G.R. No. 197743 , October 18, 2022
HEIRS OF JOSE MARIANO AND HELEN S. MARIANO, ET AL. VS. CITY OF NAGA

FACTS

The petitioners, heirs of the registered owners, sought to recover possession of a five-hectare parcel of land in Naga City, which the respondent city government had occupied since 1954 based on a Deed of Donation. The Municipal Trial Court dismissed the petitioners’ complaint for unlawful detainer, but the Regional Trial Court reversed this. The Court of Appeals reinstated the dismissal. Upon appeal, the Supreme Court’s First Division, in a 2018 Decision, ruled in favor of the petitioners. It declared the 1954 Deed of Donation void due to a defective acknowledgment and the absence of the donors’ and the donee-city mayor’s signatures, rendering it a void contract. The Court also found that laches did not bar the petitioners’ claim, noting their predecessors had previously followed up on a purchase proposal, they were involved in inheritance litigation, and the property’s status was only discovered in 1997. The city was ordered to vacate and pay rentals.
The respondent filed a Motion for Reconsideration with a motion for new trial, submitting a newly discovered certified copy of the deed. The First Division denied this, finding the new copy confirmed the deed’s invalidity. The respondent then filed a Second Motion for Reconsideration, arguing laches and requesting referral to the Court En Banc due to the alleged failure to apply a precedent and the “devastating” consequences of evicting the city government from its seat.

ISSUE

The core issues were: (1) whether laches barred the petitioners’ recovery of possession, and (2) whether a second motion for reconsideration should be granted in the higher interest of justice.

RULING

The Court En Banc partially granted the second motion for reconsideration. It affirmed the finding that the Deed of Donation was void ab initio for lack of a valid acceptance by the donee-city, as the mayor’s signature was affixed days after notarization. Consequently, no ownership was transferred, and the petitioners remained the registered owners. However, the Court applied the principle of laches in equity. It ruled that the petitioners and their predecessors-in-interest, by their inaction for over six decades while the City of Naga constructed and continuously operated its city hall and other vital public buildings on the land, were guilty of laches. Their failure to assert their rights for an unreasonable length of time, while the city demonstrably relied on its possession, precluded them from recovering possession.
The Court balanced the legal right of ownership with the demands of equity and public interest. Dispossessing the city government after it had established its seat for generations would cause grave injustice and public mischief. Therefore, while the petitioners could not recover possession, they were entitled to just compensation for the property taken. The Court ordered the City of Naga to pay the petitioners just compensation, reckoned from the date of taking in 1954, plus legal interest, and exemplary damages. The case was remanded to the trial court for the determination of just compensation.