THE NATIONAL TREASURER OF THE PHILIPPINES, PETITIONER, VS. PAULINA PEREZ VDA. DE MEIMBAN AND COURT OF APPEALS, RESPONDENTS.

This petition seeks the reversal of the decision of the Court of Appeals
(now Intermediate Appellate Court), dated June 16, 1982, which affirmed
the decision of the Court of First Instance of Pangasinan ordering
herein petitioner to pay the private respondent P50,000.00 as damages or
compensation out of the Assurance Fund.

The facts as stated in the decision of the lower court are as follows:

“Filomena Primicias, during her lifetime, was the owner of a
parcel of land situated in barrio San Vicente, Municipality of Alcala,
Pangasinan, designated as Lot No. 2-C, Plan PSU-109394-Amd. 2, with an
area of 613,916 square meters, and registered in her name under OCT
10318 (Exhibit B). On November 24, 1958, she executed a public document
styled ‘Donation Mortis Causa” (Exhibit A) over a 10-hectare
portion of the said land located on the southeastern part thereof in
favor of her daughter, plaintiff Paulina Perez, who accepted the
donation in the same instrument. On November 26, 1958, the document was
duly registered and annotated on the memorandum of encumbrances of OCT
10318.

“The records disclose that even prior to the execution of the
aforestated deed of donation, Filomena Primicias had sold to certain
third parties several portions of Lot 2-C located along the southwestern
part thereof. Lot 2-C was subsequently subdivided segregating the
portions thus sold, as evidenced by subdivision plan PSU­-52185 (Exhibit
4-C); and on March 28, 1963, the Register of Deeds of Pangasinan issued
TCT 43170 (Exhibit 4) in the name of Filomena Primicias covering the
remaining unsold portion of the said land, designated as Lot 2-C-16,
with an area of 588,244 square meters. However, the Register of Deeds,
through negligence or oversight, failed to carry over in TCT 43170 the
plaintiff’s deed of donation which had been annotated on OCT No. 10318.

“Thereafter Filomena Primicias obtained from defendant Peoples
Bank and Trust Co. (PBTC) two loans in the amounts of P15,000.00 and
P28,000.00 which were secured by Lot 2-C-16, as evidenced by the real
estate mortgages dated April 8 and June 10, 1963, respectively (Exhibits
6 and 7). These mortgage deeds were duly registered and the
corresponding memoranda thereof annotated on TCT No. 43170 on April 8
and June 10, 1963, respectively.

“”Filomena Primicias died on June 15, 1965 leaving her said
obligation unsettled. On July 15, 1968, PBTC instituted foreclosure
proceedings, and in due course, the plaintiff, as one of the heirs of
the deceased, was sent a copy of the notice of extra-judicial sale.
Whereupon plaintiff made the necessary in­quiries in the Office of the
Register of Deeds of Pangasinan and discovering that OCT No. 10318 has
been cancelled and, in lieu thereof, TCT No. 43170 (or 43710) had been
issued pursuant to the subdivision agreement entered into by Filomena
Primicias and the transferees of portions of the original Lot 2-C; and
that the inscription of her deed of donation mortis causa in
OCT No. 10318 had not been carried over into TCT No. 43710. To protect
her interest, the plaintiff, on August 1, 1968, registered anew the deed
of donation mortis causa (Exhibit C) and caused the entry of an adverse claim on said TCT.

“On August 7, 1968, the property was sold at public auction; and
the PBTC, as highest bidder, was issued the corresponding Sheriff’s
Certificate of Sale (Exhibit 8).

“On June 17, 1969, plaintiff instituted the instant action against
the PBTC and the Register of Deeds of Pangasinan, seeking par­tial
annulment of the Sheriff’s Certificate of Sale issued in favor of PBTC
to the extent of the 10-hectare portion donated to her.

xxx                            xxx                               xxx

“After the trial, this Court thru the Presiding Judge of Branch V,
rendered a decision in favor of the plaintiff and against the defendant
bank, ordering the partial annulment of the Sheriff’s Certificate of
Sale dated August 7, 1968, executed in favor of PBTC to the extent of 10
hectares being claimed by plaintiff and ordering defendant PBTC to
immediately segregate and reconvey to the plaintiff the said 10 hectares
portion of Lot 2-C-16 in conformity and in accordance with the terms
and conditions of the deed of donation inter vivos and, in the
alternative ordering defendant PBTC, in the event that reconveyance
thereof is not possible, to pay the plaintiff the sum of P10,000.00
representing the fair market value of her claims plus interest thereon
computed at the rate of 6% per annum from the date of the filing of the
complaint until finally paid and to pay the sum of P1,000.00 as
attorney’s fees and to pay the costs. (Idem. pp-5-6).

“However, on appeal by the defendant PBTC, the Court of Appeals
reversed and set aside the decision of this Court in Civil Case No.
U-2128 and, accordingly, dismissed the plaintiff’s complaint. In
reversing and setting aside the decision of Branch V of this Court in
Civil Case No. U-2128, the Court of Appeals held that ‘neither’ the
honest mistake and inadvertence of the Register of Deeds nor the absence
of negligence on the part of the appellee (now plaintiff herein) could
pre­judice the rights of appellant bank (PBTC) as an innocent mortgagee
for value and that the remedy of the appellee was to go against the
Assurance Fund as provided for by Section 101 of Act 496. x x x”

On the basis of the above findings of the appellate court, the trial
court rendered a decision in favor of the private respondent and against
herein petitioner, ordering the latter to pay the former out of the
Assurance Fund, in the amount of P50,000.00 as damages or compensation.

On Appeal, the Court affirmed the findings of the lower court, hence, this petition.

Petitioner assigns the following errors:

I

WHETHER RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT THE DEED OF DONATION MORTIS CAUSA EXECUTED BY FILOMENA PRIMICIAS IN FAVOR OF PAULINA PEREZ VDA. DE MEIMBAN IS A DONATION INTER VIVOS, AND IN CONSIDERING THAT THERE WAS A VALID TRANSFER TO PAULINA PEREZ VDA. DE MEIMBAN WHO COULD RECOVER FROM THE ASSURANCE FUND.

II

WHETHER RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THE PRIVATE
RESPONDENT NEGLIGENT FOR NOT SEGREGATING THE TEN-HECTARE PORTION OF THE
LAND DONATED TO HER.

III

WHETHER RESPONDENT COURT OF APPEALS ERRED IN NOT CONSIDERING THE DEFENSE OF PRESCRIPTION.

IV

WHETHER THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE ASSURANCE FUND LIABLE.

The principal issue to be determined in the present petition is the nature of the donation, whether it is a donation inter vivos or a donation mortis causa.

Whether a donation is inter vivos or mortis causa
depends upon the nature of the disposition made. Did the donor intend
to transfer the ownership of the property donated upon the execution of
the donation? If this is so, as reflected from the provisions contained
in the donation, then it is inter vivos; otherwise, it is merely mortis causa,
or made to take-effect after death. (Castro v. Court of Appeals, 27
SCRA 1076, 1082, citing Howard v. Padilla and Court of Appeals, G.R.
Nos. L-7064 and L-7098, April 22, 1955).

According to the petitioner, the donation in question is mortis causa
since it is clear from the provisions thereof that ownership and
control of the donated property would be transferred to the private
respondent only upon the death of the donor. This being so, therefore
the deed of donation should have complied with the formalities of a will
in order to become valid.

The donation provides:

“That for and in consideration of the love and affection which the
DONOR has for the DONEE, the said Donor by these presents does hereby
give, transfer, and convey unto the DONEE, her heirs and assigns a
portion of ONE HUNDRED THOUSAND (100,000) SQUARE METERS, on the
southwestern part Pro-indiviso of the above described property. (The
portion herein donated is within Lot 2-B of the proposed amendment Plan
Subdivision of Lots Nos. I and 2, Psu-109393), with all the buildings
and improvements thereon, to become effective upon the death of the DONOR.” (Italics supplied).

It is crystal clear from the above-quoted deed of donation that the
donor did not intend to transfer the ownership much less, the possession
of the donated property to the donee until after the former’s death as
evidenced not only by the caption of the deed but more importantly, by
what was expressly provided in the donation itself. That the donor
retained the ownership of the property was furthermore established by
the fact that the donor, after executing the above deed, mortgaged the
same to the PBTC and until her death, did not try to fulfill her
obligation to the latter in order to free the property from the mortgage
lien.

As the donation is in the nature of a mortis causa disposition,
the formalities of a will should have been complied with under Article
728 of the Civil Code, otherwise, the donation is void and would produce
no effect. As we have held in Alejandro v. Geraldez (78 SCRA
245, 253), “If the donation is made in contemplation of the donor’s
death, meaning that the full or naked owner­ship of the donated
properties will pass to the donee because of the donor’s death, then it
is at that time that the donation takes effect, and it is a donation mortis causa which should be embodied in a last will and testament. (Citing Bonsato v. Court of Appeals, 95 Phil. 481).”

The donation in the case at bar was only embodied in a public instrument
and was not executed in accordance with the formalities of a will.
Therefore, it could not have transferred ownership of the disputed
property to the private respondent and its subsequent annotation of
adverse claim in Transfer Certificate of Title No. 43710 did not produce
any effect whatsoever. Consequently, the private respondent cannot
claim the property, especially after the same had been foreclosed and
sold at public auction in favor of PBTC. Necessarily therefore, no
damages can also be awarded to said respondent from the Assurance Fund
since as far as the law is concerned, no donation existed which the
Register of Deeds failed to annotate on the new title of the property.

Inasmuch as all the other issues raised by herein petitioner are anchored on the vital question of whether the donation is inter vivos or mortis causa, we deem it unnecessary to pass upon these other issues.

WHEREFORE, the petition is GRANTED and the decisions of the Court of
Appeals dated June 16, 1982 and the Court of First Instance dated July
3, 1980 are hereby REVERSED and SET ASIDE. The complaint filed against
the petitioner is DISMISSED. No costs.

SO ORDERED.

Teehankee, Acting C.J., Melencio-Herrera, Plana, Relova, and De la Fuente, JJ., concur.