recited that the spouses quitclaimed and renounced whatever rights they had in the document registered under Entry Number 377847 annotated at the back of the title of Gregorio Valdez. Gregorio's signature appears on the document, but without any designation of his capacity.

Gregorio died in 1991. The private respondents alleged that the spouses then disturbed their possession by cultivating the land and fencing it. When demands to vacate went unheeded, the private respondents sued. The spouses insisted that the renunciation referred to the southern portion of the untitled land occupied by Cabero, not to the titled northern portion they had bought, and that the agreement contained a false cause and was signed through mistake.

Issues

• Whether or not the absolute deed of sale of January 1948, annotated at the back of the certificate of title, is a cloud on the title that must be removed under the Civil Code.
• Whether or not the compromise agreement of June 1977 may be invoked by the private respondents to defeat the spouses' claim over the land.
• Whether or not the Court of Appeals erred in reversing the findings of the trial court on the intention of the parties in the compromise agreement.

Applicable Provisions

Article 476 of the Civil Code provides:

Whenever there is a cloud on title to real property or any interest therein, by reason of any instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but is in truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an action may be brought to remove such cloud or to quiet the title. An action may also be brought to prevent a cloud from being cast upon title to real property or any interest therein.

This defines the action for quieting of title and the kind of instrument that constitutes a cloud.

Article 478 of the Civil Code provides:

There may also be an action to quiet title or remove a cloud therefrom when the contract, instrument or other obligation has been extinguished or has terminated, or has been barred by extinctive prescription.

This is the ground the private respondents invoked, claiming that the deed of sale had been extinguished by the compromise agreement.

Ruling

On the first issue, the Court held that the deed of sale is not a cloud on the title. A cloud exists only when an instrument is apparently valid but is in truth invalid, ineffective, voidable, or unenforceable, or when the obligation has been extinguished. Here the deed of sale was a valid and subsisting conveyance, and the private respondents themselves relied on it as the very source of the rights they claimed had been renounced.

On the second issue, the Court ruled that the private respondents cannot assert any rights under the compromise agreement. A compromise, like any other contract, takes effect only between the parties, their assigns, and heirs. The parties to the agreement were the spouses and Felipe Cabero alone, as applicants and oppositor in the land registration case. Gregorio Valdez was not a party. His signature appears on the document, but it is not typewritten with any designation of capacity, unlike the entries for the spouses, for Cabero, and for their counsel. Segundo Ramos and a witness both testified that they did not see Gregorio sign, and no witness for the private respondents testified to having seen him sign. The agreement therefore binds only the spouses and Cabero, and cannot be used by Gregorio's children to defeat the spouses' title.

On the third issue, the Court found that the Court of Appeals erred in reversing the trial court's appreciation of the parties' intention. The trial court had found that the portion actually renounced was the southern portion of the untitled land occupied by Cabero, not the titled northern portion the spouses had bought, and that the agreement expressed the wrong intention of the parties. The Court restored the trial court's conclusion that the spouses did not renounce the land in question.

Doctrine

First, an action to quiet title under Articles 476 and 478 of the Civil Code lies only where the instrument complained of is apparently valid but in truth invalid, ineffective, voidable, or unenforceable, or where the obligation has been extinguished or barred by prescription. A valid and subsisting deed of sale is not a cloud on the title it conveys.

Second, a compromise agreement is a contract and binds only the parties to it, their assigns, and heirs. A person who is not a party to the compromise, even one who signs without any stated capacity, acquires no rights under it and cannot invoke it against a party.

Third, the findings of the trial court on the intention of the parties, when supported by the evidence, deserve great weight and should not be disturbed absent a clear showing of error.

Disposition

The petition was granted. The decision of the Court of Appeals was reversed and set aside, and the decision of the trial court declaring the spouses the lawful owners of the land was reinstated.

Remember This

Memorize this line: a compromise binds only its parties, their assigns, and heirs, so a stranger who signs without a stated capacity acquires nothing under it. Examiners use this case to test the requisites of an action to quiet title under Articles 476 and 478 of the Civil Code, and the rule that a valid deed of sale is not a cloud on title.