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THIRD DIVISION D.B.T. MAR-BAY CONSTRUCTION, INCORPORATED, Petitioner, - versus G.R. No.

167232

Promulgated: July 31, 2009

RICAREDO PANES, ANGELITO PANES, SALVADOR CEA, ABOGADO MAUTIN, DONARDO PACLIBAR, ZOSIMO PERALTA and HILARION MANONGDO, Respondents. x------------------------------------------------------------------------------------x DECISION NACHURA, J.:

Before this Court is a Petition[1] for Review on Certiorari under Rule 45 of the Rules of Civil Procedure, assailing the Court of Appeals (CA) Decision[2] dated October 25, 2004 which reversed and set aside the Order [3] of the Regional Trial Court (RTC) of Quezon City, Branch 216, dated November 8, 2001. The Facts Subject of this controversy is a parcel of land identified as Lot Plan Psu-123169, [4] containing an area of Two Hundred Forty Thousand, One Hundred Forty-Six (240,146) square meters, and situated at Barangay (Brgy.) Pasong Putik, Novaliches, Quezon City (subject property). The property is included in Transfer Certificate of Title (TCT) No. 200519,
[5]

entered on July 19, 1974 and issued in favor of B.C. Regalado & Co. (B.C. Regalado). It was conveyed by B.C.

Regalado to petitioner D.B.T. Mar-Bay Construction, Inc. (DBT) through a dacion en pago[6] for services rendered by the latter to the former.On June 24, 1992, respondents Ricaredo P. Panes (Ricaredo), his son Angelito P. Panes (Angelito), Salvador Cea, Abogado Mautin, Donardo Paclibar, Zosimo P. Peralta, and Hilarion Manongdo (herein collectively referred to as respondents) filed a Complaint [7] for Quieting of Title with Cancellation of TCT No. 200519 and all Titles derived thereat (sic), Damages, with Petition for the Issuance of Injunction with Prayer for the Issuance of Restraining Order Ex-Parte, Etc. against B.C. Regalado, Mar-Bay Realty, Inc., Spouses Gereno Brioso and Criselda M. Brioso, Spouses Ciriaco and Nellie Mariano, Avelino C. Perdido and Florentina Allado, Eufrocina A. Maborang and Fe Maborang, Spouses Jaime and Rosario Tabangcura, Spouses Oscar Ikalina and the Register of Deeds (RD) of Quezon City. Subsequently, respondents filed an Amended Complaint [8] and a Second Amended Complaint [9] particularly impleading DBT as one of the defendants.

In the Complaints, Ricaredo alleged that he is the lawful owner and claimant of the subject property which he had declared for taxation purposes in his name, and assessed in the amount of P2,602,190.00 by the City Assessor of Quezon City as of the year 1985. Respondents alleged that per Certification [10] of the Department of Environment and Natural Resources (DENR) National Capital Region (NCR) dated May 7, 1992, Lot Plan Psu-123169 was verified to be correct and on file in said office, and approved on July 23, 1948. Respondents also claimed that Ricaredo, his immediate family members, and the other respondents had been, and still are, in actual possession of the portions of the subject property, and their possession preceded the Second World War. To perfect his title in accordance with Act No. 496 (The Land Registration Act) as amended by Presidential Decree (P.D.) No. 1529 (The Property Registration Decree), Ricaredo filed with the RTC of Quezon City, Branch 82 a case docketed as LRC Case No. Q-91-011, with LRC Rec. No. N-62563. [11] Respondents averred that in the process of complying with the publication requirements for the Notice of Initial Hearing with the Land Registration Authority (LRA), it was discovered by the Mapping Services of the LRA that there existed an overlapping of portions of the land subject of Ricaredos application, with the subdivision plan of B.C. Regalado. The said portion had, by then, already been conveyed by B.C. Regalado to DBT. Ricaredo asseverated that upon verification with the LRA, he found that the subdivision plan of B.C. Regalado was deliberately drawn to cover portions of the subject property. Respondents claimed that the title used by B.C. Regalado in the preparation of the subdivision plan did not actually cover the subject property. They asserted that from the records of B.C. Regalado, they gathered that TCT Nos. 211081,[12] 211095[13] and 211132,[14] which allegedly included portions of the subject property, were derived from TCT No. 200519. However, TCT No. 200519 only covered Lot 503 of the Tala Estate with an area of Twenty-Two Thousand Six Hundred Fifteen (22,615) square meters, and was different from those mentioned in TCT Nos. 211081, 211095 and 211132. According to respondents, an examination of TCT No. 200519 would show that it was derived from TCT Nos. 14814,[15] 14827,[16] 14815[17] and T-28. In essence, respondents alleged that B.C. Regalado and DBT used the derivative titles which covered properties located far from Pasong Putik, Novaliches, Quezon City where the subject property is located, and B.C. Regalado and DBT then offered the same for sale to the public. Respondents thus submitted that B.C Regalado and DBT through their deliberate scheme, in collusion with others, used (LRC) Pcs-18345 as shown in the consolidation-subdivision plan to include the subject property covered by Lot Plan Psu-123169. In his Answer[18] dated July 24, 1992, the RD of Quezon City interposed the defense that at the time of registration, he found all documents to be in order. Subsequently, on December 5, 1994, in his Motion[19] for Leave to Admit Amended Answer, with the Amended Answer attached, he admitted that he committed a grave mistake when he earlier said that TCT No. 200519 covered only one lot, i.e. Lot 503. He averred that upon careful examination, he discovered that TCT No. 200519 is composed of 17 pages, and actually covered 54 lots, namely: Lots 503, 506, 507, 508, 509, 582, 586, 655, 659, 686, 434, 495, 497, 299, 498, 499, 500, 501, 502, 493, 692, 776, 496, 785, 777, 786, 780, 783, 505, 654, 660, 661, 663, 664, 665, 668, 693, 694, 713, 716, 781, 779, 784, 782, 787, 893, 1115, 1114, 778, 669 and 788, all of the Tala Estate. Other lots included therein are Lot 890-B of Psd 36854, Lot 2 of (LRC) Pcs 12892 and Lot 3 of (LRC) Pcs 12892. Thus, respondents' allegation that Lots 661, 664, 665, 693 and 694 of the Tala Estate were not included in TCT No. 200519 was not true. On December 28, 1993, then defendants Spouses Jaime and Rosario Tabangcura (Spouses Tabangcura) filed their Answer[20]with Counterclaim, claiming that they were buyers in good faith and for value when they bought a house and lot

covered by TCT No. 211095 from B.C. Regalado, the latter being a subdivision developer and registered owner thereof, on June 30, 1986. When respondent Abogado Mautin entered and occupied the property, Spouses Tabangcura filed a case for Recovery of Property before the RTC, Quezon City, Branch 97 which rendered a decision [21] in their favor.On its part, DBT, traversing the complaint, alleged that it is the legitimate owner and occupant of the subject property pursuant to a dacion en pago executed by B.C. Regalado in the formers favor; that respondents were not real parties-in-interests because Ricaredo was a mere claimant whose rights over the property had yet to be determined by the RTC where he filed his application for registration; that the other respondents did not allege matters or invoke rights which would entitle them to the relief prayed for in their complaint; that the complaint was premature; and that the action inflicted a chilling effect on the lot buyers of DBT. [22] The RTC's Rulings On June 15, 2000, the RTC through Judge Marciano I. Bacalla (Judge Bacalla), rendered a Decision [23] in favor of the respondents. The RTC held that the testimony of Ricaredo that he occupied the subject property since 1936 when he was only 16 years old had not been rebutted; that Ricaredo's occupation and cultivation of the subject property for more than thirty (30) years in the concept of an owner vested in him equitable ownership over the same by virtue of an approved plan, Psu 123169; that the subject property was declared under the name of Ricaredo for taxation purposes;
[24]

and that the subject property per survey should not have been included in TCT No. 200519, registered in the name of

B.C. Regalado and ceded to DBT. The RTC further held that Spouses Tabangcura failed to present satisfactory evidence to prove their claim. Thus, the RTC disposed of the case in this wise: WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered declaring Certificate of Title No. 200519 and all titles derived thereat as null and void insofar as the same embrace the land covered by Plan PSU-123169 with an area of 240,146 square meters in the name of Ricaredo Panes; ordering defendant DBT Marbay Realty, Inc. to pay plaintiff Ricaredo Panes the sum of TWENTY THOUSAND (P20,000) pesos as attorneys fees plus costs of suit. SO ORDERED. On September 12, 2000, DBT filed a Motion[25] for Reconsideration, based on the grounds of prescription and laches. DBT also disputed Ricaredos claim of open, adverse, and continuous possession of the subject property for more than thirty (30) years, and asserted that the subject property could not be acquired by prescription or adverse possession because it is covered by TCT No. 200519. While the said Motion for Reconsideration was pending, Judge Bacalla passed away. Meanwhile, on January 2, 2001, a Motion [26] for Intervention and a Complaint in Intervention were filed by Atty. Andres B. Pulumbarit (Atty. Pulumbarit), representing the Don Pedro/Don Jose de Ocampo Estate. The intervenor alleged that the subject property formed part of the vast tract of land with an area of 117,000 hectares, covered by Original Certificate of Title (OCT) No. 779 issued by the Honorable Norberto Romualdez on March 14, 1913 under Decree No. 10139, which belongs to the Estate of Don Pedro/Don Jose de Ocampo. Thus, the Complaint[27] in Intervention prayed that the RTCs Decision be reconsidered; that the legitimacy and superiority of OCT 779 be upheld; and that the subject property be declared as belonging to the Estate of Don Pedro/Don Jose de Ocampo.In its

Order[28] dated March 13, 2001, the RTC, through Acting Judge Modesto C. Juanson (Judge Juanson), denied Atty. Pulumbarits Motion for Intervention because a judgment had already been rendered pursuant to Section 2, [29] Rule 19 of the 1997 Rules of Civil Procedure. On April 10, 2001, the RTC issued an Order [30] stating that there appeared to be a need for a clarificatory hearing before it could act on DBT's Motion for Reconsideration. Thus, a hearing was held on May 17, 2001. Thereafter, supplemental memoranda were required of the parties. [31] Both parties complied.[32] However, having found that the original copy of TCT No. 200519 was not submitted to it for comparison with the photocopy thereof on file, the RTC directed DBT to present the original or certified true copy of the TCT on August 21, 2001. [33] Respondents moved to reconsider the said directive [34] but the same was denied.[35] DBT, on the other hand, manifested that a copy of TCT No. 200519, consisting of 17 pages, had already been admitted in evidence; and that because of the fire in the Office of the RD in Quezon City sometime in 1988, DBT, despite diligent effort, could not secure an original or certified true copy of said TCT. Instead, DBT submitted a certified true copy of Consolidated Subdivision Plan Pcs 18345. [36] On November 8, 2001, the RTC, through Judge Juanson, issued an Order [37] reversing the earlier RTC Decision and dismissing the Complaint for lack of merit. The RTC held that prescription does not run against registered land; hence, a title once registered cannot be defeated even by adverse, open or notorious possession. Moreover, the RTC opined that even if the subject property could be acquired by prescription, respondents' action was already barred by prescription and/or laches because they never asserted their rights when B.C. Regalado registered the subject property in 1974; and later developed, subdivided and sold the same to individual lot buyers. On December 18, 2001, respondents filed a Motion for Reconsideration [38] which the RTC denied in its Order [39] dated June 17, 2002. Aggrieved, respondents appealed to the CA. [40] The CA's Ruling On October 25, 2004, the CA reversed and set aside the RTC Orders dated November 8, 2001 and June 17, 2002 and reinstated the RTC Decision dated June 15, 2000. The CA held that the properties described and included in TCT No. 200519 are located in San Francisco del Monte, San Juan del Monte, Rizal and Cubao, Quezon City while the subject property is located in Brgy. Pasong Putik, Novaliches, Quezon City. Furthermore, the CA held that Engr. Vertudazo's testimony that there is a gap of around 1,250 meters between Lot 503 and Psu 123169 was not disproved or refuted. The CA found that Judge Juanson committed a procedural infraction when he entertained issues and admitted evidence presented by DBT in its Motion for Reconsideration which were never raised in the pleadings and proceedings prior to the rendition of the RTC Decision. The CA opined that DBT's claims of laches and prescription clearly appeared to be an afterthought. Lastly, the CA held that DBT's Motion for Reconsideration was not based on grounds enumerated in the Rules of Procedure.[41] Petitioner filed a Motion for Reconsideration, [42] which was, however, denied by the CA in its Resolution[43] dated February 22, 2005. Hence, this Petition. The Issues Petitioner raises the following as grounds for this Petition: I.PETITIONER'S FAILURE TO ALLEGE PRESCRIPTION IN ITS ANSWER IS NOT A WAIVER OF SUCH DEFENSE.

II.IT IS NOT ERRONEOUS TO REQUIRE THE PRODUCTION OF A CERTIFIED TRUE COPY OF TCT NO. 200519 AFTER THE DECISION ON THE MERITS HAS BEEN RENDERED BUT BEFORE IT BECAME FINAL. III.A REGISTERED LAND CAN NOT BE ACQUIRED BY ACQUISITIVE PRESCRIPTION. IV.THE TESTIMONY OF ENGR. VERTUDAZO ON THE BASIS OF THE TECHNICAL DESCRIPTION OF LOT 503 IN AN INCOMPLETE DOCUMENT IS UNRELIABLE. V.MR. PANES HAS NEVER BEEN IN OPEN, ADVERSE AND CONTINUOUS POSSESSION OF THE SUBJECT PROPERTY FOR MORE THAN THIRTY (30) YEARS.[44] Distilled from the petition and the responsive pleadings, and culled from the arguments of the parties, the issues may be reduced to two questions, namely: 1) Did the RTC err in upholding DBT's defenses of prescription and laches as raised in the latter's Motion for Reconsideration? 2) Which between DBT and the respondents have a better right over the subject property? Our Ruling We answer the first question in the affirmative. It is true that in Dino v. Court of Appeals[45] we ruled: (T)rial courts have authority and discretion to dismiss an action on the ground of prescription when the parties' pleadings or other facts on record show it to be indeed time-barred; ( Francisco v. Robles, Feb. 15, 1954; Sison v. McQuaid, 50 O.G. 97; Bambao v. Lednicky, Jan. 28, 1961; Cordova v. Cordova, Jan. 14, 1958; Convets, Inc. v. NDC, Feb. 28, 1958; 32 SCRA 529; Sinaon v. Sorongan, 136 SCRA 408); and it may do so on the basis of a motion to dismiss (Sec. 1, [f] Rule 16, Rules of Court), or an answer which sets up such ground as an affirmative defense (Sec. 5, Rule 16), or even if the ground is alleged after judgment on the merits, as in a motion for reconsideration (Ferrer v. Ericta, 84 SCRA 705); or even if the defense has not been asserted at all, as where no statement thereof is found in the pleadings(Garcia v. Mathis, 100 SCRA 250; PNB v. Pacific Commission House, 27 SCRA 766; Chua Lamco v. Dioso, et al., 97 Phil. 821); or where a defendant has been declared in default ( PNB v. Perez; 16 SCRA 270). What is essential only, to repeat, is that the facts demonstrating the lapse of the prescriptive period be otherwise sufficiently and satisfactorily apparent on the record; either in the averments of the plaintiff's complaint, or otherwise established by the evidence . (Emphasis supplied)

Indeed, one of the inherent powers of courts is to amend and control its processes so as to make them conformable to law and justice. This includes the right to reverse itself, especially when in its opinion it has committed an error or mistake in judgment, and adherence to its decision would cause injustice. [46] Thus, the RTC in its Order dated November 8, 2001 could validly entertain the defenses of prescription and laches in DBT's motion for reconsideration. However, the conclusion reached by the RTC in its assailed Order was erroneous. The RTC failed to consider that the action filed before it was not simply for reconveyance but an action for quieting of title which is imprescriptible. Verily, an action for reconveyance can be barred by prescription. When an action for reconveyance is based on fraud, it must be filed within four (4) years from discovery of the fraud, and such discovery is deemed to have taken place from the issuance of the original certificate of title. On the other hand, an action for reconveyance based on an implied or constructive trust prescribes in ten (10) years from the date of the issuance of the original certificate of title or transfer certificate of title. The rule is that the registration of an instrument in the Office of the RD constitutes constructive notice to the whole world and therefore the discovery of the fraud is deemed to have taken place at the time of registration. [47]

However, the prescriptive period applies only if there is an actual need to reconvey the property as when the plaintiff is not in possession of the property. If the plaintiff, as the real owner of the property also remains in possession of the property, the prescriptive period to recover title and possession of the property does not run against him. In such a case, an action for reconveyance, if nonetheless filed, would be in the nature of a suit for quieting of title, an action that is imprescriptible.[48] Thus, in Vda. de Gualberto v. Go,[49] this Court held: [A]n action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten years, the point of reference being the date of registration of the deed or the date of the issuance of the certificate of title over the property, but this rule applies only when the plaintiff or the person enforcing the trust is not in possession of the property , since if a person claiming to be the owner thereof is in actual possession of the property, as the defendants are in the instant case, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe . The reason for this is that one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession.

Insofar as Ricaredo and his son, Angelito, are concerned, they established in their testimonies that, for some time, they possessed the subject property and that Angelito bought a house within the subject property in 1987. [50] Thus, the respondents are proper parties to bring an action for quieting of title because persons having legal, as well as equitable, title to or interest in a real property may bring such action, and title here does not necessarily denote a certificate of title issued in favor of the person filing the suit. [51] Although prescription and laches are distinct concepts, we have held, nonetheless, that in some instances, the doctrine of laches is inapplicable where the action was filed within the prescriptive period provided by law. Therefore, laches will not apply to this case, because respondents' possession of the subject property has rendered their right to bring an action for quieting of title imprescriptible and, hence, not barred by laches. Moreover, since laches is a creation of equity, acts or conduct alleged to constitute the same must be intentional and unequivocal so as to avoid injustice. Laches will operate not really to penalize neglect or sleeping on one's rights, but rather to avoid recognizing a right when to do so would result in a clearly inequitable situation. [52] Albeit the conclusion of the RTC in its Order dated November 8, 2001, which dismissed respondents' complaint on grounds of prescription and laches, may have been erroneous, we, nevertheless, resolve the second question in favor of DBT. It is a well-entrenched rule in this jurisdiction that no title to registered land in derogation of the rights of the registered owner shall be acquired by prescription or adverse possession. [53] Article 1126[54] of the Civil Code in connection with Section 46 [55] of Act No. 496 (The Land Registration Act), as amended by Section 47[56] of P.D. No. 1529 (The Property Registration Decree), clearly supports this rule. Prescription is unavailing not only against the registered owner but also against his hereditary successors. Possession is a mere consequence of ownership where land has been registered under the Torrens system, the efficacy and integrity of which must be protected. Prescription is rightly regarded as a statute of repose whose objective is to suppress fraudulent and stale claims from springing up at great distances of time and surprising the parties or their representatives when the facts have become obscure from the lapse of time or the defective memory or death or removal of witnesses. [57]Thus,

respondents' claim of acquisitive prescription over the subject property is baseless. Under Article 1126 of the Civil Code, acquisitive prescription of ownership of lands registered under the Land Registration Act shall be governed by special laws. Correlatively, Act No. 496, as amended by PD No. 1529, provides that no title to registered land in derogation of that of the registered owner shall be acquired by adverse possession. Consequently, in the instant case, proof of possession by the respondents is immaterial and inconsequential. [58] Moreover, it may be stressed that there was no ample proof that DBT participated in the alleged fraud. While factual issues are admittedly not within the province of this Court, as it is not a trier of facts and is not required to reexamine or contrast the oral and documentary evidence anew, we have the authority to review and, in proper cases, reverse the factual findings of lower courts when the findings of fact of the trial court are in conflict with those of the appellate court.[59] In this regard, we reviewed the records of this case and found no clear evidence that DBT participated in the fraudulent scheme. In Republic v. Court of Appeals,[60] this Court gave due importance to the fact that the private respondent therein did not participate in the fraud averred. We accord the same benefit to DBT in this case. To add, DBT is an innocent purchaser for value and good faith which, through a dacion en pago duly entered into with B.C. Regalado, acquired ownership over the subject property, and whose rights must be protected under Section 32 [61] of P.D. No. 1529. Dacion en pago is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. It is a special mode of payment where the debtor offers another thing to the creditor, who accepts it as an equivalent of the payment of an outstanding debt. In its modern concept, what actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price.[62] It must also be noted that portions of the subject property had already been sold to third persons who, like DBT, are innocent purchasers in good faith and for value, relying on the certificates of title shown to them, and who had no knowledge of any defect in the title of the vendor, or of facts sufficient to induce a reasonably prudent man to inquire into the status of the subject property. [63]To disregard these circumstances simply on the basis of alleged continuous and adverse possession of respondents would not only be inimical to the rights of the aforementioned titleholders, but would ultimately wreak havoc on the stability of the Torrens system of registration. A final note. While the Torrens system is not a mode of acquiring title, but merely a system of registration of titles to lands, justice and equity demand that the titleholder should not be made to bear the unfavorable effect of the mistake or negligence of the State's agents, in the absence of proof of his complicity in a fraud or of manifest damage to third persons. The real purpose of the Torrenssystem is to quiet title to land and put a stop forever to any question as to the legality of the title, except claims that were noted in the certificate at the time of the registration or that may arise subsequent thereto. Otherwise, the integrity of the Torrens system would forever be sullied by the ineptitude and inefficiency of land registration officials, who are ordinarily presumed to have regularly performed their duties. [64] Thus, where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the property, the court cannot disregard those rights and order the cancellation of the certificate. The effect of such outright cancellation will be to impair public confidence in the certificate of title. The sanctity of the Torrens system must be preserved; otherwise, everyone dealing with the property registered under the system will have to inquire in every instance on whether the title had been regularly

or irregularly issued, contrary to the evident purpose of the law. Every person dealing with the registered land may safely rely on the correctness of the certificate of title issued therefor, and the law will in no way oblige him to go behind the certificate to determine the condition of the property. [65] WHEREFORE, the instant Petition is GRANTED and the assailed Court of Appeals Decision dated October 25, 2004 is hereby REVERSED and SET ASIDE. A new judgment is hereby entered DISMISSING the Complaint filed by the respondents for lack of merit. SO ORDERED. ANTONIO EDUARDO B. NACHURA Associate Justice

SECOND DIVISION NEW REGENT SOURCES, INC., Petitioner, versus TEOFILO VICTOR TANJUATCO, JR., and VICENTE CUEVAS,* Respondents. G.R. No. 168800 Promulgated: April 16, 2009

DECISION QUISUMBING, J.: Petitioner through counsel prays for the reversal of the Orders dated February 12, 2005[1] and July 1, 2005[2] of the Regional Trial Court (RTC) of Calamba City, Branch 37, in Civil Case No. 2662-98-C. The RTC had granted the demurrer to evidence filed by respondent Tanjuatco, and then denied petitioners motion for reconsideration. The facts, as culled from the records, are as follows: Petitioner New Regent Sources, Inc. (NRSI) filed a Complaint [3] for Rescission/Declaration of Nullity of Contract, Reconveyance and Damages against respondent Tanjuatco and the Register of Deeds of Calamba before the RTC of Calamba, Laguna, Branch 37. NRSI alleged that in 1994, it authorized Vicente P. Cuevas III, its Chairman and President, to apply on its behalf, for the acquisition of two parcels of land by virtue of its right of accretion. Cuevas purportedly applied for the lots in his name by paying P82,400.38 to the Bureau of Lands. On January 2, 1995, Cuevas and his wife executed a Voting Trust Agreement[4]over their shares of stock in the corporation. Then, pending approval of the application with the Bureau of Lands, Cuevas assigned his right to Tanjuatco for the sum of P85,000.[5] On March 12, 1996, the Director of Lands released an Order, [6] which approved the transfer of rights from Cuevas to Tanjuatco. Transfer Certificates of Title Nos. T-369406[7] and T-369407[8] were then issued in the name of Tanjuatco. In his Answer with Counterclaim,[9] Tanjuatco advanced the affirmative defense that the complaint stated no cause of action against him. According to Tanjuatco, it was Cuevas who was alleged to have defrauded the corporation. He averred further that the complaint did not charge him with knowledge of the agreement between Cuevas and NRSI. Upon Tanjuatcos motion, the trial court conducted a preliminary hearing on the affirmative defense, but denied the motion to dismiss, and ordered petitioner to amend its complaint and implead Cuevas as a defendant. [10] Summons was served on respondent Cuevas through publication, [11] but he was later declared in default for failure to file an answer. [12] After NRSI completed presenting evidence, Tanjuatco filed a Demurrer to Evidence, [13] which the RTC granted in an Order dated February 12, 2005. In dismissing NRSIs complaint,[14] the RTC cited the Order of the Director of Lands and certain insufficiencies in the allegations in the complaint. The trial court further held that Tanjuatco is an innocent purchaser for value. NRSI moved for reconsideration, but it was denied by the trial court in an Order dated July 1, 2005, thus: WHEREFORE, the Motion for Reconsideration filed by the plaintiff on May 3, 2005 is DENIED for lack of merit. SO ORDERED.[15] Hence, NRSI filed the instant petition for review on certiorari, raising the following issues: 1. WHETHER OR NOT THE ALLEGED INSUFFICIENCY OF THE ALLEGATIONS IN THE COMPLAINT MAY BE USED AS A BASIS TO DISMISS THE SAME BY WAY OF A DEMURRER TO EVIDENCE;

2. WHETHER OR NOT A COMPLAINT MAY BE DISMISSED ON DEMURRER TO EVIDENCE BASED ON A DOCUMENT NOT PROPERLY IDENTIFIED, MARKED AND OFFERED IN EVIDENCE.[16] In a nutshell, the issue for our determination is whether the trial court erred in dismissing the case on demurrer to evidence. NRSI argues that the supposed insufficiency of allegations in the complaint did not justify its dismissal on demurrer to evidence. It contends that a dismissal on demurrer to evidence should be grounded on insufficiency of evidence presented at trial. NRSI contends that the sufficiency of its allegations was affirmed when the trial court denied the motion to dismiss. It likewise asserts that the RTC erred in declaring Tanjuatco a buyer in good faith. It stressed that the Order of the Director of Lands, as the basis for such finding, was not formally offered in evidence. Hence, it should not have been considered by the trial court in accordance with Section 34,[17] Rule 132 of the Rules of Court. Tanjuatco, for his part, maintains that NRSI failed to make a case for reconveyance against him. He insists that the complaint stated no cause of action, and the evidence presented established, rather than refuted, that he was an innocent purchaser. Tanjuatco adds that the RTCs denial of the motion to dismiss, and admission of evidence negated NRSIs claim that it relied on the complaint alone to decide the case. Lastly, Tanjuatco argues that the Order of the Director of Lands was a matter of judicial notice. Thus, under Section 1,[18] Rule 129 of the Rules of Court, there was no need to identify, mark, and offer it in evidence. After serious consideration, we find the instant petition utterly without merit. In its petition, NRSI questions the trial courts dismissal of its complaint upon a demurrer to evidence and invites a calibration of the evidence on record to determine the sufficiency of the factual basis for the trial courts order. This factual analysis, however, would involve questions of fact which are improper in a petition for review under Rule 45 of the Rules of Court. It is well established that in an appeal by certiorari, only questions of law may be reviewed.[19] A question of law exists when there is doubt or difference as to what the law is on a certain state of facts. A question of fact exists if the doubt centers on the truth or falsity of the alleged facts. [20] There is a question of law when the issue does not call for an examination of the probative value of evidence presented, the truth or falsehood of facts being admitted, and the doubt concerns the correct application of law and jurisprudence on the matter. [21] Otherwise, there is a question of fact. Since it raises essentially questions of fact, the instant petition must be denied. In any event, we find that based on the examination of the evidence at hand, we are in agreement that the trial court correctly dismissed NRSIs complaint on demurrer to evidence. Petitioner filed a complaint for rescission/declaration of nullity of contract, reconveyance and damages against respondents. An action for reconveyance is one that seeks to transfer property, wrongfully registered by another, to its rightful and legal owner. [22] In an action for reconveyance, the certificate of title is respected as incontrovertible. What is sought instead is the transfer of the property, specifically the title thereof, which has been wrongfully or erroneously registered in another persons name, to its rightful and legal owner, or to one with a better right. [23] To warrant a reconveyance of the land, the following requisites must concur: (1) the action must be brought in the name of a person claiming ownership or dominical right over the land registered in the name of the defendant; (2) the registration of the land in the name of the defendant was procured through fraud [24] or other illegal means; [25] (3) the property has not yet passed to an innocent purchaser for value; [26] and (4) the action is filed after the certificate of title had already become final and incontrovertible [27] but within four years from the discovery of the fraud, [28] or not later than 10 years in the case of an implied trust. [29] Petitioner failed to show the presence of these requisites. Primarily, NRSI anchors its claim over the lands subjects of this case on the right of accretion. It submitted in evidence, titles[30] to four parcels of land, which allegedly adjoin the lots in the name of Tanjuatco. But it must be stressed that accretion as a mode of acquiring property under Article 457 [31] of the Civil Code requires the concurrence of the following requisites: (1) that the deposition of soil or sediment be gradual and imperceptible; (2) that it be the result of the action of the waters of the river; and (3) that the land where accretion takes place is adjacent to the banks of rivers. [32] Thus, it is not enough to be a riparian owner in order to enjoy the benefits of accretion. One who claims the right of accretion must show by preponderant evidence that he has met all the conditions provided by law. Petitioner has notably failed in this regard as it did not offer any evidence to prove that it has satisfied the foregoing requisites. Further, it is

undisputed that Tanjuatco derived his title to the lands from Original Certificate of Title (OCT) No. 245 registered in the name of the Republic of the Philippines. Said parcels of land formed part of the Dried San Juan River Bed, [33] which under Article 502 (1)[34] of the Civil Code rightly pertains to the public dominion. The Certification[35] issued by Forester III Emiliano S. Leviste confirms that said lands were verified to be within the Alienable and Disposable Project No. 11-B of Calamba, Laguna per BFD LC Map No. 3004, certified and declared as such on September 28, 1981. Clearly, the Republic is the entity which had every right to transfer ownership thereof to respondent. Next, petitioner sought to establish fraudulent registration of the land in the name of Tanjuatco. NRSI presented before the trial court a copy of the Voting Trust Agreement which the spouses Cuevas executed in favor of Pauline Co. However, nothing in said agreement indicates that NRSI empowered Cuevas to apply for the registration of the subject lots on its behalf. Neither did petitioner adduce evidence to prove that Cuevas was its President and Chairman. Even assuming that Cuevas was the president of NRSI, his powers are confined only to those vested upon him by the board of directors or fixed in the by-laws. [36] In truth, petitioner could have easily presented its by-laws or a corporate resolution[37] to show Cuevass authority to buy the lands on its behalf. But it did not. Petitioner disagrees with the trial courts finding that Tanjuatco was a buyer in good faith. It contends that the March 12, 1996Order of the Director of Lands which declared that the lots covered by TCT Nos. T-369406 and T369407 were free from claims and conflicts when Cuevas assigned his rights thereon to Tanjuatco. But petitioners claim is untenable because respondents did not formally offer said order in evidence. Lastly, petitioner makes an issue regarding the below-fair market value consideration which Tanjuatco paid Cuevas for the assignment of his rights to the lots. But it draws unconvincing conclusions therefrom that do not serve to persuade us of its claims. We note that Tanjuatco filed a demurrer to evidence before the RTC. By its nature, a demurrer to evidence is filed after the plaintiff has completed the presentation of his evidence but before the defendant offers evidence in his defense. Thus, the Rules provide that if the defendants motion is denied, he shall have the right to present evidence. However, if the defendants motion is granted but on appeal the order of dismissal is reversed, he shall be deemed to have waived the right to present evidence.[38] It is understandable, therefore, why the respondent was unable to formally offer in evidence the Order of the Director of Lands, or any evidence for that matter. More importantly, petitioner introduced in evidence TCT Nos. T-369406 and T-369407 in the name of respondent Tanjuatco. These titles bear a certification that Tanjuatcos titles were derived from OCT No. 245 in the name of no less than the Republic of thePhilippines. Hence, we cannot validly and fairly rule that in relying upon said title, Tanjuatco acted in bad faith. A person dealing with registered land may safely rely upon the correctness of the certificate of title issued therefor and the law will in no way oblige him to go behind the certificate to determine the condition of the property.[39] This applies even more particularly when the seller happens to be the Republic, against which, no improper motive can be ascribed. The law, no doubt, considers Tanjuatco an innocent purchaser for value. An innocent purchaser for value is one who buys the property of another, without notice that some other person has a right or interest in such property and pays the full price for the same, at the time of such purchase or before he has notice of the claims or interest of some other person in the property.[40] As regards the consideration which Tanjuatco paid Cuevas for the assignment of rights to the lands, suffice it to state that the assignment merely vested upon Tanjuatco all of Cuevass intangible claims, rights and interests over the properties and not the properties themselves. At the time of the assignment, the lots were still the subjects of a pending sales application before the Bureau of Lands. For, it was not until May 24, 1996, that titles were issued in Tanjuatcos name. The assignment not being a sale of real property, it was not surprising that Cuevas demanded from Tanjuatco only P85,000 for the transfer of rights. From all the foregoing, it is plain and apparent that NRSI failed to substantiate its claim of entitlement to ownership of the lands in Tanjuatcos name. The trial court, therefore, correctly dismissed petitioners complaint for reconveyance. WHEREFORE, the petition is DENIED. The Orders dated February 12, 2005 and July 1, 2005 of the Regional Trial Courtof Calamba City, Branch 37, in Civil Case No. 2662-98-C are AFFIRMED. Costs against petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD EN BANC G.R. No. 169956 January 19, 2009 DIVISION

SPOUSES JONEL PADILLA and SARAH PADILLA, Petitioners, vs. ISAURO A. VELASCO, TEODORA A. VELASCO, DELIA A. VELASCO, VALERIANO A. VELASCO, JR., IDA A. VELASCO, AMELITA C. VELASCO, ERIBERTO C. VELASCO, JR., and CELIA C. VELASCO, Respondents. DECISION NACHURA, J.: Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Decision 1 dated February 11, 2005 and the Resolution2 dated October 4, 2005 of the Court of Appeals (CA) in CA-G.R. CV No. 69997 entitled Isauro A. Velasco, Teodora A. Velasco, Delia A. Velasco, Valeriano A. Velasco, Jr., Ida A. Velasco, Amelita C. Velasco, Eriberto C. Velasco, Jr. and Celia C. Velasco v. Spouses Jonel Padilla and Sarah Padilla. The facts The facts of the case are as follows: Respondents are the heirs of Dr. Artemio A. Velasco (Artemio), who died single and without any issue on January 22, 1949. During his lifetime, Artemio acquired Lot No. 2161 consisting of 7,791 square meters situated at Barangay Pinagsanjan, Pagsanjan, Laguna, covered by Tax Declaration No. 4739. Artemio acquired the lot from spouses Brigido Sacluti and Melitona Obial, evidenced by a deed of sale dated February 14, 1944 In October 1987, petitioners entered the property as trustees by virtue of a deed of sale executed by the Rural Bank of Pagsanjan in favor of spouses Bartolome Solomon, Jr. and Teresita Padilla (Solomon spouses). Respondents demanded that petitioners vacate the property, but the latter refused. The matter was referred to the barangay for conciliation; however, the parties failed to reach an amicable settlement. Thereafter, petitioners caused the cutting of trees in the area, fenced it and built a house thereon. They harvested the crops and performed other acts of dominion over the property. On October 14, 1991, respondents filed a complaint for accion publiciana, accounting and damages against petitioners before the Regional Trial Court (RTC) of Santa Cruz, Laguna. They asked the court to order petitioners to vacate the property and to pay moral and exemplary damages, attorneys fees and cost of suit. Isauro A. Velasco (Isauro), the brother of the deceased Artemio, as administrator of the property, was presented as a witness. He testified that Artemio owned the property. As evidence thereof, he presented the Kasulatan ng Bilihang Tuluyan executed by spouses Brigido Sacluti and Melitona Obial in favor of Artemio, and declared that he (Isauro) was present during the signing of the instrument. He offered in evidence tax declarations and tax receipts covering Lot No. 2161 which were all in the name of Artemio. A certification from the Land Registration Authority (LRA) was likewise presented by Isauro which states that based on the records of the LRA, Decree No. 403348 was issued on October 10, 1930 covering Lot No. 2161.3 Rolando R. Flores, a geodetic engineer, also testified that on January 16, 1993, upon prior notice to petitioners, he conducted a survey of the land based on the technical description of the property and the map from the Bureau of Lands. The purpose of the survey was to verify if the area occupied by petitioners was Lot No. 2161. Upon his examination and based on his survey, he concluded that the land occupied by petitioners was Lot No. 2161. 4

On the other hand, petitioners averred that the Solomon spouses owned the property; that the said spouses bought it from the Rural Bank of Pagsanjan as evidenced by a deed of sale dated September 4, 1987; that the land was identified as Lot No. 76-pt, consisting of 10,000 square meters, located at Pinagsanjan, Pagsanjan, Laguna; and that the spouses authorized petitioners to occupy the land and introduce improvements thereon. Petitioners further claimed that subsequent to the sale of the property to the Solomon spouses, Lot No. 76-pt. was levied on in Civil Case No. 320 under the jurisdiction of the Municipal Trial Court of Pagsanjan, Laguna. The case was entitled Rural Bank of Pagsanjan, Inc. v. Spouses Hector and Emma Velasco, Valeriano Velasco and Virginia Miso. Petitioners alleged that Valeriano Velasco obtained a loan from the Rural Bank of Pagsanjan, with Hector Velasco as co-maker, and the land was mortgaged by Valeriano as collateral. Valerianos failure to pay the loan caused the foreclosure of the land, and on September 17, 1980, Lot No. 76-pt was sold at a public auction by the Provincial Sheriff. The Rural Bank of Pagsanjan was the highest bidder. Pedro Zalameda Trinidad, Jr. (Pedro), as a witness for the petitioners, testified that he was born in Barangay Pinagsanjan, Pagsanjan, Laguna, and had been residing there since birth. He said that based on his knowledge, the land belonged to Nonong (Valeriano) Velasco because he used to buy coconuts harvested from the said land and it was Nonong Velasco who caused the gathering of coconuts thereon. 5 Petitioner Jonel Padilla also took the witness stand. He testified that Pedro was occupying the land when he initially visited it. A representative of the Rural Bank of Pagsanjan disclosed to him that the land previously belonged to Valeriano. He verified from the Municipal Assessor the technical description of the land, but no longer verified from the Bureau of Lands because he trusted the bank. Upon his recommendation, his sister and his brother-in-law purchased the property after verifying the supporting documents. It was his brother-in-law who went to the Bureau of Lands and found that it was Lot No. 2161.6 On July 27, 1999, the RTC rendered a Decision,7 the dispositive portion of which reads: WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of the [respondents] ordering the [petitioners] to vacate the land presently occupied by them and restore possession thereof to the [respondents], to render an accounting of the proceeds from the crop harvested therefrom starting September 1987 up to the time the property is returned to the [respondents], and to remove at their expense all the structures they constructed thereon.8 Petitioners filed an appeal before the CA, but on February 11, 2005, the CA issued the assailed decision affirming the decision of the RTC. They consequently filed a motion for reconsideration. However, the same was denied in the assailed resolution dated October 4, 2005. Hence, the instant petition. The Issues Petitioners anchor their petition on the following grounds: I. The alleged sale executed between Brigido Sacluti and Melitona Obial as seller and Dr. Artemio [Velasco] as buyer was never established, respondents having failed to present the original copy thereof during the trial despite their clear and categorical commitment to do so. Furthermore, the purported Original Certificate of Title issued in the name of Brigido Sacluti and Melitona Obial was never presented in evidence, thus, creating the presumption that had it been presented, the same would have been adverse to respondents. 9 II. The spouses Solomon acquired the subject property from its lawful owner in good faith and for value. 10 III. The spouses Solomon acquired the subject property at the public auction sale conducted by the provincial sheriff of Laguna based on the judgment and writ of execution issued by the Municipal Trial Court of Laguna against respondent Valeriano Velasco for non-payment of a loan considering that (1) the issuance of Tax Declaration No. 4624 in the name of respondent Valeriano Velasco is entitled to the presumption of regularity especially since respondents have not explained how and why it was wrongly issued in the name of their own brother, respondent Valeriano Velasco and without any of them taking any action to correct the alleged mistake; and (2) by their failure to assert their alleged ownership of the

property and their inaction [by not] questioning the legal action taken by the bank against their co-respondent Valeriano Velasco and the subject property despite their full awareness since 1980, respondents are barred by estoppel from denying the title of the bank and the Solomon spouses.11 IV. The action a quo was barred by prescription considering that respondents filed their legal action against the petitioners only on October 14, 1991, more than ten (10) years after the bank had acquired the subject property on September 17, 1980 at the public auction conducted by the Provincial Sheriff of Laguna. 12 V. At the very least, respondents are guilty of laches, they having slept on their rights for an unreasonable length of time such that to dispossess petitioners of the property after they had introduced substantial improvements thereon in good faith would result in undue damage and injury to them all due to the silence and inaction of respondents in asserting their alleged ownership over the property.13 VI. The evidence proves that Lot no. 2161 and Lot no. 76-pt are one and the same. 14 VII. The failure of Atty. Asinas to present other witnesses, additional documents and to respond to certain pleadings brought about by his serious illnesses constitutes excusable negligence or incompetency to warrant a new trial considering that the Supreme Court itself had recognized negligence or incompetency of counsel as a ground for new trial especially if it has resulted in serious injustice or to an uneven playing field. 15 VIII. The overwhelming testimonial and documentary evidence, if presented, would have altered the result and the decision now appealed from.16 IX. The petitioners should be awarded their counterclaim for exemplary damages, attorneys fees and litigation expenses.17 The arguments submitted by petitioners may be summed up in the following issues: I. Who, as between the parties, have a better right of possession of Lot No. 2161; II. Whether the complaint for accion publiciana has already prescribed; and III. Whether the negligence of respondents counsel entitles them to a new trial. The Ruling of the Court We deny the instant petition. First. The instant case is for accion publiciana, or for recovery of the right to possess. This was a plenary action filed in the regional trial court to determine the better right to possession of realty independently of the title. 18 Accion publiciana is also used to refer to an ejectment suit where the cause of dispossession is not among the grounds for forcible entry and unlawful detainer, or when possession has been lost for more than one year and can no longer be maintained under Rule 70 of the Rules of Court. The objective of the plaintiffs in accion publiciana is to recover possession only, not ownership.19 Based on the findings of facts of the RTC which were affirmed by the CA, respondents were able to establish lawful possession of Lot No. 2161 when the petitioners occupied the property. Lot No. 2161 was the subject of Decree No. 403348 based on the decision dated October 10, 1930 in Cadastre (Cad.) Case No. 11, LRC Record No. 208. The Original Certificate of Title to the land was issued to Brigido Sacluti and Melitona Obial. On February 14, 1944, the original owners of the land sold the same to Artemio. From the date of sale, until Artemios death on January 22, 1949, he was in continuous possession of the land. When Artemio died, Isauro acted as administrator of the land with Tomas Vivero as caretaker. In 1987, petitioners occupied the property by virtue of a deed of sale between the Rural Bank of Pagsanjan and the Solomon spouses. The land bought by the Solomon spouses from the Bank is denominated as Lot No. 76-pt and previously owned by Valeriano. However, it was proved during trial that the land occupied by petitioners was Lot No. 2161 in the name of Artemio, whereas the land sold by the bank to the petitioners was Lot No. 76-pt.

Given this factual milieu, it can readily be deduced that respondents are legally entitled to the possession of Lot No. 2161. It is a long-standing policy of this Court that the findings of facts of the RTC which were adopted and affirmed by the CA are generally deemed conclusive and binding. This Court is not a trier of facts and will not disturb the factual findings of the lower courts unless there are substantial reasons for doing so. 20 In the instant case, we find no exceptional reason to depart from this policy. Second. The case filed by respondents for accion publiciana has not prescribed. The action was filed with the RTC on October 14, 1991. Petitioners dispossessed respondents of the property in October 1987. At the time of the filing of the complaint, only four (4) years had elapsed from the time of dispossession. Under Article 555(4) of the Civil Code of the Philippines, the real right of possession is not lost till after the lapse of ten years. It is settled that the remedy of accion publiciana prescribes after the lapse of ten years. 21 Thus, the instant case was filed within the allowable period. Third. Petitioners put in issue that Lot No. 2161 and Lot 76-pt are one and the same, and that the land was owned by Valeriano when it was foreclosed by the bank. This, in effect, is a collateral attack on the title over the property which is registered in the name of Artemio. We cannot countenance this stance of the petitioners, and perforce, must strike it down. Title to a registered land cannot be collaterally attacked. 22 A separate action is necessary to raise the issue of ownership. In accion publiciana, the principal issue is possession, and ownership is merely ancillary thereto. Only in cases where the possession cannot be resolved without resolving the issue of ownership may the trial court delve into the claim of ownership. This rule is enunciated in Refugia v. CA,23 where the Court declared, viz.: Where the question of who has prior possession hinges on the question of who the real owner of the disputed portion is, the inferior court may resolve the issue of ownership and make a declaration as to who among the contending parties is the real owner. In the same vein, where the resolution of the issue of possession hinges on a determination of the validity and interpretation of the document of title or any other contract on which the claim of possession is premised, the inferior court may likewise pass upon these issues. This is because, and it must be so understood, that any such pronouncement made affecting ownership of the disputed portion is to be regarded merely as provisional, hence, does not bar nor prejudice an action between the same parties involving title to the land. Fourth. Petitioners aver that they are entitled to a new trial due to the failure of their counsel in the proceedings before the RTC to present testimonial and documentary evidence necessary for them to obtain a favorable judgment. They maintain that the failure of their counsel to present these other evidence was due to counsels lingering illness at that time, and therefore, constitutes excusable negligence. It may be reiterated that mistakes of counsel as to the competency of witnesses, the sufficiency and relevancy of evidence, the proper defense, or the burden of proof, as well as his failure to introduce certain evidence or to summon witnesses and to argue the case, are not proper grounds for a new trial, unless the incompetence of counsel be so great that his client is prejudiced and prevented from fairly presenting his case. 24 In this case, the illness of petitioners counsel and his alleged failure to present additional evidence during the trial of the case do not constitute sufficient ground for a new trial. The Order25 issued by the trial court in its denial of the motion for new trial filed by petitioners aptly explains the reason why a new trial is unnecessary, viz.: Assuming that Atty. Asinas failed to perform the imputed acts by reason of his ailments, still, the same is insufficient ground to grant a new trial. The evidence on record established the fact that [respondents] and their predecessors-in-interest have been in possession of the subject realty for a long time. Their possession was interrupted by [petitioners] who entered the property in [1987] pursuant to a deed of sale between the Rural Bank of Pagsanjan and spouses Bartolome C. Solomon and Teresita Padilla. Considering that this is an accion publiciana and [respondents] earlier rightful possession of the subject parcel of land has been adequately established, the testimonial and documentary evidence sought to be adduced in a new trial would not adversely affect the findings of the Court. The ownership and possession of the property purchased by the Solomon spouses from the Rural Bank of Pagsanjan could be the subject of an appropriate action. WHEREFORE, the instant petition is DENIED for lack of merit. Costs against the petitioners. SO ORDERED. ANTONIO Associate Justice EDUARDO B. NACHURA

FIRST DIVISION JOSEPH REMENTIZO, Petitioner, G.R. No. 170318

DECISION CARPIO, J.: The Case This petition for review[1] assails the 4 July 2005 Amended Decision[2] and 3 October 2005 Resolution[3] of the Court of Appeals in CA-G.R. SP No. 65286. The Court of Appeals set aside its 26 May 2004 Decision[4] by declaring void Emancipation Patent (EP) No. A-028390-H issued to petitioner Joseph Rementizo (Rementizo). The Facts The instant controversy stemmed from a Complaint for Annulment and Cancellation of Original Certificate of Title (OCT) No. EP-195 and EP No. A-028390-H filed by the late Pelagia Vda. De Madarieta (Madarieta) against Rementizo before the Department of Agrarian Reform Adjudication Board (DARAB) in Camiguin.In her complaint, Madarieta claimed that she is the owner of a parcel of land declared in the name of her late husband Angel Madarieta (Angel), Lot No. 153-F with an area of 436 square meters situated in Tabulig, Poblacion, Mambajao, Camiguin. Madarieta alleged that Rementizo was a tenant of Roque Luspo (Luspo) and, as such, Rementizo was issued OCT No. EP-185 and OCT No. 174. Madarieta also alleged that the Department of Agrarian Reform (DAR) mistakenly included Lot No. 153-F as part of Luspos property covered by Operation Land Transfer. As a result, EP No. A-028390-H was issued to Rementizo. By virtue of such emancipation patent, OCT No. EP-195 was registered in Rementizos name. Madarieta further claimed that she had been deprived of her property without due process since she had not received any notice or information from the DAR relating to the transfer of ownership over the subject land to Rementizo. In his answer, Rementizo claimed that he had been in possession of the subject land in the concept of an owner since 1987 and even constructed a house on the subject lot after the registration of the title. Rementizo denied that Lot No. 153-F is owned by Angel. Instead, the subject land was allegedly adjoining Lot No. 153 which is owned by Luspo. Rementizo further claimed that assuming Madarietas allegations were true, Angel did not object to his possession of the subject land during the latters lifetime considering that the subject land is just a few meters away from the Madarietas house. Further, Rementizo asserted that, in instituting the case, Madarieta was guilty of laches and that the action had already prescribed.On 22 December 1998, the Provincial Adjudicator [5] issued an Order declaring OCT No. EP-195 and EP No. A-028390-H null and void, and directing Rementizo or anyone in possession to vacate the subject property. The dispositive portion of this Order reads: WHEREFORE, the Original Certificate of Title No. 195, EP No. A-028390-H issued in the name of the respondent is hereby ordered cancelled and/or revoked for being null and void ab initio, and the respondent or anybody in possession or occupation of subject land is hereby ordered to turn over subject land to the plaintiff and vacate the premises. SO ORDERED.[6] Rementizo appealed the Provincial Adjudicators order to the DARAB-Central Office. On 7 February 2001, the DARABCentral Office reversed the Provincial Adjudicators order by ruling in favor of Rementizo, thus:

x x x After careful considerations, we find the appeal impressed with merit. The records show that the subject land was placed under Operation Land Transfer, pursuant to P.D. No. 27. It must be pointed out that the coverage was made during the lifetime of Angel Madarieta who is the alleged declared owner of the land in question. There is no showing that the late Angel objected to the coverage. Consequently, OCT No. 195 was generated in favor of Respondent-Appellant who took possession thereof and even built his house thereon. All this while there was no objection to said occupation. Considering that the occupation is manifest, that the landholding of said Angel is proximate thereto, there can be no question that the occupancy of Respondent was known to the late Angel Madarieta, under whose alleged rights over said landholding, herein Petitioner-Appellee anchors her claim. Angel Madarieta failed to object to Respondent-Appellants possession and occupation of the subject premises for a period of eleven (11) years; said inaction of alleged declared owner of the subject land only shows that Respondents occupancy thereof was legitimate, and that the late Angel had no rights or claims thereon. Under the circumstances, the surviving wifes claim now of rights over said land on alleged non-notice of DAR coverage is untenable. Moreover, an action to invalidate a Certificate of Title on the ground of fraud prescribes after one (1) year from the entry of the decree of registration. (Bishop vs. Court of Appeals, 208 SCRA 637). In this case, Petitioners (sic) inaction for more than eleven (11) years is inexcusable (Comero vs. Court of Appeals, 247 SCRA 291). WHEREFORE, premises considered, the appealed decision is SET ASIDE. A new judgment is rendered. 1. Upholding the validity of Original Certificate of Title (CTC) No. 195, E.P. No. A-028390-H issued in favor of Respondent-Appellant Joseph Rementizo; 2. Nullifying the Order dated February 15, 1999, and Ordering the Plaintiff and all persons acting in her behalf to respect and maintain Respondent Rementizo's peaceful occupation of the land in question; and 3. Reinstating Respondent-Appellant over the subject land, if already ejected. SO ORDERED.[7]

Madarieta filed a petition for review with the Court of Appeals under Rule 43 of the Rules of Court assailing the decision of the DARAB. Madarieta raised the following errors in the Court of Appeals: 1. The DARAB erred in holding that she had already learned of Rementizos occupation and possession of the subject property for the last 11 years prior to the filing of the case, when EP No. A-028390-H was registered and the OCT was issued in 1987; and 2. The DARAB erred in holding that she committed negligence for failing to file the instant case within the prescriptive period. Madarieta argued that she never knew that the subject land was part of her husbands estate. Madarieta averred that it was only on 21 November 1997, through a relocation survey, that she discovered that the land where Rementizo constructed his house was part of her husbands property. This discovery prompted Madarieta to file a complaint with the DARAB on 5 November 1998, or within 11 months and 14 days reckoned from such knowledge. The Court of Appeals Ruling In its Decision of 26 May 2004, the Court of Appeals held that when Madarieta filed an action on 5 November 1998, for the annulment and cancellation of Rementizos title, more than 10 years had passed after the issuance of Rementizos title rendering the title incontrovertible. Madarieta sought reconsideration of the 26 May 2004 Decision, which the Court of

Appeals partially granted in its Amended Decision of 4 July 2005. The Court of Appeals set aside its earlier decision of 26 May 2004.

In its Amended Decision, the appellate court applied the exception to the rule that an action for reconveyance of a fraudulently registered real property prescribes in 10 years. Citing Bustarga v. Navo II,[8] the appellate court held that Lot No. 153-F was erroneously awarded to Rementizo. The entire Lot No. 153 was indeed covered by the Operation Land Transfer. Hence, Lot No. 153 was subdivided into: (1) Lot No. 153-B, declared in the name of Alberto Estanilla; (2) Lot No. 153-C, declared in the name of Eusebio Arce; (3) Lot No. 153-D, declared in the name of Feliciano Tadlip; and (4) Lot Nos. 153-E and F, retained and declared in the name of Angel. Nowhere in the records is it shown that Rementizo was a beneficiary or tenant of Lot No. 153-F. The Court of Appeals granted the petition insofar as the cancellation of EP No. A-028390-H was concerned. The appellate court opined that Madarieta still has to file the appropriate action in the Regional Trial Court, which has original jurisdiction in actions after original registration, to have the subject OCT reconveyed by virtue of the issuance of a void emancipation patent. The Court of Appeals disposed of the instant case, as follows: WHEREFORE, the instant motion for reconsideration is PARTIALLY GRANTED. The Decision of this Court promulgated on May 26,2004 is SET ASIDE. In lieu thereof, the herein discussion is adopted and a new judgment is entered, as follows: WHEREFORE, the petition for review is GRANTED. The decision of the DARAB dated February 7, 2001 is REVERSED and SET ASIDE. Further, Emancipation Patent (EP) No. A-028390-H, covering Lot No. 153-F, issued to the private respondent, is declared NULL and VOID. SO ORDERED.[9] The Issue The crucial issue in this case is whether the action for the annulment of the emancipation patent, which ultimately seeks the reconveyance of the title issued to Rementizo, has already prescribed. The Ruling of the Court The petition is meritorious. In the present case, the DAR, which is presumed to have regularly performed its official function, awarded EP No. A028390-H to Rementizo in 1987. Aside from this emancipation patent, two other emancipation patents and certificates of title (OCT Nos. 183 and 174) were issued to Rementizo covering two different parcels of land. This means that Rementizo was a qualified beneficiary of various parcels of agricultural land placed under the governments Operation Land Transfer. The Court notes that Madarieta was claiming the subject property as the surviving spouse of Angel. While Madarieta presented evidence pointing out that Lot No. 153-F was historically owned and declared in the name of her deceased husband, Angel, there is nothing in the records showing that Angel during his lifetime opposed Rementizos occupation and possession of the subject land. Madarieta and respondents started claiming the property after the death of Angel. Considering that the subject property was proximate to the Madarietas residence, Angel could have questioned the legality of Rementizos occupation over the land. There is no dispute that Rementizo possessed the subject land in the concept of an owner since the issuance of EP No. A-028390-H and the registration of OCT No. EP-195 in 1987, when Angel was still alive. Rementizo even constructed a house on the subject property immediately thereafter. No objection was interposed by Angel against Rementizos possession of the subject land. With Angels unexplained silence or

acquiescence, it may be concluded that Angel recognized the legitimacy of Rementizos rights over the land. Otherwise, Angel could have challenged Rementizos occupation of the subject property. There is no allegation or proof that there was fraud in the issuance of EP No. A-028390-H and OCT No. EP-195. Madarieta did not adduce any evidence showing the existence of fraud in the issuance of the subject emancipation patent and title. In fact, Madarieta faulted the DAR in including the subject land in the Operation Land Transfer and termed DARs alleged unlawful taking of the subject property as landgrabbing. In her Memorandum before the DARAB, Madarieta stated that: Unfortunately for petitioner (Madarieta), sometime about 1988, DAR people of Camiguin Province identified respondent as tenant of Roque Luspo and Lourdes Luspo Neri and made him qualified beneficiary of the said landowner in the implementation of P.D. 27, and awarded to respondent not only the farm of the said landowner but also the subject land exclusively belonging to petitioner x x That by virtue thereof, said respondent was issued OCT No. EP 195. Respondent cannot be considered possessor in good faith. He has no hand in the acquisition of the property. He was merely a recipient being a qualified beneficiary. It was the government thru the instrumentality of a law P.D. 27 that acquired the land thru the Ministry of Agrarian Reform. [10] (Emphasis supplied) Thus, Madarieta miserably failed to show that Rementizo employed fraud in the awarding of EP No. A-028390-H in his favor. Fraud is a question of fact which must be alleged and proved. Fraud cannot be presumed and must be proven by clear and convincing evidence. [11] In this case, there was no such evidence showing actual fraud on the part of Rementizo. Madarietas evidence at the most tends to show that the DAR committed a mistake in issuing EP No. A-028390-H in favor of Rementizo, who was admittedly a tenant of Luspo and not of Angel. While the entire Lot No. 153 was indeed covered by the Operation Land Transfer, Madarieta presented the Real Property Historical Ownership which was issued by the Office of the Provincial Assessor, [12] stating that Lot Nos. 153-E and F were retained and declared in the name of Angel.Considering that there appears to be a mistake in the issuance of the subject emancipation patent, then the registration of the title to the subject property in Rementizos name is likewise erroneous. In such a case, the law prescribes a specific remedy reserved to the rightful owner of the erroneously registered property, that is, an action for reconveyance.In an action for reconveyance, the decree of registration is respected as incontrovertible but what is sought instead is the transfer of the property wrongfully or erroneously registered in anothers name to its rightful owner or to one with a better right. The person in whose name the land is registered holds it as a mere trustee. [13] Nevertheless, the right to seek reconveyance of registered property is not absolute because it is subject to extinctive prescription.
[14]

In Caro v. Court of Appeals,[15] the prescriptive period of an action for reconveyance was explained:

[U]nder the present Civil Code, we find that just as an implied or constructive trust is an offspring of the law (Art. 1456, Civil Code), so is the corresponding obligation to reconvey the property and the title thereto in favor of the true owner. In this context, and vis--vis prescription, Article 1144 of the Civil Code is applicable. Article 1144. The following actions must be brought within ten years from the time the right of action accrues:

(1) (2) (3)

Upon a Upon an obligation Upon a judgment. (Emphasis supplied)

written created

by

contract; law;

The 10-year prescriptive period is reckoned from the date of issuance of the certificate of title. There is but one instance when prescription cannot be invoked in an action for reconveyance, that is, when the plaintiff or complainant (Madarieta or respondents in this case) is in possession of the land to be reconveyed, [16] and the registered owner was never in possession of the disputed property. In such a case, the Court has allowed the action for reconveyance to prosper despite the lapse of more than 10 years from the issuance of the title to the land. [17]

In the instant case, however, it is the rule rather than the exception which should apply.

To repeat, an action for reconveyance based on an implied or constructive trust prescribes in 10 years from the issuance of theTorrens title over the property, which operates as a constructive notice to the whole world. [18] The title over the subject land was registered in Rementizos name in 1987 while Madarieta filed the complaint to recover the subject lot only in 1998. More than 11 years had lapsed before Madarieta instituted the action for annulment of EP No. A-028390-H, which in essence is an action for reconveyance. Therefore, the complaint was clearly barred by prescription.

Madarietas discovery in 1997, through a relocation survey, of the ownership of the subject land can not be considered as the reckoning point for the computation of the prescriptive period. EP No. A-028390-H, by virtue of which OCT No. EP-195 was registered, was issued in 1987, when Angel who is the declared landowner was still alive.

In GSIS v. Santiago,[19] Samonte v. Court of Appeals,[20] and Adille v. Court of Appeals,[21] this Court used as starting point the date of the actual discovery of the fraud, instead of the date of the issuance of the certificate of title. In those cases, however, there were evident bad faith, misrepresentations, and fraudulent machinations employed by the registered owners in securing titles over the disputed lots.

In this case, there is no evidence adduced by Madarieta or respondents that Rementizo employed fraud in the issuance of EP No. A-028390-H and OCT No. EP-195. Madarieta did not even present any evidence that her late husband objected to Rementizos occupation over the subject land after the issuance of EP No. A-028390-H and OCT No. EP-195. The absence of fraud in the present case distinguishes it from the cases of GSIS,[22] Samonte,[23] and Adille.[24] The

reckoning point, therefore, for the computation of the 10-year prescriptive period is the date of the issuance of EP No. A028390-H and registration of OCT No. EP-195 in the name of Rementizo.

WHEREFORE, we GRANT the petition. We SET ASIDE the 4 July 2005 Amended Decision and 3 October 2005 Resolution of the Court of Appeals in CA-G.R. SP No. 65286. We DISMISS the Complaint for Annulment and Cancellation of Original Certificate of Title No. EP-195 and Emancipation Patent No. A-028390-H on the ground of prescription. Costs against respondents. SO ORDERED.

ANTONIO T. CARPIO Associate Justice Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 170923 January 20, 2009

SULO SA NAYON, INC. and/or PHILIPPINE VILLAGE HOTEL, INC. and JOSE MARCEL E. PANLILIO, Petitioners, vs. NAYONG PILIPINO FOUNDATION, Respondent. DECISION PUNO, C.J.: On appeal are the Court of Appeals (CAs) October 4, 2005 Decision 1 in CA-G.R. SP No. 74631 and December 22, 2005 Resolution,2 reversing the November 29, 2002 Decision3 of the Regional Trial Court (RTC) of Pasay City in Civil Case No. 02-0133. The RTC modified the Decision4 of the Metropolitan Trial Court (MeTC) of Pasay City which ruled against petitioners and ordered them to vacate the premises and pay their arrears. The RTC declared petitioners as builders in good faith and upheld their right to indemnity. The facts are as follows: Respondent Nayong Pilipino Foundation, a government-owned and controlled corporation, is the owner of a parcel of land in Pasay City, known as the Nayong Pilipino Complex. Petitioner Philippine Village Hotel, Inc. (PVHI), formerly called Sulo sa Nayon, Inc., is a domestic corporation duly organized and existing under Philippine laws. Petitioner Jose Marcel E. Panlilio is its Senior Executive Vice President. On June 1, 1975, respondent leased a portion of the Nayong Pilipino Complex, consisting of 36,289 square meters, to petitioner Sulo sa Nayon, Inc. for the construction and operation of a hotel building, to be known as the Philippine Village Hotel. The lease was for an initial period of 21 years, or until May 1996. It is renewable for a period of 25 years under the same terms and conditions upon due notice in writing to respondent of the intention to renew at least 6 months before its expiration. Thus, on March 7, 1995, petitioners sent respondent a letter notifying the latter of their intention to renew the contract for another 25 years. On July 4, 1995, the parties executed a Voluntary Addendum to the Lease Agreement. The addendum was signed by petitioner Jose Marcel E. Panlilio in his official capacity as Senior Executive Vice President of the PVHI and by Chairman Alberto A. Lim of the Nayong Pilipino Foundation. They agreed to the renewal of the contract for another 25 years, or until 2021. Under the new agreement, petitioner PVHI was bound to pay the monthly rental on a per square meter basis at the rate of P20.00 per square meter, which shall be subject to an increase of 20% at the end of every 3-year period. At the time of the renewal of the lease contract, the monthly rental amounted to P725,780.00. Beginning January 2001, petitioners defaulted in the payment of their monthly rental. Respondent repeatedly demanded petitioners to pay the arrears and vacate the premises. The last demand letter was sent on March 26, 2001. On September 5, 2001, respondent filed a complaint for unlawful detainer before the MeTC of Pasay City. The complaint was docketed as Civil Case No. 708-01. Respondent computed the arrears of petitioners in the amount of twenty-six million one hundred eighty-three thousand two hundred twenty-five pesos and fourteen centavos (P26,183,225.14), as of July 31, 2001. On February 26, 2002, the MeTC rendered its decision in favor of respondent. It ruled, thus:

. . . . The court is convinced by the evidence that indeed, defendants defaulted in the payment of their rentals. It is basic that the lessee is obliged to pay the price of the lease according to the terms stipulated (Art. 1657, Civil Code). Upon the failure of the lessee to pay the stipulated rentals, the lessor may eject (sic) and treat the lease as rescinded and sue to eject the lessee (C. Vda[.] De Pamintuan v. Tiglao, 53 Phil. 1). For non-payment of rentals, the lessor may rescind the lease, recover the back rentals and recover possession of the leased premises. . . xxx . . . . Improvements made by a lessee such as the defendants herein on leased premises are not valid reasons for their retention thereof. The Supreme Court has occasion to address a similar issue in which it ruled that: "The fact that petitioners allegedly made repairs on the premises in question is not a reason for them to retain the possession of the premises. There is no provision of law which grants the lessee a right of retention over the leased premises on that ground. Article 448 of the Civil Code, in relation to Article 546, which provides for full reimbursement of useful improvements and retention of the premises until reimbursement is made, applies only to a possessor in good faith, i.e., one who builds on a land in the belief that he is the owner thereof. This right of retention does not apply to a mere lessee, like the petitioners, otherwise, it would always be in his power to "improve" his landlord out of the latters property (Jose L. Chua and Co Sio Eng vs. Court of Appeals and Ramon Ibarra, G.R. No. 109840, January 21, 1999)." Although the Contract of Lease stipulates that the building and all the improvements in the leased premises belong to the defendants herein, such will not defeat the right of the plaintiff to its property as the defendants failed to pay their rentals in violation of the terms of the contract. At most, defendants can only invoke [their] right under Article 1678 of the New Civil Code which grants them the right to be reimbursed one-half of the value of the building upon the termination of the lease, or, in the alternative, to remove the improvements if the lessor refuses to make reimbursement. The dispositive portion of the decision reads as follows: WHEREFORE, premises considered, judgment is hereby rendered in favor of Nayong Pilipino Foundation, and against the defendant Philippine Village Hotel, Inc[.], and all persons claiming rights under it, ordering the latter to: 1. VACATE the subject premises and surrender possession thereof to plaintiff; 2. PAY plaintiff its rental arrearages in the sum of TWENTY SIX MILLION ONE HUNDRED EIGHTY THREE THOUSAND TWO HUNDRED TWENTY FIVE PESOS AND 14/100 (P26,183,225.14) incurred as of July 31, 2001; 3. PAY plaintiff the sum of SEVEN HUNDRED TWENTY FIVE THOUSAND SEVEN HUNDRED EIGHTY PESOS (P725,780.00) per month starting from August 2001 and every month thereafter by way of reasonable compensation for the use and occupation of the premises; 4. PAY plaintiff the sum of FIFTY THOUSAND PESOS (P50,000.00) by way of attorneys fees[; and] 5. PAY the costs of suit. The complaint against defendant Jose Marcel E. Panlilio is hereby dismissed for lack of cause of action. The said defendants counterclaim however is likewise dismissed as the complaint does not appear to be frivolous or maliciously instituted. SO ORDERED.5 Petitioners appealed to the RTC which modified the ruling of the MeTC. It held that: . . . it is clear and undisputed that appellants-lessees were expressly required to construct a first-class hotel with complete facilities. The appellants were also unequivocally declared in the Lease Agreement as the owner of the improvements so constructed. They were even explicitly allowed to use the improvements and building as security or collateral on loans and credit accommodations that the Lessee may secure for the purpose of financing the construction of the building and other improvements (Section 2; pars. "A" to "B," Lease Agreement). Moreover, a time frame was setforth (sic) with respect to the duration of the lease initially for 21 years and renewable for another 25 years in order to enable the

appellants-lessees to recoup their huge money investments relative to the construction and maintenance of the improvements. xxx Considering therefore, the elements of permanency of the construction and substantial value of the improvements as well as the undispute[d] ownership over the land improvements, these, immensely engender the application of Art. 448 of the Civil Code. The only remaining and most crucial issue to be resolved is whether or not the appellants as builders have acted in good faith in order for Art. 448 in relation to Art. 546 of the Civil Code may apply with respect to their rights over improvements. xxx . . . it is undeniable that the improvement of the hotel building of appellants (sic) PVHI was constructed with the written consent and knowledge of appellee. In fact, it was precisely the primary purpose for which they entered into an agreement. Thus, it could not be denied that appellants were builders in good faith. Accordingly, and pursuant to Article 448 in relation to Art. 546 of the Civil Code, plaintiff-appellee has the sole option or choice, either to appropriate the building, upon payment of proper indemnity consonant to Art. 546 or compel the appellants to purchase the land whereon the building was erected. Until such time that plaintiff-appellee has elected an option or choice, it has no right of removal or demolition against appellants unless after having selected a compulsory sale, appellants fail to pay for the land (Ignacio vs. Hilario; 76 Phil. 605). This, however, is without prejudice from the parties agreeing to adjust their rights in some other way as they may mutually deem fit and proper. The dispositive portion of the decision of the RTC reads as follows: WHEREFORE, and in view of the foregoing, judgment is hereby rendered modifying the decision of [the] MTC, Branch 45 of Pasay City rendered on February 26, 2002 as follows: 1. Ordering plaintiff-appellee to submit within thirty (30) days from receipt of a copy of this decision a written manifestation of the option or choice it selected, i.e., to appropriate the improvements upon payment of proper indemnity or compulsory sale of the land whereon the hotel building of PVHI and related improvements or facilities were erected; 2. Directing the plaintiff-appellee to desist and/or refrain from doing acts in the furtherance or exercise of its rights and demolition against appellants unless and after having selected the option of compulsory sale and appellants failed to pay [and] purchase the land within a reasonable time or at such time as this court will direct; 3. Ordering defendants-appellants to pay plaintiff-appellee [their] arrears in rent incurred as of July 31, 2001 in the amount of P26,183,225.14; 4. Ordering defendants-appellants to pay to plaintiff-appellee the unpaid monthly rentals for the use and occupation of the premises pending this appeal from July to November 2002 only at P725,780.00 per month; 5. The fourth and fifth directives in the dispositive portion of the trial courts decision including that the last paragraph thereof JME Panlilios complaint is hereby affirmed; 6. The parties are directed to adjust their respective rights in the interest of justice as they may deem fit and proper if necessary. SO ORDERED.6 Respondent appealed to the CA which held that the RTC erroneously applied the rules on accession, as found in Articles 448 and 546 of the Civil Code when it held that petitioners were builders in good faith and, thus, have the right to indemnity. The CA held:

By and large, respondents are admittedly mere lessees of the subject premises and as such, cannot validly claim that they are builders in good faith in order to solicit the application of Articles 448 and 546 of the Civil Code in their favor. As it is, it is glaring error on the part of the RTC to apply the aforesaid legal provisions on the supposition that the improvements, which are of substantial value, had been introduced on the leased premises with the permission of the petitioner. To grant the respondents the right of retention and reimbursement as builders in good faith merely because of the valuable and substantial improvements that they introduced to the leased premises plainly contravenes the law and settled jurisprudential doctrines and would, as stated, allow the lessee to easily "improve" the lessor out of its property. . . . . Introduction of valuable improvements on the leased premises does not strip the petitioner of its right to avail of recourses under the law and the lease contract itself in case of breach thereof. Neither does it deprive the petitioner of its right under Article 1678 to exercise its option to acquire the improvements or to let the respondents remove the same. Petitioners Motion for Reconsideration was denied. Hence, this appeal.7 Petitioners assign the following errors: THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR IN NOT HOLDING THAT PETITIONERS WERE BUILDERS IN GOOD FAITH OVER THE SUBSTANTIAL AND VALUABLE IMPROVEMENTS WHICH THEY HAD INTRODUCED ON THE SUBJECT PROPERTY, THUS COMPELLING THE APPLICATION OF ARTICLE 448 OF THE CIVIL CODE IN RELATION TO ARTICLE 546 OF THE SAME CODE, INSTEAD OF ARTICLE 1678 OF THE CIVIL CODE. II HONORABLE COURT OF APPEALS COMMITTED A SERIOUS REVERSIBLE ERROR WHEN IT DISREGARDED THE FACT THAT THE LEASE CONTRACT GOVERNS THE RELATIONSHIP OF THE PARTIES AND CONSEQUENTLY THE PARTIES MAY BE CONSIDERED TO HAVE IMPLIEDLY WAIVED THE APPLICATION OF ARTICLE 1678 OF THE CIVIL CODE TO THE INSTANT CASE. III ASSUMING ARGUENDO THAT THE PETITIONERS ARE NOT BUILDERS IN GOOD FAITH, THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR WHEN IT OVERLOOKED THE FACT THAT RESPONDENT ALSO ACTED IN BAD FAITH WHEN IT DID NOT HONOR AND INSTEAD BREACHED THE LEASE CONTRACT BETWEEN THE PARTIES, THUS BOTH PARTIES ACTED AS IF THEY ARE IN GOOD FAITH. IV TO SANCTION THE APPLICATION OF ARTICLE 1678 OF THE CIVIL CODE INSTEAD OF ARTICLE 448 OF THE CIVIL CODE IN RELATION TO ARTICLE 546 OF THE SAME CODE WOULD NOT ONLY WREAK HAVOC AND CAUSE SUBSTANTIAL INJURY TO THE RIGHTS AND INTERESTS OF PETITIONER PHILIPPINE VILLAGE HOTEL, INC. WHILE RESPONDENT NAYONG PILIPINO FOUNDATION, IN COMPARISON THERETO, WOULD SUFFER ONLY SLIGHT OR INCONSEQUENTIAL INJURY OR LOSS, BUT ALSO WOULD CONSTITUTE UNJUST ENRICHMENT ON THE PART OF RESPONDENT AT GREAT EXPENSE AND GRAVE PREJUDICE OF PETITIONERS. V THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR IN NOT HOLDING THAT THE COURTS A QUO DID NOT ACQUIRE JURISDICTION OVER THE UNLAWFUL DETAINER CASE FOR NON-COMPLIANCE WITH JURISDICTIONAL REQUIREMENTS DUE TO THE ABSENCE OF A NOTICE TO VACATE UPON PETITIONERS.8

First, we settle the issue of jurisdiction. Petitioners argue that the MeTC did not acquire jurisdiction to hear and decide the ejectment case because they never received any demand from respondent to pay rentals and vacate the premises, since such demand is a jurisdictional requisite. We reiterate the ruling of the MeTC, RTC and CA. Contrary to the claim of petitioners, documentary evidence proved that a demand letter dated March 26, 2001 was sent by respondent through registered mail to petitioners, requesting them "to pay the rental arrears or else it will be constrained to file the appropriate legal action and possess the leased premises."Further, petitioners argument that the demand letter is "inadequate" because it contained no demand to vacate the leased premises does not persuade. We have ruled that: . . . . The word "vacate" is not a talismanic word that must be employed in all notices. The alternatives in this case are clear cut. The tenants must pay rentals which are fixed and which became payable in the past, failing which they must move out. There can be no other interpretation of the notice given to them. Hence, when the petitioners demanded that either he pays P18,000 in five days or a case of ejectment would be filed against him, he was placed on notice to move out if he does not pay. There was, in effect, a notice or demand to vacate. 9 In the case at bar, the language of the demand letter is plain and simple: respondent demanded payment of the rental arrears amounting to P26,183,225.14 within ten days from receipt by petitioners, or respondent will be constrained to file an appropriate legal action against petitioners to recover the said amount. The demand letter further stated that respondent will possess the leased premises in case of petitioners failure to pay the rental arrears within ten days. Thus, it is clear that the demand letter is intended as a notice to petitioners to pay the rental arrears, and a notice to vacate the premises in case of failure of petitioners to perform their obligation to pay.Second, we resolve the main issue of whether the rules on accession, as found in Articles 448 and 546 of the Civil Code, apply to the instant case. Article 448 and Article 546 provide: Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof. Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor. Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof. We uphold the ruling of the CA. The late Senator Arturo M. Tolentino, a leading expert in Civil Law, explains: This article [Article 448] is manifestly intended to apply only to a case where one builds, plants, or sows on land in which he believes himself to have a claim of title, 10 and not to lands where the only interest of the builder, planter or sower is that of a holder, such as a tenant.11 In the case at bar, petitioners have no adverse claim or title to the land. In fact, as lessees, they recognize that the respondent is the owner of the land. What petitioners insist is that because of the improvements, which are of substantial value, that they have introduced on the leased premises with the permission of respondent, they should be considered builders in good faith who have the right to retain possession of the property until reimbursement by respondent. We affirm the ruling of the CA that introduction of valuable improvements on the leased premises does not give the petitioners the right of retention and reimbursement which rightfully belongs to a builder in good faith. Otherwise, such a situation would allow the lessee to easily "improve" the lessor out of its property. We reiterate the doctrine that a lessee is

neither a builder in good faith nor in bad faith12 that would call for the application of Articles 448 and 546 of the Civil Code. His rights are governed by Article 1678 of the Civil Code, which reads: Art. 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than is necessary. With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished. Under Article 1678, the lessor has the option of paying one-half of the value of the improvements which the lessee made in good faith, which are suitable for the use for which the lease is intended, and which have not altered the form and substance of the land. On the other hand, the lessee may remove the improvements should the lessor refuse to reimburse. Petitioners argue that to apply Article 1678 to their case would result to sheer injustice, as it would amount to giving away the hotel and its other structures at virtually bargain prices. They allege that the value of the hotel and its appurtenant facilities amounts to more than two billion pesos, while the monetary claim of respondent against them only amounts to a little more than twenty six-million pesos. Thus, they contend that it is the lease contract that governs the relationship of the parties, and consequently, the parties may be considered to have impliedly waived the application of Article 1678. We cannot sustain this line of argument by petitioners. Basic is the doctrine that laws are deemed incorporated in each and every contract. Existing laws always form part of any contract. Further, the lease contract in the case at bar shows no special kind of agreement between the parties as to how to proceed in cases of default or breach of the contract. Petitioners maintain that the lease contract contains a default provision which does not give respondent the right to appropriate the improvements nor evict petitioners in cases of cancellation or termination of the contract due to default or breach of its terms. They cite paragraph 10 of the lease contract, which provides that: 10. DEFAULT. - . . . Default shall automatically take place upon the failure of the LESSEE to pay or perform its obligation during the time fixed herein for such obligations without necessity of demand, or, if no time is fixed, after 90 days from the receipt of notice or demand from the LESSOR. . . In case of cancellation or termination of this contract due to the default or breach of its terms, the LESSEE will pay all reasonable attorneys fees, costs and expenses of litigation that may be incurred by the LESSOR in enforcing its rights under this contract or any of its provisions, as well as all unpaid rents, fees, charges, taxes, assessment and others which the LESSOR may be entitled to. Petitioners assert that respondent committed a breach of the lease contract when it filed the ejectment suit against them. However, we find nothing in the above quoted provision that prohibits respondent to proceed the way it did in enforcing its rights as lessor. It can rightfully file for ejectment to evict petitioners, as it did before the court a quo. IN VIEW WHEREOF, petitioners appeal is DENIED. The October 4, 2005 Decision of the Court of Appeals in CAG.R. SP No. 74631 and its December 22, 2005 Resolution are AFFIRMED. Costs against petitioners. SO ORDERED. REYNATO S. PUNO Chief Justice

THIRD DIVISION BICOL AGRO-INDUSTRIAL PRODUCERS COOPERATIVE, INC. (BAPCI), Petitione - versus EDMUNDO O. OBIAS, PERFECTO O. OBIAS, VICTOR BAGASINA, ELENA BENOSA, MELCHOR BRANDES, ROGELIO MONTERO, PEDRO MONTERO, CLAUDIO RESARI, PILAR GALON, ANTONIO BUISON, PRUDENCIO BENOSA, JR., MARIA VILLAMER and ROBERTO PADUA,

G.R. No. 172077

Promulgated:

October 9, 2009 Respondent. x----------------------------------------------------x

DECISION PERALTA, J.: Before this Court is a Petition for Review on certiorari[1] under Rule 65 of the Rules of Court, seeking to set aside the August 24, 2005 Decision[2] and March 28, 2006 Resolution[3] of the Court of Appeals (CA) in CA-G.R. CV No. 59016. The facts of the case: Sometime in 1972, the Bicol Sugar Development Corporation (BISUDECO) was established at Himaao, Pili, Camarines Sur. In the same year, BISUDECO constructed a road (the disputed road) measuring approximately 7 meters wide and 2.9 kilometers long. The disputed road was used by BISUDECO in hauling and transporting sugarcane to and from its mill site (Pensumil) and has thus become indispensable to its sugar milling operations. [4] On October 30, 1992, petitioner Bicol Agro-Industrial Producers Cooperative, Inc. acquired the assets of BISUDECO. On April 19, 1993, petitioner filed a Complaint[5] against respondents Edmundo Obias, Perfecto Obias, Victor Bagasina, Elena Benosa, Melchor Brandes, Rogelio Montero, Pedro Montero, Claudio Resari, Pilar Galon, Antonio Buison, Prudencio Benosa, Jr., Victor Bagasina Jr., Maria Villamer, and Roberto Padua, alleging that on March 27, 1993 and April 3, 1993, respondents unjustifiably barricaded the disputed road by placing bamboos, woods, placards and stones across it, preventing petitioners and the other sugar planters vehicles from passing through the disputed road, thereby causing serious damage and prejudice to petitioner.[6] Petitioner alleged that BISUDECO constructed the disputed road pursuant to an agreement with the owners of the ricefields the road traversed. The agreement provides that BISUDECO shall employ the children and relatives of the landowners in exchange for the construction of the road on their properties. Petitioner contends that through prolonged and continuous use of the disputed road, BISUDECO acquired a right of way over the properties of the landowners, which right of way in turn was acquired by it when it bought BISUDECOs assets. Petitioner prayed that respondents be permanently ordered to restrain from barricading the disputed road and from obstructing its free passage.
[7]

In an Order[8] dated April 19, 1993, the Regional Trial Court of Pili (RTC), Camarines Sur, 5 th Judicial Region, Branch 31, ordered respondents, their agents and representatives to cease and desist from placing barricades on the disputed road.[9] In their Answer,[10] respondents denied having entered into an agreement with BISUDECO regarding the construction and the use of the disputed road. They alleged that BISUDECO, surreptitiously and without their knowledge and consent, constructed the disputed road on their properties and has since then intermittently and discontinuously used the disputed road for hauling sugarcane despite their repeated protests. Respondents claimed they tolerated BISUDECO in the construction and the use of the road since BISUDECO was a government-owned and controlled corporation, and the entire country was then under Martial Law. Respondents likewise denied that the road has become a public road, since no public funds were used for its construction and maintenance. Moreover, respondents alleged that with the exception of Edmundo and Perfecto Obias, they are actual tillers of the ricelands, having acquired their rights over said lands under Presidential Decree No. 27 (PD 27). Edmundo and Perfecto Obias are the owners of the eastern portion of the property on which a portion of the road going to BISUDECO was constructed. Respondents denied that they barricaded the road.[11]

Jaime Manubay and Manolito Maralit, for themselves and in representation of other sugarcane planters, filed the first complaint-in-intervention.[12]Petitioner filed an Amended Complaint[13] and with leave of court a Re-Amended Complaint,[14] where it averred, as an alternative cause of action in the event the lower court does not find merit in its causes of action, that it will avail of the benefits provided for under Article 649 [15] of the New Civil Code. Petitioner thus demanded from respondents a right of way over the disputed road for its use. [16]

Respondents filed an Answer[17] to refute petitioners alternative cause of action. Respondents claimed that the road from the sugarmill to the Maharlika Highway at Barangay Romero, Bula, Camarines Sur, which exits at the Rural Bank of Bula site, had a distance of only about 15 kilometers; hence, respondents asserted that said road was shorter and was a more appropriate right of way than the disputed road. [18] On July 21, 1993, the RTC issued a Writ of Preliminary Injunction[19] ordering the respondents to desist from constructing barricades across the road. On June 28, 1994, nine other cooperatives[20] filed their Complaint-in-Intervention.[21]

On June 25, 1997 the RTC rendered a Decision,[22] the dispositive portion of which reads: WHEREFORE, premises considered, a decision is hereby rendered declaring the Writ of Preliminary Injunction issued against all the herein defendants, their agents, representatives and such other persons acting in their behalf, permanent and perpetual BUT the plaintiff Bicol Agro-Industrial Cooperative, Inc., (BAPCI) is hereby ordered to pay the owners of the lots affected by the road, viz: Pedro Montero P299,040.00; Pedro Galon P52,920.00; Clara Padua P46,410.00; Antonio Buizon P35,070.00; Rogelio Montero P41,160.00; Maria Villamer P41,580.00; Melchor Brandes P76,440.00; Prudencio Benosa P41, 650.00; Elena Benosa P39,550.00; Victor Bagasina, Jr. P39,410.00; and Claudio Resari P40,950.00. Upon full payment thereof, the plaintiff shall be declared the absolute owner of the road in question. Legal rate if interest is hereby imposed upon the plaintiff from the finality of this decision until fully payment hereof. No costs.. SO ORDERED.[23]

The RTC ruled that petitioner failed to present any concrete evidence to prove that there was an agreement between BISUDECO and respondents for the construction of the disputed road. [24] Moreover, it held that petitioner did not acquire the same by prescription. [25] The RTC, however, also held that petitioner was entitled to a compulsory easement of right of way as provided for under Article 649 of the New Civil Code upon payment of proper indemnity to respondents.
[26]

Both parties filed a motion for reconsideration of the RTC Decision. Petitioner contended that: (1) the value of the land

is excessive; (2) the evidence is insufficient to justify the award; (3) the decision is contrary to law and jurisprudence. Respondents, on the other hand, alleged that: (1) the trial court erred in declaring the persons mentioned in the decisions dispositive portion to be entitled to indemnity for the construction and the use of the disputed road; (2) BAPCI should not be declared the absolute owner of the disputed road upon full payment of the indemnity due to the defendants; and (3) the decision failed to award damages.[27] On September 24, 1997, the RTC denied both motions for reconsideration. [28] The parties then appealed to the CA. August 24, 2005, the CA rendered a Decision, the dispositive portion of which reads: WHEREFORE, premises considered, the appeal is PARTLY GRANTED. The assailed decision of the Regional Trial Court, Branch 31, Pili, Camarines Sur, in Civil Case No. P-1899 is hereby MODIFIED as follows: the awards of Php46,410.00 to Clara Padua and Php41,650.00 to Prudencio Benosa are hereby DELETED, and the declaration that the plaintiff BAPCI shall become the absolute owner of the disputed road upon full payment of indemnity is REVERSED and SET ASIDE. Accordingly, the owners of the servient estate in the easement of right of way recognized in this Decision shall retain ownership of the lands affected by the easement in accordance with Art. 630 of the Civil Code. We hereby AFFIRM the appeal in all other respects. SO ORDERED. [29] The CA affirmed the finding of the RTC that there was no conclusive proof to sufficiently establish the existence of an agreement between BISUDECO and respondents regarding the construction of the disputed road. [30] Moreover, the CA also declared that an easement of right of way is discontinuous and as such cannot be acquired by prescription. [31] The CA likewise affirmed the finding of the RTC that petitioner was entitled to a compulsory easement of right of way upon payment of proper indemnity to respondents. The CA, however, declared that ownership over the disputed road should remain with respondents, despite the grant of a compulsory easement. [32] Lastly, the CA deleted the awards to Prudencio Benosa (Benosa) and Clara Padua (Padua), since the former never claimed ownership of any portion of the lands affected by the disputed road and the latter was not a party to the proceedings below. [33] Petitioner then filed a Motion for Reconsideration alleging among others that the CA Decision failed to rule on the issue ofestoppel and laches. Moreover, Benosa and Padua filed a Motion for Reconsideration assailing the portion of the CA Decision deleting the award of indemnity to them. On March 28, 2006, the CA issued a Resolution denying the same. Hence, herein petition, with petitioner raising the following assignment of errors, to wit: I.THE HONORABLE COURT OF APPEALS ERRED SERIOUSLY IN NOT FINDING THAT THERE WAS FORGED AN AGREEMENT BETWEEN BISUDECO MANAGEMENT AND THE PRIVATE RESPONDENTS FOR THE CONTRUCTION OF THE ROAD IN QUESTION.

II.THE HONORABLE PUBLIC RESPONDENT COURT OF APPEALS ERRED IN NOT CONSIDERING THE PRINCIPLES OF PRESCRIPTION, LACHES AND ESTOPPEL IN THE CASE AT BAR. III. THE HONORABLE COURT OF APPEALS ERRED IN COMPLETELY DISREGARDING THE CLASSIFICATION OF THE ROAD IN QUESTION AS BARANGAY ROAD. IV. IN THE ALTERNATIVE CAUSE OF ACTION, THE PUBLIC RESPONDENT SERIOUSLY ERRED IN CONSIDERING THE VALUATION OF THE LANDS AFFECTED BY THE ROAD IN 1994, AND NOT IN 1974, WHEN SAID ROAD WAS CONSTRUCTED. V.THE HONORABLE PUBLIC RESPONDENT ERRED SERIOUSLY WHEN IT FAILED ALSO TO CONSIDER THE LEGAL PRINCIPLE OF UNJUST ENRIGHTMENT AT THE EXPENSE OF ANOTHER.[34] At the outset, this Court shall address some procedural matters. Quite noticeably, herein petition is denominated as one filed under Rule 65[35] of the Rules of Court notwithstanding that it seeks to assail the Decision and Resolution of the CA. Clearly, petitioner had availed of the improper remedy as the appeal from a final disposition of the CA is a petition for review under Rule 45and not a special civil action under Rule 65 of the Rules of Court.[36] In Active Realty and Development Corporation v. Fernandez, [37] this Court discussed the difference between petitions filed under Rule 65 and Rule 45, viz: A petition for certiorari under Rule 65 is proper to correct errors of jurisdiction committed by the lower court, or grave abuse of discretion which is tantamount to lack of jurisdiction. This remedy can be availed of when there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law. Appeal by certiorari under Rule 45 of the Rules of Court, on the other hand, is a mode of appeal available to a party desiring to raise only questions of law from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law. x x x The general rule is that the remedy to obtain reversal or modification of judgment on the merits is appeal. Thus, the proper remedy for the petitioner should have been a petition for review on certiorari under Rule 45 of the Rules of Court since the decision sought to be reversed is that of the CA. The existence and availability of the right of appeal proscribes a resort to certiorari, because one of the requisites for availment of the latter is precisely that there should be no appeal. The remedy of appeal under Rule 45 of the Rules of Court was still available to the petitioner. [38] Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless of the nature of the action or proceeding involved, may be appealed to this Court by filing a petition for review, which would be but a continuation of the appellate process over the original case. [39] Moreover, it is basic that one cannot avail of the remedy provided for under Rule 65 when an appeal is still available. Hence, petitioner should have filed its petition under Rule 45.The procedural infirmity notwithstanding and in the interest of substantial justice, this Court shall consider herein petition as one filed under Rule 45 especially since it was filed well within the reglementary period proscribed under the said Rule. The Court also takes notice that the assignment of errors raised by petitioner does not allege grave abuse of discretion or lack of jurisdiction on the part of the CA. On the Existence of an Agreement between BISUDECO and Respondents

Anent the first error raised, petitioner argues that the CA erred in not finding that BISUDECO and respondents forged an agreement for the construction of the road in dispute. Petitioner thus asserts its entitlement to an easement of right of way over the properties of respondents by virtue of said agreement. An easement of right of way was succinctly explained by the CA in the following manner, to wit: Easement or servitude is an encumbrance imposed upon an immovable for the benefit of another immovable belonging to a different owner. By its creation, easement is established either by law (in which case it is a legal easement) or by will of the parties (a voluntary easement). In terms of use, easement may either be continuous or discontinuous. The easement of right of way the privilege of persons or a particular class of persons to pass over anothers land, usually through one particular path or linen is characterized as a discontinuous easementbecause its use is in intervals and depends on the act of man. Because of this character, an easement of a right of way may only be acquired by virtue of a title.[40] Article 622 of the New Civil Code is the applicable law in the case at bar, viz: Art. 622. Continuous non-apparent easements, and discontinuous ones, whether apparent or not, may be acquired only by virtue of a title. Based on the foregoing, in order for petitioner to acquire the disputed road as an easement of right-of-way, it was incumbent upon petitioner to show its right by title or by an agreement with the owners of the lands that said road traversed. While conceding that they have no direct evidence of the alleged agreement, petitioner posits that they presented circumstantial evidence which, if taken collectively, would prove its existence. [41] Specifically, petitioner cites the following circumstances, to wit: a. The agreement was of public knowledge. [42] Allegedly BISUDECO and respondents entered into an agreement for

the construction of the road provided that the latter, their children or relatives were employed with BISUDECO. b. c. The road was continuously used by BISUDECO and the public in general. [43] There was no protest or complaint from respondents for almost a period of two decades. [44]

d. The portions of the land formerly belonging to respondents affected by the road were already segregated and surveyed from the main lots.[45] e. The road in dispute is already a barangay road.

The well-entrenched rule in our jurisdiction is that only questions of law may be entertained by this Court in a petition for review on certiorari. This rule, however, is not iron-clad and admits certain exceptions, such as when (1) the conclusion is grounded on speculations, surmises or conjectures; (2) the inference is manifestly mistaken, absurd or impossible; (3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) there is no citation of specific evidence on which the factual findings are based; (7) the findings of absence of facts are contradicted by the presence of evidence on record; (8) the findings of the Court of Appeals are contrary to those of the trial court; (9) the Court of Appeals manifestly overlooked certain relevant and

undisputed facts that, if properly considered, would justify a different conclusion; (10) the findings of the Court of Appeals are beyond the issues of the case; and (11) such findings are contrary to the admissions of both parties. [46] After a painstaking review of the records, this Court finds no justification to warrant the application of any exception to the general rule.Crucial to the petitioners cause was its burden of proving the existence of the alleged agreement between BISUDECO and respondents for the construction of the road. In this regard, the RTC found that petitioner failed to prove its existence, to wit: It is clear that the plaintiff failed to present any concrete evidence to prove that there was such an agreement between BISUDECO and defendants. Hereunder quoted are the testimonies of plaintiffs witnesses regarding the alleged agreement.

Romeo Deveterbo, Transportation Superintendent of BISUDECO testified

Cross Examination by Atty. Pejo

Q: You also mentioned that there was an agreement between Senator Cea, Mr. Obias and some of the tenants? A: Yes.

Q: You mentioned that this was not in writing, am I right? A: Yes.

Q: How did you know about it that it was not in writing, who told you, Senator Cea? A: It was commonly known to all original employees of the BISUDECO.

Q: You know it from the management? A: From co-employees.

Q: You learned about that agreement from you co-employees? A: Yes.

Q: In other words, therefore, that is why you said you are confused between Edmundo Cea and Perfecto Obias because you just learned it from other employees and you were never present when they talked about it, am I right?

A: Yes. x x x

To this effect also is the testimony of Angel Lobo, head of the agricultural Department of BAPCI, to wit:

A: Yes, your Honor? COURT: From where did you learn? A: From people whom I talked with at that time and it is a public common knowledge at that time. xxx

Atty. Carandang: I repeat my question, Your Honor. You said you acquired it from or because of common knowledge and you mentioned some people. Who are those people you are referring to whom you acquired that knowledge? A: Most of all, the late Benjamin Bagasina, Barangay Captain at that time who was our employee in consideration of this agreement, then we have also a Civil Engineering Head, Civil Engineering Department who is responsible for the maintenance of this road. I learned from him that this arrangement established the fact why this road was constructed.

Q: Who is the head of the Engineering Dept?

xxx

COURT: May answer. A: Engineer Pablo Tordilla who was then the head of our Civil Engineering Dept.

But this Engineer Pablo Tordilla, Lobos alleged source of the information, was never presented in Court. And, according to the Chief Accountant of BAPCI, David Severo:

A: When I was interviewing Mrs. Alma Montero Penaflor she filed to me a certain arrangement related to the used of the land to Himaao as road going to the central. COURT: You mean Himaao Millsite road? A: Yes, sir.

Atty. Carandang: Q: What arrangement is that supposedly filed to you? A: She told me in exchange for the use of the road, the relatives or owners or tenants of the land will be hired by the sugar Central?

COURT: Q: So, only the tenants not the owners? A: The tenants children the road belongs. xxx

Finally, intervenor Antonio Austria, in trying to show you that there was consent and approval on the part of the defendant Edmundo Obias to give the right of way to BISUDECO at the time to be used in hauling the sugarcane of the planters to the Central, averred the following uncertain statements: A: Well, he has (sic) having a case against PENSUNIL, regarding the property I think the right of way going to PENSUMIL right now we discuss it and he said he is allowing it anymore but then I reminded him wayback in 1974 to 1980 he was one of the biggest planters in the part of Partido so he consented to the late I think Edmundo Cea, the owner of BISUDECO at that time to pass his property since he is also milling a lot of things at that time and many other things one of the concession mill was I think some of the tenants there in Himaao will be employed in the mill. xxx These aforequoted testimonies of the plaintiffs witnesses failed to satisfactorily establish the plaintiffs contention that there was such an agreement. Likewise, the list of the Employees of Defendants relatives, son/daughter employed by the BISUDECO (Exhibit H) does not in any manner prove the alleged agreement.[47] For its part, the CA also ruled that petitioner failed to prove the existence of the said agreement, to wit: Like the lower court, we found no conclusive proof to sufficiently establish the existence of an agreement between BISUDECO and the defendants-appellants regarding the construction and the use of the disputed road . The lower court correctly disbelieved the plaintiffs-appellants contention that an agreement existed because there is simply no direct evidence to support this allegation. BAPCI submitted purely circumstantial evidence that are not sufficiently adequate as basis for the inference than an agreement existed. By themselves, the circumstances the plaintiffsappellants cited i.e., the employment of sixteen (16) relatives of the defendants-appellants; the defendants-appellants unjustified silence; the fact that the existence of the agreement is known to everyone, etc. are events susceptible of diverse interpretations and do not necessarily lead to BAPCIs desired conclusion. Additionally, the testimonies that the plaintiffs-appellants presented are mainly hearsay, as not one among the witnesses had personal knowledge of the agreement by reason of direct participation in the agreement or because the witness was present when the

agreement was concluded by the parties . Thus, given the defendants-appellants categorical denial that an agreement existed, we sustain the lowers conclusion that no agreement existed between BISUDECO and the defendants-appellants.
[48]

Based on the foregoing, the inability of petitioner to prove the existence of an agreement militates its allegations in

herein petition. On this score, both the RTC and the CA are one in ruling that petitioner had failed to prove the existence of the agreement between BISUDECO and the respondents for the construction of the road. Also, well-established is the rule that "factual findings of the Court of Appeals are conclusive on the parties and carry even more weight when the said court affirms the factual findings of the trial court." [49] Hence, this Court finds no reason to reverse such findings. On Acquisition by Prescription Petitioner would have this Court re-examine Costabella Corporation v. Court of Appeals[50] (Costabella) where the Court held that, It is already well-established that a right of way is discontinuous and, as such, cannot be acquired by prescription.[51] Petitioner contends that some recognized authorities[52] share its view that an easement of right of way may be acquired by prescription.

Be that as it may, this Court finds no reason to re-examine Costabella. This Court is guided by Bogo-Medellin Milling Co., Inc. v. Court of Appeals [53] (Bogo-Medellin), involving the construction of a railroad track to a sugar mill. In Bogo-Medellin, this Court discussed the discontinuous nature of an easement of right of way and the rule that the same cannot be acquired by prescription, to wit: Continuous and apparent easements are acquired either by virtue of a title or by prescription of ten years. The trial court and the Court of Appeals both upheld this view for the reason that the railroad right of way was, according to them, continuous and apparent in nature. The more or less permanent railroad tracks were visually apparent and they continuously occupied the subject strip of land from 1959 (the year the easement granted by Feliciana Santillan to petitioner expired). Thus, with the lapse of the 10year prescriptive period in 1969, petitioner supposedly acquired the easement of right of way over the subject land. Following the logic of the courts a quo, if a road for the use of vehicles or the passage of persons is permanently cemented or asphalted, then the right of way over it becomes continuous in nature. The reasoning is erroneous. Under civil law and its jurisprudence, easements are either continuous or discontinuous according to the manner they are exercised,not according to the presence of apparent signs or physical indications of the existence of such easements . Thus, easement is continuous if its use is, or may be, incessant without the intervention of any act of man, like the easement of drainage; and it is discontinuous if it is used at intervals and depends on the act of man, like the easement of right of way. The easement of right of way is considered discontinuous because it is exercised only if a person passes or sets foot on somebody elses land. Like a road for the passage of vehicles or persons, an easement of right of way of railroad tracks is discontinuous because the right is exercised only if and when a train operated by a person passes over another's property. In other words, the very exercise of the servitude depends upon the act or intervention of man which is the very essence of discontinuous easements.

The presence of more or less permanent railroad tracks does not, in any way, convert the nature of an easement of right of way to one that is continuous. It is not the presence of apparent signs or physical indications showing the existence of an easement, but rather the manner of exercise thereof, that categorizes such easement into continuous or discontinuous. The presence of physical or visual signs only classifies an easement into apparent or non-apparent. Thus, a road (which reveals a right of way) and a window (which evidences a right to light and view) are apparent easements, while an easement of not building beyond a certain height is non-apparent. In Cuba, it has been held that the existence of a permanent railway does not make the right of way a continuous one; it is only apparent. Therefore, it cannot be acquired by prescription. In Louisiana, it has also been held that a right of passage over another's land cannot be claimed by prescription because this easement is discontinuous and can be established only by title. In this case, the presence of railroad tracks for the passage of petitioners trains denotes the existence of an apparent but discontinuous easement of right of way. And under Article 622 of the Civil Code, discontinuous easements, whether apparent or not, may be acquired only by title. Unfortunately, petitioner Bomedco never acquired any title over the use of the railroad right of way whether by law, donation, testamentary succession or contract. Its use of the right of way, however long, never resulted in its acquisition of the easement because, under Article 622, the discontinuous easement of a railroad right of way can only be acquired by title and not by prescription.[54] Applying Bogo-Medellin to the case at bar, the conclusion is inevitable that the road in dispute is a discontinuous easement notwithstanding that the same may be apparent. To reiterate, easements are either continuous or discontinuous according to the manner they are exercised, not according to the presence of apparent signs or physical indications of the existence of such easements. Hence, even if the road in dispute has been improved and maintained over a number of years, it will not change its discontinuous nature but simply make the same apparent. To stress, Article 622 of the New Civil Code states that discontinuous easements, whether apparent or not, may be acquired only by virtue of a title.

On Laches and Estoppel Petitioner argues that estoppel and laches bar respondents from exercising ownership rights over the properties traversed by the road in dispute. In support of said argument, petitioner posits that BISUDECO had been peacefully and continuously using the road without any complaint or opposition on the part of the respondents for almost twenty years. Respondents, on the other hand, claim that they merely tolerated the use of their land as BISUDECO was a governmentowned and controlled corporation and considering that the disputed road was constructed during the time of Martial Law. There is no absolute rule on what constitutes laches. It is a rule of equity and applied not to penalize neglect or sleeping on ones rights, but rather to avoid recognizing a right when to do so would result in a clearly unfair situation. The question of laches is addressed to the sound discretion of the court and each case must be decided according to its particular circumstances.[55] It is the better rule that courts, under the principle of equity, should not be guided or bound strictly by the statute of limitations or the doctrine of laches if wrong or injustice will result. [56] In herein petition, the CA denied petitioners argument in the wise:

As previously explained in our Decision, the applicable law is Article 622 of the Civil Code of the Philippines, which provides: Art. 622. Continuous non-apparent easements, and discontinuous ones, whether apparent or not, may be acquired only by virtue of a title. The eminent jurist, former Senator Arturo M. Tolentino, opines that this provision seeks to prevent the imposition of a burden on a tenement based purely on the generosity, tolerance and spirit of neighborliness of the owners thereof. We applied the cited provision to the case in ruling that no easement of right of way was acquired; based on the evidence presented, the plaintiff-appellant failed to satisfactorily prove the existence of an agreement evidencing any right or title to use the disputed road. We additionally rejected the plaintiff-appellants position that it had acquired the easement of right of way through acquisitive prescription, as settled jurisprudence states that an easement of right of way cannot be acquired by prescription.

We hold the same view on the issue of acquisition of an easement of right of way by laches. To our mind, settled jurisprudence on the application of the principle of estoppel by laches militates against the acquisition of an easement of right of way by laches. Laches is a doctrine in equity and our courts are basically courts of law and not courts of equity; equity, which has been aptly described as justice outside legality, should be applied only in the absence of, and never against, statutory law; Aeguetas nunguam contravenit legis. Based on this principle, we find that the positive mandate of Article 622 of the Civil Code the statutory provision requiring title as basis for the acquisition of an easement of a right of way precludes the application of the equitable principle of laches.[57] This Court agrees with the CA. The fact that the law is categorical that discontinuous easements cannot be acquired by prescription militates against petitioners claim of laches. To stress, discontinuous easements can only be acquired by title. More importantly, whether or not the elements of laches are present is a question involving a factual determination by the trial court.[58]Hence, the same being a question of fact, it cannot be the proper subject of herein petition. On the other hand, as to the issue of estoppel, this Court likewise agrees with the finding of the CA that petitioner did not present any evidence that would show an admission, representation or conduct by respondents that will give rise to estoppel. [59] Classification of the Road in Dispute as a Barangay Road Petitioner argues that the CA erred when it disregarded the classification of the road in question as a barangay road. In support of said argument, petitioner presented Exhibit Q, a Tax Declaration or Field Appraisal and Assessment Sheet[60] (1991 FAAS) with Survey Number 1688-40 and PIN No. 026-01-009-08-037, dated April 30, 1991, which they claim proves that the road in dispute is already a barangay road. The same is again a question of fact which cannot be the proper subject of herein petition. Petitioner cannot have this Court re-examine the evidentiary value of the documents it presented before the RTC as the same is not a function of this Court. In any case, after a closer scrutiny of the 1991 FAAS, this Court holds that the same is insufficient to prove petitioners claim.

Respondents, in their Comment,[61] argue against the classification of the road in dispute as a barangay road in the wise: Petitioner also stated that the Honorable Court of Appeals fails to consider the fact that the owner of the road in question is the Municipality of Pili in the Province of Camarines Sur and as proof of such claim they presented and marked as Exhibit Q, tax declaration no. 009-756 or Annex D of their Petition. However, private respondents wish to call the attention of this Honorable Court to the following: a. b. c. Tax Declaration No. 009-828 attached as Annex C-6 of the Verified Petition declared in the name of Edmundo Obias (one of the private respondents); Actual Use portion of said Annex C-6 marked as Exh. No. N-6-a-1 which states Road Lot (BISUDECO Road); and The Memoranda portion in the second page of Annex C-6 which states: Revised to declare the property in The name of the rightful owner, Edmundo Obias based from the approved subdivision plan, Bsd-05-000055 (OLT) & technical descriptions. Likewise area was made to conform with the said subdivision plan from 4,773 sq.m. to 11,209 sq.m.

Obviously, the alleged Exhibit Q of the Petitioner is an erroneous tax declaration, thus, negates the claim of the Petitioner that the same is owned by the Municipality of Pili and has been declared a barangay road. Private respondents cannot understand why the herein Petitioner alleged this matter and used it as a proof to support their claim when they are already in possession of a tax declaration correcting the same and even attached the same as part of their Petition. [62] In its Reply,[63] petitioner counters: II. While Petitioners claim that the road belongs to the Municipal Government of Pili, yet what they attached to the Petition as Annex C-7 is a tax declaration of Edmundo Obias. Petitioners have the following observations: (b) That land of Edmundo Obias covered by Annex C-6 to the Petition is not included or involved in this case at bar. His name does not appear to be awarded in the Decision of the Honorable Court of Appeals and also in the list of beneficiaries to receive monetary considerations made by Mr. Angel Lobo. [64] After a painstaking review of the records, this Court is more inclined to believe the claim of respondents. The claim of petitioner to the effect that the land of Edmundo Obias is not included in the case at bar is misleading. It may be true that Edmundo was not awarded indemnity by the lower courts, however, the same does not mean that his lands do not form part of the subject matter of herein petition. It bears to stress that Edmundo claimed in the CA that he was the owner of the affected ricelands and that respondents were merely his tenants-beneficiaries under PD 27, otherwise known as the Tenant Emancipation Decree.[65] The CA, however, dismissed said claim because it was raised for the first time on appeal. It also held that the averments in the documents submitted by Edmundo in the RTC described respondents as "owners" of the land they till; hence, the same constituted binding judicial admissions. [66] Based on the foregoing, petitioner's attempt to refute the contents of the 1995 FAAS by claiming that the lands of Edmundo are not involved in the case at bar must fail. It is clear that respondents are the tenant-beneficiaries of the lands

of Edmundo under PD 27; hence, contrary to the claim of petitioner, the lands of Edmundo are the subject matter of herein petition. In addition, it is curious that petitioner relies on the 1991 FAAS yet finds exception to the contents of the 1995 FAAS. After a closer scrutiny of both documents, it appears to this Court that the land described in the 1991 FAAS is also the same land described in the 1995 FAAS. Both FAAS involve land measuring 4,773 square meters. Likewise, both FAAS have the same PIN Number (026-01-009-08-037) and Survey Number (1688-40). Accordingly, the annotation contained in the 1995 FAAS, to the effect that a BISUDECO road does not belong to the Municipality of Pili, serves to weaken petitioners claim. The Court also considers portions of the RTC Decision where it can be gathered that the road in dispute is not a barangayroad, to wit: At this point, it is important to note that defendants admitted the identity of the road and the area of the same as reflected in the Commissioners Report, during the Pre-trial held last September 19, 1995. Engr. Roberto Revilla testified that a portion of the road inside the property of Edmundo Obias, is a barangay road which are lots A-52 sq.m., B-789 sq.m. and C-655 sq.m. or a total of 1,497 sq.m. which starts from the intersection of the National Road and the road to Pensumil up to Corner 9 of Lot 37, Bsc-05-000055 (OCT) in the name of Pedro O. Montero. Engr. Revilla concluded that the actual area occupied by the road in question is the sum of areas of Lots D-2042 sq.m., E-2230 sq.m., F-756 sq.m., G-663 sq.m., H-501 sq.m. , I-588 sq.m., J-594 sq.m., K-l092 sq.m., L-595 sq.m., M-459 sq.m., N-106 sq.m., O-585 sq.m. and P-563 sq.m., or a total of 10,774 square meters . Said road starts from corner 9 of the lot of Pedro Montero which is equivalent to corner 25 of Lot 40 Bsd-05-000055 (OCT) going to the Southern Direction and ending at corner 25 of Lot 1688 Cad. 291 Pili Cadastre covered by OCT No. 120-217 (1276) in the name of spouses Edmundo Obias and Nelly Valencia and spouses Perfecto Obias and Adelaida Abenojar. [67] The RTC findings of fact thus shows that while certain portions of the property of Edmundo is a barangay road, the same only pertains to Lots A, B and C, or a total of 1,497 square meters, which is distinct from the road in dispute which pertains to different lots (lots E to P) and covers a total area of 10,774 square meters. In light of the foregoing, considering that the contents of the 1991 FAAS is disputable, it was incumbent on petitioner to present documents which would evidence the expropriation of the road in dispute by the local government as a barangay road. Under the prevailing circumstances, the documents of the expropriation proceedings would have been the best evidence available and the absence thereof is certainly damaging to petitioners cause. Amount of Indemnity Due & On Unjust Enrichment Petitioner manifested in the RTC its desire, in the alternative, to avail of a compulsory easement of right of way as provided for under Article 649 the New Civil Code. Said relief was granted by the RTC because of the unavailability of another adequate outlet from the sugar mill to the highway. Despite the grant of a compulsory easement of right of way, petitioner, however, assails both the RTC and CA Decision with regard to the amount of indemnity due respondents. Petitioner likens the proceedings at bar to an expropriation proceeding where just compensation must be based on the value of the land at the time of taking. [68] Petitioner thus maintains that the compensation due to respondents should have been computed in 1974 when the road was constructed. [69] This Court does not agree. Article 649 of the New Civil Code states:

The owner, or any person who by virtue of a real right may cultivate or use any immovable, which is surrounded by other immovables pertaining to other persons and without adequate outlet to a public highway, is entitled to demand a right of way through the neighboring estates, after payment of the proper indemnity. Should this easement be established in such a manner that its use may be continuous for all the needs of the dominant estate, establishing a permanent passage, the indemnity shall consist of the value of the land occupied and the amount of the damage cause to the servient estate . Based on the foregoing, it is clear that the law does not provide for a specific formula for the valuation of the land. Neither does the same state that the value of the land must be computed at the time of taking. The only primordial consideration is that the same should consist of the value of the land and the amount of damage caused to the servient estate. Hence, the same is a question of fact which should be left to the sound discretion of the RTC. In this regard, the RTC ruled: The market value per hectare in 1974 or at the time of taking or prior to its conversion to road is P6,500/hectare, the same being a first class riceland irrigated therefore the total market value is P6,864.31. The 1994 Market Value of P1,292,880.00 is the value assigned to the property in question after it was already developed as a road lot where the unit value applied per square meter is P120.00 for 5th class residential lot.

It has to be remembered however that the cost of transforming the land to road was entirely borne by BISUDECO including its maintenance, repair and the cost of the improvements and by plaintiff after its acquisition. Thus, the P120.00 unit value is exorbitant while the 1974 valuation ofP6,500/hectare is low and unreasonable. In fine, this Court will adopt the unit value of P70.00 per square meter as shown by Exhibit Q, the Real Property Field Assessment Sheet No. 009-756. [70] In addition, the CA ruled: We stress that the amount of proper indemnity due to the landowners does not only relate to the market value of their property but comprehends as well the corresponding damage caused to the servient estate. It is undisputed that the BISUDECO began the construction and used of the disputed road in 1974. While the maintenance was borne by BISUDECO and now by BAPCI who principally used the disputed road for their sugar milling operations, the defendants-appellants have been deprived of the use do their ricefields because of the roads construction since 1974. Thus, it is but proper to compensate them for this deprivation, over and above the prevailing market value of the affected property. To our mind, in light of the circumstances surrounding the acquisition of the affected ricelands and the construction of the disputed road, particularly the absence of a definitive agreement to show that the defendants-appellants consented to the roads construction, we find the P70.00 per square meter indemnity awarded by the lower court in accordance with the Real Property Field Assessment Sheet No. 009-756, to be fair and reasonable under the circumstances.[71]

Withal, this Court finds no error as to the proper amount of indemnity due respondents as the findings of both the RTC and the CA appear to be fair and reasonable under the prevailing circumstances and in accordance with the provisions of Article 649 of the New Civil Code.

WHEREFORE, premises considered, the petition is DENIED. The August 24, 2005 Decision and October 27, 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 59016 are hereby AFFIRMED.

SO ORDERED.

SECOND DIVISION PRECY BUNYI and MILA BUNYI, Petitioners,- versus FE S. FACTOR, Respondent x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION QUISUMBING, J.: For review on certiorari are the Decision[1] dated January 16, 2006 and Resolution[2] dated April 26, 2006 of the Court of Appeals in CA-G.R. SP No. 90397, which had affirmed the Decision[3] dated March 7, 2005 of the Regional Trial Court (RTC) of Las Pias City, Branch 198 in Civil Case No. LP-04-0160. G.R. No. 172547

The antecedent facts are as follows: Respondent Fe S. Factor is one of the co-owners of an 18-hectare piece of land located in Almanza, Las Pias City. The ownership of the land originated from respondents paternal grandparents Constantino Factor and Maura Mayuga-Factor who had been in actual, continuous, peaceful, public, adverse and exclusive possession and occupation of the land even before 1906.[4] On December 9, 1975, the children of Constantino Factor and Maura Mayuga-Factor filed a Petition for Original Registration and Confirmation of Imperfect Title to the said parcel of land, or Lots 1, 2, 3 and 4 of Psu-253567, before the RTC of Pasig City, Branch 71.[5] On December 8, 1994, the trial court granted the petition in LRC Case No. N-9049 and declared the children of Constantino Factor and Maura Mayuga-Factor as co-owners of the property. [6] The children of Constantino Factor and Maura Mayuga-Factor thereafter sold seven (7) hectares of the Factor family property during the same year. The siblings, except Enrique Factor, respondents father, shared and divided the proceeds of the sale among themselves, with the agreement that Enrique would have as his share the portion of the property located in Antioch Street, Pilar Executive Village, Almanza I, Las Pias City, known as the Factor compound. Following his acquisition thereof, Enrique caused the construction of several houses in the compound including the subject property, a rest house, where members of the Factor family stayed during get-togethers and visits.
[7]

Petitioners Precy Bunyi and her mother, Mila Bunyi, were tenants in one of the houses inside the compound,

particularly in No. 8 Antioch St., Pilar Village, Almanza, Las Pias City since 1999.[8] When Enrique Factor died on August 7, 1993, the administration of the Factor compound including the subject rest house and other residential houses for lease was transferred and entrusted to Enriques eldest child, Gloria FactorLabao. Gloria Factor-Labao, together with her husband Ruben Labao and their son Reggie F. Labao, lived in Tipaz, Taguig, Metro Manila but visited and sometimes stayed in the rest house because Gloria collected the rentals of the residential houses and oversaw the Factor compound. When Gloria died on January 15, 2001, the administration and management of the Factor compound including the subject rest house, passed on to respondent Fe S. Factor as co-owner of the property. As an act of goodwill and compassion, considering that Ruben Labao was sickly and had no means of income, respondent allowed him to stay at the rest house for brief, transient and intermittent visits as a guest of the Factor family. On May 31, 2002, Ruben Labao married petitioner Precy Bunyi. On November 10, 2002, Ruben Labao died. At about this time, respondent discovered that petitioners forcibly opened the doors of the rest house and stole all the personal properties owned by the Factor family and then audaciously occupied the premises. Respondent alleged that petitioners unlawfully deprived her and the Factor family of the subject propertys lawful use and possession. Respondent also added that when she tried to enter the rest house on December 1, 2002, an unidentified person who claimed to have been authorized by petitioners to occupy the premises, barred, threatened and chased her with a jungle bolo. Thus, on September 12, 2003, respondent Fe S. Factor filed a complaint [9] for forcible entry against herein petitioners Precy Bunyi and Mila Bunyi. Petitioners, for their part, questioned Fes claim of ownership of the subject property and the alleged prior ownership of her father Enrique Factor. They asserted that the subject property was owned by Ruben Labao,

and that petitioner Precy with her husband moved into the subject property, while petitioner Mila Bunyi, mother of Precy, remained in No. 8 Antioch St. On July 13, 2004, the Metropolitan Trial Court (MeTC) of Las Pias City, Branch 79 ruled in favor of Fe S. Factor. The dispositive portion of the decision reads: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering the latter and all persons claiming rights under them to: 1. To immediately vacate the subject premises and surrender possession thereof to the plaintiff. 2. To pay the monthly rental of P2,000.00 from December 1, 2002 up to the time they finally vacate the premises. 3. To pay attorneys fee of Php 10,000.00. The counter-claim is dismissed for lack of merit. SO ORDERED.[10]

Petitioners appealed the decision to the RTC of Las Pias City, Branch 198, which, however, affirmed in toto the decision of the MeTC and later denied their motion for reconsideration. [11] Undaunted, petitioners filed a petition for review before the Court of Appeals but it was denied also. Hence, the instant petition before us. Petitioners submit the following issues for the Courts consideration: [WHETHER] THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN LAW AND JURISPRUDENCE WHEN IT AFFIRMED THE DECISION OF THE REGIONAL TRIAL COURT THAT FORCE, THREAT, INTIMIDATION AND STEALTH HAD BEEN COMMITTED BY THE PETITIONERS IN OCCUPYING THE SUBJECT RESIDENTIAL HOUSE; [WHETHER] THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT MISAPPRECIATED THE FACT THAT THE RESPONDENT HAS A BETTER RIGHT OF PHYSICAL AND MATERIAL POSSESSION OF THE SUBJECT PROPERTY; [WHETHER] THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN AFFIRMING THE FINDING OF THE REGIONAL [TRIAL] COURT HOLDING PETITIONERS LIABLE TO PAY THE MONTHLY RENTAL OF P2,000.00 FROM DECEMBER 1, 2002 UP TO THE TIME THEY FINALLY VACATE PREMISES.[12]

I.

II.

III.

The resolution of the first issue raised by petitioners requires us to inquire into the sufficiency of the evidence presented below, a course of action which this Court will not do, consistent with our repeated holding that the Supreme Court is not a trier of facts.[13] The resolution of factual issues is the function of lower courts, whose findings on these matters are received with respect and considered binding by the Supreme Court subject only to certain exceptions, none of which is present in the instant petition. [14]Noteworthy, in this case, the cited findings of the RTC have been affirmed by the Court of Appeals.

As to the second issue, the resolution thereof boils down to a determination of who, between petitioners and respondent, would be entitled to the physical possession of the subject property. Both parties anchor their right of material possession of the disputed property on their respective claims of ownership. Petitioners insist that petitioner Precy has a

better right of possession over the subject property since she inherited the subject property as the surviving spouse and sole heir of Ruben Labao, who owned the property before his death. Respondent, on the other hand, hinges her claim of possession on the fact that her predecessor-in-interest had prior possession of the property as early as 1975. After careful consideration, we find in favor of the respondent. In ejectment cases, the only issue for resolution is who is entitled to the physical or material possession of the property involved, independent of any claim of ownership set forth by any of the party-litigants. The one who can prove prior possession de facto may recover such possession even from the owner himself.[15] Possession de facto is the physical possession of real property. Possession de facto and not possession de jure is the only issue in a forcible entry case.[16] This rule holds true regardless of the character of a partys possession, provided, that he has in his favor priority of time which entitles him to stay on the property until he is lawfully ejected by a person having a better right by either accion publiciana or accion reivindicatoria.[17] Petitioners argue that respondent was never in possession of the subject property since the latter never occupied the same. They claim that they have been in actual possession of the disputed property from the time petitioner Precy married Ruben Labao in 2002. In this instance, however, petitioners contention is unconvincing. For one to be considered in possession, one need not have actual or physical occupation of every square inch of the property at all times.[18] Possession can be acquired not only by material occupation, but also by the fact that a thing is subject to the action of ones will or by the proper acts and legal formalities established for acquiring such right.
[19]

Possession can be acquired by juridical acts. These are acts to which the law gives the force of acts of

possession. Examples of these are donations, succession, execution and registration of public instruments, and the inscription of possessory information titles.[20] While petitioners claim that respondent never physically occupied the subject property, they failed to prove that they had prior possession of the subject property. On record, petitioner Precy Bunyi admitted that Gloria Factor-Labao and Ruben Labao, as spouses, resided in Tipaz, Taguig, Metro Manila and used the subject property whenever they visit the same.[21] Likewise, as pointed out by the MeTC and the RTC, Ruben and petitioner Precys marriage certificate revealed that at the time of their marriage, Ruben was residing at 123 A. Lake St., San Juan, Metro Manila. Even Rubens death certificate showed that his place of death and residence was at #4 Labao St., Tipaz, Taguig, Metro Manila. Considering that her husband was never a resident of the subject property, petitioner Precy failed to explain convincingly how she was able to move in with Ruben Labao in the subject property during their marriage. On the other hand, it was established that respondents grandparents, Constantino Factor and Maura MayugaFactor, had been the occupants and in possession of various agricultural parcel of lands situated in Almanza, Las Pias City, in the concept of owners, for more than thirty years prior to 1975. In fact, the RTC in its Decision dated December 8, 1994 in LRC Case No. N-9049 has confirmed the rights of respondents predecessors over the subject property and ordered the issuance of the corresponding certificate of title in their favor. [22] The right of respondents predecessors over the subject property is more than sufficient to uphold respondents right to possession over the same. Respondents right to the property was vested in her along with her siblings from the

moment of their fathers death. [23] As heir, respondent had the right to the possession of the property, which is one of the attributes of ownership. Such rights are enforced and protected from encroachments made or attempted before the judicial declaration since respondent acquired hereditary rights even before judicial declaration in testate or intestate proceedings.
[24]

After the death of Enrique Factor, it was his eldest child, Gloria Factor-Labao who took over the administration of the subject property. And as a consequence of co-ownership, [25] soon after the death of Gloria, respondent, as one of the surviving co-owners, may be subrogated to the rights of the deceased co-owner, which includes the right to the administration and management of the subject property. As found by the Court of Appeals, petitioners unsupported claim of possession must yield to that of the respondent who traces her possession of the subject property to her predecessors-in-interest who have always been in possession of the subject property. Even assuming that respondent was never a resident of the subject property, she could legally continue possessing the property. Visiting the property on weekends and holidays is evidence of actual or physical possession.[26] The fact of her residence somewhere else, by itself, does not result in loss of possession of the subject property. The law does not require one in possession of a house to reside in the house to maintain his possession. [27] For, again, possession in the eyes of the law does not mean that a man has to have his feet on every square meter of the ground before he is deemed in possession.[28] There is no cogent reason to deviate from this doctrine. All things considered, this Court finds that respondent Fe S. Factor successfully proved the extent and character of her possession over the disputed property. As a consequence of her ownership thereof, respondent is entitled to its possession, considering petitioners failure to prove prior possession. The Court stresses, however, that its determination of ownership in the instant case is not final. It is only a provisional determination for the sole purpose of resolving the issue of possession. It would not bar or prejudice a separate action between the same parties involving the quieting of title to the subject property.[29] As regards the means upon which the deprivation took effect, it is not necessary that the respondent must demonstrate that the taking was done with force, intimidation threat, strategy or stealth. The Supreme Court, in Baes v. Lutheran Church in the Philippines,[30] explained: In order to constitute force that would justify a forcible entry case, the trespasser does not have to institute a state of war. The act of going to the property and excluding the lawful possessor therefrom necessarily implies the exertion of force over the property which is all that is necessary and sufficient to show that the action is based on the provisions of Section 1, Rule 70 of the Rules of Court. [31]

As expressly stated in David v. Cordova:[32] The words by force, intimidation, threat, strategy or stealth include every situation or condition under which one person can wrongfully enter upon real property and exclude another, who has had prior possession therefrom. If a trespasser enters upon land in open daylight, under the very eyes of the person already clothed with lawful possession, but without the consent of the latter, and there plants himself and excludes such prior possessor from the property, the action of forcible entry and detainer can unquestionably be maintained, even though no force is used by the trespasser other than such as is necessarily implied from the mere acts of planting himself on the ground and excluding the other party. [33]

Respondent, as co-owner, has the control of the subject property even if she does not stay in it. So when petitioners entered said property without the consent and permission of the respondent and the other co-owners, the latter were deprived of its possession. Moreover, the presence of an unidentified man forbidding respondent from entering the subject property constitutes force contemplated by Section 1, [34] Rule 70 of the Rules of Court. As to the last issue, we have previously ruled that while the courts may fix the reasonable amount of rent for the use and occupation of a disputed property, they could not simply rely on their own appreciation of land values without considering any evidence. The reasonable amount of any rent could not be determined by mere judicial notice but by supporting evidence. [35] In the instant case, we find no evidence on record to support the MeTCs award of rent. On the matter of attorneys fees awarded to the respondent, we are in agreement to delete it. It is a well-settled rule that where attorneys fees are granted, the court must explicitly state in the body of the decision, and not only in the dispositive portion thereof, the legal reason for the award.[36] Again, nothing in the body of both decisions of RTC and MeTC explicitly stated the reasons for the award of attorneys fees.

WHEREFORE, the instant petition is DENIED. The challenged Decision dated January 16, 2006 and Resolution datedApril 26, 2006 of the Court of Appeals in CA-G.R. SP No. 90397 are AFFIRMED with MODIFICATION that the award of rentals and attorneys fees are DELETED. No pronouncement as to costs. SO ORDERED. LEONARDO A. QUISUMBING Associate Justice

SECOND DIVISION UNISOURCE COMMERCIAL AND DEVELOPMENT CORPORATION, Petitioner, G.R. No. 173252 Present: QUISUMBING, J., Chairperson, CARPIO MORALES, CHICO-NAZARIO,* LEONARDO-DE CASTRO,**and BRION, JJ. Promulgated:

- versus -

JOSEPH CHUNG, KIAT CHUNG and KLETO CHUNG, Respondents.

July 17, 2009 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION QUISUMBING, J.:

The instant petition assails the Decision [1] dated October 27, 2005 and the Resolution[2] dated June 19, 2006 of the Court of Appeals in CA-G.R. CV No. 76213. The appellate court had reversed and set aside the Decision [3] dated August 19, 2002 of the Regional Trial Court of Manila, Branch 49, in Civil Case No. 00-97526. The antecedent facts are as follows: Petitioner Unisource Commercial and Development Corporation is the registered owner of a parcel of land covered by Transfer Certificate of Title (TCT) No. 176253 [4] of the Register of Deeds of Manila. The title contains a memorandum of encumbrance of a voluntary easement which has been carried over from the Original Certificate of Title of Encarnacion S. Sandico. The certified English translation[5] of the annotation reads: By order dated 08 October 1924 of the Court of First Instance of Manila, Chamber IV (AP7571/T-23046), it is declared that Francisco Hidalgo y Magnifico has the right to open doors in the course of his lot described as Lot No. 2, Block 2650 of the map that has been exhibited, towards the left of the Callejon that is used as a passage and that appears as adjacent to the said Lot 2 and to pass through the land of Encarnacion Sandico y Santana, until the bank of the estero that goes to the Pasig River, and towards the right of the other Callejon that is situated between the said Lot 2 and Lot 4 of the same Block N.[6] As Sandicos property was transferred to several owners, the memorandum of encumbrance of a voluntary easement in favor of Francisco M. Hidalgo was consistently annotated at the back of every title covering Sandicos property until TCT No. 176253 was issued in petitioners favor. On the other hand, Hidalgos property was eventually transferred to respondents Joseph Chung, Kiat Chung and Cleto Chung under TCT No. 121488.[7] On May 26, 2000, petitioner filed a Petition to Cancel the Encumbrance of Voluntary Easement of Right of Way on the ground that the dominant estate has an adequate access to a public road which is Matienza Street. The trial court dismissed the petition on the ground that it is a land registration case. Petitioner moved for reconsideration. Thereafter, the trial court conducted an ocular inspection of the property. In an Order[9] dated November 24, 2000, the trial court granted the motion and made the following observations:
[8]

1. The dominant estate is a property enclosed with a concrete fence with no less than three (3) doors in it, opening to an alley belonging to the servient estate owned by the petitioner. The alley is leading to Matienza St.; 2. The dominant estate has a house built thereon and said house has a very wide door accessible to Matienza St. without any obstruction. Said street is perpendicular to J.P. Laurel St. It is therefore found that the dominant estate has an egress to Matienza St. and does not have to use the servient estate.[10] In their Answer,[11] respondents countered that the extinguishment of the easement will be of great prejudice to the locality and that petitioner is guilty of laches since it took petitioner 15 years from acquisition of the property to file the petition. In a Decision dated August 19, 2002, the trial court ordered the cancellation of the encumbrance of voluntary easement of right of way in favor of the dominant estate owned by respondents. It found that the dominant estate has no more use for the easement since it has another adequate outlet to a public road which is Matienza Street. The dispositive portion of the decision reads: IN VIEW OF ALL THE FOREGOING, the Court hereby orders the cancellation of the Memorandum of Encumbrance annotated in TCT No. 176253 which granted a right of way in favor of the person named therein and, upon the finality of this decision, the Register of Deeds of the City of Manila is hereby directed to cancel said encumbrance.

With respect to the other prayers in the petition, considering that the same are mere incidents to the exercise by the owners of right of their ownership which they could well do without the Courts intervention, this Court sees no need to specifically rule thereon. The Court cannot award plaintiffs claims for damages and attorneys fees for lack of sufficient bases therefor. SO ORDERED.[12] Respondents appealed to the Court of Appeals. On October 27, 2005, the appellate court reversed the decision of the trial court and dismissed the petition to cancel the encumbrance of voluntary easement of right of way. The appellate court ruled that when petitioners petition was initially dismissed by the executive judge, the copy of the petition and the summons had not yet been served on respondents. Thus, when petitioner moved to reconsider the order of dismissal, there was no need for a notice of hearing and proof of service upon respondents since the trial court has not yet acquired jurisdiction over them. The trial court acquired jurisdiction over the case and over respondents only after the summons was served upon them and they were later given ample opportunity to present their evidence. The appellate court also held that the trial court erred in canceling the encumbrance of voluntary easement of right of way. The appellate court ruled that Article 631(3) [13] of the Civil Code, which was cited by the trial court, is inapplicable since the presence of an adequate outlet to a highway extinguishes only legal or compulsory easements but not voluntary easements like in the instant case. There having been an agreement between the original parties for the provision of an easement of right of way in favor of the dominant estate, the same can be extinguished only by mutual agreement or by renunciation of the owner of the dominant estate. The decretal portion of the decision reads: WHEREFORE, the foregoing considered, the appeal is hereby GRANTED and the assailed decision is REVERSED and SET ASIDE. Accordingly, the petition to cancel the encumbrance of right of way is dismissed for lack of merit. No costs. SO ORDERED.[14] Before us, petitioner alleges that the Court of Appeals erred in: I. BRUSHING ASIDE PETITIONERS CONTENTION THAT THE EASEMENT IS PERSONAL SINCE THE ANNOTATION DID NOT PROVIDE THAT IT IS BINDING ON THE HEIRS OR ASSIGNS OF SANDICO. NOT CONSIDERING THAT THE EASEMENT IS PERSONAL SINCE NO COMPENSATION WAS GIVEN TO PETITIONER. DISREGARDING THE CIVIL CODE PROVISION ON UNJUST ENRICHMENT. TREATING THE EASEMENT AS PREDIAL.[15]

II. III. IV.

Petitioner contends that the fact that Sandico and Hidalgo resorted to judicial intervention only shows that they contested the existence of the requisite factors establishing a legal easement. Besides, the annotation itself provides that the easement is exclusively confined to the parties mentioned therein, i.e., Sandico and Hidalgo. It was not meant to bind their heirs or assigns; otherwise, they would have expressly provided for it. Petitioner adds that it would be an unjust enrichment on respondents part to continue enjoying the easement without adequate compensation to petitioner. Petitioner also avers that to say that the easement has attached toHidalgos property is erroneous since such property no longer exists after it has been subdivided and registered in respondents respective names. [16] Petitioner

further argues that even if it is bound by the easement, the same can be cancelled or revoked since the dominant estate has an adequate outlet without having to pass through the servient estate. Respondents adopted the disquisition of the appellate court as their counter-arguments. The petition lacks merit. As defined, an easement is a real right on anothers property, corporeal and immovable, whereby the owner of the latter must refrain from doing or allowing somebody else to do or something to be done on his property, for the benefit of another person or tenement. Easements are established either by law or by the will of the owner. The former are called legal, and the latter, voluntary easements.[17] In this case, petitioner itself admitted that a voluntary easement of right of way exists in favor of respondents. In its petition to cancel the encumbrance of voluntary easement of right of way, petitioner alleged that [t]he easement is personal. It was voluntarily constituted in favor of a certain Francisco Hidalgo y Magnifico, the owner of [the lot] described as Lot No. 2, Block 2650. [18] It further stated that the voluntary easement of the right of way in favor of Francisco Hidalgo y Magnifico was constituted simply by will or agreement of the parties. It was not a statutory easement and definitely not an easement created by such court order because [the] Court merely declares the existence of an easement created by the parties. [19] In its Memorandum[20] dated September 27, 2001, before the trial court, petitioner reiterated that [t]he annotation found at the back of the TCT of Unisource is a voluntary easement. [21] Having made such an admission, petitioner cannot now claim that what exists is a legal easement and that the same should be cancelled since the dominant estate is not an enclosed estate as it has an adequate access to a public road which is Callejon Matienza Street.[22] As we have said, the opening of an adequate outlet to a highway can extinguish only legal or compulsory easements, not voluntary easements like in the case at bar. The fact that an easement by grant may have also qualified as an easement of necessity does not detract from its permanency as a property right, which survives the termination of the necessity. [23] A voluntary easement of right of way, like any other contract, could be extinguished only by mutual agreement or by renunciation of the owner of the dominant estate. [24] Neither can petitioner claim that the easement is personal only to Hidalgo since the annotation merely mentioned Sandico andHidalgo without equally binding their heirs or assigns. That the heirs or assigns of the parties were not mentioned in the annotation does not mean that it is not binding on them. Again, a voluntary easement of right of way is like any other contract. As such, it is generally effective between the parties, their heirs and assigns, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. [25] Petitioner cites City of Manila v. Entote[26] in justifying that the easement should bind only the parties mentioned therein and exclude those not so mentioned. However, that case is inapplicable since the issue therein was whether the easement was intended not only for the benefit of the owners of the dominant estate but of the community and the public at large.[27] In interpreting the easement, the Court ruled that the clause any and all other persons whomsoever in the easement embraces only those who are privy to the owners of the dominant estate, Lots 1 and 2 Plan Pcs-2672 and excludes the indiscriminate public from the enjoyment of the right-of-way easement. [28] We also hold that although the easement does not appear in respondents title over the dominant estate, the same subsists. It is settled that the registration of the dominant estate under the Torrens system without the annotation of the voluntary easement in its favor does not extinguish the easement. On the contrary, it is the registration of the servient estate as free, that is, without the annotation of the voluntary easement, which extinguishes the easement. [29] Finally, the mere fact that respondents subdivided the property does not extinguish the easement. Article 618 of the Civil Code provides that if the dominant estate is divided between two or more persons, each of them may use the easement in its entirety, without changing the place of its use, or making it more burdensome in any other way.
[30]

WHEREFORE, the instant petition is DENIED. The Decision dated October 27, 2005 and the Resolution dated June 19, 2006 of the Court of Appeals in CA-G.R. CV No. 76213 are AFFIRMED. SO ORDERED.

LEONARDO A. QUISUMBING Associate Justice

SECOND DIVISION

JOSEPHINE MARMO,*NESTOR ESGUERRA, DANILO DEL PILAR and MARISA DEL PILAR, Petitioners, versus -

G.R. No. 182585

November 27, 2009

MOISES O. ANACAY, Respondent.

DECISION

BRION, J.: Before us is the Petition for Review on Certiorari,[1] filed by the spouses Josephine Marmo and Nestor Esguerra and the spouses Danilo del Pilar and Marisa del Pilar (collectively, the petitioners), to reverse and set aside the Decision[2] dated December 28, 2007 and the Resolution[3] dated April 11, 2008 of the Former Special Eleventh Division of the Court of Appeals (CA) in CA-G.R. SP No. 94673. The assailed CA Decision dismissed the petitioners petition for certiorari challenging the Orders dated March 14, 2006[4] and May 8, 2006[5] of the Regional Trial Court (RTC), Branch 90, Dasmarias, Cavite in Civil Case No. 2919-03, while the assailed CA Resolution denied the petitioners motion for reconsideration FACTUAL BACKGROUND

The facts of the case, as gathered from the parties pleadings, are briefly summarized below: On September 16, 2003, respondent Moises O. Anacay filed a case for Annulment of Sale, Recovery of Title with Damages against the petitioners[6] and the Register of Deeds of the Province of Cavite, docketed as Civil Case No. 291903.[7] The complaint states, among others, that: the respondent is the bona-fide co-owner, together with his wife, Gloria P. Anacay (now deceased), of a 50-square meter parcel of land and the house built thereon, located at Blk. 54, Lot 9, Regency Homes, Brgy. Malinta, Dasmarias,Cavite, covered by Transfer Certificate of Title ( TCT) No. T-815595 of the Register of Deeds of Cavite; they authorized petitioner Josephine to sell the subject property; petitioner Josephine sold the subject property to petitioner Danilo for P520,000.00, payable in monthly installments of P8,667.00 from May 2001 to June 2006; petitioner Danilo defaulted in his installment payments from December 2002 onwards; the respondent subsequently discovered that TCT No. 815595 had been cancelled and TCT No. T-972424 was issued in petitioner Josephines name by virtue of a falsified Deed of Absolute Sale dated September 20, 2001; petitioner Josephine subsequently transferred her title to petitioner Danilo; TCT No. T-972424 was cancelled and TCT No. T-991035 was issued in petitioner Danilos name. The respondent sought the annulment of the Deed of Absolute Sale dated September 20, 2001 and the cancellation of TCT No. T-991035; in the alternative, he demanded petitioner Danilos payment of the balance of P347,000.00 with interest from December 2002, and the payment of moral damages, attorneys fees, and cost of suit. In her Answer, petitioner Josephine averred, among others, that the respondents children, as co-owners of the subject property, should have been included as plaintiffs because they are indispensable parties. [8] Petitioner Danilo echoed petitioner Josephines submission in his Answer. [9]Following the pre-trial conference, the petitioners filed a Motion to Dismiss the case for the respondents failure to include his children as indispensable parties. [10] The respondent filed an Opposition, arguing that his children are not indispensable parties because the issue in the case can be resolved without their participation in the proceedings. [11] THE RTC RULING The RTC found the respondents argument to be well-taken and thus denied the petitioners motion to dismiss in an Order dated March 14, 2006.[12] It also noted that the petitioners motion was simply filed to delay the proceedings.

After the denial of their Motion for Reconsideration, [13] the petitioners elevated their case to the CA through a Petition forCertiorari under Rule 65 of the Rules of Court.[14] They charged the RTC with grave abuse of discretion amounting to lack of jurisdiction for not dismissing the case after the respondent failed to include indispensable parties. THE CA RULING The CA dismissed the petition[15] in a Decision promulgated on December 28, 2007. It found that the RTC did not commit any grave abuse of discretion in denying the petitioners motion to dismiss, noting that the respondents children are not indispensable parties. The petitioners moved [16] but failed[17] to secure a reconsideration of the CA Decision; hence, the present petition.Following the submission of the respondents Comment [18] and the petitioners Reply,[19] we gave due course to the petition and required the parties to submit their respective memoranda. [20] Both parties complied.[21] Meanwhile, on April 24, 2009, the petitioners filed with the RTC a Motion to Suspend Proceedings due to the pendency of the present petition. The RTC denied the motion to suspend as well as the motion for reconsideration that followed. The petitioners responded to the denial by filing with us a petition for the issuance of a temporary restraining order (TRO) to enjoin the RTC from proceeding with the hearing of the case pending the resolution of the present petition. THE PETITION and THE PARTIES SUBMISSIONS The petitioners submit that the respondents children, who succeeded their deceased mother as co-owners of the property, are indispensable parties because a full determination of the case cannot be made without their presence, relying on Arcelona v. Court of Appeals, [22] Orbeta v. Sendiong,[23] and Galicia v. Manliquez Vda. de Mindo.[24] They argue that the non-joinder of indispensable parties is a fatal jurisdictional defect. The respondent, on the other hand, counters that the respondents children are not indispensable parties because the issue involved in the RTC whether the signatures of the respondent and his wife in the Deed of Absolute Sale dated September 20, 2001were falsified - can be resolved without the participation of the respondents children. THE ISSUE The core issue is whether the respondents children are indispensable parties in Civil Case No. 2919-03. In the context of the Rule 65 petition before the CA, the issue is whether the CA correctly ruled that the RTC did not commit any grave abuse of discretion in ruling that the respondents children are not indispensable parties. OUR RULING We see no merit in the petition. General Rule: The denial of a motion to dismiss is an interlocutory order which is not the proper subject of an appeal or a petition for certiorari. At the outset, we call attention to Section 1 of Rule 41 [25] of the Revised Rules of Court governing appeals from the RTC to the CA. This Section provides that an appeal may be taken only from a judgment or final order that completely disposes of the case, or of a matter therein when declared by the Rules to be appealable. It explicitly states as well that no appeal may be taken from an interlocutory order. In law, the word interlocutory refers to intervening developments between the commencement of a suit and its complete termination; hence, it is a development that does not end the whole controversy. [26] An interlocutory order

merely rules on an incidental issue and does not terminate or finally dispose of the case; it leaves something to be done before the case is finally decided on the merits. [27] An Order denying a Motion to Dismiss is interlocutory because it does not finally dispose of the case, and, in effect, directs the case to proceed until final adjudication by the court. Only when the court issues an order outside or in excess of jurisdiction or with grave abuse of discretion, and the remedy of appeal would not afford adequate and expeditious relief, will certiorari be considered an appropriate remedy to assail an interlocutory order. [28] In the present case, since the petitioners did not wait for the final resolution on the merits of Civil Case No. 2919-03 from which an appeal could be taken, but opted to immediately assail the RTC Orders dated March 14, 2006 and May 8, 2006 through a petition for certiorari before the CA, the issue for us to address is whether the RTC, in issuing its orders, gravely abused its discretion or otherwise acted outside or in excess of its jurisdiction. The RTC did not commit grave abuse of discretion in denying the petitioners Motion to Dismiss; the respondents coowners are not indispensable parties.

The RTC grounded its Order dated March 14, 2006 denying the petitioners motion to dismiss on the finding that the respondents children, as co-owners of the subject property, are not indispensable parties to the resolution of the case. We agree with the RTC. Section 7, Rule 3 of the Revised Rules of Court [29] defines indispensable parties as parties-in-interest without whom there can be no final determination of an action and who, for this reason, must be joined either as plaintiffs or as defendants. Jurisprudence further holds that a party is indispensable, not only if he has an interest in the subject matter of the controversy, but also if his interest is such that a final decree cannot be made without affecting this interest or without placing the controversy in a situation where the final determination may be wholly inconsistent with equity and good conscience. He is a person whose absence disallows the court from making an effective, complete, or equitable determination of the controversy between or among the contending parties. [30]When the controversy involves a property held in common, Article 487 of the Civil Code explicitly provides that any one of the co-owners may bring an action in ejectment. We have explained in Vencilao v. Camarenta[31] and in Sering v. Plazo[32] that the term action in ejectment includes a suit for forcible entry ( detentacion) or unlawful detainer (desahucio).[33] We also noted in Sering that the term action in ejectment includes also, an accion publiciana (recovery of possession) or accion reinvidicatoria[34] (recovery of ownership). Most recently in Estreller v. Ysmael,[35] we applied Article 487 to an accion publiciana case; in Plasabas v. Court of Appeals[36] we categorically stated that Article 487 applies to reivindicatory actions. We upheld in several cases the right of a co-owner to file a suit without impleading other co-owners, pursuant to Article 487 of the Civil Code. We made this ruling in Vencilao, where the amended complaint for forcible entry and detainer specified that the plaintiff is one of the heirs who co-owns the disputed properties. In Sering, and Resuena v.

Court of Appeals,[37] the co-owners who filed the ejectment case did not represent themselves as the exclusive owners of the property. In Celino v. Heirs of Alejo and Teresa Santiago,[38] the complaint for quieting of title was brought in behalf of the co-owners precisely to recover lots owned in common. [39] In Plasabas, the plaintiffs alleged in their complaint for recovery of title to property ( accion reivindicatoria) that they are the sole owners of the property in litigation, but acknowledged during the trial that the property is co-owned with other parties, and the plaintiffs have been authorized by the co-owners to pursue the case on the latters behalf. These cases should be distinguished from Baloloy v. Hular[40] and Adlawan v. Adlawan[41] where the actions for quieting of title and unlawful detainer, respectively, were brought for the benefit of the plaintiff alone who claimed to be the sole owner. We held that the action will not prosper unless the plaintiff impleaded the other co-owners who are indispensable parties. In these cases, the absence of an indispensable party rendered all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to those present. We read these cases to collectively mean that where the suit is brought by a co-owner, without repudiating the coownership, then the suit is presumed to be filed for the benefit of the other co-owners and may proceed without impleading the other co-owners. However, where the co-owner repudiates the co-ownership by claiming sole ownership of the property or where the suit is brought against a co-owner, his co-owners are indispensable parties and must be impleaded as party-defendants, as the suit affects the rights and interests of these other co-owners. In the present case, the respondent, as the plaintiff in the court below, never disputed the existence of a coownership nor claimed to be the sole or exclusive owner of the litigated lot. In fact, he recognized that he is a bonafide co-owner of the questioned property, along with his deceased wife. Moreover and more importantly, the respondents claim in his complaint in Civil Case No. 2919-03 is personal to him and his wife, i.e., that his and his wifes signatures in the Deed of Absolute Sale in favor of petitioner Josephine were falsified. The issue therefore is falsification, an issue which does not require the participation of the respondents co-owners at the trial; it can be determined without their presence because they are not parties to the document; their signatures do not appear therein. Their rights and interests as co-owners are adequately protected by their co-owner and father, respondent Moises O. Anacay, since the complaint was made precisely to recover ownership and possession of the properties owned in common, and, as such, will redound to the benefit of all the co-owners. [42] In sum, respondents children, as co-owners of the subject property, are not indispensable parties to the resolution of the case. We held in Carandang v. Heirs of De Guzman[43] that in cases like this, the co-owners are not even necessary parties, for a complete relief can be accorded in the suit even without their participation, since the suit is presumed to be filed for the benefit of all. [44] Thus, the respondents children need not be impleaded as partyplaintiffs in Civil Case No. 2919-03. We cannot subscribe to the petitioners reliance on our rulings in Arcelona v. Court of Appeals,[45] Orbeta v. Sendiong[46]and Galicia v. Manliquez Vda. de Mindo,[47] for these cases find no application to the present case. In these cited cases, the suits were either filed against a co-owner without impleading the other co-owners, or filed by a party claiming sole ownership of a property that would affect the interests of third parties.

Arcelona involved an action for security of tenure filed by a tenant without impleading all the co-owners of a fishpond as party-defendants. We held that a tenant, in an action to establish his status as such, must implead all the proindiviso co-owners as party-defendants since a tenant who fails to implead all the co-owners as party-defendants cannot establish with finality his tenancy over the entire co-owned land. Orbeta, on the other hand, involved an action for recovery of possession, quieting of title and damages wherein the plaintiffs prayed that they be declared absolute coowners of the disputed property, but we found that there were third parties whose rights will be affected by the ruling and

who should thus be impleaded as indispensable parties. In Galicia, we noted that the complaint for recovery of possession and ownership and annulment of title alleged that the plaintiffs predecessor-in-interest was deprived of possession and ownership by a third party, but the complaint failed to implead all the heirs of that third party, who were considered indispensable parties.

In light of these conclusions, no need arises to act on petitioners prayer for a TRO to suspend the proceedings in the RTC and we find no reason to grant the present petition.

WHEREFORE, premises considered, we hereby DENY the petition for its failure to show any reversible error in the assailed Decision dated December 28, 2007 and Resolution dated April 11, 2008 of the Court of Appeals in CA-G.R. SP No. 94673, both of which we hereby AFFIRM. Costs against the petitioners.

SO ORDERED.

THIRD DIVISION

WILSON A. GO, Petitioner, - versus -

G.R. No. 183546 Ynares-Santiago, J. (Chairperson), Chico-Nazario,

HARRY A. GO, Respondent. Promulgated: September 18, 2009

DECISION YNARES-SANTIAGO, J.: This is a petition for certiorari under Rule 65 of the Rules of Court assailing the April 21, 2008 Decision [1] of the Court of Appeals in CA-G.R. SP No. 100100 which annulled the May 4 [2] and July 4, 2007[3] Orders of the Regional Trial Court (RTC) of Valenzuela City, Branch 172 in Civil Case No. 179-V-06. In its July 4, 2008 Resolution,[4] the Court of Appeals denied petitioners motion for reconsideration. On September 11, 2006, petitioner Wilson A. Go instituted an action[5] for partition with accounting against private respondent Harry A. Go in the RTC of Valenzuela City. The case was raffled to Branch 172 and docketed as Civil Case No. 179-V-06. Petitioner alleged that he and private respondent are among the five children of Spouses Sio Tong Go and Simeona Lim Ang; that he and private respondent are the registered co-owners of a parcel of land, with an area of 7,151 square meters located at Valenzuela City, Metro Manila, covered by Transfer Certificate of Title (TCT) No. V-44555 issued on June 24, 1996 by the Registry of Deeds of Valenzuela, Metro Manila; that, upon mutual agreement between petitioner and private respondent, petitioner has possession of the Owner's Duplicate Copy of TCT No. V-44555; that on said land there are seven warehouses being rented out by private respondent to various businesses without proper authority from petitioner; that from March 2006 to September 2006, private respondent collected rentals thereon amounting to P1,697,850.00 without giving petitioner his one-half (1/2) share; that petitioner has repeatedly demanded payment of his rightful share in the rentals from private respondent to no avail; and that due to loss of trust and confidence in private respondent, petitioner has no recourse but to demand the partition of the subject land. Petitioner prayed that the RTC render judgment (a) ordering the partition of the subject land together with the building and improvements thereon in equal share between petitioner and private respondent; (b) directing private respondent to render an accounting of the rentals collected from the seven warehouses; (c) ordering the joint collection by petitioner and private respondent of the monthly rentals pending the resolution of the case; and (d) ordering private respondent to pay attorney's fees and the costs of suit. In his answer,[6] private respondent claimed that during the lifetime of their father, Sio Tong Go, the latter observed Chinese customs and traditions; that, for this reason, when Sio Tong Go acquired the subject land together with one Wendell Simsim on November 23, 1995, the title to the same was placed in the names of petitioner, private respondent and Simsim instead of his (Sio Tong Go's) name and that of his wife; that the interest of Simsim in the subject land was subsequently transferred in the names of petitioner and private respondent through the deed of extra-judicial settlement dated June 24, 1996; that the investment of their father flourished after businessmen started renting the warehouses built thereon; that during his lifetime, Sio Tong Go had control and stewardship of the business while petitioner and private respondent helped manage the business; that it was Sio Tong Go who entrusted the title to the subject land to petitioner for safekeeping and custody while the operations and management of the business were given to private respondent in accordance with the prevailing customs observed and practiced by their parents of Chinese origin;

that the buildings and other improvements were sourced from the business and money of their parents and not from petitioner or private respondent; that partition is not proper because indivision was imposed as a condition by their father prior to his death; that the subject land cannot be partitioned without making the whole property unserviceable for the purpose intended by their parents; that partition will prejudice the rights of the other surviving siblings of Sio Tong Go and his surviving wife who depend on the rental income for their subsistence and to answer for the expenses in maintaining and preserving the subject land; that the amount of rental collection is only P228,000.00 per month or a total P1,596,000.00 for a period of six months and not P1,697,850.00 as alleged by petitioner; that the income must be offset with the payment for the debts of petitioner which were paid out from the rental income as well as the expenses for utilities and other costs of administration and preservation of the subject land; and that the issue of ownership must first be resolved before partition may be granted. Private respondent prayed that the complaint be dismissed; he counterclaimed for moral and exemplary damages, and attorney's fees. On April 23, 2007, petitioner filed a motion[7] to require private respondent to deposit with the trial court petitioner's one-half (1/2) share in the rental collections from the date of the filing of the complaint on September 11, 2006 up to April 30, 2007, and every month thereafter as well as the rental collections from February 2006 to August 2006. On May 4, 2007, the trial court issued an order granting the motion not only with respect to the one-half (1/2) share prayed for but the entire monthly rental collections: WHEREFORE, finding the instant motion to be well-taken, the defendant is hereby directed to deposit in Court within thirty (30) days from receipt hereof all the amounts collected by him from the lessees of the warehouses covered by the certificate of title in the names of the [petitioner] and [private respondent], and no withdrawal therefrom shall be allowed without the previous written authority of this Court. SO ORDERED.[8] Private respondent moved for reconsideration which was denied by the trial court in its July 4, 2007 Order. Aggrieved, he filed a petition for certiorari with the Court Appeals attributing grave abuse of discretion on the trial court. On April 21, 2008, the Court of Appeals issued the assailed Decision which nullified and set aside the May 4 and July 4, 2007 Orders of the trial court: WHEREFORE, premises considered, the present petition is hereby GIVEN DUE COURSE and the writ prayed for accordingly GRANTED. The assailed Orders dated May 4 and July 4, 2007 issued by respondent court are hereby ANNULLED and SET ASIDE. No pronouncement as to costs. So ORDERED.[9] The Court of Appeals noted, citing the ruling in Maglucot-aw v. Maglucot,[10] that an action for partition involves two phases. During the first phase, the trial court determines whether a co-ownership in fact exists while in the second phase the propriety of partition is resolved. Thus, until and unless the issue of co-ownership is definitely resolved, it would be premature to effect a partition of the subject property. Applying this principle by analogy, the appellate court concluded that the deposit of the monthly rentals with the trial court was premature considering that the issue of coownership has yet to be resolved: The Court holds that with the issue of co-ownership, or to be precise, the nature and extent of private respondent's title on the subject real estate, i.e., whether as owner of one-half (1/2) share, or a co-owner along with the other heirs of the late Sio Tong Go, not having been resolved first, it was premature for the respondent court to act favorable on private respondent's motion to deposit in court all rentals collected

from the date of death of the said decedent, which according to petitioner is the true owner of the property under co-ownership. Such relief may be granted during the second stage of the action for partition, after due trial and the court has been satisfied that indeed private respondent-movant is the owner of the full one-half (1/2) share, and not just of an equal share with the other siblings and their mother, the surviving wife of Sio Tong Go. For, if it turns out that the subject property is owned not just by petitioner and private respondent but all the heirs of the late Sio Tong Go, then the latter had to be included as parties in interest in the partition case, pursuant to Sec. 1, Rule 69. As co-owners entitled to a share in the property subject of partition, assuming the evidence at the trial proves the contention of petitioner, the other sibling and mother of petitioner and private respondent are indispensable parties to the suit. Indeed, the presence of all indispensable parties is a condition sine qua non for the exercise of judicial power. Without the presence of all the other heirs as plaintiffs, the trial court could not validly render judgment and grant relief in favor of the private respondent. Moreover, assuming the veracity of the allegations raised in the answer by petitioner, it would appear that the real property sought to be partitioned is merely held in trust by petitioner and private respondent for the benefit of their deceased father, and the latters surviving heirs who succeeded him in his estate after his death. Thus, all the co-heirs and persons having an interest in the property are indispensable parties; as such, an action for partition will not lie without the joinder of the said parties. The circumstance that the names of the other alleged co-owners and co-heirs do not appear in the certificate of title over the subject property is of no moment. It was held that the mere issuance of a certificate of title does not foreclose the possibility that the real property may be under co-ownership with persons not named therein. Petitioners answer and the annexes attached thereto raise serious question on the right or interest of private respondent to seek segregation of the subject property to the extent of one-half (1/2) share thereof, and consequently, to receive rents or income of the property corresponding to such claimed onehalf (1/2) share. That the rentals sought to be deposited in court is limited only to those collected following the death of their father only tends to support the position of petitioner that the subject real property is owned in common by the heirs of Sio Tong Go, and not just by petitioner and private respondent. It may also be noted that the complaint contains no categorical statement that private respondent, before the filing of the complaint, has in fact received such one-half (1/2) share out of the rentals collected from the lessees of the warehouses. Hence, respondent courts order for petitioner to deposit all rental income from the real estate subject of partition, which amounts to an accounting of rents and income pertaining to the co-owner share of private respondent prior to the determination of the question of co-ownership, constitutes grave abuse of discretion.[11] Thereafter, the Court of Appeals denied petitioners motion for reconsideration in Resolution dated July 4, 2008. Petitioner filed the instant petition for certiorari under Rule 65 of the Rules of Court alleging grave abuse of discretion on the part of the appellate court in nullifying the aforementioned orders of the trial court. The Court notes that petitioner pursued the wrong remedy when he filed a petition for certiorari under Rule 65 from the adverse ruling of the Court of Appeals. The province of a petition for certiorari is strict and narrow for it is limited to questions of lack of or excess in jurisdiction, or grave abuse of discretion. The proper remedy should have been a petition for review under Rule 45. However, the Court, pursuant to the liberal spirit which pervades the Rules and given the substantial issue raised, shall treat the present petition as a petition for review on certiorari under Rule 45 since it was filed within the 15-day reglementary period prescribed under said rule. [12] The sole issue is whether the Court Appeals erred when it nullified the order requiring private respondent to deposit the monthly rentals over the subject land with the trial court during the pendency of the action for partition and accounting. Petitioner contends that the subject order is

merely provisional and preservatory in character. It is intended to prevent the undue dissipation of the rental income until such time that the trial court shall determine who is lawfully entitled thereto. Rule 69 of the Rules of Court on partition does not preclude the trial court from issuing orders to protect and preserve the rights and interests of the parties while the main action for partition is being litigated. In this case, there is no dispute that the subject property is registered in the names of petitioner and private respondent, this being admitted by private respondent himself. Petitioner thus asserts that the trial court correctly ordered the deposit of the monthly rentals to safeguard the interests of the parties to this case. Private respondent counters that assuming that the subject order is merely provisional in nature, such order needs a concrete ground to justify it. The fact that the title to the subject land is in the names of petitioner and private respondent does not automatically mean that there exists a co-ownership. The surrounding circumstances of this case support the contention that the subject land was bought by Sio Tong Go and the title thereto was placed in the names of his two sons, petitioner and private respondent, in observance of the Chinese customs and tradition. Private respondent emphasizes that petitioner began to claim his (petitioners) alleged one-half (1/2) share in the rentals only after the death of their father on February 27, 2006 despite the fact that the subject land was bought way back on June 24, 1996. Petitioners acquiescence for 10 years thus shows that he knew that the subject land was really owned by their father and was merely placed in their names. Further, the grant of the motion to deposit will unduly prejudice the whole family because they depend on the rental income for their living expenses as well as the costs of administration and preservation of the subject land. Also, petitioner failed to prove that there was an undue dissipation of the rental income by private respondent which would warrant the issuance of the subject order. Finally, the order to deposit the whole monthly rental income is erroneous because petitioner only prayed for the deposit of his alleged one-half (1/2) share therein and not the entirety thereof. The petition is partly meritorious. The appellate court held that the order granting petitioners motion to deposit monthly rentals is premature because the question of co-ownership should first be resolved before said motion may be granted. However, as correctly argued by petitioner, the assailed order is merely preservatory or provisional in nature. It does not amount to an adjudication on the merits of the action for partition and accounting for the rentals are merely kept by the trial court until it is finally determined who is lawfully entitled thereto. Although the Rules of Court do not expressly provide for this kind of provisional relief, the Court has, in the past, sanctioned such practice pursuant to the courts general power to issue such orders conformable to law and justice[13] and to adopt means necessary to carry its jurisdiction into effect. [14] In The Province of Bataan v. Hon. Villafuerte, Jr. ,[15] the Court sustained the escrow order issued by the trial court over the lease rentals of the subject properties therein pending the resolution of the main action for annulment of sale and reconveyance. In upholding the authority of the trial court to issue such order, the Court ratiocinated thus: In a manner of speaking, courts have not only the power to maintain their life, but they have also the power to make that existence effective for the purpose for which the judiciary was created. They can, by appropriate means, do all things necessary to preserve and maintain every quality needful to make the judiciary an effective institution of Government. Courts have therefore inherent power to preserve their integrity, maintain their dignity and to insure effectiveness in the administration of justice. To lend flesh and blood to this legal aphorism, Rule 135 of the Rules of Court explicitly provides:

Section 5. Inherent powers of courts Every court shall have power: . . . (g) To amend and control its process and orders so as to make them conformable to law and justice. Section 6. Means to carry jurisdiction into effect When by law jurisdiction is conferred on a court or judicial officer, all auxiliary writs, processes and other means necessary to carry it into effect may be employed by such court or officer, and if the procedure to be followed in the exercise of such jurisdiction is not specifically pointed out by law or by these rules, any suitable process or mode of proceeding may be adopted which appears conformable to the spirit of said law or rules. (Emphasis ours) It is beyond dispute that the lower court exercised jurisdiction over the main action docketed as Civil Case No. 210-ML, which involved the annulment of sale and reconveyance of the subject properties. Under this circumstance, we are of the firm view that the trial court, in issuing the assailed escrow orders, acted well within its province and sphere of power inasmuch as the subject orders were adopted in accordance with the Rules and jurisprudence and were merely incidental to the court's exercise of jurisdiction over the main case, thus: In the ordinary case the courts can proceed to the enforcement of the plaintiff's rights only after a trial had in the manner prescribed by the laws of the land, which involves due notice, the right of the trial by jury, etc. Preliminary to such an adjudication, the power of the court is generally to preserve the subject matter of the litigation to maintain the status, or issue some extraordinary writs provided by law, such as attachments, etc. None of these powers, however, are exercised on the theory that the court should, in advance of the final adjudication determine the rights of the parties in any summary way and put either of them in the enjoyment thereof; but such actions taken merely, as means for securing an effective adjudication and enforcement of rights of the parties after such adjudication. Colby v. Osgood Tex. Civ. App ., 230 S.W. 459; (emphasis ours)

On this score, the incisive disquisition of the Court of Appeals is worthy of mention, to wit: . . . Given the jurisdiction of the trial court to pass upon the raised question of ownership and possession of the disputed property, there then can hardly be any doubt as to the competence of the same court, as an adjunct of its main jurisdiction, to require the deposit in escrow of the rentals thereof pending final resolution of such question. To paraphrase the teaching in Manila Herald Publishing Co., Inc. vs. Ramos (G.R. No. L4268, January 18, 1951, cited in Francisco, Revised Rules of Court, Vol. 1, 2nd ed., p. 133), jurisdiction over an action carries with it jurisdiction over an interlocutory matter incidental to the cause and deemed essential to preserve the subject matter of the suit or to protect the parties' interest. x x x x x x the impugned orders appear to us as a fair response to the exigencies and equities of the situation. Parenthetically, it is not disputed that even before the institution of the main case below, the Province of Bataan has been utilizing the rental payments on the Baseco Property to meet its financial requirements. To us, this circumstance adds a more compelling dimension for the issuance of the assailed orders. . . . Applying the foregoing principles and considering the peculiarities of the instant case, the lower court, in the course of adjudicating and resolving the issues presented in the main suit, is clearly

empowered to control the proceedings therein through the adoption, formulation and issuance of orders and other ancillary writs, including the authority to place the properties in custodia legis, for the purpose of effectuating its judgment or decree and protecting further the interests of the rightful claimants of the subject property. To trace its source, the court's authority proceeds from its jurisdiction and power to decide, adjudicate and resolve the issues raised in the principal suit. Stated differently, the deposit of the rentals in escrow with the bank, in the name of the lower court, is only an incident in the main proceeding. To be sure, placing property in litigation under judicial possession, whether in the hands of a receiver, and administrator, or as in this case, in a government bank, is an ancient and accepted procedure. Consequently, we find no cogency to disturb the questioned orders of the lower court and in effect uphold the propriety of the subject escrow orders. (emphasis ours) [16] In another case, Bustamante v. Court of Appeals,[17] private respondents filed a complaint against petitioners for recovery of possession with preliminary injunction over the subject lot with buildings thereon. Favorably acting on the application for a writ of preliminary injunction, the trial court required the petitioners to pay reasonable rent to private respondents and granted to the latter the right to collect rentals from the existing lessees of the subject lot and buildings. On review, the Court ruled, inter alia, that the vesting in private respondents of the right to collect rent from the existing lessees of the buildings is premature pending a final determination of who among the parties is the lawful possessor of the subject lot and buildings. The Court went on to state that [t]he most prudent way to preserve the rights of the contending parties is to deposit with the trial court all the rentals from the existing lessees of the Buildings.[18] Consequently, petitioners were ordered to deposit with the trial court all collections of rentals from the lessees of the buildings pending the resolution of the case. As can be seen, the order to deposit the lease rentals with the trial court is in the nature of a provisional relief designed to protect and preserve the rights of the parties while the main action is being litigated. Contrary to the findings of the Court of Appeals, such an order may be issued even prior to the determination of the issue of co-ownership because it is precisely meant to preserve the rights of the parties until such time that the court finally determines who is lawfully entitled thereto. It does not follow, however, that the subject order in this case should be sustained. Like all other interlocutory orders issued by a trial court, the subject order must not suffer from the vice of grave abuse of discretion. As will be discussed hereunder, special and compelling circumstances constrain the Court to hold that the subject order was tainted with grave abuse of discretion. At the outset, the Court agrees with private respondent that the RTC gravely abused its discretion when it ordered the deposit of the entire monthly rentals whereas petitioner merely asked for the deposit of his alleged one-half (1/2) share therein. Indeed, the courts power to grant any relief allowed under the law is, as general rule, delimited by the cardinal principle that it cannot grant anything more than what is prayed for because the relief dispensed cannot rise above its source.[19] Here, petitioner categorically prayed for in his motion for deposit with the trial court of only one-half (1/2) of the monthly rentals during the pendency of the case. [20] It was, therefore, highly irregular for the RTC to order the deposit of the entire monthly rentals. The RTC offered no reason for its departure from such a basic principle of law; its actuations, thus, constituted grave abuse of discretion. This finding does not, however, fully dispose of this case. The question may be asked, if petitioner is not entitled to the deposit of the entire monthly rentals, is he then entitled to the deposit of his alleged one-half (1/2) share therein? The Court answers in the negative.

The origin of petitioners alleged one-half (1/2) share as co-owner of the subject land is conspicuously absent in the allegations in his complaint for partition and accounting before the trial court. Petitioner tersely stated that, as per the title of the subject land, he and private respondent are named as co-owners in equal shares. It was private respondents answer to the complaint which brought to light the alleged origin of their title to the subject land. Private respondent claimed that the subject land was actually bought by their father but the title was placed in petitioner and private respondents names in accordance with the customs and traditions of their parents who were of Chinese descent. Furthermore, it was their father who exercised control and ownership over the subject land as well as the warehousing business built thereon. Before the Court of Appeals, petitioner never refuted this claim by private respondent. Rather, petitioner insisted that the names in the title is controlling and, on its face, the existence of a coownership has been duly established, thus, entitling him to the deposit of his one-half (1/2) share in the monthly rentals in order to protect his interest during the pendency of the case. Curiously, after the Court of Appeals ruled in its April 21, 2008 Decision that the act of Sio Tong Go in placing in the names of his two children the title to the subject land merely created an implied trust for the benefit of Sio Tong Go and, upon his death, all his legal heirs pursuant to Article 1448[21] of the Civil Code, petitioner, in his motion for reconsideration, harped on a new theory through a process of deduction. For the first time on appeal, he claimed that the subject land was donated by their father to him and private respondent using the very same provision that the Court of Appeals relied on in concluding that an implied trust was created.[22] Then, before this Court, petitioner sought to further amplify his new found theory of the case. In trying to explain why he did not demand the rental collections as early as the date of purchase of the subject land in 1996 and why he waited until the death of his father in 2006, he stated, again for the first time on appeal, that while it may be true that petitioner did not seek the partition of the property and asked for his share in the rental collection when their father Sio Tong Go was still alive, it was but an act of courtesy and respect to their father, since the latter was still the one overseeing and supervising the business operation, and there was yet no danger and risk of abuse and dissipation of the rental collections since Sio Tong Go was still alive to control the rental collections and disbursements of the funds.[23] In effect, petitioner admitted that his father had control and ownership of the subject land and the lease rentals collected therefrom thereby lending credence to private respondents consistent claim that the subject land was actually bought by their father. Prescinding from the foregoing, the Court cannot lightly brush aside petitioners lack of forthrightness and candor reflected, as it were, in the shifting sands of his theory of the case. While initially in his complaint he anchored his alleged one-half (1/2) share based solely on the names appearing in the title of the subject land, petitioners subsequent admissions (when confronted with private respondents answer to the complaint) contradicted his previous allegations, thus, creating serious doubts as to the real extent of his lawful interest in the subject land. What emerges at this stage of the proceedings, albeit preliminary and subject to the outcome of the presentation of evidence during the trial on merits, is that the subject land was bought by Sio Tong Go and, upon his death, his interest therein passed on to his surviving spouse, Simeona Lim Ang, and their five children. Under the presumption that the subject land is conjugal property because it was bought during the marriage of Sio Tong Go and Simeona Lim Ang, and pursuant to the law on succession, petitioners share, as one of the children, appears to be limited to 1/12 [24] of the monthly rentals. Thus, it is only to this extent that his alleged interest as co-owner should be protected through the order to deposit rental income. Consequently, under the prevailing equities of this case, the subject order requiring private respondent to deposit with the trial court the

entire monthly rental income should be reduced to 1/12 of said income reckoned from the finality of this Decision and every month thereafter until the trial court finally determines who is lawfully entitled thereto. The Court emphasizes that these are preliminary findings for the sole purpose of resolving the propriety of the subject order requiring the deposit of the monthly rentals with the trial court. The precise extent of the interest of the parties in the subject land will have to await the final determination by the trial court of the main action for partition after a trial on the merits. While ordinarily this Court does not interfere with the sound discretion of the trial court to determine the propriety and extent of the provisional relief necessitated by a given case, the afore-discussed special and compelling circumstances warrant a correction of the trial courts exercise of discretion based on the grave abuse of discretion standard. It is well to remember that the question often asked of this Court, that is, whether it is a court of law or a court of justice, has always been answered in that it is both a court of law and a court of justice.[25] When the circumstances warrant, this Court shall not hesitate to modify the order issued by a trial court to ensure that it conforms to justice. The result reached here is but an affirmation of this long held and cherished principle. As a final note, private respondent raised a collateral matter regarding the lack of jurisdiction of the RTC over this case for failure to implead indispensable parties, i.e., all the legal heirs of Sio Tong Go. The records indicate that on August 16, 2007, Simeona Lim Ang filed a motion [26] to intervene although it is not clear whether the trial court has acted on this motion and whether the other legal heirs have similarly intervened in this case. At any rate, the Court cannot rule on this issue because the present case is limited to the propriety of the subject order granting the motion to deposit monthly rentals. The proper forum to thresh out this issue, if the parties so desire, is the trial court where the main action is pending. WHEREFORE, the petition is PARTIALLY GRANTED. The April 21, 2008 Decision and July 4, 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 100100 are REVERSED and SET ASIDE. The May 4 and July 4, 2007 Orders of the Regional Trial Court of Valenzuela City, Branch 172 in Civil Case No. 179-V-06 are SET ASIDE and a new Order is entered directing private respondent to deposit 1/12 of the monthly rentals collected by him from the buildings on TCT No. V-44555 with the trial court from the finality of this Decision and every month thereafter until it is finally adjudged who is lawfully entitled thereto. Costs against petitioner.

SO ORDERED. THIRD DIVISION

SPOUSES ROGELIO F. LOPEZ AND TEOTIMA G. LOPEZ Petitioners,

G.R. No. 184225

- versus SPOUSES SAMUEL R. ESPINOSA AND ANGELITA S. ESPINOSA, Respondents. September 4, 2009 Promulgated:

DECISION YNARES-SANTIAGO, J.: Assailed in this petition[1] for review on certiorari is the March 24, 2008 Decision[2] of the Court of Appeals in CA-G.R. CV No. 00113 finding petitioners, Spouses Rogelio F. Lopez and Teotima G. Lopez, liable for forcible entry and damages as well as the August 7, 2008 Resolution[3] denying petitioners motion for reconsideration. Respondents, Spouses Samuel R. Espinosa and Angelita S. Espinosa, owned a house located at Barangay Washington,Surigao City. Constructed in 1983, the house was situated at the back of petitioners residence and stood over a portion of a parcel of land covered by Transfer Certificate of Title No. T-12332 [4], which was issued under the name of petitioners on June 28, 1996. It appears from the records that the parties have had conflicting claims over the subject property since 1994 when petitioners, together with a Mr. Nolan Kaimo, filed an action for recovery of possession against respondents. The case was docketed as Civil Case No. 4301 before Branch 2 of the Municipal Trial Court in Cities of Surigao City, but was dismissed on September 7, 1994 on technical grounds. [5] On June 9, 1997 and July 2, 1997, petitioners were also summoned by the Office of the Punong Barangay of Barangay Washington, in connection with a complaint for malicious mischief filed by respondents. [6] Meanwhile, the instant case stemmed from a complaint [7] for Forcible Entry with Damages filed by respondents against petitioners on September 30, 2002. The case was docketed as Civil Case No. 02-5950 before Branch 2 of the Municipal Trial Court in Cities of Surigao City. Respondents alleged that on May 10, 2002, petitioners took advantage of their absence and demolished their house by means of stealth and strategy. Aided by hired personnel, petitioners removed and destroyed respondents house and enclosed the property with a concrete fence.

In their Answer,[8] petitioners denied having demolished respondents house and claimed that it was destroyed by the elements. They also averred that respondents permanently transferred residence in 1999 considering that they paid their water bill only until February 1999 while the electrical utility was disconnected on the same year. [9] On February 5, 2004, the Municipal Trial Court in Cities ruled in favor of respondents and held that petitioners forcibly entered the subject premises. It noted that: [I]n 1994 defendant Lopez and a certain Nolan Kaimo filed a case for recovery of possession versus herein plaintiffs [respondents] who were already occupants of a portion thereof, but the same was dismissed for technical reasons. In 1996, the defendants were able to secure TCT T-12332 in their name and which cover not only their residential lot but also the adjacent lot which plaintiffs occupied and where their house was erected. Then, in 1997 the plaintiffs had a clash with defendants when the latter allegedly destroyed plaintiffs fence which conflict reached Barangay Captain Laxas attention. These series of events clearly tend to show the many attempts of defendant Lopez to oust the plaintiffs from the premises and occupy the same as his

own. And, the last event is the one related in the instant case where the defendants, sensing that plaintiffs were not present and their house already destroyed by the elements, had the lot relocated and fenced as a consequence of which plaintiffs were totally deprived of possession thereof.[10] The Municipal Trial Court did not lend credence to petitioners claims that respondents abandoned their house and that the same was destroyed by natural elements. It held that despite petitioners constructive possession following the issuance of TCT No. T-12332, they were not justified in making such forcible entry. [11] The dispositive portion of the Decision[12] states: WHEREFORE, judgment is hereby rendered: 1. Directing defendants [petitioners] to remove the concrete fence, steel gate, grills and other structures found on the premises occupied by plaintiffs previous to the forcible entry, and after which to deliver possession thereof to plaintiffs smoothly and peacefully; 2. Directing defendants [petitioners] to pay the value of the house and improvements in the sum of P85,200.00; 3. Ordering defendants [petitioners] to further pay litigation expenses and the costs, and the sum of P10,000.00 as attorneys fees. SO ORDERED.[13] Petitioners appealed to the Regional Trial Court of Surigao City/Surigao del Norte, which reversed the ruling of the Municipal Trial Court in Cities. In its August 17, 2004 Decision, [14] the Regional Trial Court dismissed the case on the ground that the evidence clearly prove abandonment on the part of respondents. [15] Respondents filed a petition for review [16] before the Court of Appeals which affirmed in toto the Decision of the Municipal Trial Court in Cities. It found that while respondents left the house in 1999 when respondent Samuel was assigned to Placer, Surigao del Norte, this fact alone does not establish abandonment. Moreover, the appellate court noted that respondents enjoy priority of possession, and that they paid the corresponding taxes due on the house.[17] Thus: WHEREFORE, the instant petition is hereby GRANTED. The Decision dated 17 August 2004 of the Regional Trial Court, Tenth (10th) Judicial Region, Branch No. 29 of Surigao City in Civil Case No. 6229 is REVERSED and SET ASIDE. The Judgment dated 05 February 2004 of the Municipal Trial Court in Cities, Branch No. 2 of Surigao City in Civil Case No. 02-5950 for Forcible Entry with Damages is AFFIRMED IN TOTO. SO ORDERED.[18] Petitioners motion for reconsideration was denied, hence this petition on the following grounds: THE COURT OF APPEALS ERRED IN RULING THAT THE HEREIN RESPONDENTS DID NOT ABANDON THEIR NIPA HOUSE DESPITE THE FOLLOWING UNDISPUTED FACTS, TO WIT:

A. THE LOT OVER WHICH THE NIPA HOUSE WAS CONSTRUCTED IS OWNED BY THE HEREIN PETITIONERS AND COVERED BY TCT-T12332;

B. NOBODY WAS LEFT STAYING IN THE NIPA HOUSE FOR YEARS AND THE WATER AND ELECTRICAL CONNECTIONS IN THE NIPA HOUSE WERE ALREADY CUT OFF AS EARLY AS 1999.

Petitioners argue that the disconnection of water and electric supply in respondents house is proof of their intention to abandon the house, especially because respondents are not the owners of the land on which the house stood. Petitioners also allege that, even assuming arguendo that the Municipal Trial Court correctly decided on the issue of possession, the award of Php85,200.00 representing the value of improvements and attorneys fees is not supported by evidence. On the other hand, respondents claim that they did not abandon their house, and that the abandonment of a right, claim or property must be clear, absolute, and irrevocable. On the award of Php85,200.00, respondents aver that the issue was raised for the first time on appeal. The petition lacks merit. In Dy v. Mandy Commodities Co., Inc.,[19] the Court held that there is forcible entry or desahucio when one is deprived of physical possession of land or building by means of force, intimidation, threat, strategy or stealth. The basic inquiry centers on who has the prior possession de facto. The plaintiff must prove that he was in prior possession and that he was deprived thereof. In the instant case, respondents house was constructed in 1983 and they had prior physical possession until they were deprived thereof by petitioners. To substantiate their claims, respondents submitted the affidavit, dated September 20, 2002,[20] of Carlos C. Menil and Lolito S. Bito, who witnessed the demolition of respondents house during the latters absence. Mr. Menil and Mr. Bito attested that they saw petitioner Rogelio personally supervising the demolition of respondents house, and that he erected a concrete fence enclosing the area where the house formerly stood. Petitioners failed to refute the foregoing allegations except with bare denials. While petitioners hold title to the subject property where the house was located, the sole issue in forcible entry cases is who had prior possession de facto of the disputed property.[21] In Dy, the Court held that these are summary proceedings intended to provide an expeditious means of protecting actual possession or right of possession of property. Title is not involved; that is why it is a special civil action with a special procedure.[22] The Court of Appeals correctly held that respondents did not abandon their house. Abandonment requires (a) a clear and absolute intention to renounce a right or claim or to desert a right or property; and (b) an external act by which that intention is expressed or carried into effect. The intention to abandon implies a departure, with the avowed intent of never returning, resuming or claiming the right and the interest that have been abandoned. [23] There is none in this case. The disconnection of water and electric supply and the fact that respondents left the house when respondent Samuel was assigned to Surigao del Norte in 1999, do not constitute abandonment. As correctly found by the Court of Appeals, respondents left valuables inside the house and had the same padlocked, which acts constitute assertion and protection of their right over the subject house and negate renunciation and intention to lose the same. [24]

It bears stressing that the instant case was preceded by the filing of actions for recovery of possession and malicious mischief before the Office of the Punong Barangay. Likewise, upon discovery of petitioners acts of intrusion, respondents immediately filed a complaint for forcible entry and damages before the Municipal Trial Court in Cities. The Certification to File Action dated August 26, 2002 shows that no settlement or conciliation was reached. [25] It is clear from the foregoing that respondents have not been remiss in asserting their rights and that petitioners claims over the subject property have not gone unchallenged.

The Court affirms the award of Php85,200.00 representing the value of improvements and attorneys fees. The issue on the propriety of the award was raised for the first time on motion for reconsideration before the Court of Appeals. Well-settled is the rule that issues not raised below cannot be raised for the first time on appeal. [26]

WHEREFORE, based on the foregoing, the petition is DENIED. The March 24, 2008 Decision of the Court of Appeals in CA-G.R. SP No. 00113-MIN finding petitioners liable for forcible entry is AFFIRMED.

SO ORDERED.

CONSUELO YNARES-SANTIAGO Associate Justice

THIRD DIVISION RODOLFO RUDY CANLAS, VICTORIA CANLAS, FELICIDAD CANLAS and SPOUSES PABLO CANLAS AND CHARITO CANLAS, Petitioners - versus G.R. No. 184285

ILUMINADA TUBIL, Respondent. September 25, 2009

Promulgated:

x ---------------------------------------------------------------------------------------- x

DECISION YNARES-SANTIAGO, J.: Assailed in this petition for review on certiorari is the June 12, 2008 Decision[1] of the Court of Appeals in CAG.R. SP No. 99736, which reversed the April 11, 2007 Decision [2] of the Regional Trial Court (RTC) of Guagua, Pampanga, Branch 50, in Special Civil Case No. G-06-544, and ordered said Regional Trial Court to decide the case on merits, pursuant to Section 8, par. 2 of Rule 40 of the Rules of Court. The RTC affirmed the Decision [3] of the Municipal Trial Court (MTC) of Guagua, Pampanga, Branch 2, which dismissed Civil Case No. 3582 for unlawful detainer filed by respondent Iluminada Tubil. Also assailed is the September 1, 2008 Resolution [4] of the Court of Appeals which denied the Motion for Reconsideration. The facts are as follows: On June 9, 2004, a complaint for unlawful detainer was filed by respondent Iluminada Tubil against petitioners Rodolfo Canlas, Victoria Canlas, Felicidad Canlas and spouses Pablo and Charito Canlas before the MTC. The pertinent allegations read 3. That the plaintiff is the owner, together with the other heirs of her late husband Nicolas Tubil who are their children, of a residential land located at San Juan, Betis, Guagua, Pampanga, identified as Cadastral Lot No. 2420, with an area of 332 square meters, covered by Original Certificate of Title No. 11199 of the Registry of Deeds of Pampanga, x x x; 4. That before the aforesaid parcel of land was titled, it was declared for taxation purposes in the name of plaintiff Iluminada Tubil in the Municipal Assessors Office of Guagua, Pampanga, 6. That sometime ago, the defendants Roldolfo Rudy Canlas, Victoria Canlas and Felicidad Canlas erected a house in the aforesaid land of the plaintiff, which they are presently occupying as their residential house; 7. That likewise sometime ago defendants spouses Pablo Canlas and Charito Canlas erected a house in the aforesaid land of the plaintiff, which they are presently occupying as their residential house; 8. That the said houses of the defendants were erected in the aforesaid land and their stay therein was by mere tolerance of the plaintiff, as well as co-heirs, considering that defendants are plaintiffs relatives; 9. That plaintiff and her co-heirs wish to use and dedicate the aforesaid parcel of land fruitfully, demands were verbally made upon the defendants to vacate and remove their house therefrom, but defendants just ignored the plea of plaintiff and co-heirs, and instead failed and refused to remove the houses without any lawful and justifiable reason;

10. That in light of said refusal, the plaintiff referred the matter to a lawyer, who sent defendants demand letters to vacate dated January 12, 2004, but inspite of receipt of the same defendants failed and refused to vacate and remove their houses and continue to fail and refuse to do so without lawful justification x x x; 11. That this matter was ventilated with before the barangay government for conciliation, mediation, arbitration and settlement prior to the filing of this case with this court, but no settlement was arrived at inspite of the effort exerted by the barangay authorities and so a certification to file action was issued by the Pangkat Chairman of Barangay San Juan, Betis, Guagua, Pampanga x x x; [5] Petitioners filed a motion to dismiss alleging that the MTC is without jurisdiction over the subject matter, and that the case was not prosecuted in the name of the real parties in interest. [6] On September 14, 2004, the MTC denied the motion because the grounds relied upon were evidentiary in nature which needed to be litigated.[7] Thus, petitioners filed their answer where they denied the allegations in the complaint. They claimed that together with their predecessors-in-interest, they had been in open, continuous, adverse, public and uninterrupted possession of the land for more than 60 years; that respondents title which was issued pursuant to Free Patent No. 03540 was dubious, spurious and of unlawful character and nature; and that respondents cause of action was for an accion publiciana, which is beyond the jurisdiction of the MTC.[8] On October 23, 2006, the MTC rendered judgment dismissing the complaint for unlawful detainer because respondent failed to show that the possession of the petitioners was by mere tolerance. Respondent appealed to the RTC which rendered its Decision on April 11, 2007 affirming in toto the judgment of the MTC. Respondent filed a motion for reconsideration but it was denied in an Order [9] dated June 8, 2007. Respondent filed a petition for review with the Court of Appeals, which rendered the assailed decision on June 12, 2008, which reversed the Regional Trial Courts Decision, the dispositive portion of which reads: WHEREFORE, in view of all the foregoing premises, judgment is hereby rendered by us SETTING ASIDE the decision rendered by Branch 50 of the RTC in Guagua, Pampanga on April 11, 2007 in Special Civil Case No. G-06-544 and ORDERING the said regional trial court branch to decide Special Civil Case No. G-06-544 on the merits based on the entire record of the proceedings had in the Municipal Trial Court of Guagua, Pampanga in Civil Case No. 3582 and such memoranda as are filed therewith, without prejudice to the admission of amended pleadings and additional evidence in the interest of justice, pursuant to par. 2 of Section 8 of Rule 40 of the 1997 Revised Rules of Court. IT IS SO ORDERED.[10] Petitioners moved for reconsideration but it was denied by the Court of Appeals in its September 1, 2008 Resolution.[11] Hence, this petition for review on certiorari alleging that: x x x THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT SET ASIDE THE DECISION RENDERED BY BRANCH 50 OF THE REGIONAL TRIAL COURT OF GUAGUA, PAMPANGA ON APRIL 11, 2007 IN SPECIAL CIVIL CASE NO. G-06-544 AND IN ORDERING THE SAID COURT TO DECIDE SPECIAL CIVIL CASE NO. G-06-544 ON THE MERITS BASED

ON THE ENTIRE RECORD OF THE PROCEEDINGS HAD IN THE MUNICIPAL TRIAL COURT OF GUAGUA, PAMPANGA IN CIVIL CASE NO. 3582, WITHOUT PREJUDICE TO THE ADMISSION OF AMENDED PLEADINGS AND ADDITIONAL EVIDENCE PURSUANT TO PARAGRAPH 2 OF SECTION 8 OF RULE 40 OF THE 1997 RULES OF CIVIL PROCEDURE AS AMENDED, DESPITE THE FACTTHAT BRANCH 50 OF THE REGIONAL TRIAL COURT OF GUAGUA, PAMPANGA DOES NOT HAVE ORIGINAL JURISDICTION OVER THE SUBJECT MATTER OF CIVIL CASE NO. 3582 FILED IN THE MUNICIPAL TRIAL COURT OF GUAGUA, PAMPANGA ON JUNE 9, 2004.[12] Petitioners contend that the RTC does not have original jurisdiction over the subject matter of the case, thus, it cannot validly decide on the merits, as ordered by the Court of Appeals, pursuant to paragraph 2 of Section 8, Rule 40 of the Rules of Court, which reads: SEC. 8. Appeal from orders dismissing case without trial; lack of jurisdiction. If the case was tried on the merits by the lower court without jurisdiction over the subject matter, the Regional Trial Court on appeal shall not dismiss the case if it has original jurisdiction thereof, but shall decide the case in accordance with the preceding section, without prejudice to the admission of amended pleadings and additional evidence in the interest of justice. We note that when petitioners filed their motion to dismiss before the MTC, they claimed that it is the RTC which has jurisdiction over the subject matter. However, in the instant petition for review, petitioners changed their theory; they now claim that it is the MTC, and not the RTC, which has jurisdiction over the subject matter since the dispossession was only for five months counted from respondents last demand to the filing of the complaint for unlawful detainer before the MTC.

As a rule, a change of theory cannot be allowed. [13] However, when the factual bases thereof would not require presentation of any further evidence by the adverse party in order to enable it to properly meet the issue raised in the new theory,[14] as in this case, the Court may give due course to the petition and resolve the principal issues raised therein. The issue to be resolved is which court, the MTC or the RTC has jurisdiction over the subject matter. If it is an unlawful detainer case, the action was properly filed in the MTC. However, if the suit is one for accion publiciana, original jurisdiction is with the RTC, which is mandated not to dismiss the appeal but to decide the case on the merits pursuant to Section 8 of Rule 40 of the Rules of Court.

Well-settled is the rule that what determines the nature of the action as well as the court which has jurisdiction over the case are the allegations in the complaint. [15] In ejectment cases, the complaint should embody such statement of facts as to bring the party clearly within the class of cases for which the statutes provide a remedy, as these proceedings are summary in nature. The complaint must show enough on its face to give the court jurisdiction without resort to parol evidence.[16] Unlawful detainer is an action to recover possession of real property from one who illegally withholds possession after the expiration or termination of his right to hold possession under any contract, express or implied. The possession of the defendant in unlawful detainer is originally legal but became illegal due to the expiration or termination of the right to possess. [17]An unlawful detainer proceeding is summary in nature, jurisdiction of which lies in the proper

municipal trial court or metropolitan trial court. The action must be brought within one year from the date of last demand and the issue in said case is the right to physical possession. [18] On the other hand, accion publiciana is the plenary action to recover the right of possession which should be brought in the proper regional trial court when dispossession has lasted for more than one year. It is an ordinary civil proceeding to determine the better right of possession of realty independently of title. In other words, if at the time of the filing of the complaint, more than one year had elapsed since defendant had turned plaintiff out of possession or defendants possession had become illegal, the action will be, not one of forcible entry or illegal detainer, but an accion publiciana. In Cabrera v. Getaruela,[19] the Court held that a complaint sufficiently alleges a cause of action for unlawful detainer if it recites the following: (1) (2) (3) (4) initially, possession of property by the defendant was by contract with or by tolerance of the plaintiff; eventually, such possession became illegal upon notice by plaintiff to defendant of the termination of the latters right of possession; thereafter, the defendant remained in possession of the property and deprived the plaintiff of the enjoyment thereof; and within one year from the last demand on defendant to vacate the property, the plaintiff instituted the complaint for ejectment

In the instant case, respondents allegations in the complaint clearly make a case for an unlawful detainer, essential to confer jurisdiction on the MTC over the subject matter. Respondent alleged that she was the owner of the land as shown by Original Certificate of Title No. 111999 issued by the Register of Deeds of Pampanga; that the land had been declared for taxation purposes and she had been paying the taxes thereon; that petitioners entry and construction of their houses were tolerated as they are relatives; and that she sent on January 12, 2004 a letter demanding that petitioners vacate the property but they failed and refused to do so. The complaint for unlawful detainer was filed on June 9, 2004, or within one year from the time the last demand to vacate was made.It is settled that as long as these allegations demonstrate a cause of action for unlawful detainer, the court acquires jurisdiction over the subject matter. This principle holds, even if the facts proved during the trial do not support the cause of action thus alleged, in which instance the court - after acquiring jurisdiction - may resolve to dismiss the action for insufficiency of evidence. [20]

The ruling cited by the Court of Appeals in Sarmiento v. Court of Appeals,[21] i.e., that jurisdictional facts must appear on the face of the complaint for ejectment such that when the complaint fails to faithfully aver facts constitutive of forcible entry or unlawful detainer, as where it does not state how entry was effected, or how and when dispossession started, the remedy should either be an accion publiciana or an accion reinvindicatoria in the proper regional trial court,
[22]

finds no application in the instant case. In Sarmiento, the complaint did not characterize the entry into the land as legal

or illegal. It was also not alleged that dispossession was effected through force, intimidation, threat, strategy or stealth to make out a case of forcible entry, nor was there a contract, express or implied, as would qualify the case as unlawful detainer.[23] Contrarily, the complaint in this case specifically alleged that possession of the petitioners was by tolerance. The rule is that possession by tolerance is lawful, but such possession becomes unlawful upon demand to

vacate made by the owner and the possessor by tolerance refuses to comply with such demand. [24] In Sarmiento, the claim that possession of the land was by tolerance was a mere afterthought, raised only in subsequent pleadings but not in the complaint.[25] The requirement that the complaint should aver jurisdictional facts, like when and how entry on the land was made by the defendants, applies only when at issue is the timeliness of the filing of the complaint before the MTC and not when the jurisdiction of the MTC is assailed as being one for accion publiciana cognizable by the RTC. Thus, in Javelosa v. Court of Appeals,[26] it was held that: The ruling in the Sarona case cited by petitioner i.e., that a complaint for unlawful detainer should allege when and how entry on the land was made by the defendant, finds no application to the case at bar. In Sarona, the main issue was the timeliness of the filing of the complaint before the MTC. In forcible entry cases, the prescriptive period is counted from the date of defendants actual entry on the land; in unlawful detainer, from the date of the last demand to vacate. Hence, to determine whether the case was filed on time, there was a necessity to ascertain whether the complaint was one for forcible entry or unlawful detainer. In light of these considerations, the Court ruled that since the main distinction between the two actions is when and how defendant entered the land, the determinative facts should be alleged in the complaint. Thus, in Sarona, the jurisdiction of the MTC over the complaint was never in issue for whether the complaint was one for forcible entry or unlawful detainer, the MTC had jurisdiction over it. The case at bar is different for at issue is the jurisdiction of the MTC over the unlawful detainer case for petitioner (defendant therein) asserts that the case is one for accion publiciana cognizable by the RTC. In the instant case, the timeliness of the filing of the complaint is not at issue as the dispossession of the property by the respondent has not lasted for more than one year. Thus, the ruling of the RTC that the length of time she was dispossessed of the property is almost 36 years, which made her cause of action beyond the ambit of unlawful detainer and became one for accion publiciana,[27] lacks legal and factual basis. Section 1, Rule 70 of the Rules of Court allows a plaintiff to bring an action in the proper inferior court for unlawful detainer within one year, after such unlawful withholding of possession, counted from the date of the last demand.[28] The records show that respondent sent the demand to vacate the property to the petitioners on January 24, 2004 and filed the complaint for unlawful detainer on June 9, 2004, which is well within the one-year period.

Having ruled that the MTC acquired jurisdiction over Civil Case No. 3582, it thus properly exercised its discretion in dismissing the complaint for unlawful detainer for failure of the respondent to prove tolerance by sufficient evidence. Consquently, Section 8 (2nd par.) of Rule 40 of the Rules of Court which ordains the Regional Trial Court not to dismiss the cases appealed to it from the metropolitan or municipal trial court which tried the same albeit without jurisdiction, but to decide the said case on the merits, finds no application here.

WHEREFORE, the petition is GRANTED. The June 12, 2008 Decision of the Court of Appeals in CA-G.R. SP No. 99736 ordering the Regional Trial Court of Guagua, Pampanga, Branch 50 to decide Special Civil Case No. G-06544, as well as its September 1, 2008 Resolution denying the Motion for Reconsideration, are REVERSED and SET

ASIDE. The October 23, 2006 Decision of the MTC of Guagua, Pampanga, Branch 2, dismissing the complaint for unlawful detainer for failure of respondent to show that petitioners possession of the subject property was by mere tolerance is REINSTATED and AFFIRMED.

SO ORDERED.

CONSUELO YNARES-SANTIAGO Associate Justice

THIRD DIVISION HERMINIO M. GUTIERREZ GUTIERREZ-MAYUGA, Petitioners, versus Promulgated: FLORA MENDOZA-PLAZA HERNANDEZ, Respondents. DECISION and PONCIANO December 4, 2009 and ELISA A. G.R. No. 185477

CHICO-NAZARIO, J.: This Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court assails the Amended Decision[2] dated 26 September 2008 of the Court of Appeals in CA-G.R. CV No. 89555, which recalled and set aside its earlier Decision[3] dated 2 June 2008. The prior Decision of the appellate court reversed the Decision [4] dated 15 June 2007 of the Regional Trial Court (RTC) ofTanauan City, Branch 83, in Civil Case No. 06-04-2929, which pronounced that herein respondents Flora Mendoza and Ponciano Hernandez (respondents) were the lawful owners of the property subject of this case. As culled from the records, the antecedents of the case are as follows:

Ignacio Mendoza is the common ascendant of the parties herein. Ignacio was first married to Juana Jaurigue, [5] to whom Dominador and Victoria were born. Petitioner Herminio M. Gutierrez (Herminio)[6] is the son of Victoria, and petitioner Elisa A. Gutierrez-Mayuga (Elisa) [7] is the daughter of Herminio. After the death of Juana in 1913, Ignacio married Ignacia Jaurigue, the younger sister of Juana. Out of this second marriage, five children were born, namely: Crisostomo, Flora, Felisa, Mercedes and Constancia. As aforesaid, respondent Flora Mendoza-Plaza (Flora) is the daughter of Ignacia, while respondent Ponciano Hernandez (Ponciano) is the son of Felisa. The parcel of land subject of this case (subject property) is an unregistered land located in Barangay Sta. Clara, Sto. Tomas, Batangas, containing an area of 446 square meters, more or less. On 25 March 1916, Ignacio acquired the subject property by way of purchase from Luis Custodio for P200.00, which sale was contained in a notarized document entitled Escritura Publica.[8] Thereafter, on 8 March 1940, Ignacio executed a deed of donation inter vivos,[9] whereby the subject property was donated to the children whom he begot with Ignacia, his second wife. Ignacia accepted the donation in the same instrument on behalf of her children. Dominador and Victoria were also signatories to the deed of donation inter vivos as instrumental witnesses. The deed was likewise duly notarized, but the same was not recorded in the Registry of Deeds. Subsequently, on 27 April 2006, respondents filed a Complaint for Accion Reivindicatoria, Publiciana and Quieting of Title against petitioners in the RTC of Tanauan City, which was docketed as Civil Case No. 06-042929. Respondents alleged that after the execution of the deed of donation inter vivos, the subject property was assigned to Flora and her sister Felisa, who then possessed and occupied the same as owners. Ponciano took over and exercised the rights of his mother Felisa after the latter died in 1988. On or about late January or early February of 2006, petitioners took possession of the southern portion of the subject property and constructed a house of strong materials therein, despite the vigorous objection and opposition of the respondents. As the parties were close relatives, respondents exerted efforts to compromise and amicably settle the case, but petitioners refused. Respondents prayed, inter alia, that they be declared the true and rightful owners of the subject land; petitioners be directed to demolish and remove the house of strong materials, which they built in bad faith; and petitioners be ordered to pay attorneys fees, expenses of litigation, damages and judicial costs. Petitioners accordingly denied the above material averments in their Answer, [10] asserting that Ignacio and his first wife, Juana, had been in possession of the subject property as early as 1900. After the death of Juana, Dominador, Victoria and Ignacio took over possession of the subject property. When Dominador and Victoria died in 1940 and 1943, respectively, their heirs, including petitioners, occupied and possessed the subject property openly, peacefully and publicly. Petitioners likewise disputed the genuineness and authenticity of the deed of donation inter vivos, considering that for more than 65 years the said document was not registered with the office of the Register of Deeds to cause its transfer to respondents. Respondents presence on and occupancy of a portion of the subject property were allegedly a mere tolerance on the part of petitioners. Thus, the title and rights of petitioners over the subject property were absolute and legal by virtue of succession.

On 15 June 2007, the RTC rendered its Decision in favor of respondents, the dispositive portion of which provides: WHEREFORE, judgment is rendered in favor of the [respondents] and against [petitioners]: 1. Pronouncing and confirming that the [respondents] are the lawful, true and rightful owners of the land described in paragraph 4 of the complaint [subject property], and hereby remove the cloud and quiet their title thereto: 2. Ordering the [petitioners] to refrain from disturbing in whatever manner the ownership and possession of the [respondents] over the land subject matter of this litigation; 3. Pronouncing [petitioners] to have lost the house of strong and concrete materials which they built in bad faith on the land of the [respondents] without right to indemnity, and ordering the [petitioners] to demolish and remove the said house from the [respondents] land within thirty (30) days from the date this judgment becomes final at their own expense and thereafter vacate and restore to the [respondents] possession of the portion of the land which the [petitioners] have occupied. 4. Ordering the [petitioners] to pay [respondent] Ponciano Hernandez the sum of P50,000.00 for moral damages, and another sum ofP20,000.00 to both [respondents] for attorneys fees. 5. Plus the costs assessed against the [petitioners]. [11] Principally, the RTC relied on the deed of donation inter vivos in awarding the subject property to respondents. The same was properly identified and described in the testimony of Mercedes Mendoza, one of the daughters of Ignacio by his second marriage. The deed was also a notarized document, which was executed with all the formal requirements of the law. Thus, the recitals contained therein were presumed to be true and authentic, which presumption the petitioners failed to overcome with clear, convincing, overwhelming and more than merely preponderant evidence. The RTC also ruled that the deed of donation inter vivoswas an ancient document,[12] having been executed on 8 March 1940 and being clearly more than thirty (30) years old. The deed was in the proper custody of respondent Ponciano who acquired the same from his mother Felisa, before the latters death. On its face, the deed was free from any alterations, interlineations, or erasures of a material character, or any circumstance that may generate suspicion of its authenticity. The certificate of the Clerk of Court of Batangas City offered by petitioners, stating that the office had no available records/documents notarized by the notary public who signed the deed of donation inter vivos, did not rule out the authenticity of the said deed. It did not follow that the deed was also inexistent in another government depositories of ancient documents. Moreover, the RTC declared petitioners to be in bad faith in building a house of strong materials on a portion of the subject property. The respondents strongly opposed the construction from the start, given that the occupation and possession by the petitioners were merely tolerated. Petitioners filed an appeal with the Court of Appeals, which was docketed as CA-G.R. CV No. 89555. On 2 June 2008, the Court of Appeals promulgated a Decision, reversing the ruling of the RTC, ratiocinating in this wise: It is undisputed that the subject property is an unregistered land over which both parties, who are descendants of Ignacio Mendoza, claim ownership. [Respondents] claim ownership by virtue of a donation inter vivos, allegedly executed in 1940 by Ignacio in favor of Ignacia, and possession thereof. On the other hand, [petitioners] claim that they are owners of a portion of the property by acquisitive possession. Both parties presented receipts proving that they have been paying realty taxes on the property. Thus, the controversy boils down to the examination of the evidence presented.

The RTC herein relied heavily on the donation inter vivos, Exh. B dated March 8, 1940, allegedly executed by Ignacio Mendoza in favor of [his children with his second wife Ignacia], which was acknowledged by Ignacia in the same instrument x x x. Reliance on Exh. B, however, is flawed. It must be noted that the property subject of controversy is an unregistered land, and the parties therein are [the children of Ignacio with his second wife] and Ignacio Mendoza. [Petitioners] are strangers to the instrument. Thus, while Exh. B is valid between Ignacio Mendoza and [respondents], the same cannot affect third parties such as [petitioners], unless the same is registered in the manner provided under Section 194 of Act No. 2711, effective March 10, 1917, as amended by Act No. 2837 and later by Act No. 3344, which states: Sec. 194. Recording of instruments or deeds relating to real estate not registered under Act Numbered Four Hundred and Ninety-Six or under the Spanish Mortgage Law. No instrument or deed establishing, transmitting, acknowledging, modifying or extinguishing rights with respect to real estate not registered under the provisions of Act Numbered Four Hundred and Ninety-Six entitled The Land Registration Act, and its amendments, or under the Spanish Mortgage Law, shall be valid, except as between the parties thereto, until such instrument or deed has been registered x x x in the office of the register of deeds for the province or city where the real estate lies. The above provision of the law has been reiterated in Section 113 of Presidential Decree No. 1529, as amended, which states:

Sec. 113. Recording of instruments relating to unregistered lands. No deed, conveyance, mortgage, lease or other voluntary instrument affecting land not registered under the Torrens system shall be valid, except as between the parties thereto, unless such instrument shall have been recorded in the manner herein prescribed in the office of the Register of Deeds for the province or city where the land lies. A careful review of the records shows that Exh. B, purporting to be a deed of donation, was not registered at all. Apropos, the [petitioners], being third parties thereto, are not bound by the transmittal of rights from Ignacio Mendoza to the [respondents] x x x . Setting aside Exh. B, the pieces of evidence left are the tax declarations presented during the trial. However, it is an established jurisprudence that tax declarations and tax receipts are not conclusive evidence of ownership x x x. In the absence of actual public and adverse possession, the declaration of the land for tax purposes does not prove ownership x x x. Further examination of the tax declarations x x x show that both parties have been paying realty taxes thereon in the name of Ignacio Mendoza. Likewise, while the parties rely on the tax receipts and tax declarations coupled with the assertions of adverse possession, these do not indicate that they own the same because the property was not declared in their names. x x x.[13] (Emphases ours.) The Court of Appeals, thus, decreed: IN VIEW OF THE FOREGOING, the instant appeal is GRANTED. The Decision of the Regional Trial Court (RTC) dated June 15, 2007, promulgated by Branch 83, City of Tanuan, Batangas, in Civil Case No. 06-042929, is hereby REVERSED and SET ASIDE, and a new one entered DISMISSING the complaint in Civil Case No. 06-04-2929. No cost.[14]

Respondents forthwith filed a Motion for Reconsideration [15] on the above Decision, contending, inter alia, that where a party has knowledge of a prior existing interest which was unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him. The knowledge of Victoria, an instrumental witness to the deed of donation inter vivos, of the existing prior interest of the heirs of Ignacio by his second marriage is deemed in law to be knowledge of the petitioners. On 26 September 2008, the Court of Appeals promulgated an Amended Decision, [16] setting aside its earlier Decision, holding that: After a careful analysis of the circumstances of this case, We find merit in the arguments of the plaintiffappellees. To clarify, as a general rule, no deed, conveyance, mortgage, lease or other voluntary instrument affecting land not registered under the Torrens system shall be valid, except as between the parties thereto, unless such instrument shall have been recorded in the manner herein prescribed in the office of the Register of Deeds for the province or city where the land lies (Section 113, Presidential Decree No. 1529, as amended). This means that any instrument dealing with unregistered land shall not bind third persons, unless the instrument is registered in the Office of the Register of Deeds albeit valid as between the parties therein. As correctly pointed out by the [respondents], the law has exceptions. The conveyance shall not be valid against any person unless registered, except (1) the grantor, (2) his heirs and devisees, and (3) third persons having actual notice of knowledge thereof (Heirs of Eduardo Manlapat v. Court of Appeals, supra, p. 426, citing Pea, Registration of Land Titles and Deeds, 1994 ed. p. 28.)

Appropriately, the proper exception applicable in this case to bind the [petitioners] to the donation inter vivos should be under the second exception, that is, being heirs of Ignacio Mendoza. It should be stressed that the owner of the unregistered property is Ignacio Mendoza and that both parties are his successors. [Respondents] are his successors by his second marriage, while [petitioners] are his successors by his first marriage. Thus, being his heirs and successors, the [petitioners] must be bound for they are considered mere extension of the grantor (Pea, Registration of Land Titles and Deeds, p. 28). IN VIEW OF ALL THE FOREGOING, the instant motion for reconsideration is hereby GRANTED. This Courts Decision promulgated on June 2, 2008 is RECALLED AND SET ASIDE, and a new one entered AFFIRMING the Regional Trial Courts Decision dated June 15, 2007, in Civil Case No. 06-04-2929. No Cost. (Emphases ours.)

Petitioners filed a Motion for Reconsideration [17] and a Supplement to the Motion for Reconsideration, [18] but the Court of Appeals was not persuaded. On 21 November 2008, the appellate court issued a Resolution, [19] finding that: A careful review of the motion for reconsideration shows that the issues raised therein have been already been (sic) clarified in and by Our Amended Decision. As to the arguments raised in the Supplement, i.e., that the [petitioners] legitimes are prejudiced, the same must likewise be denied for having been raised for the first time at this stage of the appeal in a motion for reconsideration. In any case, the [petitioners] are not without recourse regarding their alleged prejudiced right to their legitimes.

IN VIEW OF THE FOREGOING, the instant motion for reconsideration and Supplement are DENIED. Petitioners filed the instant Petition for Review on Certiorari, imploring the Court to take another judicious look at their case, in their hope of securing a more favorable judgment. Petitioners insist on disputing the authenticity of the deed of donation inter vivos in favor of the children of Ignacio and his second wife, Ignacia. Not only was the deed belatedly introduced by Ponciano; the same is also fatally invalid in view of its non-registration as prescribed by law. Supposedly, the said deed is likewise inherently flawed substantively, because its provisions totally exclude petitioners from participating in the sharing of the property subject of the case, thereby impairing their legitimes. Furthermore, petitioners claim that they have occupied and possessed a portion of the subject property in their own right and in the concept of owners, thus acquiring the same by prescription, if not laches. We deny the petition. Petitioners seem to have overlooked the fact that the deed of donation inter vivos is a notarized document. According to Section 30, Rule 132 of the Rules of Court, every instrument duly acknowledged or proved and certified as provided by law, may be presented in evidence without further proof, the certificate of acknowledgment being a prima facie evidence of the execution of the instrument or document involved. A notarial document is evidence of the facts expressed therein.[20] A notarized document enjoys a prima facie presumption of authenticity and due execution. Clear and convincing evidence must be presented to overcome such legal presumption. [21] In the instant case, petitioners failed to adduce sufficient evidence to overcome the above presumption. The only evidence offered by petitioners to impugn the deed of donation inter vivos was the testimony[22] of petitioner Elisa, wherein she stated that the contents of the deed could not have been true, given that petitioners inherited the subject property from Victoria Mendoza, the daughter of Ignacio with his first wife Juana. Such testimony was utterly lacking. Furthermore, the Court finds nothing wrong and/or unusual in the fact that the deed of donation inter vivos was produced and made known to petitioners only in the early part of the year 2006 or more than sixty (60) years after its execution. Understandably, it was only when petitioners claimed ownership of a portion of the subject property that respondents were compelled to assert their own title to the property, which they traced to the deed of donation inter vivos The non-registration of the aforesaid deed does not also affect the validity thereof. Registration is not a requirement for validity of the contract as between the parties, for the effect of registration serves chiefly to bind third persons. The principal purpose of registration is merely to notify other persons not parties to a contract that a transaction involving the property has been entered into. [23] The conveyance of unregistered land shall not be valid against any person unless registered, except (1) the grantor, (2) his heirs and devisees, and (3) third persons having actual notice or knowledge thereof. As held by the Court of Appeals, petitioners are the heirs of Ignacio, the grantor of the subject property. Thus, they are bound by the provisions of the deed of donation inter vivos. Anent the argument that the donation inter vivos impaired the legitimes of petitioners, the Court deems it unnecessary to discuss the same. Said argument was indeed only raised for the first time on appeal to the Court of Appeals and in the Supplement to the Motion for Reconsideration of the appellate courts Amended Decision at that. Points of law, theories, issues, and arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by a reviewing court, as these cannot be raised for the first time at such late stage. Basic considerations of due process underlie this rule.[24] Petitioners claim of prescription in their favor likewise deserves scant consideration. Unlike respondents who can trace their title to the subject property by virtue of the deed of donation inter vivos, petitioners cannot adequately explain how they entered and possessed the subject property to become owners thereof. More importantly, petitioners cannot even rebut the testimony[25] of Mercedes Mendoza that she was present when Victoria entreated their father Ignacio to allow her (Victoria) to construct a house on a portion of the subject property. Ignacio gave permission to Victoria, but

only on the condition that she would have to leave when his children by his second marriage would need the property. Thus, the possession of the property by Victoria was only by virtue of the mere tolerance thereof by Ignacio and the children of his second marriage. As such, the alleged possession by petitioners, which they claim to trace to Victoria, was also by mere tolerance on the part of respondents. Prescription as a mode of acquisition requires the existence of the following: (1) capacity to acquire by prescription; (2) a thing capable of acquisition by prescription; (3) possession of the thing under certain conditions; and (4) lapse of time provided by law. Acquisitive prescription may either be ordinary, in which case the possession must be in good faith and with just title; or extraordinary, in which case there is neither good faith nor just title. In either case, there has to be possession, which must be in the concept of an owner, public, peaceful and uninterrupted. [26] As a corollary, Article 1119 of the Civil Code provides that: Art. 1119. Acts of possessory character executed in virtue of license or by mere tolerance of the owner shall not be available for the purposes of possession Acts of possessory character performed by one who holds by mere tolerance of the owner are clearly not en concepto de dueo, and such possessory acts, no matter how long so continued, do not start the running of the period of prescription. In light of the foregoing, petitioners cannot claim any better right to the subject property as against respondents. WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of Court is DENIED. The Amended Decision dated 26 September 2008 of the Court of Appeals in CA-G.R. CV No. 89555 is hereby AFFIRMED. No costs. SO ORDERED.

[G. R. No. 160800. October 12, 2004] LEE vs. TANCANGCO EN BANC Gentlemen: Quoted hereunder, for your information, is a resolution of this Court dated OCT 12 2004. G. R. No. 160800 (SALLY A. LEE vs. HON. COMMISSIONER LUZVIMINDA G. TANCANGCO.) Before us is a petition for indirect contempt filed on December 4, 2003 by Sally A. Lee (LEE) against Commission on Elections (COMELEC) Commissioner Luzviminda G. Tancangco. 1 The antecedents are as follows: Petitioner LEE was a candidate for mayor in Sorsogon City, Sorsogon, in the 2001 elections. During the canvassing, her opponent, Leovic Dioneda, objected to the inclusion of the election return for Precinct 28A2, Brgy. Bucalbucalan, Sorsogon City, on the grounds that it was incomplete on a material data and that it was prepared by persons other than the

members of the Board of Election Inspectors (BEI). The City Board of Canvassers (BOC), however, included the contested return and proclaimed petitioner LEE as duly-elected Mayor. Dioneda appealed to the COMELEC. The COMELEC Second Division reversed the BOC ruling and excluded the subject return. The exclusion was affirmed by the COMELEC en banc. As a consequence, petitioner LEE's proclamation was nullified and a new City BOC was ordered to be convened to prepare another Statement of Votes excluding the subject return, and to proclaim the winning candidate. Petitioner LEE assailed the ruling in a special civil action for certiorari filed with this Court, docketed as G.R. No. 157004,2 imputing grave abuse of discretion on the part of the COMELEC in excluding the election return for Precinct 28A2. She argued that even if the exclusion was valid, a recount should have been ordered first to avoid disenfranchisement of the voters in the precinct involved. We rendered our decision on July 4, 2003, the dispositive portion of which reads WHEREFORE, the COMELEC is x x x DIRECTED to determine x x x whether the integrity of the ballot box, the ballot-contents of which were tallied and reflected in the questioned return, is intact and, if in the affirmative and the integrity of the ballots is likewise intact, to order the Sorsogon City Board of Election Inspectors to recount the votes cast in Precinct No. 28A2 in Barangay Bucalbucalan, Sorsogon City and prepare a new return to serve as basis of canvass by said board; otherwise the ballot box should no longer be opened or the ballots should no longer be recounted as the case may be, in which case an order for the safekeeping of the ballot box should be issued. The Status Quo Ante Order issued on February 18, 2003 is hereby DISSOLVED. SO ORDERED.3 To implement the above Decision, the COMELEC issued an Order dated July 22, 2003 creating a new City BOC composed of COMELEC officials to determine the integrity of the subject ballot box. Petitioner, however, moved for reconsideration of our July 4, 2003 decision. On November 18, 2003, we denied petitioner's motion for reconsideration. Petitioner LEE thereupon filed a motion in the COMELEC en banc4 to amend its Order dated July 22, 2003 on the ground that it should be the BEI of the subject precinct, not the BOC, composed of COMELEC officials, that should conduct the determination-of-integrity proceedings. She further argued that no new proclamation can be made if no recount is conducted upon a finding of violation of integrity of the ballot box and/or ballots. On November 27, 2003, petitioner LEE received copy of an Order of the COMELEC which recalled its earlier designation of the new City BOC, composed of COMELEC officials. The Order also designated Commissioner Tancangco to conduct the determination-ofintegrity proceedings. At the same time, COMELEC approved and adopted her findings that the integrity of the ballot box was no longer intact and that its contents appeared to have been the subject of manipulation and tampering. Petitioner LEE objected again to the November 27, 2003 Order on the ground that her motion dated November 24, 2003 had not yet been acted upon. She asked that the motion and its incidents, as well as her "Motion to Inhibit Hon. Commissioner Luzviminda G. Tancangco," be set for hearing. No hearing was ordered by the COMELEC. On December 4, 2003, petitioner LEE filed the present contempt proceedings alleging that respondent Tancangco is guilty of indirect contempt for determining the integrity of the subject ballot box (1) before the finality of the Court's decision in G.R. No. 157004, (2) without notice to the parties and in their absence; and, (3) for opening the ballot box despite the finding that its integrity was no longer intact. We find no merit in the petition. Contempts are punished as offenses against the administration of justice and the offense of violating a judicial order is punishable by the court which is charged with its enforcement, regardless of the court which may have made the order.5 In the case at bar, we tasked the COMELEC en banc to enforce our decision of July 4, 2003. Thus, any alleged irregularity that may have been committed by respondent in the enforcement of our decision should be addressed to the COMELEC, including those which may constitute contemptuous acts.

Petitioner's contention that respondent Commissioner implemented our decision despite its non-finality, lacks merit. We denied petitioner's motion for reconsideration in our Resolution dated November 18, 2003, copy of which was received by petitioner on November 21, 2003.6 Respondent, on the other hand, alleged that the COMELEC received notice on November 20, 2003.7 Clearly then, the determination-of-integrity proceedings on November 24, 2003 was conducted after the parties received notice of our resolution denying petitioner's motion for reconsideration and after finality of our decision. IN VIEW WHEREOF, the petition is dismissed. Morales, Azcuna and Chico-Nazario, JJ., on leave. Very truly yours, (Sgd.) LUZVIMINDA D. PUNO Clerk of Court

Republic of the Philippines Supreme Court Manila ECISION ARSENIO OLEGARIO and HEIRS OF ARISTOTELES F. OLEGARIO, represented by CARMELITA GUZMANOLEGARIO, Petitioners, G.R. No. 147951

- versus -

DEL CASTILLO, J.: Possession, to constitute the foundation of acquisitive prescription, must be possession under a claim of title or must be adverse. Acts of a possessory character performed by one who holds the property by mere tolerance of the owner are clearly not in the concept of an owner and such possessory acts, no matter how long continued, do not start the running of the period of prescription. In the present Petition for Review on Certiorari,[1] petitioners assail the April 18, 2001 Decision[2] of the Court of Appeals (CA) in CA-G.R. CV No. 52124, reversing the October 13, 1995 Decision [3] of the Regional Trial Court (RTC) of Pangasinan, Branch 39. The CA declared the respondent herein as the owner of Lot Nos. 17553, 17526 and 14356 of the Mangatarem cadastral survey. Factual antecedents As early as 1916,[4] Juan Mari, the father of respondent, declared his ownership over a parcel of land in Nancasalan, Mangatarem for tax purposes. He took possession of the same by delineating the limits with a bamboo fence,[5] planting various fruit bearing trees and bamboos[6] and constructing a house thereon.[7] After a survey made in 1950, Tax Declaration No. 8048 [8]for the year 1951 specified the subject realty as a residential land with an area of 897 square meters and as having the following boundaries: North Magdalena Fernandez; South - Catalina Cacayorin; East - Camino Vecinal; and West - Norberto Bugarin. In 1974, the subject realty was transferred to respondent, Pedro Mari, by virtue of a deed of sale. Meanwhile, in 1947, Wenceslao Olegario, the husband of Magdalena Fernandez and father of petitioner Arsenio Olegario, filed a new tax declaration [9] for a certain 50-square meter parcel of land, indicating the following boundaries: North - Cesario and Antonio Fernandez; South - Juan Mari; East - Barrio Road; and West Norberto Bugarin. Then on May 14, 1961, Wenceslao Olegario executed a "Deed of Quit-Claim of Unregistered Property" [10] in favor of Arsenio Olegario transferring to the latter inter alia the aforementioned 50-square meter property. In the cadastral survey conducted from 1961 to 1962, the subject realty was identified as Lot Nos. 17526, 17553 and 14356 of the Mangatarem Cadastre. At this time, Wenceslao Olegario disputed Juan Maris claim over Lot Nos. 17526 and 17553. Hence, on the two corresponding survey notification cards dated September 28, 1968,[11] the claimant appeared as "Juan Mari v. Wenceslao Olegario". With regard to Lot No. 14356, the survey notification card named Juan Mari as the claimant Sometime around 1988, respondent filed with the Department of Environment and Natural Resources Regional Office in Pangasinan a protest against the petitioners because of their encroachment into the disputed realty. After investigation, said office decided in favor of the respondent and found the latter to be the owner of Lot Nos. 17526, 17553 and 14356. Petitioners did not appeal and the said decision became final and executory. In 1989, Arsenio Olegario caused the amendment of his tax declaration [12] for the 50-square meter property to reflect 1) an increased area of 341 square meters; 2) the Cadastral Lot No. as 17526, Pls-768-D;[13] and 3) the boundaries as: NorthNE Lot 16385 & Road; South-NW-Lots 14363 & 6385, Pls-768-D; East-SE-Lot 17552, Pls-768-D and West-SW-Lot 14358, Pls768-D. Proceedings before the Regional Trial Court.. In 1990, after discovering the amended entries in Arsenio Olegario's Tax Declaration No. 4107-R, respondent filed a complaint [14] with the RTC of Lingayen, Pangasinan, for Recovery of Possession and Annulment of Tax Declaration No. 4107-R. Respondent alleged, inter alia, that Juan Mari, and subsequently his successor, was deprived by the Olegarios of the possession of portions of subject realty which respondent owned. Trial thereafter ensued. On October 13, 1995, the RTC rendered judgment in favor of the petitioners, viz: WHEREFORE, in the light of the foregoing considerations, judgment is hereby rendered as foll 1. Declaring the defendants-Olegario the owners of Lots 17553 and 17526 of the Mangatarem cadastral surve

2. Dismissing the plaintiff's Complaint on the ground of prescription of action and on the further ground that [he] failed to prove [his] ownership of any portion of the two lots mentioned in the next preceding paragraph (assuming arguendo that [his] action has not prescribed); 3. Ordering the plaintiff to pay the costs of this suit. No damages are awarded by the Court. Proceedings before the Court of Appeals Respondent appealed to the CA which reversed the trial court's findings. The CA found respondent to have adduced stronger evidence of prior possession and ownership of the disputed realty. The dispositive portion of the CA Decision states: WHEREFORE, the trial court's Decision dated October 13, 1995 is REVERSED and SET ASIDE and a new one is hereby entered declaring appellant Pedro C. Mari represented by Lilia C. Mari-Camba the lawful owner of Lot Nos. 17526, 17553 and 14356 of the Mangatarem Cadastre, without pronouncement as to costs. Petitioners, without filing a motion for reconsideration of the CA Decision, thereafter filed the present petition for review. Issues. Petitioners raise the following issues: 1. Whether or not there was failure on [the part of] the Court of Appeals to appreciate and give weight to the evidence presented by the petitioners; 2. Whether or not the Court of Appeals erred in its decision in adjudicating ownership of the said lots in favor of the respondent and [in] giving great weight to the respondents evidence; 3. Whether or not the Court of Appeals erred in its failure to declare the action as barred by laches; 4. Whether or not the Court of Appeals failed to find an[d] declare the petitioners as having acquired ownership of the disputed lots by acquisitive prescription; 5. Whether or not the Court of Appeals erred in adjudicating the lot in favor of respondent and also [in] denying award of damages to petitioners.[17] Petitioners' Arguments. Petitioners contend that they have been in possession of the disputed lots since 1948 or thereabouts, or for more than 30 years already. Hence, they acquired ownership thereover by virtue of prescription. They also impute negligence or failure on the part of respondent to assert his alleged rights within a reasonable time. Respondent's Arguments. On the other hand, respondent asserts that petitioners claim ownership over only a certain 50-square meter parcel of land, as evidenced by their tax declaration which consistently declared only such area. It was only in September 1989 that petitioners sought to expand the area of their claim to 341 square meters by virtue of a letter to the Provincial Assessor of Pangasinan. Hence, respondent asserts that prescription has not set in. Respondent also contends that petitioners' occupancy has been illegal from the point of inception and thus, such possession can never ripen into a legal status. Our Ruling. The petition has no merit. Petitioners' Evidence is Weak Considering the conflicting findings of the RTC and the CA, a circumstance that constitutes an exception[18] to the general rule that only questions of law are proper subjects of a petition under Rule 45, we shall assess and weigh the evidence adduced by the parties and shall resolve the questions of fact raised by petitioners. A study of the evidence presented by petitioners shows that the CA did not err in finding such evidence weaker than that of respondent. Arsenio Olegario testified that as early as 1937 their family had built a nipa house on the land where they lived. Yet he also testified that the former owner of the land was his mother, Magdalena Fernandez.[19] Significantly, Magdalena Fernandez has never claimed and was never in possession or ownership of Lot Nos. 17553, 17526 and 14356. Petitioners evidence thus supports the conclusion that in 1937 they were in possession, not of Lot No. 17526, but of their mothers land, possibly 50 square meters of it, which is the approximate floor area of the house. Conversely, petitioners' evidence fails to clearly prove that in 1937 they were already occupying the disputed lots. The records, in fact, do not show exactly when the Olegarios entered and started occupying the disputed lots. The evidence shows that a hollow block fence, an improvement introduced by the Olegarios in 1965, now exists somewhere along the disputed lots. Petitioners' claim that they were in possession of the disputed lots even prior to 1965 based on the existence of the bamboo fence on the boundary of their land preceding the existence of the hollow block fence, however, holds no water. The

testimony of Marcelino Gutierrez shows that formerly there was a bamboo fence demarcating between the land of the Olegarios and the Maris and that in 1964 or 1965 a hollow block fence was constructed. He did not say, however, that the place where the hollow block fence was constructed was the exact same place where the bamboo boundary fence once stood. Even the testimony of Arsenio Olegario was ambiguous on this matter, viz: Q A Q A When was the [concrete] hollow block [fence] separating your property [from] the property of Juan Mari constructed? It was constructed in 1965. Before the construction of that concrete hollow block fence between your land and the land of Juan Mari [in] 1965, what was the visible boundary between your land and the land of Juan Mari? Bamboo fence, sir.[20]

Arsenio merely testified that a bamboo fence was formerly the visible boundary between his land and the land of Juan Mari; and that a concrete hollow block fence was constructed in 1965. His testimony failed to show that the concrete hollow block fence was constructed in the same position where the bamboo boundary fence once stood. On the other hand, there is ample evidence on record, embodied in Tax Declaration No. 9404 for the year 1947; the survey sketch plan of 1961; and the survey plan of 1992, that the boundary claimed by the Olegarios kept moving in such a way that the portion they occupied expanded from 50 square meters (in the land of his mother) to 377 square meters. [21] Viewed in relation to the entire body of evidence presented by the parties in this case, these documents cannot plausibly all be mistaken in the areas specified therein. As against the bare claim of Arsenio[22] that his predecessor merely made an inaccurate estimate in providing 50 square meters as the area claimed by the latter in 1947 in the tax declaration,[23] we find it more plausible to believe that each of the documents on record stated the true area measurements of the parties' claims at the particular time each document was executed. As correctly found by the CA, the earliest that petitioners can be considered to have occupied the disputed property was in 1965 when the concrete hollow block fence was constructed on the disputed lots. Ownership and Prescription As previously mentioned, respondent's predecessor, Juan Mari, had declared the disputed realty [24] for tax purposes as early as 1916. The tax declarations show that he had a two storey house on the realty. He also planted fruit bearing trees and bamboos thereon. The records[25] also show that the 897-square meter property had a bamboo fence along its perimeter. All these circumstances clearly show that Juan Mari was in possession of subject realty in the concept of owner, publicly and peacefully since 1916 or long before petitioners entered the disputed realty sometime in 1965. Based on Article 538 of the Civil Code,[26] the respondent is the preferred possessor because, benefiting from his father's tax declaration of the subject realty since 1916, he has been in possession thereof for a longer period. On the other hand, petitioners acquired joint possession only sometime in 1965. Despite 25 years of occupying the disputed lots, therefore, petitioners did not acquire ownership. Firstly, they had no just title. Petitioners did not present any document to show how the titles over Lot Nos. 17526 and 17533 were transferred to them, whether from respondent, his predecessor, or any other person.[27] Petitioners, therefore, could not acquire the disputed real property by ordinary prescription through possession for 10 years. Secondly, it is settled that ownership cannot be acquired by mere occupation. Unless coupled with the element of hostility towards the true owner, occupation and use, however long, will not confer title by prescription or adverse possession.[28] In other words, possession, to constitute the foundation of a prescriptive right, must be possession under claim of title, that is, it must be adverse.[29] Petitioners' acts of a possessory character - acts that might have been merely tolerated by the owner - did not constitute possession. No matter how long tolerated possession is continued, it does not start the running of the prescriptive period. [30] Mere material possession of land is not adverse possession as against the owner and is insufficient to vest title, unless such possession is

accompanied by the intent to possess as an owner. There should be a hostile use of such a nature and exercised under such circumstance as to manifest and give notice that the possession is under a claim of right. [31]Petitioners have failed to prove that their possession was adverse or under claim of title or right. Unlike respondent, petitioners did not have either the courage or forthrightness to publicly declare the disputed lots as owned by them for tax purposes. Tax declarations "prove that the holder has a claim of title over the property. Aside from manifesting a sincere desire to obtain title thereto, they announce the holder's adverse claim against the state and other interested parties".[32] Petitioners' omission, when viewed in conjunction with respondent's continued unequivocal declaration of ownership over, payment of taxes on and possession of the subject realty, shows a lack of sufficient adverseness of the formers possession to qualify as being one in the concept of owner. The only instance petitioners assumed a legal position sufficiently adverse to respondent's ownership of the disputed properties was when they declared Lot No. 17526 for tax purposes in their name in 1989.[33] Since then and until the filing of the complaint for recovery of possession in 1990, only one year had elapsed. Hence, petitioners never acquired ownership through extraordinary prescription of the subject realty. On the other hand, being the sole transferree of his father, respondent showed through his tax declarations which were coupled with possessory acts that he, through his predecessor, had been in possession of the land for more than 30 years since 1916. "Open, exclusive and undisputed possession of alienable public land for the period prescribed by law creates the legal fiction whereby the land, upon completion of the requisite period - ipso jure and without the need of judicial or other sanction, ceases to be public land and becomes private property."[34] Ownership of immovable property is acquired by extraordinary prescription through possession for 30 years.[35] For purposes of deciding the instant case, therefore, the possession by respondent and his predecessor had already ripened into ownership of the subject realty by virtue of prescription as early as 1946. Laches Petitioners cannot find refuge in the principle of laches. It is not just the lapse of time or delay that constitutes laches. The essence of laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which, through due diligence, could or should have been done earlier, thus giving rise to a presumption that the party entitled to assert it had earlier abandoned or declined to assert it.. The essential elements of laches are: (a) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation complained of; (b) delay in asserting complainant's rights after he had knowledge of defendant's acts and after he has had the opportunity to sue; (c) lack of knowledge or notice by defendant that the complainant will assert the right on which he bases his suit and (d) injury or prejudice to the defendant in the event the relief is accorded to the complainant. [36] In the instant case, the second and third elements are missing. Petitioners had notice and knew all along the position of the respondent and his predecessor Juan Mari - they were standing pat on his ownership over the subject realty. This stand of respondent and his predecessor was recorded and clearly visible from the notification survey cards.[37] From 1968, the date of the cards, until 1989 there was nothing to indicate any change in the position of any of the parties. Moreover, that respondent had not conceded ownership and possession of the land to petitioners is clear also from the fact that Pedro Mari continued to declare the entire 897-square meter property in his name and pay taxes for the entire area after his father transferred the property to him. On the other hand, it was petitioners who suddenly changed their position in 1989 by changing the area of the property declared in their name from 50 square meters to 341 square meters and specifying the details to make it appear that the tax declaration for the 50-square meter property pertained to Lot No. 17526. As previously discussed, it was only at this point, in 1989, that it can be clearly stated that petitioners were making their claim of ownership public and unequivocal and converting their possession over Lot No. 17526 into one in the concept of owner.

Upon discovery of this clear and unequivocal change in status of petitioners position over the disputed land respondent immediately acted. He filed in 1990 the complaint for recovery of possession and nullification of tax declaration. Hence, we find no laches in the instant case. In conclusion, we find no reversible error on the part of the CA in recognizing the ownership and right of possession of respondent over Lot Nos. 17526, 17553 and 14356. There is, thus, also no basis for an award of damages and attorneys fees in favor of petitioners. WHEREFORE, the instant petition is DENIED. The assailed Decision of the Court of Appeals dated April 18, 2001 is AFFIRMED. SO ORDERED.

MARIANO C. DEL CASTILLO Associate Justice THIRD DIVISION PRIVATIZATION AND MANAGEMENT OFFICE,

Petitioner, - versus LEGASPI TOWERS 300, INC., Respondent.

DECISION

PERALTA, J.: This is a petition for review on certiorari seeking to annul and set aside the Decision [1] dated February 16, 2001, of the Court of Appeals (CA) in CA-G.R. CV No. 48984, affirming the Decision of the Regional Trial Court (RTC). The factual and procedural antecedents are as follows: Caruff Development Corporation owned several parcels of land along the stretch of Roxas

Boulevard, Manila. Among them were contiguous lots covered by Transfer Certificate of Title (TCT) Nos. 120311, 120312, 120313, and 127649 (now TCT No. 200760).Sometime in December 1975, Caruff obtained a loan from the Philippine National Bank (PNB) to finance the construction of a 21-storey condominium along Roxas Boulevard.[2] The loan accommodation was secured by a real estate mortgage over three (3) parcels of land covered by TCT Nos. 120311, 120312, and 120313,[3] where Caruff planned to erect the condominium.In 1979, Caruff started constructing a multi-storey building on the mortgaged parcels of land. Along with the other appurtenances of the building constructed by Caruff, it built a powerhouse (generating set) and two sump pumps in the adjacent lot covered by TCT No. 127649 (now TCT No. 200760).After the completion of the condominium project, it was constituted pursuant to the Condominium Act (Republic Act No. 4726), as the Legaspi Towers 300, Inc.However, for Caruffs failure to pay its loan with PNB, the latter foreclosed the mortgage and acquired some of the properties of Caruff at the sheriffs auction sale held on January 30, 1985.[4] Thereafter, Proclamation No. 50[5] was issued. It was aimed to promote privatization for the prompt disposition of the large number of non-performing assets of the government financial institutions, and certain government-owned and controlled corporations, which have been found unnecessary or inappropriate for the government sector to maintain. It also provided for the creation of the Asset Privatization Trust (APT).By virtue of Administrative Order No. 14 and the Deed of Transfer executed by PNB, the National Government, thru the APT, became the assignee and transferee of all its rights and titles to and interests in its receivables with Caruff, including the properties it acquired from the foreclosure Caruffs mortgage.Meanwhile, Caruff filed a case against PNB before the RTC of Manila, Branch 2, whereby Caruff sought the nullification of PNBs foreclosure of its properties. [6] The case was docketed as Civil Case No. 85-29512. A Compromise Agreement[7] dated August 31, 1988 was later entered into by Caruff, PNB, and the National Government thru APT. The parties agreed, among other things, that Caruff would transfer and convey in favor of the National Government, thru the APT, the lot covered by TCT No. 127649 (now TCT No. 200760), where it built the generating set and sump pumps.On September 9, 1988, the RTC rendered a Decision approving the Compromise

Agreement executed and submitted by the parties. The dispositive portion of said Decision reads:x x x and finding the foregoing compromise agreement to be well-taken, the Court hereby approves the same and renders judgment in accordance with the terms and conditions set forth [sic] therein and enjoins the parties to comply strictly therewith.SO ORDERED.[8] Thus, by virtue of the Decision, the subject property was among those properties that were conveyed by Caruff to PNB and the National Government thru APT.July 5, 1989, respondent filed a case for Declaration of the existence of an easement before the RTC of Manila, docketed as Spec. Proc. No. 89-49563. Respondent alleged that the act of Caruff of constructing the powerhouse and sump pumps on its property constituted a voluntary easement in favor of the respondent. It prayed, among other things, that judgment be rendered declaring the existence of an easement over the portion of the property covered by TCT No. 127649 (now TCT No. 200760) that was being occupied by the powerhouse and the sump pumps in its favor, and that the Register of Deeds of Manila annotate the easement at the back of said certificate of title. [9] In its Answer with Counterclaim and Cross-claim, [10] APT alleged that respondent had no cause of action against it, because it was but a mere transferee of the land. It acquired absolute ownership thereof by virtue of the Compromise Agreement in Civil Case No. 85-2952, free from any liens and/or encumbrances. It was not a privy to any transaction or agreement entered into by and between Caruff, respondent, and the bank. It further alleged that the continued use of the subject property by respondent and the condominium owners without its consent was an encroachment upon its rights as absolute owner and for which it should be properly compensated.On January 12, 1995, after trial on the merits, the RTC rendered a Decision[11] declaring the existence of an easement over the portion of the land covered by TCT No. 127649 (TCT No. 200760), the decretal portion of which reads:WHEREFORE, judgment is hereby rendered in favor of the petitioner and against the respondents hereby declaring the existence of an easement over the portion of land covered by TCT No. 200760 (previously No. 127649) occupied at present [by the] powerhouse and sump pumps nos. 1 and 2 only, of Legaspi Towers 300, in favor of Legaspi Towers 300, Incorporated. The Register of Deeds of Manila is, likewise, hereby directed to annotate this easement at the back of the said certificate of title. The counterclaim and cross-claim are dismissed accordingly.SO ORDERED. Aggrieved, APT sought recourse before the CA in CA-G.R. CV No. 48984. Subsequently, the term of existence of APT expired and, pursuant to Section 2, Article III of Executive Order No. 323, the powers, functions, duties and responsibilities of APT, as well as all the properties, real or personal assets, equipments and records held by it and its obligations and liabilities that were incurred, was transferred to petitioner Privatization and Management Office (PMO). Thus, the PMO substituted APT in its appeal.On February 16, 2001, finding no reversible error on the part of the RTC, the CA rendered a Decision[12] affirming the decision appealed from. PMO filed a Motion for Reconsideration, but it was denied in the Resolution[13] dated May 3, 2001. Hence, the present petition assigning the following errors: THE PUBLIC RESPONDENT COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE COURT A QUO IN FINDING THAT [THE] PRESENCE OF THE GENERATOR SET (GENERATING SET) AND SUMP PUMPS CONSTITUES AN EASEMENT. THE PUBLIC RESPONDENT COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE COURT A QUO IN DECLARING THE EXISTENCE OF AN EASEMENT OVER THE PORTION OF LAND COVERED BY TCT NO. [200760] OCCUPIED BY THE GENERATOR SET AND SUMP PUMPS NOS. 1 AND 2, PURSUANT TO ARTICLE 688 OF THE CIVIL CODE. THE PUBLIC RESPONDENT COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE COURT A QUO IN NOT REQUIRING THE RESPONDENT-PETITIONER TO PAY ANY COMPENSATION TO PETITIONER, THE OWNER OF THE LAND, FOR THE USE OF ITS PROPERTY. [14] Petitioner argues that the presence of the generator set and sump pumps does not constitute an easement. They are mere improvements and/or appurtenances complementing the condominium complex, which has not attained the character of immovability. They were placed on the subject property as accessories or improvements for the general use and comfort of the occupants of the condominium complex.Petitioner maintains that, as the generator set and sump pumps are improvements of the condominium, the same should have been removed after Caruff undertook to deliver the subject property free from any liens and encumbrances by virtue of the Decision of the RTC in Civil Case No. 85-29512 approving the parties Compromise Agreement. It adds that, in alienating the property in favor of APT/PMO, Caruff could not have intended to include as encumbrance the voluntary easement. Petitioner posits that respondent failed to present any evidence to prove the existence of the necessary requisites for the establishment of an easement. There is no concrete evidence to show that Caruff had

a clear and unequivocal intention to establish the placing of the generator set and sump pumps on the subject property as an easement in favor of respondent.Lastly, petitioner contends that respondent is a squatter for having encroached on the formers property without its consent and without paying any rent or indemnity. Petitioner submits that respondents presence on the subject property is an encroachment on ownership and, thus, cannot be properly considered an easement. It adds that an easement merely produces a limitation on ownership, but the general right of ownership of the servient tenement must not be impaired so as to amount to a taking of property. When the benefit being imposed is so great as to impair usefulness of the servient estate, it would amount to a cancellation of the rights of the latter. Petitioner insists that, for having unjustly enriched itself at the expense of the National Government and for encroaching on the latters rights as the absolute owner, respondent should rightfully compensate the National Government for the use of the subject property which dates back to August 28, 1989 up to the present. For its part, respondent argues that it was the intention of Caruff to have a voluntary easement in the subject property and for it to remain as such even after the property was subsequently assigned to APT. It was Caruff who constructed the generating set and sump pumps on its adjacent property for the use and benefit of the condominium adjoining it. Also, the manner in which the sump pumps were installed is permanent in nature, since their removal and transfer to another location would render the same worthless and would cut off the supply of electricity and water to the condominium and its owners.Respondent maintains that petitioner cannot assume that Caruff intended to renounce the voluntary easement over the subject property by virtue of the Compromise Agreement, since such defense can only be presented by Caruff and not the petitioner. It added that petitioner had actual notice of the presence of the generating set and sump pumps when they were negotiating with Caruff regarding the compromise agreement and at the time the subject property was transferred to petitioner. Also, petitioner cannot claim the payment of rent, considering that there was no written demand for respondent to pay rent or indemnity. Respondent submits that the mandate of petitioner to privatize or dispose of the non-performing assets transferred to it does not conflict with the issue of the declaration of the easement over the subject property, considering that petitioner is not prevented from privatizing the same despite the presence of the voluntary easement. The petition is meritorious. An easement or servitude is a real right constituted on anothers property, corporeal and immovable, by virtue of which the owner of the same has to abstain from doing or to allow somebody else to do something on his property for the benefit of another thing or person. [15] The statutory basis of this right is Article 613 of the Civil Code, which provides: Art. 613. An easement or servitude is an encumbrance imposed upon an immovable for the benefit of another immovable belonging to a different owner. The immovable in favor of which the easement is established is called the dominant estate; that which is subject thereto, the servient estate. There are two sources of easements: by law or by the will of the owners. Article 619 of the Civil Code states: Art. 619. Easements are established either by law or by the will of the owners. The former are called legal and the latter voluntary easements. In the present case, neither type of easement was constituted over the subject property.In its allegations, respondent claims that Caruff constituted a voluntary easement when it constructed the generating set and sump pumps over the disputed portion of the subject property for its benefit. However, it should be noted that when the appurtenances were constructed on the subject property, the lands where the condominium was being erected and the subject property where the generating set and sump pumps were constructed belonged to Caruff. Therefore, Article 613 of the Civil Code does not apply, since no true easement was constituted or existed, because both properties were owned by Caruff.Also, Article 624 of the Civil Code is controlling, as it contemplates a situation where there exists an apparent sign of easement between two estates established or maintained by the owner of both. The law provides: Art. 624. The existence of an apparent sign of easement between two estates, established or maintained by the owner of both, shall be considered, should either of them be alienated, as a title in order that the easement may continue actively and passively, unless, at the time the ownership of the two estates is divided, the contrary should be provided in the title of conveyance of either of them , or the sign aforesaid should be removed before the execution of the deed. This provision shall also apply in case of the division of a thing owned in common by two or more persons. [16] From the foregoing, it can be inferred that when the owner of two properties alienates one of them and an apparent sign of easement exists between the two estates, entitlement to it continues, unless there is a contrary agreement, or the indication that the easement exists is removed before the execution of the deed.

In relation thereto, the Compromise Agreement, as approved by the court, clearly states, among other things, that: 2.0 That in consideration of the covenants hereunder stipulated, plaintiff [Caruff] Development Corporation (CDC), hereby terminates the instant case against defendants Philippine National Bank (PNB) and the National Government/APT, and hereby: 2.1 Assigns, transfers and conveys in favor of defendant National government thru APT, CDCs rights, title and interest in the Maytubig property, situated at the back of the Legaspi Towers 300 Condominium, consisting of seven (7) contiguous lots with an aggregate area of 1,504.90 square meters, covered by the following Transfer Certificate of Title, viz: TCT No. 23663 Pasay City Registry; TCT No. 142497 Metro Manila 1 Registry; TCT No. 142141 Metro Manila 1 Registry; TCT No. 127649 Metro Manila 1 Registry ; x x x; all titles, free from any and all liens and encumbrances, to be delivered, and the necessary papers and documents to be turned over/executed to effect transfer in favor of the National Government/APT, upon approval of this Compromise Agreement; Thus, when the subject property was assigned to the National Government thru the APT, no easement arose or was voluntarily created from the transfer of ownership, considering that the parties, more particularly, Caruff, pledged that it was assigning, transferring, and conveying the subject property in favor of the National Government thru the APT free from any and all liens and encumbrances.Compromise agreements are contracts, whereby the parties undertake reciprocal obligations to resolve their differences, thus, avoiding litigation, or put an end to one already commenced. [18] As a contract, when the terms of the agreement are clear and explicit that they do not justify an attempt to read into it any alleged intention of the parties; the terms are to be understood literally, just as they appear on the face of the contract. [19] Considering that Caruff never intended to transfer the subject property to PMO, burdened by the generating set and sump pumps, respondent should remove them from the subject property. As regards PMOs claim for rent, respondent has been enjoying the use of the subject property for free from the time the rights over the property were transferred and conveyed by Caruff to the National Government. We have held that [t]here is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience. Article 22 of the Civil Code provides that [e]very person who, through an act or performance by another, or any other means, acquires or comes into possession of something at the expense of the latter, without just or legal ground, shall return the same to him. The principle of unjust enrichment under Article 22 of the Civil Code requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such benefit is derived at anothers expense or damage. [20] In the present case, there is no dispute as to who owns the subject property and as to the fact that the National Government has been deprived of the use thereof for almost two decades. Thus, it is but just and proper that respondent should pay reasonable rent for the portion of the subject property occupied by the generating set and sump pumps, from the time respondent deprived the lawful owner of the use thereof up to the present. To rule otherwise would be unjust enrichment on the part of respondent at the expense of the Government. From the records, APT/PMO submitted, as part of its evidence, a letter [21] dated June 18, 1992, wherein it fixed the monthly rental fee per square meter of the entire property at P56.25, or P1.81 per square meter per day. Hence, respondent should pay the National Government reasonable rent in the amount of P56.25 per square meter per month, to be reckoned from August 28, 1989 up to the time when the generating set and sump pumps are completely removed therefrom. WHEREFORE, premises considered, the Decision of the Regional Trial Court in Spec. Proc. No. 89-49563 dated January 12, 1995, and the Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 48984 dated February 16, 2001 and May 3, 2001, respectively, are REVERSED and SET ASIDE. Legaspi Towers 300, Inc. is DIRECTED to REMOVE the generating set and sump pumps 1 and 2 from the property covered by TCT No. 200760 and to PAY reasonable rent at the rate of P56.25 per square meter/per month from August 28, 1989until the same are completely removed. SO ORDERED.

Republic of the Philippines Supreme Court Manila

THIRD DIVISION G.R. No. 152319 DECISION PERALTA, J., This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set aside the Decision[1] of the Court of Appeals dated December 20, 2001 in CA-G.R. CV No. 33589 affirming in toto the Decision[2] of the Regional Trial Court of Manila, Branch 15, dated September 21, 1990 in Civil Case No. 83-16128. The antecedent facts are as follows: Dalmacio Lozada was the registered owner of a parcel of land identified as Lot No. 12, Block No. 1074 of the cadastral survey of the City of Manila covered by Original Certificate of Title (OCT) No. 7036 issued at the City of Manila on June 14, 1927,[3]containing an area of 873.80 square meters, more or less, located in Beata Street, Pandacan, Manila. Dalmacio Lozada subdivided his property into five (5) lots, namely: Lot Nos. 12-A, 12-B, 12C, 12-D and 12-E. Through a Deed of Donation dated March 9, 1932,[4] he donated the subdivided lots to his daughters, namely: Isabel, Salud, Catalina, and Felicidad, all surnamed Lozada. The Deed of Donation was registered with the office of the Register of Deeds of Manila on March 15, 1932. Under the said Deed of Donation, the lots were adjudicated to Dalmacio's daughters in the following manner: a. Lot No. 12-A in favor of Isabel Lozada, married to Isaac Limense; b. Lot No. 12-B in favor of Catalina Lozada, married to Sotero Natividad; c. Lot No. 12-C in favor of Catalina Lozada, married to Sotero Natividad; Isabel Lozada, married to Isaac Limense; and Salud Lozada, married to Francisco Ramos, in equal parts; d. Lot No. 12-D in favor of Salud Lozada, married to Francisco Ramos; and e. Lot No. 12-E in favor of Isabel Lozada, married to Isaac Limense, and Felicidad Lozada, married to Galicano Centeno. By virtue of the Deed of Donation executed by Dalmacio Lozada, OCT No. 7036, which was registered in his name, was cancelled and, in lieu thereof, Transfer Certificates of Title (TCTs) bearing Nos. 40041, 40042, 40043, 40044, and 40045 were issued in favor of the donees, except TCT No. 40044, which remained in his name. These new TCTs were annotated at the back of OCT No. 7036. [5] TCT No. 40043, which covered Lot No. 12-C, was issued in the name of its co-owners Catalina Lozada, married to Sotero Natividad; Isabel Lozada, married to Isaac Limense; and Salud Lozada, married to Francisco Ramos. It covered an area of 68.60 square meters, more or less, was bounded on the northeast by Lot No. 12-A, on the southwest by Calle Beata, and on the northwest by Lot No. 12-D of the subdivision plan. In 1932, respondents' predecessor-in-interest constructed their residential building on Lot No. 12-D, adjacent to Lot No. 12-C. On May 16, 1969, TCT No. 96886[6] was issued in the name of Joaquin Limense covering the very same area of Lot No. 12-C. On October 1, 1981, Joaquin Limense secured a building permit for the construction of a hollow block fence on the boundary line between his aforesaid property and the adjacent parcel of land located at 2759 Beata Street, Pandacan, Manila, designated as Lot No. 12-D, which was being occupied by respondents. The fence, however, could not be constructed because a substantial portion of respondents' residential building in Lot No. 12-D encroached upon portions of Joaquin Limense's property in Lot No. 12-C. Joaquin Limense demanded the removal of the encroached area; however, respondent ignored both oral and written demands. The parties failed to amicably settle the differences between them despite referral to the barangay. Thus, on March 9, 1983, Joaquin Limense, duly represented by his Attorney-in-Fact, Teofista L. Reyes, instituted a Complaint [7] against respondents before the Regional Trial Court (RTC) of Manila, Branch 15, for removal of obstruction and damages. Joaquin Limense prayed that the RTC issue an order directing respondents,

jointly and severally, to remove the portion which illegally encroached upon his property on Lot No. 12-C and, likewise, prayed for the payment of damages, attorneys fees and costs of suit. Respondents, on the other hand, averred in their Answer[8] that they were the surviving heirs of Francisco Ramos, [9] who, during his lifetime, was married to Salud Lozada, one of the daughters of Dalmacio Lozada, the original owner of Lot No. 12. After subdividing the said lot, Dalmacio Lozada donated Lot No. 12-C in favor of his daughters Catalina, married to Sotero Natividad; Isabel, married to Isaac Limense; and Salud, married to Francisco Ramos. Being the surviving heirs of Francisco Ramos, respondents later became co-owners of Lot No. 12-C. Lot No. 12-C has served as right of way or common alley of all the heirs of Dalmacio Lozada since 1932 up to the present. As a common alley, it could not be closed or fenced by Joaquin Limense without causing damage and prejudice to respondents. After trial on the merits, the RTC rendered a Decision [10] dated September 21, 1990 dismissing the complaint of Joaquin Limense. It ruled that an apparent easement of right of way existed in favor of respondents. Pertinent portions of the decision read as follows: The Court finds that an apparent easement of right of way exists in favor of the defendants under Article 624 of the Civil Code. It cannot be denied that there is an alley which shows its existence. It is admitted that this alley was established by the original owner of Lot 12 and that in dividing his property, the alley established by him continued to be used actively and passively as such. Even when the division of the property occurred, the non-existence of the easement was not expressed in the corresponding titles nor were the apparent sign of the alley made to disappear before the issuance of said titles. The Court also finds that when plaintiff acquired the lot (12-C) which forms the alley, he knew that said lot could serve no other purpose than as an alley. That is why even after he acquired it in 1969, the lot continued to be used by defendants and occupants of the other adjoining lots as an alley. The existence of the easement of right of way was therefore known to plaintiff who must respect the same in spite of the fact that his transfer certificate of title does not mention the lot of defendants as among those listed therein as entitled to such right of way. It is an established principle that actual notice or knowledge is as binding as registration.[11] Aggrieved by said decision, Joaquin Limense filed a notice of appeal. The records of the case were transmitted to the Court of Appeals (CA). During the pendency of the appeal with the CA, Joaquin Limense died in 1999. [12]The CA, Seventh Division, in CA-G.R. CV No. 33589, in its Decision [13] dated December 20, 2001 dismissed the appeal and affirmed in toto the decision of the RTC. Frustrated by this turn of events, petitioners, as surviving heirs of Joaquin Limense, elevated the case to this Court via a Petition for Review on Certiorari[14] raising the following issues: 1. DID THE HONORABLE COURT OF APPEALS COMMIT A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION, IN HOLDING, LIKE THE TRIAL COURT DID, THAT RESPONDENTS' LOT 12-D HAS AN EASEMENT OF RIGHT OF WAY OVER JOAQUIN LIMENSE'S LOT 12-C? 2. DID THE HONORABLE COURT OF APPEALS COMMIT A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION, IN FAILING TO HOLD, LIKE THE TRIAL COURT DID, THAT THE PROTRUDING PORTIONS OF RESPONDENTS' HOUSE ON LOT 12-D EXTENDING INTO JOAQUIN LIMENSE'S LOT 12-C CONSTITUTE A NUISANCE AND, AS SUCH, SHOULD BE REMOVED? Petitioners aver that the CA erred in ruling that since Lot No. 12-C was covered by two TCT's, i.e., TCT Nos. 40043 and 96886, and there was no evidence on record to show how Joaquin Limense was able to secure another title over an already titled property, then one of these titles must be of dubious origin. According to the CA, TCT No. 96886, issued in the name of Joaquin Limense, was spurious because the Lozada sisters never disposed of the said property covered by TCT No. 40043. The CA further ruled that a co-ownership existed over Lot No. 12-C between petitioners and respondents. Petitioners countered that TCT No. 96886, being the only and best legitimate proof of ownership over Lot No. 12-C, must prevail over TCT No. 40043. Respondents allege that it was possible that TCT No. 96886, in the name of Joaquin Limense, was obtained thru fraud, misrepresentation or

falsification of documents because the donees of said property could not possibly execute any valid transfer of title to Joaquin Limense, as they were already dead prior to the issuance of TCT No. 96886 in 1969. Respondents further allege that petitioners failed to produce proof substantiating the issuance of TCT No. 96886 in the name of Joaquin Limense. Apparently, respondents are questioning the legality of TCT No. 96886, an issue that this Court cannot pass upon in the present case. It is a rule that the validity of a torrens title cannot be assailed collaterally. [15] Section 48 of Presidential Decree (PD) No. 1529 provides that: [a] certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law. In the case at bar, the action filed before the RTC against respondents was an action for removal of obstruction and damages. Respondents raised the defense that Joaquin Limense's title could have been obtained through fraud and misrepresentation in the trial proceedings before the RTC. Such defense is in the nature of a collateral attack, which is not allowed by law. Further, it has been held that a certificate of title, once registered, should not thereafter be impugned, altered, changed, modified, enlarged or diminished, except in a direct proceeding permitted by law. Otherwise, the reliance on registered titles would be lost. The title became indefeasible and incontrovertible after the lapse of one year from the time of its registration and issuance. Section 32 of PD 1529 provides that upon the expiration of said period of one year, the decree of registration and the certificate of title shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for damages against the applicant or other persons responsible for the fraud.[16] It has, therefore, become an ancient rule that the issue on the validity of title, i.e., whether or not it was fraudulently issued, can only be raised in an action expressly instituted for that purpose. [17] In the present case, TCT No. 96886 was registered in 1969 and respondents never instituted any direct proceeding or action to assail Joaquin Limense's title. Additionally, an examination of TCT No. 40043 would readily show that there is an annotation that it has beenCANCELLED.[18] A reading of TCT No. 96886 would also reveal that said title is a transfer from TCT No. 48866[19] and not TCT 40043. Thus, it is possible that there was a series of transfers effected from TCT No. 40043 prior to the issuance of TCT No. 96886. Hence, respondents' position that the issuance of TCT No. 96886 in the name of Joaquin Limense is impossible, because the registered owners of TCT No. 40043 were already dead prior to 1969 and could not have transferred the property to Joaquin Limense, cannot be taken as proof that TCT No. 96886 was obtained through fraud, misrepresentation or falsification of documents. Findings of fact of the CA, although generally deemed conclusive, may admit review by this Court if the CA failed to notice certain relevant facts that, if properly considered, would justify a different conclusion, and if the judgment of the CA is premised on a misapprehension of facts. [20] As with the present case, the CA's observation that TCT No. 96886 is of dubious origin, as TCT No.40043 does not appear to have been disposed of by Catalina, Isabel and Salud Lozada, is improper and constitutes an indirect attack on TCT No. 96886. As we see it, TCT No. 96886, at present, is the best proof of Joaquin Limenses ownership over Lot No. 12-C. Thus, the CA erred in ruling that respondents and petitioners co-owned Lot No. 12-C, as said lot is now registered exclusively in the name of Joaquin Limense. Due to the foregoing, Joaquin Limense, as the registered owner of Lot 12-C, and his successors-in-interest, may enclose or fence his land or tenements by means of walls, ditches, live or dead hedges, or by any other means without detriment to servitudes constituted thereon.[21] However, although the owner of the property has the right to enclose or fence his property, he must respect servitudes constituted thereon. The question now is whether respondents are entitled to an easement of right of way. Petitioners contend that respondents are not entitled to an easement of right of way over Lot No. 12-C, because their Lot No. 12-D is not duly annotated at the back of TCT No. 96886 which would entitle them to enjoy the easement, unlike Lot Nos. 12-A-1, 12-A-2, 12-A-3, 12-A-4, 12-A-5, and 12-A-6. Respondents, on the other hand, allege that they are entitled to an easement of right of way over Lot No. 12-C, which has been continuously used as an alley by the heirs of Dalmacio Lozada, the residents in the area and the public in general from 1932 up to the present. Since petitioners are fully aware of the long existence of the said alley or easement of right of way, they are bound to respect the same. As defined, an easement is a real right on another's property, corporeal and immovable, whereby the owner of the latter must refrain from doing or allowing somebody else to do or something to be done on his property, for the benefit of another person or tenement.[22] Easements may be continuous or discontinuous, apparent or non-apparent. Continuous easements are those the use of which is or may be incessant, without the intervention of any act of man. Discontinuous easements are those which are used at intervals and depend upon the acts of man. Apparent easements are those which are made known and are continually kept in view by external signs that reveal the use and enjoyment of the same. Non-apparent easements are those which show no external indication of their existence. [23]

In the present case, the easement of right of way is discontinuous and apparent. It is discontinuous, as the use depends upon the acts of respondents and other persons passing through the property. Being an alley that shows a permanent path going to and from Beata Street, the same is apparent. Being a discontinuous and apparent easement, the same can be acquired only by virtue of a title. [24] In the case at bar, TCT No. 96886, issued in the name of Joaquin Limense, does not contain any annotation that Lot No. 12-D was given an easement of right of way over Lot No. 12-C. However, Joaquin Limense and his successors-in-interests are fully aware that Lot No. 12-C has been continuously used and utilized as an alley by respondents and residents in the area for a long period of time. Joaquin Limense's Attorney-in-Fact, Teofista L. Reyes, testified that respondents and several other residents in the area have been using the alley to reach Beata Street since 1932. Thus: Atty. Manuel B. Tomacruz: Q: Mrs. Witness, by virtue of that Deed of Donation you claim that titles were issued to the children of Dalmacio Lozada namely Salud Lozada, Catalina Lozada and Isabel Lozada, is that right? A: Yes, sir. Q: A: Q: A: Q: A: Q: A: Q: A: Q: A: Q: A: Q: A: Q: A: And after the said property was adjudicated to his said children the latter constructed their houses on their lots. Yes, sir. As a matter of fact, the herein defendants have constructed their houses on the premises alloted to them since the year 1932? Yes, sir, they were able to construct their house fronting Beata Street. And that house they have constructed on their lot in 1932 is still existing today? Yes, sir and they still used the alley in question and they are supposed to use Beata Street but they are not using Beata Street. They are using the alley? Yes, sir, they are using the alley and they do not pass through Beata Street. And they have been using the alley since 1932 up to the present? Yes, sir they have been using the alley since that time. That was their mistake and they should be using Beata Street because they are fronting Beata Strret. As a matter of fact, it is not only herein defendants who have been using that alley since 1932 up to the present? Yes, sir they are using the alley up to now. As a matter of fact, in this picture marked as Exh. C-1 the alley is very apparent. This is the alley? Yes, sir. And there are houses on either side of this alley? Yes, sir. As a matter of fact, all the residents on either side of the alley are passing through this alley? Yes, sir, because the others have permit to use this alley and they are now allowed to use the alley but the Ramos's family are now [not] allowed to use this alley. [25]

In Mendoza v. Rosel,[26] this Court held that: Petitioners claim that inasmuch as their transfer certificates of title do not mention any lien or encumbrance on their lots, they are purchasers in good faith and for value, and as such have a right to demand from respondents some payment for the use of the alley. However, the Court of Appeals found, as a fact, that when respondents acquired the two lots which form the alley, they knew that said lots could serve no other purpose than as an alley. The existence of the easement of right of way was therefore known to petitioners who must respect the same, in spite of the fact that their transfer

certificates of title do not mention any burden or easement. It is an established principle that actual notice or knowledge is as binding as registration. Every buyer of a registered land who takes a certificate of title for value and in good faith shall hold the same free of all encumbrances except those noted on said certificate. It has been held, however, that where the party has knowledge of a prior existing interest that was unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him. [27] In the case at bar, Lot No. 12-C has been used as an alley ever since it was donated by Dalmacio Lozada to his heirs. It is undisputed that prior to and after the registration of TCT No. 96886, Lot No. 12-C has served as a right of way in favor of respondents and the public in general. We quote from the RTC's decision: x x x It cannot be denied that there is an alley which shows its existence. It is admitted that this alley was established by the original owner of Lot 12 and that in dividing his property the alley established by him continued to be used actively and passively as such. Even when the division of the property occurred, the non-existence of the easement was not expressed in the corresponding titles nor were the apparent sign of the alley made to disappear before the issuance of said titles. The Court also finds that when plaintiff acquired the lot (12-C) which forms the alley, he knew that said lot could serve no other purpose than as an alley. That is why even after he acquired it in 1969 the lot continued to be used by defendants and occupants of the other adjoining lots as an alley. x x x[28] Thus, petitioners are bound by the easement of right of way over Lot No. 12-C, even though no registration of the servitude has been made on TCT No. 96886. However, respondents right to have access to the property of petitioners does not include the right to continually encroach upon the latters property. It is not disputed that portions of respondents' house on Lot No. 12-D encroach upon Lot No. 12-C. Geodetic Engineer Jose Agres, Jr. testified on the encroachment of respondents' house on Lot No. 12-C, which he surveyed. [29] In order to settle the rights of the parties relative to the encroachment, We should determine whether respondents were builders in good faith. Good faith is an intangible and abstract quality with no technical meaning or statutory definition; and it encompasses, among other things, an honest belief, the absence of malice and the absence of a design to defraud or to seek an unconscionable advantage. An individuals personal good faith is a concept of his own mind and, therefore, may not conclusively be determined by his protestations alone. It implies honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry. The essence of good faith lies in an honest belief in the validity of ones right, ignorance of a superior claim, and absence of intention to overreach another. Applied to possession, one is considered in good faith if he is not aware that there exists in his title or mode of acquisition any flaw which invalidates it. [30] Good faith is always presumed, and upon him who alleges bad faith on the part of the possessor rests the burden of proof.[31] It is a matter of record that respondents' predecessor-in-interest constructed their residential building on Lot No. 12-D, adjacent to Lot No. 12-C, in 1932. [32] Respondents' predecessor-in-interest owned the 1/3 portion of Lot No. 12-C at the time the property was donated to them by Dalmacio Lozada in 1932. The Deed of Donation executed by the late Dalmacio Lozada, dated March 9, 1932, specifically provides that: I hereby grant, cede and donate in favor of Catalina Lozada married to Sotero Natividad, Isabel Lozada married to Isaac Simense and Salud Lozada married to Francisco Ramos, all Filipinos, of legal age, the parcel of land known as Lot No. 12-C, in equal parts.[33] The portions of Lot No. 12-D, particularly the overhang, covering 1 meter in width and 17 meters in length; the stairs; and the concrete structures are all within the 1/3 share alloted to them by their donor Dalmacio Lozada and, hence, there was absence of a showing that respondents acted in bad faith when they built portions of their house on Lot No. 12-C. Using the above parameters, we are convinced that respondents' predecessors-in-interest acted in good faith when they built portions of their house on Lot 12-C. Respondents being builders in good faith, we shall now discuss the respective rights of the parties relative to the portions encroaching upon respondents' house. Articles 448 and 546 of the New Civil Code provide: Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper

indemnity. The parties shall agree upon the terms of the lease and, in case of disagreement, the court shall fix the terms thereof. Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor.Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof. In Spouses Del Campo v. Abesia,[34] this provision was applied to one whose house, despite having been built at the time he was still co-owner, overlapped with the land of another. In that case, this Court ruled: The court a quo correctly held that Article 448 of the Civil Code cannot apply where a co-owner builds, plants or sows on the land owned in common for then he did not build, plant or sow upon the land that exclusively belongs to another but of which he is a co-owner. The co-owner is not a third person under the circumstances, and the situation is governed by the rules of co-ownership. However, when, as in this case, the ownership is terminated by the partition and it appears that the house of defendants overlaps or occupies a portion of 5 square meters of the land pertaining to plaintiffs which the defendants obviously built in good faith, then the provisions of Article 448 of the new Civil Code should apply. x x x[35] In other words, when the co-ownership is terminated by a partition, and it appears that the house of an erstwhile co-owner has encroached upon a portion pertaining to another co-owner, but the encroachment was in good faith, then the provisions of Article 448 should apply to determine the respective rights of the parties. In this case, the co-ownership was terminated due to the transfer of the title of the whole property in favor of Joaquin Limense. Under the foregoing provision, petitioners have the right to appropriate said portion of the house of respondents upon payment of indemnity to respondents, as provided for in Article 546 of the Civil Code. Otherwise, petitioners may oblige respondents to pay the price of the land occupied by their house. However, if the price asked for is considerably much more than the value of the portion of the house of respondents built thereon, then the latter cannot be obliged to buy the land. Respondents shall then pay the reasonable rent to petitioners upon such terms and conditions that they may agree. In case of disagreement, the trial court shall fix the terms thereof. Of course, respondents may demolish or remove the said portion of their house, at their own expense, if they so decide.[36]The choice belongs to the owner of the land, a rule that accords with the principle of accession that the accessory follows the principal and not the other way around. [37] Even as the option lies with the landowner, the grant to him, nevertheless, is preclusive. He must choose one. He cannot, for instance, compel the owner of the building to instead remove it from the land.[38] The obvious benefit to the builder under this article is that, instead of being outrightly ejected from the land, he can compel the landowner to make a choice between two options: (1) to appropriate the building by paying the indemnity required by law, or (2) to sell the land to the builder. [39] The raison detre for this provision has been enunciated, thus: Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In view of the impracticability of creating a state of forced coownership, the law has provided a just solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity, or to oblige the builder or planter to pay for the land and the sower the proper rent. He cannot refuse to exercise either option. It is the owner of the land who is authorized to exercise the option, because his right is older, and because, by the principle of accession, he is entitled to the ownership of the accessory thing.[40] In accordance with Depra v. Dumlao,[41] this case must be remanded to the trial court to determine matters necessary for the proper application of Article 448 in relation to Article 546. Such matters include the option that petitioners would take and the amount of indemnity that they would pay, should they decide to appropriate the improvements on the lots. Anent the second issue, although it may seem that the portions encroaching upon respondents' house can be considered a nuisance, because it hinders petitioners' use of their property, it cannot simply be removed at respondents'

expense, as prayed for by petitioner. This is because respondents built the subject encroachment in good faith, and the law affords them certain rights as discussed above. WHEREFORE, the petition is DENIED, the Decision of the Court of Appeals dated December 20, 2001 in CAG.R. CV No. 33589 is AFFIRMED with the following MODIFICATIONS: 1. respondents. 2. The case is REMANDED to the Regional Trial Court, Branch 15, Manila, for further proceedings without No co-ownership exists over Lot No. 12-C, covered by TCT No. 96886, between petitioners and

further delay to determine the facts essential to the proper application of Articles 448 and 546 of the Civil Code.

SO ORDERED.

DIOSDADO M. PERALTA Associate Justice

FIRST DIVISION

CARMEN A. BLAS, Petitioner, -versus SPOUSES EDUARDO and SALUD GALAPON, Respondents. X

G.R. No. 159710 September 30, 2009

DECISION BERSAMIN, J.: By petition for review on certiorari, the petitioner appeals the April 30, 2002 decision and the September 1, 2003 resolution of the Court of Appeals (CA) in C.A.-G.R. SP No. 49535, affirming the decision of the Office of the President (OP) that awarded in equal shares to the petitioner and the respondents the 50-square meter lot on which ZIP Tag Structure No. 86-313 stood. Antecedents In pursuit of the urban land reform program of the Government under Presidential Decree No. 1517, [1] Proclamation No. 1893,[2] and National Housing Authority (NHA) Circular No. 13, [3] the NHA conducted in 1987 the Zonal Improvement Program (ZIP) census and tagging of structures as pre-qualifying requisites for determining the potential lot beneficiaries in the Peafrancia ZIP zone in Paco, Manila. In the census, the petitioner was determined to be an absentee structure owner of the dwelling unit tagged as Structure No. 86-313, [4] while respondent Eduardo Galapon and three others, namely Carlos Menodiado, Martin Nobleza and Buenaventura A. Zapanta, were censused to be the renters of the petitioner in the structure. The petitioner, then a 78-year old widow living in her son's dwelling unit tagged as Structure No. 86-305, had been renting Structure No. 86-313 out as a source of income. NHA Circular No. 13 disqualified any absentee or uncensused structure owner from owning a lot within a ZIP zone. Alarmed that she might be disqualified to own the 50-square meter lot located at Lot 12, Block 2, Peafrancia ZIP zone where Structure No. 86-313 stood, the petitioner filed a petition for change of status from absentee structure owner to residing structure owner with the Awards and Arbitration Committee (AAC) of NHA. The Ruling of the NHA The AAC recommended the approval of the petitioner's petition for change of status. Aggrieved, respondent Spouses Eduardo and Salud Galapon appealed the recommendation of the AAC. The NHA gave due course to the appeal and ultimately awarded the 50-square meter lot to them on January 30, 1996, [5] stating: Records show the following: 1. During the 1987 census survey of the project, you were censused as absentee owner of the structure with Tag No. 86-313 while Eduardo Galapon, Jr., Carlos Menodiado, Martin Nobleza and Buenaventura A. Zapanta were censused as your renters. 2. Although you have not left the project prior to, during and after the 1987 census survey, you were not found to be residing at the structure with Tag No. 86-313, allegedly owned by your daughter, Fe Blas. 3. Your daughter Fe Blas, is forty (40) years old, single and physically disabled making her dependent on you for physical and financial support.

4. Despite the foregoing facts, the Awards and Arbitration Committee recommended the approval of your request for change of status and the award in your favor of 50.0 sq. m. portion, more or less of Lot 12 Block 2. 5. On September 1, 1995, the District Manager, in an answer to our query, informed our Legal Department of the following: 4. The Civil Status of Fe Blas, 40 years old, is single. 5. Mrs Carmen Blas do not have any personal belongings nor does she maintain her own room in the contested structure. She is renting out the subject structure to renters, Carlos Menodiado, Eduardo Galapon Jr., Martin Nobleza and Buenaventura Zapanta at the time of the census to augment her income for old age and medicine. 6. The census masterlist provided by the project office indicates that you were censused as absentee owner of the structure with Tag No. 86-313 with remarks which is owned by your son, Rodrigo Blas. He is also an absentee structure owner. The abode date contradicts findings of the AAC that you lived with your daughter, Fe Blas in the structure with Tag No. 86-274. 7. You maintain the structure with Tag No. 83-313 not as your residence but for purely commercial purposes by renting it out. In view of all the foregoing, your petition for change of census status from absentee structure owner to residing structure owner and the award of 50.0 sq. m. portion, more or less, of Lot 12 Blk. 2 is hereby DENIED. The petitioner elevated for review the NHA decision to the OP, which docketed her appeal as OP Case No. 96E-6455. In the meantime, the petitioner filed an ejectment action against the respondents on October 18, 1996. She obtained a favorable judgment. After she was issued a writ of execution, the respondents voluntarily vacated the structure on November 17, 1996. Ruling of the OP On October 13, 1997, the OP found the petitioner and the respondents to be the long-standing bona fide qualified applicants and awarded the disputed lot and the structure to both of them in equal shares, [6] viz: WHEREFORE, premises considered, the appealed letter-decision of the NHA General Manager Mariano Pineda, dated January 30, 1996 is hereby SET ASIDE, and another one entered, dividing the area into two equal parts as much as possible, and allocating the same to appellant and appellees in the manner indicated in the body of this decision. SO ORDERED. Both parties sought reconsideration of the OP decision. The petitioner's motion was not acted upon by the OP while that of the respondents was denied for being filed out of time. On August 13, 1998, the respondents, through their representative, Prospero M. de la Torre, wrote a letter seeking reconsideration to then Chief Presidential Legal Counsel Harriet O. Demetriou. In response, the OP issued a resolution datedOctober 15, 1998 denying the request.[7] Ruling of the CA The petitioner filed a petition for review in the CA, assailing the October 13, 1997 decision and the October 15, 1998resolution of the OP. She prayed that the disputed lot and structure be awarded to her solely considering that the respondents had already vacated the structure even prior to the promulgation of the OP decision.

On April 30, 2002, the CA denied the petition for review for lack of merit, [8] holding: The fact that she rented out her tagged structure proved that she did not live in that dwelling unit, hence, she remained under the law an absentee owner who was disqualified outright. If at all the Office of the President awarded her one-half of the disputed lot, it was out of pure beneficence of this Office and not because she had that right under the law. Moreover Blas did not allege in the petition nor prove that the Office of the President committed grave abuse of discretion, fraud or error in law in dividing the disputed lot between her and the Galapons. While she assigned as an error on the part of the Office of the President in having the said lot divided, it was only upon the ground that the Galapons have already ceased to be renters after they were ejected by the court. This nevertheless does not constitute an error for the fact remains that the Galapons were the occupants at the time of the census, and not Blas. Administrative decisions on matters within the executive jurisdiction can only be set aside on proof of grave abuse of discretion , fraud, or error of law (Itogon-Suyoc Mines, Inc. vs. Office of the President, 270 SCRA 63; Zabat vs. CA, 338 SCRA 551). Absent these badges of executive excesses, this petition must fail. The Office of the President in awarding the disputed lot to both in equal shares, did so because it was censused that the Galapons were renters of the Tagged Structure owned by Blas. As such the Galapons similarly were potential ZIP Beneficiaries who enjoyed the right of preemption and security of tenure as defined in the NHA Implementing guidelines. The fact that they were ejected in a case before Branch 25, Metropolitan Trial Court of Manila, did not render them automatically disqualified from being awardees of the ZIP project. Under the Implementing Guidelines (VIII. Ejectment, par. 1, p. 111, rollo) an ejected censused renter may only lose his status as a potential ZIP beneficiary if he does not inform the NHA or the local government unit of his address. There is nothing said and proved in the petition that spouses Galapon failed to up-date NHA of their address. [9]

The CA also denied the petitioners motion for reconsideration on September 1, 2003. Issues The petitioner now seeks the review and reversal of the decision of the CA upon the following issues: (1) Whether or not the petitioner was an absentee structure owner; and (2) Whether or not the respondents were disqualified to be awardees of Lot 12, Block 2, Peafrancia ZIP Project. Ruling of the Court The petition lacks merit.I Petitioner Was an Absentee Structure Owner The ZIP is designed to upgrade the legal, environmental, social and economic conditions of slum residents within Metro Manila, in line with the spirit of the constitutional provision guaranteeing housing and a decent quality of life for every Filipino. The ownership of land by the landless is the primary objective of the ZIP. [10] The Code of Policies embodied in NHA Circular No. 13 governed the implementation of the ZIP as to the classification and treatment of existing structures, the selection and qualification of intended beneficiaries, the disposition and award of fully developed lots in all ZIP zones within Metro Manila, and other related activities. [11] Paragraph V of the Code of Policies laid down the rules on beneficiary selection and lot allocation, [12] to wit:

V. BENEFICIARY SELECTION AND LOT ALLOCATION 1. The official Zip census and tagging shall be the primary basis for determining potential program beneficiaries and structures or dwelling units in the project area. 2. Issuance of Zip tag number in no way constitutes a guarantee for Zip lot allocation. 3. Absentee censused households and all uncensused households are automatically disqualified from lot allocation. 4. Only those household included in the ZIP census and who, in addition, qualify under the provisions of the Code of Policies, are the beneficiaries of the Zonal Improvement Program. 5. A qualified censused-household is entitled to only one residential lot within the ZIP project areas of Metro Manila. 6. Documentation supporting lot allocation shall be made in the name of the qualified household head. 7. An Awards and Arbitration (AAC) shall be set up in each ZIP project area to be composed of representative each from the Authority, the local government, the barangay and the community. The AAC shall determine lot allocation amongst qualified beneficiaries, arbitrate in matters of claims and disputes, and safeguard the rights of all residents in ZIP project areas by any legal means it may consider appropriate. All decisions of the AAC shall be subject to review and approval of the General Manager of the Authority, the local Mayors, and finally the Governor of the Metropolitan Manila Commission.[13] The declaration of policy in the Code of Policies stated that an absentee or uncensused structure owner was disqualified from owning a lot within the ZIP zones. [14] A careful perusal of the Code of Policies shows the following persons to be automatically disqualified, namely: (1) Absentee censused household censused household that vacates a duly tagged structure or dwelling unit and leaves the project area for a continuous period for at least six months without written notice to the NHA and the local government unit;[15] (2) Uncensused household household that is not registered in the official ZIP census; [16] (3) Absentee structure owner any individual who owns a structure or dwelling unit in a ZIP project area and who has not occupied it prior to the official closure of the Census; [17] and (4) Uncensused structure owner any person who owns a structure or dwelling unit not registered in the official ZIP census.[18] The CA categorically declared the petitioner as an absentee structure owner disqualified to the award of the disputed lot. On the other hand, the petitioner insists that she was not an absentee structure owner because she never abandoned nor relinquished her right over Structure No. 86-313. According to her, she occupied the disputed lot since 1938 although she was not living thereat during the time of the official ZIP census. We agree with the CA. The following requisites must concur for one to be considered an absentee structure owner: one, the person must own a structure or dwelling unit within the ZIP zone; and two, the person has not occupied the structure or dwelling unit prior to the official closure of the census. The petitioner did not meet the second requisite because it was the respondents, not her, who were living in or occupying Structure No. 86-313 at the time of the official ZIP census and until they vacated the premises on November 17, 1996. In the award of the ZIP lot allocation, the primary bases for determining the potential program beneficiaries and structures or dwelling units in the project area were the official ZIP census and tagging conducted in 1987. It was, therefore, the primordial requisite that the intended beneficiary must be the occupant of the tagged structure at the time of the official ZIP census or at the closure thereof. Otherwise, the person was considered an absentee structure owner for being absent from his usual residence or domicile. At any rate, the Code of Policies made it clear that the issuance of a ZIP tag number to a structure did not guarantee ZIP lot allocation to the owner

of the tagged structure.[19] Such interpretation of the Code of Policies was in harmony with the objectives and principles underlying the program to provide adequate shelter and place of abode to the legally qualified beneficiaries. That the petitioner was the person who built Structure No. 86-313 did not necessarily mean that the lot on which the structure stood would be automatically awarded to her. Like any other beneficiary, she must first comply with the requirements imposed by the Government before being deemed entitled to the lot allocation. Unfortunately, she was not using Structure No. 86313 as a dwelling or living quarters, but as a source of income, which only signified that she was not a homeless person whom the ZIP intended to benefit. To consider her a homelot beneficiary would be contrary to the spirit of the Code of Policies and would defeat the very object of the ZIP. II Respondents are not disqualified to be awardees of Lot 12, Block 2, Peafrancia ZIP Project The petitioner claims that the respondents were disqualified to become homelot beneficiaries because they had been evicted by virtue of the judgment rendered in the ejectment case she had filed against them; and that when they vacated Structure No. 86-313, they did not inform the NHA of their present address, an omission that violated Paragraph III of the Code of Policies, which reads: III. EJECTMENT 1. A censused renter or censused rent-free occupant who has been ejected should inform the Authority and the local government of his address in order that he may not lose his status as a potential ZIP beneficiary. 2. A qualified censused structure owner who succeeds in ejecting his renter or rent-free occupant or legal grounds, may be allowed to transfer to his structure or dwelling unit, with the prior written clearance of the Authority or its duly authorized representative, as certified by the local government.[20]

We are not persuaded by the petitioners claims. It is undisputed that the respondents were the censused renters or occupants of Structure No. 86-313. Such status could not automatically be changed by their judicial ejectment at the petitioners instance, considering that their right to become lot beneficiaries of the ZIP was consistently recognized by the AAC, the NHA, the OP and the CA. The discretion to determine who were the qualified homelot beneficiaries belonged to the AAC, subject to the review and approval of the NHA General Manager.[21] The NHA ruling on the issue was conclusive and binding in the absence of any clear showing of any grave abuse of discretion on the part of such administrative office directly tasked to execute, implement and administer the ZIP. That such ruling was even upheld by the OP and then the CA strengthened even more the presumption of correctness in its favor. The petitioner cannot rely on the judgment rendered in the ejectment case to buttress her claim of the ownership of the structure. Neither was that judgment a valid basis for asserting a better right to the lot on which the structure stood. In ejectment cases, the only issue is the physical and material possession of the property involved, the resolution being independent of any claim of ownership made by any of the litigants. The question of ownership is, at best, merely provisionally decided, but only for the sole purpose of determining which party has the better right to the physical possession of the property. [22] Indeed, the judgment in the ejectment case could only determine who between the petitioner and the respondents had a better right to possess Structure No. 86-313. It did not, as it could not, decide that the petitioner was entitled to the award of the lot, or that the respondents could not be considered as qualified beneficiaries of

the ZIP. We further affirm the ruling of the CA to the effect that the petitioner did not substantiate her claim that the respondents had failed to inform the NHA of their present address; and that contrary to the Code of Policies, she did not allege that she now lived in her structure following her eviction of the respondents with prior written clearance from the NHA or its duly authorized representative, as verified by the City Government of Manila. The respondents, being qualified homelot beneficiaries of Lot 12, Block 2, enjoyed the right of pre-emption vis-vis Structure No. 86-313, which was a right granted to them as the censused renters of the structure to have the first option to acquire or to purchase the structure.[23] WHEREFORE, we deny the petition for review on certiorari for lack of merit. The April 30, 2002 decision and the September 1, 2003 resolution in C.A.-G.R. SP No. 49535 are modified, awarding the 50-square meter portion of Lot 12, Block 2 of the Peafrancia ZIP Project on which Structure No. 86-313 stood exclusively to the respondents. Costs of suit to be paid by the petitioner. SO ORDERED.

FIRST DIVISION

VALENTIN CABRERA, MANUEL CABRERA, and REBECCA LESLIE CABRAS, x

G.R. No. 164213

Present:

DECISION

CARPIO, J. The Case

Before the Court is a petition for review [1] assailing the 22 January 2004 Decision[2] and 3 May 2004 Resolution[3] of the Court of Appeals in CA-G.R. SP No. 80062. The Antecedent Facts Lot Nos. 3635-CC and 3635-Y, located in Inayawan, Pardo, Cebu City were covered by Tax Declaration Nos. GR2K-12-078-02409 and GR2K-12-078-02431 in the name of Arcadio Jaca (Arcadio). The heirs of Arcadio executed a notarized document known as Kasabutan nga Hinigala dated 25 July 1951 which stipulated that all the inherited properties of Arcadio, including Lot No. 3635, would go to Peregrina Jaca Cabrera (Peregrina). However, in a Repartition Project approved on 21 November 1956 by Judge Jose M. Mendoza of the Court of First Instance of Cebu City, Branch 6 in Special Proceedings No. 211-V, Lot Nos. 3635-CC and 3635-Y were given to Urbana Jaca Ababon (Urbana), mother of Elizabeth Getaruela, Eulogio Ababon, Leonida Ligan, Marietto Ababon, Gloria Panal, Leonora Ocariza, Sotero Ababon, Jr., and Joseph Ababon (respondents). Upon Urbanas death in 1997, respondents inherited the lots Valentin Cabrera (Valentin), Manuel Cabrera (Manuel), and Rebecca Leslie Cabras (Cabras), Peregrinas adopted daughter, occupied the lots with the knowledge and consent of respondents.

Respondents alleged that Valentin, Manuel, and Cabras (collectively, petitioners) were occupying portions of the lots without paying any rentals, but with an agreement that they would vacate the premises and demolish their houses at their expense should respondents need the property. In 2001, respondents personally notified petitioners that they would repossess the property. Respondents asked petitioners to vacate the premises and remove the houses they built on the lots. However, despite repeated demands, petitioners refused to vacate the premises. The matter was referred to the Lupong Tagapamayapa of Barangay Inayawan, Cebu for possible amicable settlement but petitioners still refused to

vacate the premises. Thus, respondents filed an action for ejectment against petitioners, docketed as Civil Case No. R45280. Petitioners assailed the Project of Partition as incredible because its first page was missing and it lacked the signatures of the parties who executed it. Petitioners asserted the validity of the Kasabutan nga Hinigala. Cabras alleged that as owner of Lot No. 3635 upon Peregrinas death, she could not be ejected from the premises. Valentin and Manuel alleged that they could not be ejected because they built their houses with Peregrinas knowledge and consent. The Rulings of the MTCC and RTC In its Decision[4] dated 4 April 2002, the Municipal Trial Court in Cities, Branch 7, Cebu City (MTCC) ruled in favor of respondents, as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants, ordering the latter to vacate the premises in question and to demolish whatever improvements introduced thereon and surrender complete control and possession thereof to the plaintiffs, and to jointly and severally pay the latter:

1) the amount of P15,000.00 for and as attorneys fees; 2) litigation expenses in the sum of P5,000.00; and cost of suit. SO ORDERED.[5]

The MTCC ruled that the Kasabutan nga Hinigala was superseded by the court-approved Repartition Project. The MTCC noted that in the Repartition Project, Lot Nos. 3635-CC and 3635-Y were given to Urbana, respondents predecessor-in-interest. The MTCC ruled that while the lots were still in Urbanas name, respondents were not barred from judicially ejecting petitioners from the premises. Petitioners appealed from the MTCCs Decision. In its 19 May 2003 Decision, [6] the Regional Trial Court of Cebu City, Branch 7 (RTC) reversed the MTCCs Decision. The RTC ruled that the Project of Partition showed that Lot No. 3635-Y was co-owned by Urbana (251 sq. m.), Peregrina (863 sq. m.), and Andres Jaca (251 sq. m.). The RTC ruled that as Peregrinas heir, Cabras became a co-owner of Lot No. 3635-Y and she could not be ejected from the property. The RTC ruled that Valentin and Manuel could not likewise be ejected from the property as they were allowed by Cabras to occupy the lot. The RTC ruled that the Project of Partition also showed that Urbanas total share of 1,499 sq. m., covering 1,248 sq. m. of Lot No. 3635-CC and 251 sq. m. of Lot No. 3635-Y, was sold to one Josefina Asas (Asas). As such, respondents had no cause of action against petitioners. The dispositive portion of the RTCs Decision reads: Wherefore, the judgment in the Decision dated April 4, 2002, of the Municipal Trial Court in Cities, Branch 7, Cebu City, in Civil Case No. R-45280, is REVERSED, and another one is entered DISMISSING the case against defendants-

appellants. Plaintiffs-appellees are directed to compensate defendants-appellants attorneys fees in the amount of P15,000.00, and litigation expenses in the amount of P5,000.00, as well as to pay the costs. SO ORDERED. [7] Respondents filed a motion for reconsideration. In its 29 July 2003 Order, the RTC partially granted respondents motion. The RTC ruled that it erred in finding that Urbana sold her share to Asas. The RTC ruled that the Project of Partition showed that it was Panfilo Jaca who sold his share to Asas. The RTC modified its 19 May 2003 Decision as follows: Wherefore, the judgment in the Decision dated April 4, 2002, of the Municipal Trial Court in Cities, Branch 7, Cebu City, in Civil Case No. R-45280, is MODIFIED, as follows: 1) Dismissing the complaint as regards Lot 3655-Y; and

2) Ordering defendants-appellants to vacate Lot No. 3655-CC, demolish whatever improvements they may have introduced thereon and surrender complete control and possession thereof to plaintiffs-appellees. No pronouncement as to costs. SO ORDERED.[8]

Petitioners moved for reconsideration of the RTCs 29 July 2003 Order, assailing the Project of Partition. In its 3 September 2003 Order,[9] the RTC denied petitioners motion. The RTC ruled that petitioners failed to present any evidence supporting the purported falsity of the Project of Partition. The RTC upheld the jurisdiction of the MTCC and further ruled that respondents action was an ejectment case.

Petitioners filed a petition for review before the Court of Appeals.

The Ruling of the Court of Appeals

In its 22 January 2004 Decision, the Court of Appeals affirmed the 29 July 2003 and 3 September 2003 Orders of the RTC.

The Court of Appeals held that the jurisdiction of the court is determined by the allegations in the complaint. The Court of Appeals held that a complaint for unlawful detainer is sufficient if it alleges that the withholding of possession or the refusal to vacate is unlawful. The Court of Appeals ruled that prior physical possession is indispensable only in actions for forcible entry but not in unlawful detainer. The Court of Appeals further ruled that occupation of the premises must be tolerated by the owners right from the start of the possession of the property sought to be recovered.The Court of Appeals found that in this case, petitioners were occupying the lots without rentals upon agreement with respondents that they would relinquish possession once respondents need the property. However, petitioners refused to vacate the

premises despite demands by respondents. The Court of Appeals ruled that the allegations were sufficient to confer jurisdiction upon the MTCC where the ejectment suit was instituted and tried.

The Court of Appeals noted that petitioners challenged respondents claim of ownership of the property. The Court of Appeals ruled that the only issue involved in an ejectment case is possession de facto. However, when the issue of possession could not be resolved without resolving the issue of ownership, the court may receive evidence upon the question of title to the property but solely for the purpose of determining the issue of possession. Hence, the MTCC acted correctly when it received evidence on the issue of ownership. The Court of Appeals further noted that the RTC upheld the MTCCs finding that the Project of Partition superseded the Kasabutan nga Hinigala. The Court of Appeals sustained the RTC in refusing to admit documents submitted by petitioners which they failed to present before the MTCC. The Court of Appeals stressed that the MTCCs finding on the issue of ownership was merely provisional. Thus, petitioners were not legally barred from filing the proper action to settle the question of title.

The dispositive portion of the Decision of the Court of Appeals reads:

WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and accordingly DISMISSED. The assailed Orders dated July 29, 2003 and September 3, 2003 of the court a quo are hereby both AFFIRMED.

No pronouncement as to costs.

SO ORDERED.[10]

Petitioners filed a motion for reconsideration. In its 3 May 2004 Resolution, the Court of Appeals denied the motion.

The Court of Appeals ruled that a complaint for unlawful detainer must be filed within one year from demand and not from the start of possession as claimed by petitioners. The Court of Appeals reiterated that in cases of forcible entry and unlawful detainer, the issue is pure physical or de facto possession and pronouncements made on the question of ownership are provisional in nature. The Court of Appeals further ruled that all cases of forcible entry and unlawful detainer shall be filed before the proper Municipal Trial Court, there being no jurisdictional amount involved, even with respect to damages or unpaid rentals sought.

Hence, the petition before this Court.

The Issues

Petitioners raise the following issues in their Memorandum: [11]

1. Whether the MTCC had jurisdiction to entertain the ejectment case considering the absence of a contract, written or oral, entered into by respondents and petitioners as lessors and lessees, respectively;

2.

Whether tolerance as a ground for ejectment is tenable in this case; and

3.

Whether the Project of Partition superseded the Kasabutan nga Hinigala.

The Ruling of this Court

The petition has no merit.

Petitioners insist that the MTCC had no jurisdiction to entertain respondents complaint because there was no contract, oral or written, between the parties. Petitioners allege that the proper action should have been one for recovery of possession and not for unlawful detainer.

We do not agree.

It is settled that a complaint sufficiently alleges a cause of action for unlawful detainer if it recites the following:

(1)

initially, possession of property by the defendant was by contract with or by tolerance of the plaintiff;

(2)

eventually, such possession became illegal upon notice by plaintiff to defendant of the termination of the latters right of possession;

(3)

thereafter, the defendant remained in possession of the property and deprived the plaintiff of the enjoyment thereof; and

(4)

within one year from the last demand on defendant to vacate the property, the plaintiff instituted the complaint for ejectment.[12]

In this case, the complaint alleged that petitioners were occupying the property, with agreement that should respondents need the property, petitioners would relinquish possession of the lots and demolish their houses at their expense. Respondents personally notified petitioners to vacate the premises and to demolish their houses but petitioners refused to vacate the lots. The complaint established that petitioners possession was by tolerance of respondents, and their possession became illegal when they refused to vacate the premises upon demand by respondents. Here, the possession became illegal not from the time petitioners started occupying the property but from the time demand was made for them to vacate the premises. In short, the complaint sufficiently established a case for unlawful detainer.

Contrary to petitioners contention, the issue in this case is not the ownership of the lots. It should be stressed that the allegations in the complaint and the character of the relief sought determine the nature of the action and the court with jurisdiction over it.[13] The defenses set up in an answer are not determinative of jurisdiction. [14] The jurisdiction of the court cannot be made to depend on the exclusive characterization of the case by one of the parties. [15] Thus:

In an unlawful detainer case, the sole issue for resolution is physical or material possession of the property involved, independent of any claim of ownership by any of the parties. However, where the issue of ownership is raised, the courts may pass upon the issue of ownership in order to determine who has the right to possess the property. We stress, however, that this adjudication is only an initial determination of ownership for the purpose of settling the issue of possession, the issue of ownership being inseparably linked thereto. The lower courts adjudication of ownership in the ejectment case is merely provisional and would not bar or prejudice an action between the same parties involving title to the property. It is, therefore, not conclusive as to the issue of ownership x x x. [16]

The MTCC, the RTC, and the Court of Appeals all held that the Repartition Project superseded the Kasabutan nga Hinigala. We sustain their factual finding as this Court gives substantial weight to the factual finding of the trial court, particularly if this factual finding is sustained by appellate courts. However, we also reiterate that this resolution on the issue of ownership is only provisional for the purpose of settling the issue of possession.

WHEREFORE, we DENY the petition. We AFFIRM the 22 January 2004 Decision and 3 May 2004 Resolution of the Court of Appeals in CA-G.R. SP No. 80062.

SO ORDERED.

THIRD DIVISION G.R. No. 166553 REPUBLIC OF THE PHILIPPINES represented by the NATIONAL POWER CORPORATION, Petitioner, - versus SPOUSES RUPERTO LIBUNAO and SONIA SANOPO & HEIRS OF BENITA DOMINGO, Respondents. P. Present: Promulgated: July 30, 2009

x---------------------------------------------------x

DECISION PERALTA, J.:

Assailed in this petition for review on certiorari filed by the petitioner National Power Corporation is the Decision[1] datedApril 30, 2004 and the Resolution[2] dated January 3, 2005 of the Court of Appeals (CA) in CA-G.R. CV No. 70582 entitled, National Power Corporation v. Spouses Ruperto Libunao and Sonia P. Sanopo and Heirs of Benita Domingo. The antecedents, as summarized by the Regional Trial Court (RTC) and adopted by the CA, are as follows:

This is an action for Eminent Domain filed by the plaintiff National Power Corporation, a government-owned and controlled corporation, created and existing by virtue of Rep. Act No. 6395, as amended, against the defendants spouses Ruperto Libunao and Sonia P. Sanopo, and the defendants heirs of Benita Domingo, namely: spouses Antonio Apacible & Clarita Sioson and spouses Eligio Garcia & Salud Sioson, represented by Clarita S. Apacible. The plaintiff is seeking to expropriate the following properties: 1. Lot No. 1277-A-3-A covered by Transfer Certificate of Title 52726, under Tax Declaration No. 0520300456, located at Sumacab Norte, Cabanatuan City, with an area of 1,212 square meters registered in the name of Sonia P. Sanopo, married to Ruperto Libunao, issued by the Register of Deeds of Cabanatuan City; 2. A portion of 4,380 square meters of Lot No. 1236 covered by Transfer Certificate of Title No. 889 issued by the Register of Deeds of Cabanatuan City, with a total area of 113,745 square meters in the name of Heirs of Benita Domingo, namely: Clarita Sioson, married to Antonio Apacible, and Salud Sioson, married to Eligio Garcia, covered by Tax Declaration No. 05201-00207, located at Sumacab Norte, Cabanatuan City; in order to construct and maintain its Cabanatuan-Talavera 69 KV Transmission Line Project for public purpose, hence, the need to acquire an easement of right- of- way over the affected portions of the abovedescribed parcels of land. The defendants, through their lawyers filed their answers to the plaintiff's complaint. Upon motion of the plaintiff, a writ of possession was issued by the court and on January 7 and 8, 1998, the plaintiff was placed in possession of the properties in question. Upon motion of Atty. Marianito Bote, Reynaldo Joson, Pablo Mamaclay and Clodualdo Adao were allowed to intervene by the Court. This Court, upon motion of the parties and pursuant to Sec. 5, Rule 67 of the Rules of Court created a Commission or Committee composed of a Chairman and two members. The City Assessor of Cabanatuan, Lorenza Esguerra, was appointed as Chairwoman and the members are Oligario B. Enrile for the defendants and Atty. Manuel Bugayon and Atty. Henry Alog for the plaintiff. The Chairman and the members took their oaths of office. A City Appraisal Committee was likewise formed composed of City Assessor Lorenza Esguerra as Chairwoman and City Treasurer Bernardo C. Pineda and City Engineer Mac Arthur S. Yap, all of Cabanatuan City as members. The aforesaid City Appraisal Committee of Cabanatuan issued Resolution No. 07-[S]-2000 dated March 22, 2000 whereby it resolved that Lot No. 1277-A-3-A with an area of 1,212 square meters registered in the name of defendant Sonia Sanopo, married to Ruperto Libunao has a current and fair market value which may be appraised at P2,200 per square meter. Likewise, said Appraisal Committee issued Resolution No. 08-[S]-2000 dated March 22, 2000 whereby it resolved that a portion of 4,480 square meters of Lot 1236 registered in the name of the Heirs of Benita Domingo has a current and fair market value which may be appraised atP1,200 per square meter.Atty. Henry P. Alog, appointed Commissioner of the National Power Corporation submitted his Commissioner's Report dated June 7, 2000and made the following recommendations: 1. For plaintiff NPC to pay defendants for those areas affected that is classified and is actually devoted for agricultural purposes, an easement fee equivalent to 10% of the market value of the agricultural lots based on the area covered by the right-of-way clearance; 2. For plaintiff NPC to acquire and pay defendant Libunao the full market value of his property (174.00 sq. m.) that is classified as residential lot. The plaintiff NPC paid all the defendants and intervenors the damages to improvements existing on their lands such as palay crops, fruit, trees, etc. On August 29, 1997, the City Appraisal Committee of Cabanatuan composed of City Assessor Engr. Norberto P. Cajucom, as Chairman and City Treasurer Bernardo C. Pineda and City Engineer Mac Arthur S. Yapas, members, issued Resolution No. 03-[S]-97 recommending that the current and

fair market value of the lots in question be appraised at P700.00 per square meter for residential lot and P460.00 per square meter for agricultural lot. Hence, the said committee recommended the total amount of P122,919.61 as payment for the 1,212.00 square meters of the land owned by the defendant Sonia P. Sanopo, married to Ruperto Libunao and the total amount of P204,480.00 as payment for the 4,380 square meters of land owned by the defendants heirs of Benita Domingo.[3] On January 5, 2001, the RTC, taking into consideration the Commissioners' Reports, issued its Decision, [4] the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered: 1. Upholding the right of the plaintiff to expropriate the properties of the defendants which are particularly described below for public use or purpose as stated in the complaint; 2. Ordering the plaintiff National Power Corporation to pay the defendants spouses Ruperto Libunao and Sonia P. Sanopo the total sum ofP1,818,000.00 at the rate of P1,500.00 per square meter of Lot 1277-A-3-A covered by Transfer Certificate of Title No. T-52726 issued by the Register of Deeds of Cabanatuan City in the name of Sonia P. Sanopo, married to Ruperto Libunao, located at Sumacab Norte, Cabanatuan City with an area of 1,212 square meters covered by Tax Declaration No. 05203-00456; 3. Ordering the plaintiff to pay the defendants heirs of Benita Domingo the total sum of P2,628,000.00 at the rate of P600.00 per square meter of a portion of 4,380 square meters of Lot 1236 covered by Transfer Certificate of Title No. T-889 issued by the Register of Deeds of Cabanatuan City in the names of the heirs of Benita Domingo, namely: spouses Antonio Apacible and Clarita Sioson, and Spouses Eligio Garcia and Salud Sioson, located in Sumacab Norte, Cabanatuan City, covered by Tax Declaration No. 05201-00207; 4. Ordering the plaintiff to pay the said defendants the legal rate of interest of the said amounts of compensation fixed by this Court from the taking of the possession of the properties in question by the plaintiff on January 7 and 8, 1998, until fully paid; 5. Ordering the plaintiff to pay the costs of this suit; 6. Ordering a certified copy of this judgment or decision to be recorded in the Office of the Register of Deeds of Cabanatuan City upon its finality.SO ORDERED. [5]

In so ruling, the RTC considered the 3 recommendations/resolutions of different dates submitted to it by the City Appraisal Committee (CAC) of Cabanatuan City for the purpose of ascertaining the just compensation for the subject properties to wit: Resolution No. 03-S-97 dated August 29, 1997, and Resolution Nos. 07-S-2000 and 08-S-2000 both dated March 22, 2000, and the Report submitted by Commissioner Henry P. Alog for petitioner. It ruled that the amount of just compensation should be based on the value of the property as of the date of its taking or the filing of the complaint, whichever came first; that petitioner's complaint was filed on October 30, 1997 and petitioner's taking of the properties was made on January 7 and 8, 1998, thus, the just compensation for the expropriated property should be reckoned from October 30, 1997.The RTC did not give its approval to CAC's recommended appraised value of P2,200 per sq. meter for respondents Spouses Libunao's property and P1,200 per sq. meter for the property of respondents Heirs of Domingo, because the appraisals were determined in 2000 and not on October 30, 1997 when the complaint was filed. The RTC then fixed the value of the properties of respondents Spouses Libunao at P1,500 per sq. meter and of respondents Heirs of Domingo at P600.00 per sq. meter. Dissatisfied, petitioner and respondents Heirs of Domingo separately appealed the RTC Decision to the CA. On April 30, 2004, the CA issued its assailed Decision, the dispositive portion of which reads:

WHEREFORE, the appealed Decision dated January 5, 2001 is MODIFIED. The amount of just compensation to be paid to the Sps. Libunao and to the Heirs of Domingo for NPC's taking of their properties with an area of 1,212 square meters and 4,380 square meters described in TCT No. 52776 and T-889, respectively, is hereby fixed at P700.00 per square meter for residential land and P460.00 per square meter for agricultural land. The costs of suit awarded in favor of the Sps. Libunao and the Heirs of Benita Domingo are deleted. [6]

Anent petitioner's appeal assailing the amounts fixed by the RTC as the fair market value for the subject properties, the CA found that CAC Resolution No. 03-S-97 dated August 29, 1997, recommending the rates of P700.00 per sq. meter for residential lot and P460.00 per sq. meter for agricultural lot was the most reliable proof of valuation; that, as between the valuation based on the prevailing market value on March 22, 2000, or almost three years after the filing of the complaint, and another based on the appraisal made on August 29, 1997, or two months prior to the filing of the complaint, the latter was considered as the just and equitable basis for compensation being the closest assessment of the market value of the properties to the time the expropriation complaint was filed.The CA found no reversible error committed by the RTC in ordering the acquisition of the entire 1,212 sq. meters of land owned by respondents Spouses Libunao, since in the document entitled DATA OF LOT EXPROPRIATED, which was attached to Commissioner Alog's Report, it was admitted that the total land area affected was 1,212 sq. meters for respondents Spouses Libunao and 4,380 sq. meters for respondents Heirs of Domingo.The CA upheld the RTC's award of legal interest on the amount of compensation since a judgment in expropriation proceedings must provide for the payment of legal interest as a matter of law from the time the government took over the land until it paid the owners thereof, thus, the government is liable to pay 6% if no immediate payment was made for the value of the property at the time of actual taking. It found that the amount which petitioner allegedly deposited in a bank merely represented the provisional value of the properties sought to be expropriated to enable it to take possession of the land; that the amount withdrawn by the property owners corresponded to the consequential loss or damage to improvements suffered by the owners due to the installation of the transmission lines. The RTC's award of the cost of the suit was deleted since petitioner's charter exempts it from the obligation to pay the costs of the proceedings. The CA found no merit on the appeal of respondents Heirs of Domingo and ruled that the valuation embodied in Resolution No. 03-S-97 dated August 29, 1997 be also made applicable to them. Petitioner moved for a partial reconsideration of the Decision, which the CA denied in its Resolution [7] dated January 3, 2005. Hence, herein petition assigning the following errors committed by the CA: THE COURT OF APPEALS SERIOUSLY ERRED IN PRONOUNCING THAT THE EXPROPRIATION SHOULD COVER THE ENTIRE AREA OF RESPONDENTS' PROPERTIES, ALTHOUGH ONLY A RIGHTOF-WAY EASEMENT THEREON WAS ACTUALLY TAKEN AND BEING USED BY PETITIONER. THE COURT OF APPEALS GRAVELY ERRED IN REQUIRING PETITIONER TO PAY INTERESTS TO BE RECKONED FROM THE DATE OF TAKING UNTIL FULL PAYMENT OF THE WHOLE PROPERTY. [8]

Petitioner contends that it simply needed a mere right-of-way easement on the aerial space above respondents' properties; that the presence of transmission lines over the subject area will not damage, impair or render the entire area thereof inutile for agricultural and residential purposes; that it conducted relevant studies and initiated safety nets to ensure that the transmission lines are technically safe, environmental-friendly and would cause least injury to the affected area compatible with public interest; that, in contrast, respondents did not present any evidence to the contrary and even

the two CAC Resolutions failed to mention any actual damage or impairment that the transmission lines would possibly cause on the subject properties; that it is but proper and legal that petitioner should only be obligated to pay 10% of the market value of the subject properties in accordance with Section 3-A of Republic Act (R.A.) 6395. [9] Petitioner claims that it had already paid respondents the full assessed value of the properties in the amount of P5,196.58 prior to the use of the aerial space above respondents' properties and such amount was already withdrawn by respondents; that the amount of just compensation determined by the RTC and modified by the CA indubitably followed the formula of just compensation equals market value plus consequential loss minus consequential benefit; that consequential loss necessarily included whatever interest may be due to the owner relative to the unpaid balance of just compensation; and, that a separate computation for interest in addition to the consequential loss included in the aforesaid formula is grossly unfair and disadvantageous to the government as it will amount to double compensation. Respondents Spouses Libunao argue that the petition should be denied for having failed to present issues involving questions of law; that the CA correctly ordered the payment of their 1,212 sq. meter land since the construction of the transmission lines impaired the agricultural purpose of their land; that the check dated August 5, 1998 in the amount of P387,699.00 issued by petitioner to respondents Spouses Libunao was payment for the damaged improvements in their subject property and not as payment for the assessed value of the property; and that the CA correctly upheld the RTC's order for petitioner to pay legal interest on the amount of compensation. Respondents Heirs of Domingo claim that the first issue raised in the petition involves a question of fact and, therefore, it is not proper for a petition for review, nonetheless, they argue that there was no reversible error committed by the CA. They contend that in the document entitled DATA OF LOT EXPROPRIATED attached to the Report submitted by Commissioner Alog, it stated in no uncertain terms that the area of respondents Heirs of Domingos properties affected by the expropriation was 4,380 sq. meter; that petitioner's allegations that it had conducted relevant studies and initiated safety nets to guarantee the safety of the transmission lines were not at all raised in the RTC; and that payment of legal interest on the amount of just compensation is provided under Section 10, Rule 67 of the Rules of Court. In its Consolidated Reply, petitioner argues that there is no factual issue involved with respect to the correct application and interpretation of Section 3-A of R.A. 6395; that there are instances where factual findings of the appellate court may be reviewed by the Court such as when the CA failed to notice certain relevant facts which if properly considered will justify a different conclusion; that such exception applies in this case since the CA failed to consider that petitioner had conducted studies on the subject properties which result showed that the installation of transmission lines on the aerial space above the subject properties was safe and would not, in any way, affect the beneficial use thereof for agricultural purposes. The petition lacks merit. The Court shall first resolve the procedural matter raised by respondents, i.e., whether petitioner should pay just compensation for the entire area of respondents' properties or only an easement fee of 10% of the market value of the properties traversed by the transmission lines is a factual matter which is not proper for a petition for review. In National Power Corporation v. Purefoods Corporation,[10] the Court held: There is a question of law when the issue does not call for an examination of the probative value of the evidence presented, the truth or falsehood of facts being admitted and the doubt concerns the correct application of law and jurisprudence on the matter. On the other hand, there is a question of fact when the doubt or controversy arises as to the truth or falsity of the alleged facts. When there is no dispute as to

fact, the question of whether or not the conclusion drawn therefrom is correct is a question of law. The issue raised by petitioner of whether or not only an easement fee of 10% of the market value of the expropriated properties should be paid to the affected owners is a question of law. This issue does not call for the reevaluation of the probative value of the evidence presented but rather the determination of whether the pertinent laws cited by NAPOCOR in support of its argument are applicable to the instant case.[11]

On the substantive issue, the Court finds no reversible error committed by the CA in affirming the RTC's conclusion that the payment of just compensation should be for the entire area of respondents' subject properties. Petitioner's argument that it should only be required to pay an easement fee of 10% of the market value of the properties since it simply needed a right-of-way easement on the aerial space above respondents' properties for the passage of its transmission lines has long been found unmeritorious by the Court. In National Power Corporation v. Manubay Agro-Industrial Development Corporation, [12] a case involving an easement of a right-of-way over a parcel of land that would be traversed by high-powered transmission lines, just like the situation obtaining in the instant petition, the Court held that the nature and effect of the installation of power lines and the limitations on the use of the land for an indefinite period should be considered, as the owners of the properties would be deprived of the normal use of their properties. For this reason, the property owners are entitled to the payment of just compensation based on the full market value of the affected properties. The Court explained: Granting arguendo that what petitioner acquired over respondents property was purely an easement of a right of way, still, we cannot sustain its view that it should pay only an easement fee, and not the full value of the property. The acquisition of such an easement falls within the purview of the power of eminent domain. This conclusion finds support in similar cases in which the Supreme Court sustained the award of just compensation for private property condemned for public use. Republic v. PLDT held thus: x x x. Normally, of course, the power of eminent domain results in the taking or appropriation of title to, and possession of, the expropriated property; but no cogent reason appears why the said power may not be availed of to impose only a burden upon the owner of condemned property, without loss of title and possession. It is unquestionable that real property may, through expropriation, be subjected to an easement of right of way. True, an easement of a right of way transmits no rights except the easement itself, and respondent retains full ownership of the property. The acquisition of such easement is, nevertheless, not gratis. As correctly observed by the CA, considering the nature and the effect of the installation of power lines, the limitations on the use of the land for an indefinite period would deprive respondent of normal use of the property. For this reason, the latter is entitled to payment of a just compensation, which must be neither more nor less than the monetary equivalent of the land. Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. The measure is not the takers gain, but the owners loss. The word just is used to intensify the meaning of the word compensation and to convey thereby the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full and ample. In eminent domain or expropriation proceedings, the just compensation to which the owner of a condemned property is entitled is generally the market value. Market value is that sum of money which a person desirous but not compelled to buy, and an owner willing but not compelled to sell, would agree on as a price to be given and received therefor. Such amount is not limited to the assessed value of the property or to the schedule of market values determined by the provincial or city appraisal committee. However, these values may serve as factors to be considered in the judicial valuation of the property. [13] This ruling has been repeatedly reiterated in subsequent cases [14] and continues to be the controlling doctrine.

In its complaint for expropriation, petitioner sought authority to enter and take possession and control over the subject properties, together with the improvements, and to demolish all improvements existing thereon to commence and undertake the construction of its transmission line project. In fact, petitioner had already taken possession of the subject properties and had demolished the plants, trees and crops found in the subject properties as evidenced by checks payments for the damaged improvements. The overhead transmission lines which traverse respondents properties could be considered indefinite in nature. Moreover, the high-tension electric current passing through the transmission line would expose respondents' lives and limbs to danger. Thus, the expropriation would in fact not be limited to an easement of right-of-way only.[15] In National Power Corporation v. Aguirre-Paderanga,[16] the Court said: [I]t cannot be gainsaid that NPCs complaint merely involves a simple case of mere passage of transmission lines over Dilao, et al.sproperty. Aside from the actual damage done to the property traversed by the transmission lines, the agricultural and economic activity normally undertaken on the entire property is unquestionably restricted and perpetually hampered as the environment is made dangerous to the occupants life and limb. Petitioner's allegation that it had conducted relevant studies and initiated safety nets to guarantee that the transmission lines are technically safe and would cause least injury to the affected areas was not raised at all in the RTC as correctly argued by respondents Heirs of Domingo, thus, could no longer be considered on appeal. Petitioner's reliance on Section 3-A of R.A. 6395, as amended, is misplaced. While Section 3-A of R.A. 6395 indeed states that only 10% of the market value of the property is due to the owner of the property subject to an easement of right-of-way, said rule is not binding on the Court. [17] It has been reiterated that the determination of just compensation in eminent domain cases is a judicial function. [18] Any valuation for just compensation laid down in the statutes may serve only as a guiding principle or one of the factors in determining just compensation, but it may not substitute the courts own judgment as to what amount should be awarded and how to arrive at such amount. [19] Petitioner's claim that it should not be ordered to pay interest to be reckoned from the date of taking until the full payment of the value of the subject properties deserves scant consideration. Section 10, Rule 67 of the Rules of Court provides: SEC. 10. Rights of plaintiff after judgment and payment . - Upon payment by the plaintiff to the defendant of the compensation fixed by the judgment, with legal interest thereon from the taking of the possession of the property, or after tender to him of the amount so fixed and payment of the costs, the plaintiff shall have the right to enter upon the property expropriated and to appropriate it for the public use or purpose defined in the judgment, or to retain it should he have taken immediate possession thereof under the provision of section 2 hereof. x x x. Clearly, respondents are entitled to the payment of legal interest on the compensation for the subject lands from the time of the taking of their possession up to the time that full payment is made by petitioner. [20] In accordance with jurisprudence, the legal interest allowed in payment of just

compensation for lands expropriated for public use is six percent (6%) per annum. [21]

Finally, the Court finds no merit on petitioner's claim that the amount of P5,196.58 which petitioner deposited in a bank to be able to obtain the issuance of the writ of possession was already withdrawn by respondents. A perusal of the records does not show any evidence that respondents had withdrawn such amount. On the contrary, the CA found that the amount withdrawn by respondents corresponds to the consequential loss or damages to improvements suffered by them by reason of petitioner's installation of its transmission lines. [22] WHEREFORE, the petition is DENIED. The Decision dated April 30, 2004 and the Resolution dated January 3, 2005 of the Court of Appeals in CA-G.R. CV No. 70582 are AFFIRMED. SO ORDERED.

FIRST DIVISION G.R. No. 167017

SERAFIN CHENG,

Petitioner vs

SPOUSES VITTORIO and MA. HELEN DONINI, Respondents. Promulgated: June 22, 2009 DECISION

CORONA, J.: The subject of this petition is an oral lease agreement that went sour. Petitioner Serafin Cheng agreed to lease his property located at 479 Shaw Blvd., Mandaluyong City to respondents, Spouses Vittorio and Ma. Helen Donini, who intended to put up a restaurant thereon. They agreed to a monthly rental of P17,000, to commence in December 1990.Bearing an Interim Grant of Authority executed by petitioner, respondents proceeded to introduce improvements in the premises. The authority read: I, Serafin Cheng, of legal age and with office address at Room 310 Federation Center Building Muelle de Binondo, Manila, owner of the building/structure located at 479 Shaw Boulevard, Mandaluyong, Metro Manila, pursuant to a lease agreement now being finalized and to take effect December 1, 1990, hereby grants VITTORIO DONINI (Prospective Lessee) and all those acting under his orders to make all the necessary improvements on the prospective leased premises located at 479 Shaw Blvd., Mandaluyong, Metro Manila, and for this purpose, to enter said premises and perform, all such works and activities to make the leased premises operational as a restaurant or similar purpose. Manila, 31 October 1990.[1]

However, before respondents business could take off and before any final lease agreement could be drafted and signed, the parties began to have serious disagreements regarding its terms and conditions. Petitioner thus wrote respondents on January 28, 1991, demanding payment of the deposit and rentals, and signifying that he had no intention to continue with the agreement should respondents fail to pay. Respondents, however, ignoring petitioners demand, continued to occupy the premises until April 17, 1991 when their caretaker voluntarily surrendered the property to petitioner. Respondents then filed an action for specific performance and damages with a prayer for the issuance of a writ of preliminary injunction in the Regional Trial Court (RTC) of Pasig City, Branch 67, docketed as Civil Case No. 60769. Respondents prayed that petitioner be ordered to execute a written lease contract for five years, deducting from the deposit and rent the cost of repairs in the amount of P445,000, or to order petitioner to return their investment in the amount of P964,000 and compensate for their unearned net income of P200,000 with interest, plus attorneys fees.[2] Petitioner, in his answer, denied respondents claims and sought the award of moral and exemplary damages, and attorneys fees.[3] After trial, the RTC rendered its decision in favor of petitioner, the dispositive portion of which provided: WHEREFORE, in view of all the foregoing, this Court finds the preponderance of evidence in favor of the [petitioner] and hereby renders judgment as follows: 1. The Complaint is dismissed. 2. On the counterclaim, [respondents] are ordered, jointly and severally, to pay the [petitioner] P500,000.00 as moral damages;P100,000.00 as exemplary damages; and P50,000.00 as attorneys fees. 3. [Respondents] are likewise ordered to pay the costs. SO ORDERED.[4] Respondents appealed to the Court of Appeals (CA) which, in its decision [5] dated March 31, 2004, recalled and set aside the RTC decision, and entered a new one ordering petitioner to pay respondents the amount of P964,000 representing the latters expenses incurred for the repairs and improvements of the premises. [6] Petitioner filed a motion for reconsideration on the ground that the award of reimbursement had no factual and legal bases, [7]but this was denied by the CA in its resolution dated February 21, 2005.[8] Hence, this petition for certiorari under Rule 45 of the Rules of Court, with petitioner arguing that: THE COURT OF APPEALS DECIDED THIS CASE NOT IN ACCORD WITH LAW AND WITH APPLICABLE DECISIONS OF THIS HONORABLE COURT. PUT OTHERWISE: A. BY ORDERING PETITIONER TO REIMBURSE RESPONDENTS THE FULL VALUE OF EXPENSES FOR THEIR ALLEGED REPAIRS AND IMPROVEMENTS OF THE LEASED PREMISES, THE COURT OF APPEALS ERRONEOUSLY CONSIDERED RESPONDENTS NOT AS MERE LESSEES BUT POSSESSORS IN GOOD FAITH UNDER ARTICLES 448 AND 546 OF THE CIVIL CODE. B. THE COURT OF APPEALS DECIDED THIS CASE NOT IN ACCORD WITH ARTICLE 1678 OF THE CIVIL CODE WHICH GIVES THE LESSOR THE OPTION TO REIMBURSE THE LESSEE ONEHALF OF THE VALUE OF USEFUL IMPROVEMENTS OR, IF HE DOES NOT WANT TO, ALLOW THE LESSEE TO REMOVE THE IMPROVEMENTS. C. LIKEWISE, BY ORDERING PETITIONER TO REIMBURSE THE VALUE OF ORNAMENTAL EXPENSES, THE COURT OF APPEALS CONTRAVENED THE SECOND PARAGRAPH OF ARTICLE 1678. D. THE COURT OF APPEALS ERRED IN APPLYING THE PRINCIPLE OF EQUITY IN FAVOR OF THE RESPONDENTS. E. THE COURT OF APPEALS ERRED IN NOT AFFIRMING THE DECISION OF THE TRIAL COURT AWARDING DAMAGES TO PETITIONER.

F. THE COURT OF APPEALS SERIOUSLY ERRED AND/OR GRAVELY ABUSED ITS DISCRETION IN FIXING THE AMOUNT OF P961,000.00[9] CONTRARY TO RESPONDENTS OWN REPRESENTATION AND EVIDENCE.[10] Respondents were required to file their comment on the petition but their counsel manifested that he could not file one since his clients whereabouts were unknown to him. [11] Counsel also urged the Court to render a decision on the basis of the available records and documents. [12] Per resolution dated August 30, 2006, copies of the resolutions requiring respondents to file their comment were sent to their last known address and were deemed served. The order requiring respondents counsel to file a comment in their behalf was reiterated. [13] In their comment, respondents argued that they were possessors in good faith, hence, Articles 448 and 546 of the Civil Code applied and they should be indemnified for the improvements introduced on the leased premises. Respondents bewailed the fact that petitioner was going to benefit from these improvements, the cost of which amounted to P1.409 million, in contrast to respondents rental/deposit obligation amounting to only P34,000. Respondents also contended that petitioners rescission of the agreement was in bad faith and they were thus entitled to a refund. [14] In settling the appeal before it, the CA made the following findings and conclusions:
1. 2. 3. 4. 5. there was no agreement that the deposit and rentals accruing to petitioner would be deducted from the costs of repairs and renovation incurred by respondents; respondents committed a breach in the terms and conditions of the agreement when they failed to pay the rentals; there was no valid rescission on the part of petitioner; respondents were entitled to reimbursement for the cost of improvements under the principle of equity and unjust enrichment; and the award of damages in favor of petitioner had no basis in fact and law.[15]

As the correctness of the CAs ruling regarding (1) the lack of agreement on the deposit and rentals; (2) respondents breach of the terms of the verbal agreement and (3) the lack of valid rescission by petitioner was never put in issue, this decision will be confined only to the issues raised by petitioner, that is, the award of reimbursement and the deletion of the award of damages. It need not be stressed that an appellate court will not review errors that are not assigned before it, save in certain exceptional circumstances and those affecting jurisdiction over the subject matter as well as plain and clerical errors, none of which is present in this case. [16] Remarkably, in ruling that respondents were entitled to reimbursement, the CA did not provide any statutory basis therefor and instead applied the principles of equity and unjust enrichment, stating: It would be inequitable to allow the defendant-appellee, as owner of the property to enjoy perpetually the improvements introduced by the plaintiffs-appellants without reimbursing them for the value of the said improvements. Well-settled is the rule that no one shall be unjustly enriched or benefitted at the expense of another.[17] Petitioner, however, correctly argued that the principle of equity did not apply in this case. Equity, which has been aptly described as "justice outside legality," is applied only in the absence of, and never against, statutory law or judicial rules of procedure.[18] Positive rules prevail over all abstract arguments based on equity contra legem.[19] Neither is the principle of unjust enrichment applicable since petitioner (who was to benefit from it) had a valid claim. [20] The relationship between petitioner and respondents was explicitly governed by the Civil Code provisions on lease, which clearly provide for the rule on reimbursement of useful improvements and ornamental expenses after termination of a lease agreement. Article 1678 states: If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than is necessary.

With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished. Article 1678 modified the (old) Civil Code provision on reimbursement where the lessee had no right at all to be reimbursed for the improvements introduced on the leased property, he being entitled merely to the rights of a usufructuary the right of removal and set-off but not to reimbursement.[21] Contrary to respondents position, Articles 448 and 546 of the Civil Code did not apply. Under these provisions, to be entitled to reimbursement for useful improvements introduced on the property, respondents must be considered builders in good faith. Articles 448 and 546, which allow full reimbursement of useful improvements and retention of the premises until reimbursement is made, apply only to a possessor in good faith or one who builds on land in the belief that he is the owner thereof. A builder in good faith is one who is unaware of any flaw in his title to the land at the time he builds on it. [22] But respondents cannot be considered possessors or builders in good faith. As early as 1956, in Lopez v. Philippine & Eastern Trading Co., Inc. , [23] the Court clarified that a lessee is neither a builder nor a possessor in good faith x x x This principle of possessor in good faith naturally cannot apply to a lessee because as such lessee he knows that he is not the owner of the leased property. Neither can he deny the ownership or title of his lessor. Knowing that his occupation of the premises continues only during the life of the lease contract and that he must vacate the property upon termination of the lease or upon the violation by him of any of its terms, he introduces improvements on said property at his own risk in the sense that he cannot recover their value from the lessor, much less retain the premises until such reimbursement . (Emphasis supplied) Being mere lessees, respondents knew that their right to occupy the premises existed only for the duration of the lease. [24] Cortez v. Manimbo[25] went further to state that : If the rule were otherwise, it would always be in the power of the tenant to improve his landlord out of his property.

These principles have been consistently adhered to and applied by the Court in many cases. [26] Under Article 1678 of the Civil Code, the lessor has the primary right (or the first move) to reimburse the lessee for 50% of the value of the improvements at the end of the lease. If the lessor refuses to make the reimbursement, the subsidiary right of the lessee to remove the improvements, even though the principal thing suffers damage, arises. Consequently, on petitioner rests the primary option to pay for one-half of the value of the useful improvements. It is only when petitioner as lessor refuses to make the reimbursement that respondents, as lessees, may remove the improvements. Should petitioner refuse to exercise the option of paying for one-half of the value of the improvements, he cannot be compelled to do so. It then lies on respondents to insist on their subsidiary right to remove the improvements even though the principal thing suffers damage but without causing any more impairment on the property leased than is necessary. As regards the ornamental expenses, respondents are not entitled to reimbursement. Article 1678 gives respondents the right to remove the ornaments without damage to the principal thing. But if petitioner appropriates and retains said ornaments, he shall pay for their value upon the termination of the lease.The fact that petitioner will benefit from the improvements introduced by respondents is

beside the point. In the first place, respondents introduced these improvements at their own risk as lessees. Respondents were not forced or obliged to splurge on the leased premises as it was a matter of necessity as well as a business strategy.
[27]

In fact, had respondents only complied with their obligation to pay the deposit/rent, there would have been no dispute

to begin with. If they were able to shell out more than a million pesos to improve the property, the measly P34,000 deposit demanded by petitioner was a mere drop in the bucket, so to speak. More importantly, the unequivocal terms of Article 1678 of the Civil Code should be the foremost consideration.The Court notes that the CA pegged the total value of the improvements made on the leased premises at P964,000, which was apparently based on the allegation in respondents complaint that it was their total investment cost. [28] The CA lumped together allof respondents expenses, which was a blatant error. A qualification should have been made as to how much was spent for useful improvements (or those which were suitable to the use for which the lease was intended) and how much was for ornamental expenses. Respondent Vittorio Donini testified that he spent P450,000 for necessary repairs, while P500,000 was spent for adornments. [29] The evidence on record, however, showed respondents expenses for useful improvements to be as follows:
EXPENSE Electrical Roofing Labor Ceiling Labor Electrical (phase 2) Door Labor Water Gutters Outside Wall Inside Wall Electrical (phase 3) Labor Total AMOUNT P31,893.65 P14,856.00 P19,909.75 P65,712.00 P38,689.20 P76,539.10 P41,371.75 P25,126.00 P 8,031.00 P 35,550.05 P 24,744.00 P 22,186.10 P 88,698.30 P 19,995.00 P513,301.90 Exh. F, et seq. [30] Exhibit O[31] Exh. P, et seq.[32] Exh. Q, et seq.[33] Exh. R, et seq.[34] Exh. S, et seq.[35] Exh. T, et seq.[36] Exh. U, et seq.[37] Exhs. W & W-1[38] Exhs. X & X-1[39] Exh. X-2[40] Exh. X-3[41] Exhs. X-8 to X-11[42] Exhibit Y[43]

Accordingly, the 50% value of the useful improvements to be reimbursed by petitioner, if he chose to do so, should be based on P513,301.90. Since petitioner did not exercise his option to retain these useful improvements, then respondents could have removed the same. This was the legal consequence of the application of Article 1678 under

ordinary circumstances. The reality on the ground ought to be recognized. For one, as disclosed by respondents counsel, he no longer knows the exact whereabouts of his clients, only that they are now in Europe and he has no communication with them at all.[44] For another, it appears that as soon as respondents vacated the premises, petitioner immediately reclaimed the property and barred respondents from entering it. Respondents also alleged, and petitioner did not deny, that the property subject of this case had already been leased to another entity since 1991. [45] This is where considerations of equity should come into play. It is obviously no longer feasible for respondents to remove the improvements from the property, if they still exist. The only equitable alternative then, given the circumstances, is to order petitioner to pay respondents one-half of the value of the useful improvements (50% of P513,301.90) introduced on the property, or P256,650.95. To be off-set against this amount are respondents unpaid P17,000 monthly rentals for the period of December 1990 to April 1991, [46] or P85,000. Petitioner should, therefore, indemnify respondents the amount ofP171,650.95. This is in accord with the laws intent of preventing unjust enrichment of a lessor who now has to pay one-half of the value of the useful improvements at the end of the lease because the lessee has already enjoyed the same, whereas the lessor can enjoy them indefinitely thereafter. [47] Respondents are not entitled to reimbursement for the ornamental expenses under the express provision of Article 1678. Moreover, since they failed to remove these ornaments despite the opportunity to do so when they vacated the property, then they were deemed to have waived or abandoned their right of removal. The CA also erred when it deleted the awards of moral and exemplary damages and attorneys fees. Petitioner is entitled to moral damages but not in the amount of P500,000 awarded by the RTC, which the Court finds to be excessive. While trial courts are given discretion to determine` the amount of moral damages, it should not be palpably and scandalously excessive.[48] Moral damages are not meant to enrich a person at the expense of the other but are awarded only to allow the former to obtain means, diversion or amusements that will serve to alleviate the moral suffering he has undergone due to the other persons culpable action. [49] It must always reasonably approximate the extent of injury and be proportional to the wrong committed. [50] The award of P100,000 as moral damages is sufficient and reasonable under the circumstances. The award of P100,000 as exemplary damages is likewise excessive. Exemplary damages are imposed not to enrich one party or impoverish another but to serve as a deterrent against or as a negative incentive to curb socially deleterious actions. [51] We thinkP50,000 is reasonable in this case.Finally, Article 2208 of the

Civil Code allows recovery of attorney's fees when exemplary damages are awarded or when the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest. [52] Petitioner is entitled to it since exemplary damages were awarded in this case and respondents act in filing Civil Case No. 60769 compelled him to litigate. The amount of P25,000 is in accord with prevailing jurisprudence. [53] WHEREFORE, the petition is PARTIALLY GRANTED. The decision dated March 31, 2004 rendered by the Court of Appeals in CAG.R. CV No. 54430 is hereby MODIFIED in that (1) (2) petitioner Serafin Cheng is ORDERED to pay respondents, spouses Vittorio and Ma. Helen Donini, the amount ofP171,650.95 as indemnity for the useful improvements; and respondents, spouses Vittorio and Ma. Helen Donini, are ORDERED to pay petitioner Serafin Cheng the following sums: a) P100,000.00 moral damages; b) P50,000.00 exemplary damages and c) P25,000.00 attorneys fees. Let copies of this decision be furnished respondents, spouses Vittorio and Ma. Helen Donini, at their last known address, and their counsel of record. SO ORDERED.