Page 1 of 8

RemLawRev1 | Civil Procedure

Topic: Indispensable Party
MWSS vs. CA
G.R. No. 126000. October 7, 1998

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM (MWSS), Petitioner, v. COURT OF APPEALS,

HON. PERCIVAL LOPEZ, AYALA CORPORATION and AYALA LAND, INC., Respondents.

G.R. No. 128520. October 7, 1998

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, Petitioner, v. HON. PERCIVAL MANDAP

LOPEZ, CAPITOL HILLS GOLF AND COUNTRY CLUB INC., SILHOUETTE TRADING CORPORATION, and
PABLO ROMAN JR., Respondents.

DECISION

MARTINEZ, J.:

These are consolidated petitions for review emanating from Civil Case No. Q-93-15266 of the Regional Trial Court
of Quezon City, Branch 78, entitled "Metropolitan Waterworks and Sewerage System (hereafter MWSS) vs. Capitol
Hills Golf & Country Club Inc. (hereafter, CHGCCI), STC (hereafter, SILHOUETTE), Ayala Corporation, Ayala Land,
Inc.(hereafter AYALA) Pablo Roman, Jr., Josefino Cenizal, Jose A. Roxas, Jesus Hipolito, Alfredo Juinio, National
Treasurer of the Philippines and the Register of Deeds of Quezon City."

From the voluminous pleadings and other documents submitted by the parties and their divergent styles in the
presentation of the facts, the basic antecedents attendant herein are as follows:

Sometime in 1965, petitioner MWSS (then known as NAWASA) leased around one hundred twenty eight (128)
hectares of its land (hereafter, subject property) to respondent CHGCCI (formerly the International Sports
Development Corporation) for twenty five (25) years and renewable for another fifteen (15) years or until the year
2005, with the stipulation allowing the latter to exercise a right of first refusal should the subject property be made
open for sale. The terms and conditions of respondent CHGCCI's purchase thereof shall nonetheless be subject to
presidential approval.

Pursuant to Letter of Instruction (LOI) No. 440 issued on July 29, 1976 by then President Ferdinand E. Marcos
directing petitioner MWSS to negotiate the cancellation of the MWSS-CHGCCI lease agreement for the disposition
of the subject property, Oscar Ilustre, then General Manager of petitioner MWSS, sometime in November of 1980
informed respondent CHGCCI, through its president herein respondent Pablo Roman, Jr., of its preferential right to
buy the subject property which was up for sale. Valuadation thereof was to be made by an appraisal company of
petitioner MWSS'choice, the Asian Appraisal Co., Inc. which, on January 30, 1981, pegged a fair market value
of P40.00 per square meter or a total of P53,800,000.00 for the subject property.

Upon being informed that petitioner MWSS and respondent CHGCCI had already agreed in principle on the
purchase of the subject property, President Marcos expressed his approval of the sale as shown in his marginal
note on the letter sent by respondents Jose Roxas and Pablo Roman, Jr. dated December 20, 1982.

The Board of Trustees of petitioner MWSS thereafter passed Resolution 36-83, approving the sale of the subject
property in favor of respondent SILHOUETTE, as assignee of respondent CHGCCI, at the appraised value given by
Asian Appraisal Co., Inc. Said Board Resolution reads:

"NOW, THEREFORE, BE IT RESOLVED, as it is hereby resolved, that in accordance with Section 3, Par. (g) of the
MWSS Charter and subject to the approval of the President of the Philippines, the sale of a parcel of land located in
Balara, Quezon City, covered by TCT No. 36069 of the Registry of Deeds of Quezon City, containing an area of
ONE HUNDRED TWENTY SEVEN (127.313) hectares more or less, which is the remaining portion of the area
under lease after segregating a BUFFER ZONE already surveyed along the undeveloped area near the treatment
plant and the developed portion of the CHGCCI golf course, to SILHOUETTE TRADING CORPORATION as
Assignee of Capitol Hills Golf & Country Club, Inc., at FORTY (P40.00) PESOS per square meter, be and is hereby
approved.

"BE IT RESOLVED FURTHER, that the General Manager be authorized, as he is hereby authorized to sign for and
in behalf of the MWSS the contract papers and other pertinent documents relative thereto."

The MWSS-SILHOUETTE sales agreement eventually pushed through. Per the Agreement dated May 11, 1983
covering said purchase, the total price for the subject property is P50,925,200, P25 Million of which was to be paid
upon President Marcos' approval of the contract and the balance to be paid within one (1) year from the transfer of
the title to respondent SILHOUETTE as vendee with interest at 12% per annum. The balance was also secured by
 Page 2 of 8
RemLawRev1 | Civil Procedure
Topic: Indispensable Party
MWSS vs. CA
an irrevocable letter of credit. A Supplemental Agreement was forged between petitioner MWSS and respondent
SILHOUETTE on August 11, 1983 to accurately identify the subject property.

Subsequently, respondent SILHOUETTE, under a deed of sale dated July 26, 1984, sold to respondent AYALA
about sixty-seven (67) hectares of the subject property at P110.00 per square meter. Of the total price of
around P74 Million, P25 Million was to be paid by respondent AYALA directly to petitioner MWSS for respondent
SILHOUETTE's account and P2 Million directly to respondent SILHOUETTE. P11,600,000 was to be paid upon the
issuance of title in favor of respondent AYALA, and the remaining balance to be payable within one (1) year with
12% per annum interest.

Respondent AYALA developed the land it purchased into a prime residential area now known as the Ayala Heights
Subdivision.

Almost a decade later, petitioner MWSS on March 26, 1993 filed an action against all herein named respondents
before the Regional Trial Court of Quezon City seeking for the declaration of nullity of the MWSS-SILHOUETTE
sales agreement and all subsequent conveyances involving the subject property, and for the recovery thereof with
damages.

Respondent AYALA filed its answer pleading the affirmative defenses of (1) prescription, (2) laches, (3)
waiver/estoppel/ratification, (4) no cause of action, (5) non-joinder of indispensable parties, and (6) non-jurisdiction
of the court for non-specification of amount of damages sought.

On June 10, 1993; the trial court issued an Order dismissing the complaint of petitioner MWSS on grounds of
prescription, laches, estoppel and non-joinder of indispensable parties.

Petitioner MWSS's motion for reconsideration of such Order was denied, forcing it to seek relief from the respondent
Court where its appeal was docketed as CA-G.R. CV No. 50654. It assigned as errors the following:

"I. The court a quo committed manifest serious error and gravely abused its discretion when it ruled that
plaintiff's cause of action is for annulment of contract which has already prescribed in the face of the clear
and unequivocal recitation of six causes of action in the complaint, none of which is for annulment.

II. The lower court erred and exceeded its jurisdiction when, contrary to the rules of court and jurisprudence, it
treated and considered the affirmative defenses of Ayalas - defenses not categorized by the rules as
grounds for a motion to dismiss - as grounds of a motion to dismiss which justify the dismissal of the
complaint.

III. The lower court abused its discretion and exceeded its jurisdiction when it favorably acted on Ayala's motion
for preliminary hearing of affirmative defenses (motion to dismiss) by dismissing the complaint without
conducting a hearing or otherwise requiring the Ayalas to present evidence on the factual moorings of
their motion.

IV. The lower court acted without jurisdiction and committed manifest error when it resolved factual issues and
made findings and conclusions of facts all in favor of the Ayalas in the absence of any evidence
presented by the parties.

V. The court a quo erred when, contrary to the rules and jurisprudence, it prematurely ruled that laches and
estoppel bar the complaint as against Ayalas or that otherwise the alleged failure to implead
indispensable parties dictates the dismissal of the complaint."

In the meantime, respondents CHGCCI and Roman filed their own motions to hear their affirmative defenses which
were identical to those adduced by respondent AYALA. For its part, respondent SILHOUETTE filed a similarly
grounded motion to dismiss.

Ruling upon these motions, the trial court issued an order dated December 13, 1993 denying all of them. The
motions for reconsideration of the respondents concerned met a similar fate in the May 9, 1994 Order of the trial
court. They thus filed special civil actions for certiorari before the respondent Court which were docketed as CA-
G.R. SP Nos. 34605, 34718 and 35065 and thereafter consolidated with CA-G.R. CV No. 50694 for disposition.

Respondent court, on August 19, 1996, rendered the assailed decision, the dispositive portion of which reads:

"WHEREFORE, judgment is rendered:

 Page 3 of 8
RemLawRev1 | Civil Procedure
Topic: Indispensable Party
MWSS vs. CA
1.) DENYING the petitions for writ of certiorari for lack of merit; and

2.) AFFIRMING the order of the lower court dismissing the complaint against the appellees Ayalas.

"SO ORDERED."

Petitioner MWSS appealed to this Court that portion of the respondent Court's decision affirming the trial court's
dismissal of its complaint against respondent AYALA, docketed as G.R. No. 126000. The portion dismissing the
petition for certiorari (CA-GR Nos. 34605, 347718 and 35065) of respondents Roman, CHGCCI and SILHOUETTE,
however, became final and executory for their failure to appeal therefrom. Nonetheless, these respondents were
able to thereafter file before the trial court another motion to dismiss grounded, again, on prescription which the trial
court in an Order of October 1996 granted.

This prompted petitioner MWSS to file another petition for review of said trial court Order before this Court and
docketed as G.R. No. 128520. On motion of petitioner MWSS, this Court in a Resolution dated December 3, 1997
directed the consolidation of G.R. Nos. 126000 and 128520.

The errors assigned by petitioner MWSS in CA-GR No. 126000 are:

In holding, per the questioned Decision dated 19 August 1996, that plaintiffs cause of action is for annulment of
contract which has already prescribed in the face of the clear and unequivocal recitation of six causes of action
in the complaint, none of which is for annulment and in effect affirming the dismissal by the respondent judge of
the complaint against respondent Ayalas. This conclusion of respondent CH is, with due respect, manifestly
mistaken and legally absurd.

II

In failing to consider that the complaint recited six alternative causes of action, such that the insufficiency of one
cause - assuming there is such insufficiency - does not render insufficient the other causes and the complaint
itself. The contrary ruling in this regard by respondent CA is founded entirely on speculation and conjecture and
is constitutive of grave abuse of discretion.

In G.R. No. 128520, petitioner MWSS avers that:

The court of origin erred in belatedly granting respondent's motions to dismiss which are but a rehash, a
disqualification, of their earlier motion for preliminary hearing of affirmative defense / motion to dismiss. These
previous motions were denied by the lower court, which denial the respondents raised to the Court of Appeals
by way of perfection for certiorari, which petitions in turn were dismissed for lack of merit by the latter court. The
correctness and validity of the lower court's previous orders denying movant's motion for preliminary hearing of
affirmative defense/motion to dismiss has accordingly been settled already with finality and cannot be disturbed
or challenged anew at this instance of defendant's new but similarly anchored motions to dismiss, without
committing procedural heresy causative of miscarriage of justice.

II

The lower court erred in not implementing correctly the decision of the Court of Appeal. After all, respondents'
own petitions for certiorari questioning the earlier denial of their motion for preliminary hearing of affirmative
defense / motion to dismiss were dismissed by the Court of Appeal, in the process of affirming the validity and
legality of such denial by the court a quo. The dismissal of the respondents' petitions are embodied in the
dispositive portion of the said decision of the Court of Appeals dated 19 August 1996. The lower court cannot
choose to disregard such decretal aspect of the decision and instead implement an obiter dictum.

III.

That part of the decision of the decision of the Court of Appeals resolving the issue of prescription attendant to
the appeal of plaintiff against the Ayalas, has been appealed by plaintiff to the Supreme Court by way of a
petition for review on certiorari. Not yet being final and executory, the lower court erred in making capital out of
the same to dismiss the case against the other defendants, who are the respondents herein.
 Page 4 of 8
RemLawRev1 | Civil Procedure
Topic: Indispensable Party
MWSS vs. CA
IV.

The lower court erred in holding, per the questioned orders, that plaintiff's cause of action is for annulment of
contract which has already prescribed in the face of the clear and unequivocal recitation of six causes of action
in the complaint, none of which is for annulment. This conclusion of public respondent is manifestly mistaken
and legally absurd.

V.

The court a quo erred in failing to consider the complaint recites six alternative causes of action, such that the
insufficiency of one cause - assuming there is such insufficiency - does not render insufficient the other cause
and the complaint itself. The contrary ruling in this regard by public respondent is founded entirely on
speculation and conjecture and is constitutive of grave abuse of discretion.

In disposing of the instant petition, this Court shall dwell on the more crucial upon which the trial court and
respondent based their respective rulings unfavorable to petitioner MWSS; i.e., prescription, laches,
estoppel/ratification and non-joinder of indispensable parties.

RE: Prescription

Petitioner MWSS claims as erroneous both the lower courts' uniform finding that the action has prescribed, arguing
that its complaint is one to declare the MWSS-SILHOUETTE sale, and all subsequent conveyances of the subject
property, void which is imprescriptible.

We disagree.

The very allegations in petitioner MWSS' complaint show that the subject property was sold through contracts
which, at most, can be considered only as voidable, and not void. Paragraph 12 of the complaint reads in part:

"12. xxx.

The plaintiff has been in continuous, peaceful and public possession and ownership of the afore-described
properties, the title (TCT No. [36069] 199170) thereto, including its derivative titles TCT Nos. 213872 and 307655,
having been duly issued in its name. However, as a result of fraudulent and illegal acts of herein defendants, as
described in the paragraphs hereinafter following, the original of said title/s were cancelled and in lieu thereof new
titles were issued to corporate defendant/s covering subject 127.9271 hectares. xxx."

Paragraph 34 alleges:

"34. Sometime thereafter, clearly influenced by the premature if not questionable approval by Mr. Marcos of a non-
existent agreement, and despite full knowledge that both the assessed and market value of subject property were
much much higher, the MWSS Board of Trusties illegally passed an undated resolution ( 'Resolution No. 36-83' ),
approving the 'sale' of the property to CHGCCI at P40/sq.m. and illegally authorizing General Manager Ilustre to
sign the covering contract.

This 'resolution' was signed by Messrs. Jesus Hipolito as Chairman; Oscar Ilustre, as Vice Chairman; Aflredo Junio,
as Member; and Silvestre Payoyo, as Member; xxx"

Paragraph 53 states:

" 53. Defendants Pablo Roman, Jr., Josefino Cenizal, and Jose Roxas as well as defendant corporations (CHGCCI,
STC and Ayala) who acted through the former and their other principal officers, knowingly inducedand caused then
President Marcos and the former officers of plaintiff MWSS to enter into the aforesaid undated 'Agreement' which
are manifestly and grossly disadvantageous to the government and which gave the same defendants unwarranted
benefits, i.e., the ownership and dominion of the afore-described property of plaintiff."

Paragraph 54 avers:

"54. Defendants Jesus Hipolito and Alfredo Junio, then public officers, together with the other public officers who are
now deceased (Ferdinand Marcos, Oscar liustre, and Sivestre Payoyo) knowingly allowed themselves to be
persuaded, induced and influenced to approve and/or enter into the aforementioned 'Agreements' which are
grossly and manifestly disadvantageous to the MWSS/government and which bestowed upon the other defendants
the unwarranted benefit/ownership of subject property."
 Page 5 of 8
RemLawRev1 | Civil Procedure
Topic: Indispensable Party
MWSS vs. CA
The three elements of a contract - consent, the object, and the cause of obligation 11 are all present. It cannot be
otherwise argued that the contract had for its object the sale of the property and the cause or consideration thereof
was the price to be paid (on the part of respondents CHGCCI/SILHOUETTE) and the land to be sold (on the part of
petitioner MWSS). Likewise, petitioner MWSS' consent to the May 11, 1983 and August 11, 1983 Agreements is
patent on the face of these documents and on its own resolution No. 36-83.

As noted by both lower courts, petitioner MWSS admits that it consented to the sale of the property, with the
qualification that such consent was allegedly unduly influenced by the President Marcos. Taking such allegation to
be hypothetically true, such would have resulted in only voidable contracts because all three elements of a contract,
still obtained nonetheless. The alleged vitiation of MWSS' consent did not make the sale null and void ab
initio. Thus, "a contract where consent is given through mistake, violence, intimidation, undue influence or fraud,
is voidable."2 Contracts "where consent is vitiated by mistake, violence, intimidation, undue influence or fraud" are
voidable or annullable.3 These are not void as -

"Concepts of Voidable Contracts. - Voidable or anullable contracts are existent, valid, and binding, although they
can be annulled because of want of capacity or vitiated consent of the one of the parties, but before annulment, they
are effective and obligatory between parties. Hence, it is valid until it is set aside and its validity may be assailed
only in an action for that purpose. They can be confirmed or ratified." 4

As the contracts were voidable at the most, the four year prescriptive period under Art. 1391 of the New Civil Code
will apply. This article provides that the prescriptive period shall begin in the cases of intimidation, violence or undue
influence, from the time the defect of the consent ceases", and "in case of mistake or fraud, from the time of the
discovery of the same time".

Hypothetically admitting that President Marcos unduly influenced the sale, the prescriptive period to annul the same
would have begun on February 26, 1986 which this Court takes judicial notice of as the date President Marcos was
deposed. Prescription would have set in by February 26, 1990 or more than three years before petitioner MWSS'
complaint was filed.

However, if petitioner MWSS' consent was vitiated by fraud, then the prescriptive period commenced upon
discovery. Discovery commenced from the date of the execution of the sale documents as petitioner was party
thereto. At the least, discovery is deemed to have taken place on the date of registration of the deeds with the
register of Deeds as registration is constructive notice to the world. 5 Given these two principles on discovery, the
prescriptive period commenced in 1983 as petitioner MWSS actually knew of the sale, or, in 1984 when the
agreements were registered and titles thereafter were issued to respondent SILHOUETTE. At the latest, the action
would have prescribed by 1988, or about five years before the complaint was instituted. Thus, in Aznar vs.
Bernard6, this Court held that:

"Lastly, even assuming that the petitioners had indeed failed to raise the affirmative defense of prescription in a
motion to dismiss or in an appropriate pleading (answer, or amended or supplemental answer) and an amendment
would no longer be feasible, still prescription, if apparent on the face of the complaint, may be favorably considered.
In the case at bar, the private respondents admit in their complaint that the contract or real estate mortgage which
they alleged to be fraudulent and which had been foreclosed, giving rise to this controversy with the petitioners, was
executed on July 17, 1978, or more than eight long years before the commencement of the suit in the court a quo,
on September 15, 1986. And an action declare a contract null and void on the ground of fraud must be instituted
within four years. Extinctive prescription is thus apparent on the face of the complaint itself as resolved by the
Court."

Petitioner MWSS further contends that prescription does not apply as its complaint prayed not for the nullification of
voidable contracts but for the declaration of nullity of void ab initio contracts which are imprescriptible. This is
incorrect, as the prayers in a complaint are not determinative of what legal principles will operate based on the
factual allegations of the complaint. And these factual allegations, assuming their truth, show that MWSS consented
to the sale, only that such consent was purportedly vitiated by undue influence or fraud. Therefore, the rules on
prescription will operate. Even if petitioner MWSS asked for the declaration of nullity of these contracts, the prayers
will not be controlling as only the factual allegations in the complaint determine relief. "(I)t is the material allegations
of fact in the complaint, not the legal conclusion made therein or the prayer that determines the relief to which the
plaintiff is entitled"7. Respondent court is thus correct in holding that:

"xxx xxx xxx

The totality then of those allegations in the complaint makes up a case of a voidable contract of sale - not a void
one. The determinative allegations are those that point out that the consent of MWSS in the Agreement of Sale was
vitiated either by fraud or undue for the declaration of nullity of the said contract because the Complaint says no.
Basic is the rule however that it is the body and not the caption nor the prayer of the Complaint that determines the
nature of the action. True, the caption and prayer of the Complaint state that the action is for a judicial declaration of
 Page 6 of 8
RemLawRev1 | Civil Procedure
Topic: Indispensable Party
MWSS vs. CA
nullity of a contract, but alas, as already pointed out, its body unmistakably alleges only a voidable contract. One
cannot change the real nature of an action adopting a different nomenclature any more than one can change gin
into whisky by just replacing the label on the bottle with that of the latter's and calling it whisky. No matter what, the
liquid inside remains gin.

xxx xxx xxx."

Petitioner MWSS also theorizes that the May 11, 1983 MWSS-SILHOUETTE Agreement and the August 11, 1983
Supplemental Agreement were void ab initio because the "initial agreement" from which these agreements
emanated was executed "without the knowledge, much less the approval" of petitioner MWSS through its Board of
Trustees. The "initial agreement" referred to in petitioner MWSS' argument is the December 20, 1982 letter of
respondents Roxas and Roman, Jr. to President Marcos where the authors mentioned that they had reached an
agreement with petitioner's then general manager, Mr. Oscar Ilustre. Petitioner MWSS maintains that Mr. Ilustre was
not authorized to enter into such "initial agreement", contrary to Art. 1874 of the New Civil Code which provides that
"when a sale of a parcel of land or any interest therein is through an agent, the authority of the latter shall be in
writing otherwise the sale shall be void." It then concludes that since its Res. No. 36-83 and the May 11, 1983 and
August 11, 1983 Agreements are "fruits" of the "initial agreement" (for which Mr. Ilustre was allegedly not authorized
in writing), all of these would have been also void under Art. 1422 of NCC, which provides that a contract which is
the direct result of a pronounced illegal contract, is also void and inexistent."

The argument does not impress. The "initial agreement" reflected in the December 20, 1982 letter of respondent
Roman to Pres. Marcos, is not a sale under Art. 1874. Since the nature of the "initial agreement" is crucial, we
quote8 the letter in full:

"We respectfully approach Your Excellency in all humility and in the spirit of the Yuletide Season. We have
explained to Your Excellency when you allowed us the honor to see you, that the negotiations with MWSS which the
late Pablo R. Roman initiated way back in 1975, with your kind approval, will finally be concluded.

We have agreed in principle with Mr. Oscar llustre on the terms of the sale as evidenced by the following:

1 . Our written agreement to hire Asian Appraisal Company to appraise the entire leased area which would
then be the basis for the negotiations of the purchase price of the property; and

2. Our exchange of communications wherein MWSS made a counter-offer and our acceptance of the
counter-offer.

However, we were informed by Mr. Ilustre that only written instruction from Your Excellency will allow us to finally
sign the Agreement.

In sum, our Agreement is for the purchase price of FIFTY-SEVEN MILLION TWO-HUNDRED-FORTY THOUSAND
PESOS (P 57,240,000) for the entire leased area of 135 hectares; TWENTY-SEVEN MILLION
PESOS (P27,000,000) payable upon approval of the contract by Your Excellency and the balance of THIRTY
MILLION TWO HUNDRED FORTY THOUSAND PESOS (P 30,240,000) after one (1) year inclusive of a 12%
interest.

We believe that this arrangement is fair and equitable to both parties considering that the value of the land was
appraised by a reputable company and independent appraisal company jointly commissioned by both parties and
considering further that Capitol Hills has still a 23-year lien on the property by virtue of its existing lease contract with
MWSS.

We humbly seek your instruction, Your Excellency and please accept our families' sincere wish for a Merry
Christmas and a Happy New Year to you and the First Family."

The foregoing does not document a sale, but at most, only the conditions proposed by respondent Roman to enter
into one. By the terms thereof, it refers only to an "agreement in principle". Reflecting a future consummation, the
letter mentions "negotiations with MWSS (which) with your (Marcos') kind approval, will finally be concluded". It must
likewise be noted that presidential approval had yet to be obtained. Thus, the "initial agreement" was not a sale as it
did not in any way transfer ownership over the property. The proposed terms had yet to be approval by the
President and the agreement in principle still had to be formalized in a deed of sale. Written authority as is required
under Art. 1834 of the New Civil Code, was not needed at the point of the "initial agreement".

Verily, the principle on prescription of actions is designed to cover situations such as the case at bar, where there
have been a series of transfers to innocent purchasers for value. To set aside these transactions only to
accommodate a party who has slept on his rights is anathema to good order.9
 Page 7 of 8
RemLawRev1 | Civil Procedure
Topic: Indispensable Party
MWSS vs. CA
RE: Laches

Even assuming, for argument's sake, that the allegations in the complaint establish the absolute nullity of the
assailed contracts an hence imprescriptible, the complaint can still be dismissed on the ground of laches which is
different from prescription. This Court, as early as 1966, has distinguished these two concepts in this wise:

"x x x (T)he defense of laches applies independently of prescription. Laches is different from the statute of
limitations. Prescription is concerned with the fact of delay, whereas laches is concerned with the effect of delay.
Prescription is a matter of time; laches is principally a question of inequity of permitting a claim to be enforced, this
inequity being founded on some change in the condition of the property or the relation of the parties. Prescription is
statutory; laches is not. Laches applies in inequity, whereas prescription applies at law. Prescription is based on
fixed-time; laches is not."10

Thus, the prevailing doctrine is that the right to have a contract declared void ab initio may be barred by laches
although not barred by prescription.11

It has, for all its elements are present, viz:

(1) conduct on the part of the defendant, or one under whom he claims, giving rise to the situation that led to
the complaint and for which the complaint seeks a remedy;

(2) delay in asserting the complainant's rights, having had knowledge or notice of the defendant's conduct and
having been afforded an opportunity to institute a suit;

(3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on
which he bases his suit; and

(4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held
barred.12

There is no question on the presence of the first element. The main thrust of petitioner MWSS's complaint is to bring
to the fore what it claims as fraudulent and/or illegal acts of the respondents in the acquisition of the subject
property.

The second element of delay is evident from the fact that petitions tarried for almost ten (10) years from the
conclusion of the sale sometime in 1983 before formally laying claim to the subject property in 1993.

The third element is present as can be deduced from the allegations in the complaint that petitioner MWSS (a)
demanded for downpayment for no less than three times; (b) accepted downpayment for P25 Million; and (c)
accepted a letter of credit for the balance. The pertinent paragraphs in the complaint thus read:

"38. In a letter dated September 19, 1983, for failure of CHGCCI to pay on time, Mr. Ilustre demanded payment of
the downpayment of P25 Million which was due as of 18 April 1983. A copy of this letter is hereto attached as Annex
'X';

"39. Again, in a letter dated February 7, 1984, then MWSS Acting General Manager Aber Canlas demanded
payment from CHGCCI of the purchase price long overdue. A copy of this letter is hereto attached as Annex 'Y';

"40. Likewise, in a letter dated March 14, 1984, Mr. Canlas again demanded from CHGCCI payment of the price. A
copy of this demand letter is hereto attached as Annex 'Z';

"41. Thereafter, in a letter dated July 27, 1984, another entity, defendant Ayala Corporation, through SVP Renato de
la Fuente, paid with a check the long overdue downpayment of P25,000,000.00 of STC/CHGCCI. Likewise a
domestic stand-by letter of credit for the balance was issued in favor of MWSS; Copies of the said letter, check and
letter of credit are hereto attached as Annexes 'AA', 'BB', and 'CC', respectively."

Under these facts supplied by petitioner MWSS itself, respondents have every good reason to believe that petitioner
was honoring the validity of the conveyances of the subject property, and that the sudden institution of the complaint
in 1993 alleging the nullity of such conveyances was surely an unexpected turn of events for respondents. Hence,
petitioner MWSS cannot escape the effect of laches.

RE: Ratification
 Page 8 of 8
RemLawRev1 | Civil Procedure
Topic: Indispensable Party
MWSS vs. CA
Pertinent to this issue is the claim of petitioner MWSS that Mr. Ilustre was never given the authority by its Board of
Trustees to enter into the "initial agreement" of December 20, 1982 and therefore, the sale of the subject property is
invalid.

Petitioner MWSS misses the point. The perceived infirmity in the "initial agreement" can be cured by ratification. So
settled is the precept that ratification can be made by the corporate board either expressly or impliedly. Implied
ratification may take various forms - like silence or acquiescence; by acts showing approval or adoption of the
contract; or by acceptance and retention of benefits flowing therefrom. 13 Both modes of ratification have been made
in this case.

There was express ratification made by the Board of petitioner MWSS when it passed Resolution No. 36-83
approving the sale of the subject property to respondent SILHOUETTE and authorizing Mr. Ilustre, as General
Manager, "to sign for and in behalf of the MWSS the contract papers and other pertinent documents relative
thereto." Implied ratification by "silence or acquiescence" is revealed from the acts of petitioner MWSS in (a)
sending three (3) demand letters for the payment of the purchase price, (b) accepting P25 Million as downpayment,
and (c) accepting a letter of credit for the balance, as hereinbefore mentioned. It may well be pointed out also that
nowhere in petitioner MWSS' complaint is it alleged that it returned the amounts, or any part thereof, covering the
purchase price to any of the respondents-vendees at any point in time. This is only indicative of petitioner MWSS'
acceptance and retention of benefits flowing from the sales transactions which is another form of implied ratification.

RE: Non-joinder of indispensable parties

There is no denying that petitioner MWSS' action against herein respondents for the recovery of the subject property
now converted into a prime residential subdivision would ultimately affect the proprietary rights of the many lot
owners to whom the land has already been parceled out. They should have been included in the suit as parties-
defendants, for. "it is well established that owners of property over which reconveyance is asserted are
indispensable parties without whom no relief is available and without whom the court can render no valid
judgment."14 Being indispensable parties, the absence of these lot-owners in the suit renders all subsequent actions
of the trial court null and void for want of authority to act, not only as to the absent parties but even as to those
present.15 Thus, when indispensable parties are not before the court, the action should be dismissed. 16

WHEREFORE, in view of the foregoing, the consolidated petitions are hereby DENIED. SO ORDERED