G.R. No.

224466 (Formerly UDK-15574), March 27, 2019

KAREN NUÑEZ* VITO, LYNETTE** NUÑEZ MASINDA, WARREN NUÑEZ, AND ALDEN*** NUÑEZ,

Vicentico borrowed P30,000.00 from Rosita Moises and as security, executed a real estate mortgage
over his property. Since Rosita had no money, the funds came from Norma Moises-Palma, Rosita's
daughter. According to petitioners, the P30,000.00 loan of Vicentico was subsequently paid as evidenced
by an Affidavit Authorizing Release of Mortgage.

Upon Vicentico's death on September 27, 1994, the subject lot was transmitted to his heirs, namely:
petitioners Karen Nuñez Vito (Karen), Warren Nuñez (Warren), Lynette Nuñez Macinda (Lynette), Alden
Nuñez (Alden) (collectively, petitioners) and Placida Hisole10 Nuñez (Placida), Vicentico's surviving
spouse.11 Each heir had an undivided 1/5 share in the subject lot equivalent to 85.8 12 square meters.13

Placida died on August 1, 1997 and her 1/5 share was inherited equally by her heirs. Thus, petitioners
each had a pro indiviso 1/4 share in the subject lot equivalent to 107.25 square meters.14

On June 28, 1995, Norma was able to have all petitioners, except Alden, sign a Deed of Adjudication and
Sale15 (DAS) wherein petitioners purportedly sold to Norma their respective pro indiviso shares in the
subject lot for P50,000.00, but the DAS reflected P30,000.00 as the consideration in order to reduce the
amount to be paid for capital gains tax and documentary stamp tax. After the execution of the DAS,
Norma immediately took possession of the subject lot. 16

Instead of paying cash, Norma executed a Promissory Note 17 (PN) on July 1, 1995 in favor of petitioners
whereby she obligated herself to pay P50,000.00, which "amount represents the cost of a parcel of land
[Norma] bought from them described as follows: TITLE NO. T-16612 Lot No 2159-A situated at Poblacion
Tabuc Mambusao, Capiz[,] [containing an area of FOUR HUNDRED TWENTY NINE (429) SQUARE
METERS, more or less"18 on or before July 1, 1998, without interest.19 Upon prodding of petitioners,
Norma executed an Acknowledgment of Debt20 (AOD) dated February 22, 2007, whereby she admitted
that she owed petitioners P50,000.00, representing the purchase price of the DAS. 21

Despite non-payment of the purchase price and the absence of Alden's signature on the DAS, Norma
was able to cause the registration of the document with the Register of Deeds of Capiz and TCT T-
3546022 was issued to her on August 2, 2005.23

On July 10, 2006, Alden instituted a case against respondent for Annulment of Transfer Certificate of Title
No. T-35460, Declaring Deed of Adjudication and Sale Null and Void, Partition, Reconveyance and
Recovery of Possession of a Portion of Land with Damages24 docketed as Civil Case No. 499 before the
MTC. During the pendency of this case, Alden and Norma entered into a Compromise Agreement
(Compromise Agreement) on September 7, 2006, whereby Alden agreed to respect Norma's ownership
and possession of 85.8 square meters of the subject lot, the share being claimed by him. 25

About a year later, or on August 15, 2007, petitioners Karen, Warren and Lynette, represented by their
brother and attorney-in-fact Alden, filed against Norma a case for Declaration of Nullity of Deed of
Adjudication and Sale, Cancellation of Transfer Certificate of Title No. T-35460, Recovery of Ownership
and/or Possession of Lot No. 2159-A and Damages26 before the MTC. After trial on the merits, the MTC,
on February 27, 2009 rendered a Decision in favor of petitioners. Norma filed a Notice of Appeal on April
22, 2009 which was given due course by the MTC. On October 19, 2009, the RTC rendered a Decision
setting aside the MTC's Decision on the ground that Alden, who was merely acting as attorney-in-fact of
Karen, Warren and Lynette, was not included as indispensable party. The RTC ordered the MTC to
include Alden as an indispensable party and to conduct further proceedings on the case. 27
On February 19, 2010, Karen, Warren and Lynette, through Alden, and Alden, in his own capacity, filed
an amended complaint before the MTC for Declaration of Nullity of Deed of Adjudication and Sale,
Cancellation of Transfer Certificate of Title No. T-35460, Recovery of Ownership and/or Possession of
Lot No. 2159-A and Damages.28 The allegations of the amended complaint are basically the same as
those of the original, except the addition of Alden as an indispensable party. 29 Even up to the filing of the
amended complaint, Norma was not able to pay the consideration of P50,000.00. 30

1. whether the CA, in ruling that the transaction between petitioners and Norma is dacion en pago, erred
in applying Article 1245 of the Civil Code; and

In short, [the defendant failed to render proof that she paid the purchase price of lot No. 2159-A, because,
as] the burden of proof had already shifted [upon her] to prove she [had] paid the [consideration], she
failed to introduce [any evidence that would tend] to prove [the payment of the purchase price.] x x x 48
Having ruled that no consideration was ever given to plaintiffs (herein petitioners) by defendant (Norma),
the DAS was considered by the MTC as null and void on the ground that a contract of sale is void and
produces no effect whatsoever where the price, which appears thereon paid, has in fact never been paid
by the vendee to the vendor.49
It can be gathered from the last paragraph of the DAS wherein the Real Estate Mortgage (REM) which
Vicentico executed was "cancell[ed] and considered null and void and no effect" that a dation in payment
might have been intended by the parties therein. Under Article 1245 of the Civil Code, there is dation in
payment when property is alienated to the creditor in satisfaction of a debt in money and is governed by
the law of sales.

While the DAS seems to suggest a dation in payment, the subsequent actuations of the parties,
especially Norma, negate the same or the contemplated offset. If the DAS was intended to be a dation in
payment, the execution of the PN and AOD by Norma as well as the Compromise Agreement by Alden
and Norma on September 7, 2006, whereby Alden agreed, for an agreed consideration, to respect
Norma's ownership and possession of 85.8 square meters of the subject lot, the share being claimed by
him, shows an opposite declaration, i.e., there was no dation in payment or offset.

If the intention by the parties was that the heirs of Vicentico were ceding the subject lot to Norma as
payment of the P30,000.00 loan of their father to Rosita, it would be out of the ordinary for Norma to
execute a PN two days after the DAS, acknowledging her indebtedness of the P50,000.00 to them,
promising to pay the same within a specified period, and declaring against her interest that the said
amount represented the "cost" of the land that she bought from them. Subsequently, in 2007, it would be
unlikely for her to execute the AOD wherein she acknowledged that she owed Karen, Warren and Lynette
P50,000.00 if the consideration of the DAS was Vicentico's indebtedness of P30,000.00. Alden was no
longer included because by then Norma had already paid the P88,000.00 which she agreed to pay him
pursuant to their Compromise Agreement. And, Norma should have insisted in the case filed by Alden
against her that there was an offset of his father's loan to her, through Rosita, her mother.

Moreover, in the AARM, a duly notarized document which the heirs of Rosita executed in July 2005, they
acknowledged that: "[they] are releasing this Real Estate Mortgage, the fact being that the late Vicentico
Nuñez had already paid [their] late mother indebtedness of THIRTY THOUSAND PESOS (P30,000.00)
[and] absolving the late Vicentico Nuñez of any liabilities whatsoever." 66 Indeed, as claimed by petitioners
in the Petition, the P30,000.00 loan of their father Vicentico had been paid as duly acknowledged in a
registered public instrument by the heirs of Rosita, including Norma.

Thus, there is preponderant evidence that supports the finding that the DAS was not intended by the
parties to be a dation in payment. And, even assuming that the DAS was a dation in payment, the
documents that were subsequently executed had the effect of novating the same.

Under Article 1291 of the Civil Code, obligations may be modified by: (1) changing their object or principal
conditions; (2) substituting the person of the debtor; and (3) subrogating a third person in the rights of the
creditor.

When Norma executed the PN, AOD and Compromise Agreement, she was acknowledging that the
principal condition or stipulation on the payment of the purchase price in the DAS had been modified from
the offset or cancellation of Vicentico's indebtedness secured by the REM, without which would have
amounted to a dation in payment, to a loan payable within a certain period, which converted the
transaction to a sale on credit.

Given the foregoing, the CA erred in its finding that the transaction between the parties is a dation in
payment or dacion en pago. The MTC and RTC were, therefore, correct in considering the transaction as
a contract of sale.