Ownership (Arts.

427-439, NCC)
A. Definition.
B. Bundle of rights included in ownership (jus utendi, etc.).
C. Other specific rights found in the Civil Code.

SECOND DIVISION
[G.R. No. 160384. April 29, 2005.]
CESAR T. HILARIO, for himself and as Attorney-in-Fact of IBARRA,
NESTOR, LINA and PRESCILLA, all surnamed HILARIO, petitioners, vs.
ALLAN T. SALVADOR, respondent.
HEIRS OF SALUSTIANO SALVADOR, namely, REGIDOR M. SALVADOR and
VIRGINIA SALVADOR-LIM,respondents-intervenors.
D E C I S I O N
CALLEJO, SR., J p:
This is a petition for review on certiorari under Rule 45 of the Revised Rules
of Court of the Decision 1 of the Court of Appeals (CA) in CA-G.R. CV No.
63737 as well as its Resolution 2 denying the motion for the
reconsideration of the said decision.
The Antecedents
On September 3, 1996, petitioners Cesar, Ibarra, Nestor, Lina and Prescilla,
all surnamed Hilario, filed a complaint with the Regional Trial Court (RTC) of
Romblon, Romblon, Branch 71, against private respondent Allan T.
Salvador. They alleged therein,inter alia, as follows:
2.That, the plaintiffs are co-owners by inheritance from Concepcion Mazo
Salvador of a parcel of land designated as Cad. Lot No. 3113-part, located at
Sawang, Romblon, Romblon, which property was [adjudged] as the
hereditary share of their father, Brigido M. Hilario, Jr. when their father was
still single, and which adjudication was known by the plaintiffs['] father's
co-heirs;
3.That, sometime in 1989, defendant constructed his dwelling unit of mixed
materials on the property of the plaintiffs' father without the knowledge of
the herein plaintiffs or their predecessors-in-interest;
4.That, demands have been made of the defendant to vacate the premises
but the latter manifested that he have (sic) asked the prior consent of their
grandmother, Concepcion Mazo Salvador;
5.That, to reach a possible amicable settlement, the plaintiffs brought the
matter to the Lupon of Barangay Sawang, to no avail, evidenced by the
CERTIFICATE TO FILE ACTION hereto attached as ANNEX B;
6.That, the unjustified refusal of the defendant to vacate the property has
caused the plaintiffs to suffer shame, humiliation, wounded feelings,
anxiety and sleepless nights; CSDTac
7.That, to protect their rights and interest, plaintiffs were constrained to
engage the services of a lawyer. 3
The petitioners prayed that, after due proceedings, judgment be rendered
in their favor, thus:
WHEREFORE, it is prayed of this Honorable Court that after due process
(sic), an order be issued for the defendant to vacate and peacefully turn
over to the plaintiffs the occupied property and that defendant be made to
pay plaintiffs:
a.actual damages, as follows:
a.1.transportation expenses in connection with the projected settlement of
the case amounting to P1,500.00 and for the subsequent attendance to the
hearing of this case at P1,500.00 each schedule;
a.2.attorney's fees in the amount of P20,000.00 and P500.00 for every
court appearance;
b.moral and exemplary damages in such amount incumbent upon the
Honorable Court to determine; and
c.such other relief and remedies just and equitable under the premises. 4
The private respondent filed a motion to dismiss the complaint on the
ground of lack of jurisdiction over the nature of the action, citing Section 33
of Batas Pambansa (B.P.) Blg. 129, as amended by Section 3(3) of Republic
Act (R.A.) No. 7691. 5 He averred that
(1)the complaint failed to state the assessed value of the land in dispute;
(2)the complaint does not sufficiently identify and/or describe the parcel of
land referred to as the subject-matter of this action;
both of which are essential requisites for determining the jurisdiction of the
Court where the case is filed. In this case, however, the assessed value of
the land in question is totally absent in the allegations of the complaint and
there is nothing in the relief prayed for which can be picked-up for
determining the Court's jurisdiction as provided by law.
In the face of this predicament, it can nevertheless be surmised by reading
between the lines, that the assessed value of the land in question cannot
exceed P20,000.00 and, as such, it falls within the jurisdiction of the
Municipal Trial Court of Romblon and should have been filed before said
Court rather than before the RTC. . . . 6
The petitioners opposed the motion. 7 They contended that the RTC had
jurisdiction over the action since the court can take judicial notice of the
market value of the property in question, which was P200.00 per square
meter and considering that the property was 14,797 square meters, more
or less, the total value thereof is P3,500,000.00. Besides, according to the
petitioners, the motion to dismiss was premature and "the proper time to
interpose it is when the [petitioners] introduced evidence that the land is
of such value."
On November 7, 1996, the RTC issued an Order 8 denying the motion to
dismiss, holding that the action was incapable of pecuniary estimation, and
therefore, cognizable by the RTC as provided in Section 19(1) of B.P. Blg.
129, as amended.
After the denial of the motion to dismiss, the private respondent filed his
answer with counterclaim. 9 Traversing the material allegations of the
complaint, he contended that the petitioners had no cause of action
against him since the property in dispute was the conjugal property of his
grandparents, the spouses Salustiano Salvador and Concepcion Mazo-
Salvador. caIEAD
On April 8, 1997, Regidor and Virginia Salvador filed their Answer-in-
Intervention 10 making common cause with the private respondent. On her
own motion, however, Virginia Salvador was dropped as intervenor. 11
During trial, the petitioners adduced in evidence Tax Declaration No. 8590-
A showing that in 1991 the property had an assessed value of P5,950.00. 12
On June 3, 1999, the trial court rendered judgment finding in favor of the
petitioners. The dispositive portion of the decision reads:
WHEREFORE, as prayed for, judgment is rendered:
Ordering the defendant to vacate and peacefully turn over to the plaintiffs
the occupied property; and
Dismissing defendant's counterclaim.
SO ORDERED. 13
Aggrieved, the private respondent and respondent-intervenor Regidor
Salvador appealed the decision to the CA, which rendered judgment on
May 23, 2003 reversing the ruling of the RTC and dismissing the complaint
for want of jurisdiction. The fallo of the decision is as follows:
IN VIEW OF THE FOREGOING, the appealed decision is REVERSED, and the
case DISMISSED, without prejudice to its refilling in the proper court.
SO ORDERED. 14
The CA declared that the action of the petitioners was one for the recovery
of ownership and possession of real property. Absent any allegation in the
complaint of the assessed value of the property, the Municipal Trial Court
(MTC) had exclusive jurisdiction over the action, conformably to Section
33 15 of R.A. No. 7691.
The petitioners filed a motion for reconsideration of the said decision,
which the appellate court denied. 16 Hence, they filed the instant petition,
with the following assignment of errors:
I
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE
ERROR IN HOLDING THAT THE INSTANT CASE,ACCION REIVINDICATORIA,
FALLS WITHIN THE EXCLUSIVE ORIGINAL JURISDICTION OF THE MUNICIPAL
TRIAL COURT OF ROMBLON, AND NOT WITH THE REGIONAL TRIAL COURT
OF ROMBLON.
II
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE
ERROR IN ORDERING THE REFILING OF THE CASE IN THE [PROPER] COURT,
INSTEAD OF DECIDING THE CASE ON THE MERITS BASED ON THE
COMPLETE RECORDS ELEVATED BEFORE SAID APPELLATE COURT AND IN
NOT AFFIRMING IN TOTO THE DECISION OF THE TRIAL COURT. 17
The Ruling of the Court
The lone issue for our resolution is whether the RTC had jurisdiction over
the action of the petitioners, the plaintiffs in the RTC, against the private
respondent, who was the defendant therein. SCaIcA
The petitioners maintain that the RTC has jurisdiction since their action is
an accion reivindicatoria, an action incapable of pecuniary estimation; thus,
regardless of the assessed value of the subject property, exclusive
jurisdiction falls within the said court. Besides, according to the petitioners,
in their opposition to respondent's motion to dismiss, they made mention
of the increase in the assessed value of the land in question in the amount
of P3.5 million. Moreover, the petitioners maintain that their action is also
one for damages exceeding P20,000.00, over which the RTC has exclusive
jurisdiction under R.A. No. 7691.
The petition has no merit.
It bears stressing that the nature of the action and which court has original
and exclusive jurisdiction over the same is determined by the material
allegations of the complaint, the type of relief prayed for by the plaintiff
and the law in effect when the action is filed, irrespective of whether the
plaintiffs are entitled to some or all of the claims asserted therein. 18 The
caption of the complaint is not determinative of the nature of the action.
Nor does the jurisdiction of the court depend upon the answer of the
defendant or agreement of the parties or to the waiver or acquiescence of
the parties.
We do not agree with the contention of the petitioners and the ruling of
the CA that the action of the petitioners in the RTC was anaccion
reivindicatoria. We find and so rule that the action of the petitioners was
an accion publiciana, or one for the recovery of possession of the real
property subject matter thereof. An accion reivindicatoria is a suit which
has for its object the recovery of possession over the real property as
owner. It involves recovery of ownership and possession based on the said
ownership. On the other hand, an accion publiciana is one for the recovery
of possession of the right to possess. It is also referred to as an ejectment
suit filed after the expiration of one year after the occurrence of the cause
of action or from the unlawful withholding of possession of the realty. 19

The action of the petitioners filed on September 3, 1996 does not involve a
claim of ownership over the property. They allege that they are co-owners
thereof, and as such, entitled to its possession, and that the private
respondent, who was the defendant, constructed his house thereon in
1989 without their knowledge and refused to vacate the property despite
demands for him to do so. They prayed that the private respondent vacate
the property and restore possession thereof to them.
When the petitioners filed their complaint on September 3, 1996, R.A. No.
7691 was already in effect. Section 33(3) of the law provides:
Sec. 33.Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts in Civil Cases. Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial Courts shall exercise:
xxx xxx xxx
(3)Exclusive original jurisdiction in all civil actions which involve title to, or
possession of, real property, or any interest therein where the assessed
value of the property or interest therein does not exceed Twenty Thousand
Pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed
value does not exceed Fifty Thousand Pesos (P50,000.00) exclusive of
interest, damages of whatever kind, attorney's fees, litigation expenses and
costs: Provided, That in cases of land not declared for taxation purposes,
the value of such property shall be determined by the assessed value of the
adjacent lots.
Section 19(2) of the law, likewise, provides that:
Sec. 19.Jurisdiction in civil cases. The Regional Trial Court shall exercise
exclusive original jurisdiction: cCAIES
xxx xxx xxx
(2)In all civil actions, which involve the title to, or possession of, real
property, or any interest therein, where the assessed value of the property
involved exceeds Twenty Thousand Pesos (P20,000.00) or, for civil actions
in Metro Manila, where such value exceeds Fifty Thousand Pesos
(P50,000.00) except actions for forcible entry into and unlawful detainer of
lands or buildings, original jurisdiction over which is conferred upon the
Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial
Courts.
The jurisdiction of the court over an action involving title to or possession
of land is now determined by the assessed value of the said property and
not the market value thereof. The assessed value of real property is the fair
market value of the real property multiplied by the assessment level. It is
synonymous to taxable value. 20 The fair market value is the price at which
a property may be sold by a seller, who is not compelled to sell, and bought
by a buyer, who is not compelled to buy.
Even a cursory reading of the complaint will show that it does not contain
an allegation stating the assessed value of the property subject of the
complaint. 21 The court cannot take judicial notice of the assessed or
market value of lands. 22 Absent any allegation in the complaint of the
assessed value of the property, it cannot thus be determined whether the
RTC or the MTC had original and exclusive jurisdiction over the petitioners'
action.
We note that during the trial, the petitioners adduced in evidence Tax
Declaration No. 8590-A, showing that the assessed value of the property in
1991 was P5,950.00. The petitioners, however, did not bother to adduce in
evidence the tax declaration containing the assessed value of the property
when they filed their complaint in 1996. Even assuming that the assessed
value of the property in 1991 was the same in 1995 or 1996, the MTC, and
not the RTC had jurisdiction over the action of the petitioners since the
case involved title to or possession of real property with an assessed value
of less than P20,000.00. 23
We quote with approval, in this connection, the CA's disquisition:
The determining jurisdictional element for the accion reivindicatoria is,
as RA 7691 discloses, the assessed value of the property in question. For
properties in the provinces, the RTC has jurisdiction if the assessed value
exceeds P20,000, and the MTC, if the value is P20,000 or below. An
assessed value can have reference only to the tax rolls in the municipality
where the property is located, and is contained in the tax declaration. In
the case at bench, the most recent tax declaration secured and presented
by the plaintiffs-appellees is Exhibit B. The loose remark made by them that
the property was worth 3.5 million pesos, not to mention that there is
absolutely no evidence for this, is irrelevant in the light of the fact that
there is an assessed value. It is the amount in the tax declaration that
should be consulted and no other kind of value, and as appearing in Exhibit
B, this is P5,950. The case, therefore, falls within the exclusive original
jurisdiction of the Municipal Trial Court of Romblon which has jurisdiction
over the territory where the property is located, and not the court a
quo. 24
It is elementary that the tax declaration indicating the assessed value of the
property enjoys the presumption of regularity as it has been issued by the
proper government agency. 25
Unavailing also is the petitioners' argumentation that since the complaint,
likewise, seeks the recovery of damages exceeding P20,000.00, then the
RTC had original jurisdiction over their actions. Section 33(3) of B.P. Blg.
129, as amended, quoted earlier, explicitly excludes from the
determination of the jurisdictional amount the demand for "interest,
damages of whatever kind, attorney's fees, litigation expenses, and
costs." This Court issued Administrative Circular No. 09-94 setting the
guidelines in the implementation of R.A. No. 7691, and paragraph 2 thereof
states that
2.The exclusion of the term "damages of whatever kind" in determining the
jurisdictional amount under Section 19(8) and Section 33(1) of B.P. Blg. 129,
as amended by R.A. 7691, applies to cases where the damages are merely
incidental to or a consequence of the main cause of action. However, in
cases where the claim for damages is the main cause of action, or one of
the causes of action, the amount of such claim shall be considered in
determining the jurisdiction of the court. acADIT
Neither may the petitioners find comfort and solace in Section 19(8) of B.P.
Blg. 129, as amended, which states:
SEC. 19.Jurisdiction in civil cases. Regional Trial Courts shall exercise
exclusive original jurisdiction:
xxx xxx xxx
(8)In all other cases in which the demand, exclusive of interest, damages of
whatever kind, attorney's fees, litigation expenses, and costs or the value
of the property in controversy exceeds One Hundred Thousand Pesos
(P100,000.00) or, in such other cases in Metro Manila, where the demand,
exclusive of the above-mentioned items exceeds Two Hundred Thousand
Pesos (P200,000.00).
The said provision is applicable only to "all other cases" other than an
action involving title to, or possession of real property in which the
assessed value is the controlling factor in determining the court's
jurisdiction. The said damages are merely incidental to, or a consequence
of, the main cause of action for recovery of possession of real property. 26
Since the RTC had no jurisdiction over the action of the petitioners, all the
proceedings therein, including the decision of the RTC, are null and void.
The complaint should perforce be dismissed. 27
WHEREFORE, the petition is DENIED. The assailed Decision and
Resolution of the Court of Appeals in CA-G.R. CV No. 63737 are
AFFIRMED. Costs against the petitioners.
SO ORDERED.
Puno, Austria-Martinez, Tinga and Chico-Nazario, JJ., concur.
||| (Hilario v. Salvador, G.R. No. 160384, April 29, 2005)







THIRD DIVISION
[G.R. No. 156360. January 14, 2005.]
CESAR SAMPAYAN, petitioner, vs. THE HONORABLE COURT OF
APPEALS, CRISPULO VASQUEZ and FLORENCIA VASQUEZ
GILSANO, respondents.
D E C I S I O N
GARCIA, J p:
In this verified petition for review on certiorari under Rule 45 of the
Rules of Court, petitioner Cesar Sampayan seeks the annulment and
setting aside of the following issuances of the Court of Appeals in
CA-G.R. SP No. 43557, to wit:
1.Decision dated May 16, 2002, denying his petition for review and
affirming an earlier decision of the Regional Trial Court at Agusan del
Sur, Branch VII, which in turn reversed on appeal a favorable
judgment of the Municipal Circuit Trial Court (MCTC) of Bayugan and
Sibagat, Agusan del Sur in a forcible entry case thereat commenced
against him by herein private respondents, the brother-and-sister
Crispulo Vasquez and Florencia Vasquez-Gilsano; and
2.Resolution dated November 7, 2002, which denied his motion for
reconsideration. ScCDET
From the pleadings and memoranda respectively filed by the parties,
the Court gathers the following factual antecedents:
On July 8, 1992, in the MCTC of Bayugan and Sibagat, Agusan del
Sur, the siblings Crispulo Vasquez and Florencia Vasquez-Gilsano
filed complaint for forcible entry against Cesar Sampayan for
allegedly having entered and occupied a parcel of land, identified as
Lot No. 1959, PLS-225, and built a house thereon without their
knowledge, consent or authority, the entry having been supposedly
effected through strategy and stealth.
In their complaint, the plaintiffs (now private respondents),
substantially alleged that their mother Cristita Quita was the owner
and actual possessor of Lot No. 1959; that after their mother's death
on January 11, 1984, they became co-owners pro-indiviso and lawful
possessors of the same lot; that on June 1, 1992, while they were
temporarily absent from the lot in question, defendant Cesar
Sampayan, through strategy and stealth, entered the lot and built a
house thereon, to their exclusion; and that, despite their repeated
demands for Sampayan to vacate the lot and surrender the
possession thereof to them, the latter failed and refused to do so.
In his answer, defendant Sampayan denied the material allegations
of the complaint and averred that neither the plaintiffs nor their
mother have ever been in possession of Lot No. 1959 and that he
does not even know plaintiffs' identities or their places of residence.
He claimed that he did not enter the subject lot by stealth or
strategy because he asked and was given permission therefor by
Maria Ybaez, the overseer of the lot's true owners, Mr. and Mrs.
Anastacio Terrado who were then temporarily residing in Cebu City
for business purposes. In the same answer, Sampayan alleged that
the plaintiffs' claim has long prescribed for the reason that the lot in
dispute had been possessed and declared for taxation purposes by
the spouses Felicisimo Oriol and Concordia Balida-Oriol in 1960, and
that in 1978, the Oriol spouses sold one-half (1/2) of the lot to the
spouses Mr. and Mrs. Anastacio Terrado, while the other half, to the
couple Manolito Occida and Juliana Sambale-Occida in 1979. Both
vendees, so Sampayan averred, have actually possessed the
respective portions purchased by them up to the present. He thus
prayed for the dismissal of the complaint.
In the ensuing proceedings following the joinder of issues, the
plaintiffs, to prove that they have been in actual possession of Lot
No. 1959 when defendant Sampayan effected his entry thereto,
submitted in evidence the following documents: HTCIcE
1.Tax Declaration No. 3180 in the name of Cristita Quita;
2.Certificate of Death showing the date of death of Cristita Quita on
January 11, 1984;
3.Certificate issued by Fermina R. Labonete, Land Management
Officer-III of CENRO X-3-E, DENR-X-3-9, Bayugan, Agusan del Sur
showing that Lot 1959, PLS-225 is covered by a Miscellaneous Sales
Application of Cristita Quita; jurcda2005
4.Affidavit of one Emiliano G. Gatillo to the effect that he was the
one who gave the lot in question to Cristita Quita sometime in 1957
and that since then the latter had been occupying the lot;
Plaintiffs also filed a Supplemental Position Paper dated July 13,
1994 for the purpose of showing that Cristita Quita is one of the
oppositors in Cadastral Case No. 149. Together with said position
paper, they submitted a copy of the Answer/Opposition earlier filed
in Cadastral Case No. 149. In said cadastral case, Cristita Quita was
claiming Lot 1959, thus her name appeared in the list of oppositors
therein.
5.The decision in the said Cadastral Case No. 149 showing that the
then Court of First Instance of Agusan del Sur declared Lot No. 1959
as one of the lots subject of the same cadastral case.
For his part, defendant Sampayan, to prove the allegations in his
answer, offered in evidence the following:
1.Tax Declaration No. A-11698 in the name of Felicisimo Oriol, which
cancels Tax Declaration 8103; DIEACH
2.Tax Declaration No. GRB-01-930 in the name of Felicisimo Oriol
which cancels Tax Declaration No. A-11698;
3.Deed of Absolute Sale of Portion of Land, dated April 30, 1979,
executed by Jesus Oriol for and in behalf of the spouses Felicisimo
Oriol and Concordia Balida-Oriol, conveying the one-half (1/2)
portion of Lot No. 1959 to the couple Manolito Occida and Juliana
Sambale-Occida who possessed the one-half (1/2) portion and
introduced improvements thereon, such as coconut and caimito
trees;
4.Deed of Relinquishment of Rights of Portion of Land, executed by
the spouses Oriol in favor of the same couple Manolito Occida and
Juliana Sambale-Occida, to further strengthen the transfer of
possession and whatever possessory rights the Oriols had in the lot
in question;
5.Deed of Absolute Sale of Land executed by Concordia Balida-Oriol
with the conformity of Teodosio Mosquito (another claimant), to
prove that the other half of Lot No. 1959 was sold in 1978 to Mr. and
Mrs. Anastacio Terrado whose overseer allowed Sampayan to enter
and occupy the premises;
6.Protest filed with the CENRO, Agusan del Sur by the vendee Juliana
Sambale-Occida against the Miscellaneous Sales Application of
Cristita Quita;
7.Affidavit of Dionesia Noynay attesting to the fact that she is
residing in Lot No. 1957, a lot adjacent to the lot in question, since
1960 up to the present. In the same affidavit, Dionisia claimed that
neither Cristita Quita, much less the plaintiffs, had ever possessed
Lot No. 1959. She claimed that it was the Occida couple who
possessed said lot and introduced improvements thereon; and
8.Affidavit of Juliana Occida and Maria Ybaez to show the
impossibility of plaintiffs' possession of the same lot. aCTADI
Meanwhile, on March 21, 1996, while the case was pending with the
MCTC, the presiding judge thereof personally conducted an ocular
inspection of the contested lot in the presence of the parties and/or
their counsels. Among those found in the area during the inspection
are: the house of defendant Sampayan; the dilapidated house of a
certain Peter Siscon; and a portion of the house of Macario Noynay,
husband of Dionisia Noynay, one of Sampayan's witnesses.
Based on his ocular findings, the judge concluded that the
improvements he saw in the premises could never have been
introduced by the plaintiffs nor by their mother Cristita Quita but by
the vendees of the same lot. Reproduced by petitioner Jose
Sampayan in the instant petition as well as in the Memorandum he
subsequently filed with this Court, the MCTC judge's findings and
observations during the ocular inspection, about which the herein
private respondents took no exception whatsoever, are hereunder
quoted, as follows:
"Noted inside the land are the house of the defendant, Cesar
Sampayan, of Peter Siscon, which appears to be dilapidated, and
part of the house of Macario Noynay which encroached to the land
in question. Planted on the land are five (5) coconut trees, fruit
bearing, three (3) not fruit bearing coconut trees, and three (3) star
apple or caimito trees. Defendant Sampayan admitted that he
started occupying the land since 1992. It is admitted by the parties
during the ocular inspection that one-half (1/2) portion of the land
was bought by a certain Occida from certain Mr. and Mrs. Felicisimo
Oriol.
The findings in the ocular inspection have confirmed the allegation of
the defendant that his predecessors-in-interest have introduced
improvements by planting caimito trees, coconut trees, and others
on the land in question.
Nothing can be seen on the land that plaintiffs had once upon a time
been in possession of the land. The allegation that Cristita Quita, the
predecessor-in-interest of the plaintiffs had been in possession of the
said property since 1957, openly, exclusively, continuously, adversely
and in the concept of an owner is a naked claim, unsupported by any
evidence. ADHaTC
Clearly, from the appearance of the improvements introduced by
the predecessors-in-interest of the defendant, it is showed that they
have been in possession of the land for more than one(1) year.
Hence, the action of the plaintiffs, if any, is accion
publiciana or plenaria de possession" 1 (Emphasis supplied).
In time, the MCTC rendered judgment dismissing the complaint "for
lack of merit".
Therefrom, the plaintiffs appealed to the Regional Trial Court (RTC)
at Agusan del Sur, which appeal was raffled to Branch VII thereof. In
a decision dated December 5, 1996, said court reversed that of the
MCTC, taking note of the fact that Cristita Quita was among the
oppositors in Cadastral Case No. 149 and that she filed a
Miscellaneous Sales Application over the lot. On the basis of such
finding, the RTC concluded that it was Cristita Quita, predecessor-in-
interest of the herein private respondents, who was in actual prior
physical possession of Lot No. 1959.
Unable to accept the RTC judgment, Sampayan went to the Court of
Appeals on a petition for review, thereat docketed as CA-G.R. SP No.
43557.

As stated at the threshold hereof, the Court of Appeals, in the herein
assailed Decision dated May 16, 2002, 2 denied Sampayan's petition.
His motion for reconsideration having been similarly denied by that
court in its Resolution of November 7, 2002, 3Sampayan is now with
us via the present recourse, it being his submissions
"I.
THAT THE COURT OF APPEALS ERRED IN RULING THAT THE
MUNICIPAL CIRCUIT TRIAL COURT OF BAYUGAN, AGUSAN DEL SUR,
HAS JURISDICTION OVER THE CASE, CONSIDERING THAT DURING
THE HEARING THEREOF IT WAS FOUND OUT BY THE SAID
MUNICIPAL COURT THAT ACCION PUBLICIANA OR PLENARIA DE
POSESION, AND NOT FORCIBLE ENTRY, IS THE PROPER
ACTION; EDcIAC
II.
THAT THE CONCLUSION OF THE HONORABLE COURT OF APPEALS
THAT PRIVATE RESPONDENTS HAVE BEEN IN PRIOR ACTUAL
POSSESSION IS CONTRADICTED BY EVIDENCE ON RECORD, AND
CONSIDERING THAT THE POSSESSION TO BE LEGALLY SUFFICIENT,
CONSIST (SIC) IN THE EXERCISE OF DOMINIUM OVER IT, SUCH AS
FENCING, CULTIVATING OR OTHER UNMISTAKABLE ACTS OF
EXCLUSIVE CUSTODY AND CONTROL FACTS WHICH THE PRIVATE
RESPONDENTS HAVE NEVER DONE IS CONTRARY TO LAW". 4
In the main, petitioner maintains that based on the pieces of
evidence on record, he had sufficiently proven his prior physical
possession of the subject lot. Upon this premise, he argues that
private respondents' complaint for forcible entry has no leg to stand
on, adding that the proper remedy available to the latter is accion
publiciana or plenaria de posesion which falls under the original
jurisdiction of Regional Trial Courts and not of Municipal Circuit Trial
Courts.
As we see it, the arguments put forward by the petitioner crystallize
to one pivotal question: will the complaint for forcible entry in this
case prosper? To resolve this, however, we must first determine as
to who between the herein parties was in prior actual physical
possession of the subject lot at the time the complaint was filed in
the MCTC. For, as we have said in Gaza vs. Lim 5 ,
". . . In an action for forcible entry, the plaintiff must prove that he
was in prior possession of the land or building and that he was
deprived thereof by means of force, intimidation, threat, strategy or
stealth. . . ."
We emphasize, absence of prior physical possession by the plaintiff
in a forcible entry case warrants the dismissal of his
complaint.ISaCTE
Undoubtedly, the issue of prior physical possession is one of fact,
and settled is the rule that this Court is not a trier of facts and does
not normally embark on a re-examination of the evidence adduced
by the parties during trial. Of course, the rule admits of exceptions.
So it is that in Insular Life Assurance Company, Ltd. vs. CA, 6 we
wrote:
"[i]t is a settled rule that in the exercise of the Supreme Court's
power of review, the Court is not a trier of facts and does not
normally undertake the re-examination of the evidence presented
by the contending parties' during the trial of the case considering
that the findings of facts of the CA are conclusive and binding on the
Court. However, the Court had recognized several exceptions to this
rule, to wit: (1) when the findings are grounded entirely on
speculation, surmises or conjectures; (2) when the inference made is
manifestly mistaken, absurd or impossible; (3) when there is grave
abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of facts are
conflicting; (6) when in making its findings the Court of Appeals went
beyond the issues of the case, or its findings are contrary to the
admissions of both the appellant and the appellee; (7) when the
findings are contrary to the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are
based; (9) when the facts set forth in the petition as well as in the
petitioner's main and reply briefs are not disputed by the
respondent; (10) when the findings of fact are premised on the
supposed absence of evidence and contradicted by the evidence on
record; and (11) when the Court of Appeals manifestly overlooked
certain relevant facts not disputed by the parties, which, if properly
considered, would justify a different conclusion."
To our mind, exceptions (5) and (11) are present in this case.
However, before delving into the question of who as between the
petitioner and private respondents had prior physical possession of
the subject lot, we deem it best to first resolve the issue of whether
or not the MCTC had jurisdiction over the complaint filed in this
case, an issue also raised by the petitioner.
Relying on the conclusion of the MCTC that private respondents'
proper remedy is accion publiciana or plenaria de posesion, and not
forcible entry, petitioner would deny the MCTC's jurisdiction over
the case.
Petitioner is in error. aEcHCD
In Sarmiento vs. CA 7 , we held:
"[t]o give the court jurisdiction to effect the ejectment of an
occupant or deforciant on the land, it is necessary that the
complaint should embody such a statement of facts as brings 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 testimony. The jurisdictional facts
must appear on the face of the complaint. . . ."
Clear it is from the above that for the MCTC to acquire jurisdiction
over a forcible entry case, it is enough that the complaint avers the
jurisdictional facts, i.e. that the plaintiff had prior physical
possession and that he was deprived thereof by the defendant
through force, intimidation, threats, strategy and stealth. 8 The
complaint in this case makes such an averment. Hence, the
irrelevant circumstance that the evidence adduced during the
hearing rendered improper an action for forcible entry is of no
moment and cannot deprive the MCTC of its jurisdiction over the
case. The MCTC continues to have that jurisdiction.
We shall now address the more decisive question of prior physical
possession.
After a careful evaluation of the evidence at hand, we find for the
petitioner.
To begin with, we are at once confronted by the uncontested
findings of the MCTC judge himself during his ocular inspection of
the premises in dispute that what he saw thereat "confirmed the
allegations of the defendant [now petitioner Sampayan] that his
predecessors-in-interest have introduced improvements by planting
caimito trees, coconut trees, and others on the land in question",
adding that "[N]othing can be seen on the land that plaintiff had
once upon a time been in possession of the land", and categorically
stating that "[T]he allegation that Cristita Quita, the predecessor-in-
interest of the plaintiffs had been in possession of the said property
since 1957, openly, exclusively, continuously, adversely and in the
concept of an owner is a naked claim, unsupported by any
evidence". aETAHD
Then, too, there is the sworn affidavit of Dionesia Noynay to the
effect that she had been residing since 1960 onward on Lot No.
1957, the lot adjacent to Lot No. 1959, and that neither the private
respondents nor their mother had ever possessed Lot No. 1959.
Coming as it does from an immediate neighbor, Dionesia's
statement commands great weight and respect. Incidentally, the
MCTC judge himself found during the ocular inspection that a
portion of the house of Macario Noynay, husband of Dionesia,
protruded on Lot No. 1959.
We note that in the herein assailed decision, the Court of Appeals
attached much significance to the fact that private respondents'
mother Cristita Quita was an oppositor in Cadastral Case No. 149.
We rule and so hold that the mother's being an oppositor in said
cadastral case does not, by itself, establish prior physical possession
because not all oppositors in cadastral cases are actual possessors of
the lots or lands subject thereof.
WHEREFORE, the instant petition is hereby GRANTED and the
Decision and Resolution, respectively dated May 16, 2002 and
November 7, 2002, of the Court of Appeals REVERSED and SET
ASIDE.
SO ORDERED.
Panganiban, Sandoval-Gutierrez, Corona and Carpio Morales,
JJ., concur.
||| (Sampayan v. Court of Appeals, G.R. No. 156360, January 14,
2005)




















THIRD DIVISION
[G.R. No. 137013. May 6, 2005.]
RUBEN SANTOS, petitioner, vs. SPOUSES TONY AYON and MERCY
AYON, respondents.
D E C I S I O N
SANDOVAL-GUTIERREZ, J p:
For our resolution is the petition for review on certiorari assailing
the Decision 1 of the Court of Appeals dated October 5, 1998 in CA-
G.R. SP No. 4735 and its Resolution 2 dated December 11, 1998
denying the motion for reconsideration.
The petition alleges that on November 6, 1996, Ruben Santos,
petitioner, filed with the Municipal Trial Court in Cities (MTCC),
Branch 2, Davao City a complaint for illegal detainer against spouses
Tony and Mercy Ayon, respondents, docketed as Civil Case No.
3506-B-96.
In his complaint, petitioner averred that he is the registered owner
of three lots situated at Lanzona Subdivision, Matina, Davao City,
covered by Transfer Certificates of Title (TCT) Nos. 108174, 108175,
and 108176. Respondent spouses are the registered owners of an
adjacent parcel of land covered by TCT No. T-247792. The previous
occupant of this property built a building which straddled both the
lots of the herein parties. Respondents have been using the building
as a warehouse.
Petitioner further alleged in his complaint that in 1985, when he
bought the three lots, he informed respondents that the building
occupies a portion of his land. However, he allowed them to
continue using the building. But in 1996, he needed the entire
portion of his lot, hence, he demanded that respondents demolish
and remove the part of the building encroaching his property and
turn over to him their possession. But they refused. Instead, they
continued occupying the contested portion and even made
improvements on the building. The dispute was then referred to
the barangay lupon, but the parties failed to reach an amicable
settlement. Accordingly, on March 27, 1996, a certification to file
action was issued.
In their answer, respondents sought a dismissal of this case on the
ground that the court has no jurisdiction over it since there is no
lessor-lessee relationship between the parties. Respondents denied
they were occupying petitioner's property by mere tolerance,
claiming they own the contested portion and have been occupying
the same long before petitioner acquired his lots in 1985.
On July 31, 1997, the MTCC rendered its Decision in favor of
petitioner, thus:
"WHEREFORE, judgment is rendered in favor of the plaintiff and
against the defendants ordering the latter, their successors-in-
interest and other persons acting in their behalf to vacate the
portion of the subject properties and peacefully surrender
possession thereof to plaintiff as well as dismantle/remove the
structures found thereon. IDAESH
Defendants are further ordered to pay reasonable value for the use
and occupation of the encroached area in the amount of One
Thousand Pesos (P1,000.00) a month beginning September 1996
and the subsequent months thereafter until premises are vacated;
to pay attorney's fees of Ten Thousand Pesos (P10,000.00); and to
pay the costs of suit.
SO ORDERED." 3
On appeal, the Regional Trial Court (RTC), Branch 11, Davao City, in
its Decision dated February 12, 1998 in Civil Case No. 25, 654-97,
affirmed in toto the MTCC judgment. 4 The RTC upheld the finding of
the MTCC that respondents' occupation of the contested portion
was by mere tolerance. Hence, when petitioner needed the same,
he has the right to eject them through court action.
Respondents then elevated the case to the Court of Appeals through
a petition for review. In its Decision dated October 5, 1988 now
being challenged by petitioner, the Court of Appeals held that
petitioner's proper remedy should have been an accion
publiciana before the RTC, not an action for unlawful detainer, thus:
"In this case, petitioners were already in possession of the premises
in question at the time private respondent bought three (3) lots at
the Lanzona Subdivision in 1985, a portion of which is occupied by a
building being used by the former as a bodega. Apart from private
respondent's bare claim, no evidence was alluded to show that
petitioners' possession was tolerated by (his) predecessor-in-
interest. The fact that respondent might have tolerated petitioners'
possession is not decisive. What matters for purposes of
determining the proper cause of action is the nature of petitioners'
possession from its inception. And in this regard, the Court notes
that the complaint itself merely alleges that defendants-petitioners
have been 'occupying a portion of the above properties of the
plaintiff for the past several years by virtue of the tolerance of the
plaintiff.' Nowhere is it alleged that his predecessor likewise
tolerated petitioners' possession of the premises. . . .
Consequently, . . ., respondent should present his claim before the
Regional Trial Court in an accion publiciana and not before the
Municipal Trial Court in a summary proceeding of unlawful detainer.
WHEREFORE, the decision under review is hereby REVERSED and SET
ASIDE. Accordingly, the complaint for unlawful detainer is ordered
DISMISSED." 5
Petitioner filed a motion for reconsideration, but was denied by the
Appellate Court in its Resolution dated December 11, 1998.
Hence, the instant petition for review on certiorari ascribing to the
Court of Appeals the following errors:
"I
THE HONORABLE COURT OF APPEALS MISAPPLIED THE LAW IN
DISMISSING THE INSTANT CASE ON THE GROUND THAT PETITIONER
SHOULD PRESENT HIS CLAIM BEFORE THE REGIONAL TRIAL COURT
IN AN ACCION PUBLICIANA.
II
THE FINDINGS OF THE HONORABLE COURT OF APPEALS IS NOT IN
CONSONANCE WITH EXISTING LAWS AND JURISPRUDENCE."
The sole issue here is whether the Court of Appeals committed a
reversible error of law in holding that petitioner's complaint is within
the competence of the RTC, not the MTCC.
Petitioner contends that it is not necessary that he has prior physical
possession of the questioned property before he could file an action
for unlawful detainer. He stresses that he tolerated respondents'
occupancy of the portion in controversy until he needed it. After his
demand that they vacate, their continued possession became illegal.
Hence, his action for unlawful detainer before the MTCC is proper.
Respondents, in their comment, insisted that they have been in
possession of the disputed property even before petitioner
purchased the same on April 10, 1985. Hence, he cannot claim that
they were occupying the property by mere tolerance because they
were ahead in time in physical possession.
We sustain the petition.
It is an elementary rule that the jurisdiction of a court over the
subject matter is determined by the allegations of the complaint and
cannot be made to depend upon the defenses set up in the answer
or pleadings filed by the defendant. 6 This rule is no different in an
action for forcible entry or unlawful detainer. 7 All actions for
forcible entry or unlawful detainer shall be filed with the proper
Metropolitan Trial Courts, the Municipal Trial Courts and the
Municipal Circuit Trial Courts, which actions shall include not only
the plea for restoration of possession but also all claims for damages
and costs arising therefrom. 8 The said courts are not divested of
jurisdiction over such cases even if the defendants therein raises the
question of ownership over the litigated property in his pleadings
and the question of possession cannot be resolved without deciding
the issue of ownership. 9
Section 1, Rule 70 on forcible entry and unlawful detainer of the
1997 Rules of Civil Procedure, as amended, reads:
"Section 1.Who may institute proceedings, and when. Subject to
the provisions of the next succeeding section, a person deprived of
the possession of any land or building by force, intimidation, threat,
strategy, or stealth, or a lessor, vendor, vendee, or other person
against whom the possession of any land or building is unlawfully
withheld after the expiration or termination of the right to hold
possession, by virtue of any contract, express or implied, or the legal
representatives or assigns of any such lessor, vendor, vendee or
other person may, at any time within one (1) year after such
unlawful deprivation or withholding of possession, bring an action in
the proper Municipal Trial Court against the person or persons
unlawfully withholding or depriving of possession, or any person or
persons claiming under them, for the restitution of such possession,
together with damages and costs."
Under the above provision, there are two entirely distinct and
different causes of action, to wit: (1) a case for forcible entry, which
is an action to recover possession of a property from the defendant
whose occupation thereof is illegal from the beginning as he
acquired possession by force, intimidation, threat, strategy or
stealth; and (2) a case for unlawful detainer, which is an action for
recovery of possession from defendant whose possession of the
property was inceptively lawful by virtue of a contract (express or
implied) with the plaintiff, but became illegal when he continued his
possession despite the termination of his right thereunder. 10
Petitioner's complaint for unlawful detainer in Civil Case No. 3506-B-
96 is properly within the competence of the MTCC. His pertinent
allegations in the complaint read:
"4.That defendants (spouses) have constructed an extension of their
residential house as well as other structures and have been
occupying a portion of the above PROPERTIES of the plaintiff for the
past several years by virtue of the tolerance of the plaintiff since at
the time he has no need of the property;
5.That plaintiff needed the property in the early part of 1996 and
made demands to the defendants to vacate and turn over the
premises as well as the removal (of) their structures found inside the
PROPERTIES of plaintiff; that without any justifiable reasons,
defendants refused to vacate the portion of the PROPERTIES
occupied by them to the damage and prejudice of the plaintiff.

6.Hence, plaintiff referred the matter to the Office of the Barangay
Captain of Matina Crossing 74-A, Davao City for a possible
settlement sometime in the latter part of February 1996.
The barangay case reached the Pangkat but no settlement was had.
Thereafter, a 'Certification To File Action' dated March 27, 1996 was
issued . . .;
xxx xxx xxx." 11 (emphasis ours)
Verily, petitioner's allegations in his complaint clearly make a case
for an unlawful detainer. We find no error in the MTCC assuming
jurisdiction over petitioner's complaint. A complaint for unlawful
detainer is sufficient if it alleges that the withholding of the
possession or the refusal to vacate is unlawful without necessarily
employing the terminology of the law. 12 Here, there is an allegation
in petitioner's complaint that respondents occupancy on the portion
of his property is by virtue of his tolerance. Petitioner's cause of
action for unlawful detainer springs from respondents' failure to
vacate the questioned premises upon his demand sometime in
1996. Within one (1) year therefrom, or on November 6, 1996,
petitioner filed the instant complaint.
It bears stressing that possession by tolerance is lawful, but such
possession becomes unlawful when the possessor by tolerance
refuses to vacate upon demand made by the owner. Our ruling
in Roxas vs. Court of Appeals 13 is applicable in this case: "A person
who occupies the land of another at the latter's tolerance or
permission, without any contract between them, is necessarily
bound by an implied promise that he will vacate upon demand,
failing which, a summary action for ejectment is the proper remedy
against him."
WHEREFORE, the petition is GRANTED. The assailed Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 47435 are
hereby REVERSED and SET ASIDE. The Decision dated February 12,
1998 of the Regional Trial Court, Branch 11, Davao City in Civil Case
No. 25, 654-97, affirming the Decision dated July 31, 1997 of the
Municipal Trial Court in Cities, Branch 2, Davao City in Civil Case No.
3506-B-96, is hereby REINSTATED. CHcETA
SO ORDERED.
Panganiban, Corona, Carpio Morales and Garcia, JJ., concur.
||| (Santos v. Spouses Ayon, G.R. No. 137013, May 06, 2005)













FIRST DIVISION
[G.R. No. 150755. June 28, 2005.]
RENE GANILA, * EDUARDO DUMADA-OG, SR., RAFAEL GANILA, JOSE
PASTRANA, LOURDES GANILA, FLORENTINO GANILA, SERAFIN
GANILA, LORETO ARELLANO, CONRADO GANILA, VIVENCIO ALVIOR,
EDUARDO GANTALA, AMPARO VILLANUEVA, ELEUTERIO SILVA,
ADELINA GANILA, FELIZARDO GANILA, SR., ENRIQUE GANILA,
ABRAHAM TANONG, EMILIO ALFARAS, JR., BAPTIST CHRISTIAN
LEARNING CENTER, petitioners, vs. HON. COURT OF APPEALS AND
VIOLETA C. HERRERA, respondents.
D E C I S I O N
QUISUMBING, J p:
For review on certiorari are the Decision 1 dated March 30, 2001 of
the Court of Appeals in CA-G.R. SP No. 58191, and
itsResolution 2 dated October 18, 2001 denying the motion for
reconsideration. The assailed decision denied the petition to set
aside the Resolution 3 of the Regional Trial Court (RTC) of San
Miguel, Jordan, Guimaras, Branch 65, affirming the Order of the
Municipal Circuit Trial Court (MCTC) for the 19 petitioners to vacate
the contested parcel of land.
The facts are as follows:
On March 19, 1997, private respondent Violeta Herrera filed 21
ejectment Complaints 4 before the 16th MCTC, Jordan-Buenavista-
Nueva Valencia, Jordan, Guimaras. Private respondent alleged that
she owns Lot 1227 of the Cadastral Survey of Jordan, Guimaras, with
an area of 43,210 square meters; that she inherited the lot from her
parents; and that she only tolerated petitioners to construct
residential houses or other improvements on certain portions of the
lot without rental. Sometime in September or October 1996, private
respondent demanded that the petitioners vacate the lot and
remove their houses and other improvements thereon. Petitioners
refused, despite offer of money by way of assistance to them. After
the barangay conciliation failed, private respondent filed
the complaints.
In their Answers, 5 eight 6 of the petitioners claimed that Lot 1227
was formerly a shoreline which they developed when they
constructed their respective houses. Another eight 7 maintained
that their houses stood on Lot 1229 of the Cadastral Survey of
Jordan, Guimaras. The other three 8 asserted that Lot 1227 is a
social forest area.
At the preliminary conference, the parties agreed to designate two
geodetic engineers as commissioners of the MCTC to conduct a
relocation survey of Lot 1227 and to identify who among the
petitioners have houses within the lot. 9
The commissioners reported that: (1) the house of Henry Gabasa,
defendant in Civil Case No. 288-J, is almost outside Lot 1227; (2) the
house of Ludovico Amatorio, defendant in Civil Case No. 289-J,
diagonally traversed the boundary; and (3) the houses of the 19
petitioners are inside Lot 1227. 10
Eight months after herein petitioners' failure to comment on the
manifestation of private respondent to terminate the preliminary
conference, the MCTC terminated the preliminary
conference. 11 Thereafter, petitioners' counsel Atty. Nelia Jesusa L.
Gonzales failed to file her clients' position papers and affidavits,
even after they sought a 30-day extension to file the same. 12
Consequently, the MCTC decided the cases as follows:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiff whereby each of the twenty-one (21)
defendants are hereby ordered:
1.To vacate Lot 1227 of the Cadastral Survey of Jordan,
Guimaras; THaDEA
2.To pay Two Hundred Pesos (P200.00) per month from October,
1996 as compensation for the use of the property until the same is
vacated; and
3.To pay Two Thousand Pesos (P2,000.00) as attorney's fees and
litigation expenses.
SO ORDERED. 13
Petitioners appealed to the RTC, Branch 65, at Jordan, Guimaras,
which decided as follows:
WHEREFORE, premises considered, the decision in Civil Cases Nos.
0270-J, 0272-J, 0273-J, 0274-J, 0275-J, 0276-J, 0277-J, 0278-J, 0279-J,
0280-J, 0281-J, 0282-J, 0283-J, 0284-J, 0285-J, 0286-J, 0287-J, 0291-J
and 0292-J are hereby affirmed.
The decision of the court below in Civil Cases Nos. 0288-J and 0289-J
are set aside. Civil Cases Nos. 0288-J and 0289-J are hereby
DISMISSED.
SO ORDERED. 14
The RTC ruled that the evidence showed the better right of private
respondent to possess Lot 1227. Private respondent's position
paper, affidavit and tax declaration supported her allegations. In
addition, the commissioners' report and sketch plan showed that
indeed petitioners occupy Lot 1227. On the other hand, according to
the RTC, the petitioners failed to present evidence which would
show that they are entitled to possess the lot.
Based on the sketch plan, the RTC dismissed the cases against
Gabasa and Amatorio since their houses occupy only a small area of
Lot 1227. It declared that Gabasa and Amatorio believed in good
faith that the whole area they occupied was part of the seashore.
The 19 petitioners, who were ordered to vacate the lot, filed a joint
petition for review with the Court of Appeals. The appellate court
denied the petition. Petitioners moved for reconsideration and filed
an amended petition. The Court of Appeals, however, affirmed the
factual findings and conclusions arrived at by the trial courts and
denied the amended petition for lack of merit. 15 It also denied the
motion for reconsideration.
Petitioners are now before us, on a petition for review, alleging that:
The Honorable Court of Appeals, with due respect and deference,
committed a reversible error in the interpretation/application of the
law in the instant case and in the appreciation of the facts and
evidence presented. The Court of Appeals gravely abused its
discretion when it denied and dismissed the petition filed by the
petitioners. 16
After considering the parties' submissions, we find three basic
issues: (1) Did the MCTC err in taking jurisdiction over and deciding
the cases? (2) Did the RTC err in sustaining the MCTC's judgment?
(3) Did the CA err in denying the petition for review filed by the 19
petitioners ordered to be ejected?
Petitioners insist that private respondent should have filed an action
to recover possession de jure, not a mere complaint for ejectment,
for two reasons. One, they possessed Lot 1227 in good faith for
more than 30 years in the concept of owners. And two, there was no
withholding of possession since private respondent was not in prior
possession of the lot.
Private respondent states in her Comment before us that the
allegations in her Complaints make out a clear case of unlawful
detainer which is cognizable by the MCTC. We are in agreement with
her stance. There was no error in the choice of the complainant's
remedy, a matter left to her determination as the suitor. And the
complaint itself is defined by the allegations therein, not the
allegations of the defendants. HIAESC
At the outset, we note that petitioners question the MCTC's
jurisdiction yet they admit in their preliminary statement that
theComplaints filed are indeed for unlawful detainer, and that the
only issue to be determined is mere physical possession(possession
de facto) and not juridical possession (possession de jure), much less
ownership. 17
While petitioners assert that this case involves only deprivation of
possession, they confuse the remedy of an action for forcible entry
with that of unlawful detainer. In unlawful detainer, prior physical
possession by the plaintiff is not necessary. It is enough that plaintiff
has a better right of possession. Actual, prior physical possession of
a property by a party is indispensable only in forcible entry cases. In
unlawful detainer cases, the defendant is necessarily in prior lawful
possession of the property but his possession eventually becomes
unlawful upon termination or expiration of his right to
possess. 18 Thus, the fact that petitioners are in possession of the
lot does not automatically entitle them to remain in possession. And
the issue of prior lawful possession by the defendants does not arise
at all in a suit for unlawful detainer, simply because prior lawful
possession by virtue of contract or other reasons is given or
admitted. Unlike in forcible entry where defendants, by force,
intimidation, threat, strategy or stealth, deprive the plaintiff or the
prior physical possessor of possession. Here there is no evidence to
show that petitioners entered the lot by any of these acts.
If only to stress the fundamental principles related to present
controversy, jurisdiction over unlawful detainer suits is vested in
municipal trial courts. 19 And in ejectment cases, the jurisdiction of
the court is determined by the allegations of the complaint. 20
In this case for ejectment, private respondent's allegations
sufficiently present a case of unlawful detainer. She alleged that (1)
she owns Lot 1227; (2) she tolerated petitioners to construct their
houses thereon; (3) she withdrew her tolerance; and (4) petitioners
refused to heed her demand to vacate the lot. The Complaints were
also filed within one year from the date of her demand. The cause of
action for unlawful detainer between the parties springs from the
failure of petitioners to vacate the lot upon lawful demand of the
private respondent. When they refused to vacate the lot after her
demand, petitioners' continued possession became unlawful. Her
complaint for ejectment against respondent, to put it simply, is not
without sufficient basis.
Petitioners' contention that private respondent should have filed an
action to recover possession de jure with the RTC is not supported by
law or jurisprudence. The distinction between a summary action of
ejectment and a plenary action for recovery of possession and/or
ownership of the land is settled in our jurisprudence.
What really distinguishes an action for unlawful detainer from a
possessory action (accion publiciana) and from a reivindicatory
action (accion reivindicatoria) is that the first is limited to the
question of possession de facto. An unlawful detainer suit (accion
interdictal) together with forcible entry are the two forms of an
ejectment suit that may be filed to recover possession of real
property. Aside from the summary action of ejectment, accion
publiciana or the plenary action to recover the right of possession
and accion reivindicatoria or the action to recover ownership which
includes recovery of possession, make up the three kinds of actions
to judicially recover possession. 21

It is not up to defendants, now petitioners herein, to dictate upon
plaintiff, now the private respondent, what her initial recourse
should be. Her choice of an action for ejectment against so-called
squatters is well within her rights.
Petitioners cite the case of Bayubay v. Court of Appeals, 22 and
argue that the MCTC's decision was without jurisdictional or legal
basis because the MCTC did not issue a preliminary conference
order. They assert that the 10-day period to file position papers and
affidavits only starts after the parties had received a preliminary
conference order. They insist they were denied due process when
the MCTC decided the cases based merely on private
respondent's Complaints and affidavit, without considering
theirAnswers.
For her part, private respondent maintains that there was
substantial compliance with the rules in the MCTC's conduct of the
preliminary conference, hence there was no violation of due process
nor disregard of its proper jurisdiction.
Petitioners' present contention was first raised only in their appeal
to the RTC. Raising it before the appellate tribunal is barred by
estoppel. 23 They should have raised it in the proceedings before
the MCTC. In our view, this issue is a mere afterthought, when the
MCTC decided against them. Basic rules of fair play, justice and due
process require that as a rule an issue cannot be raised by the
petitioners for the first time on appeal. 24
Besides, petitioners did not question initially the MCTC's Order
dated February 19, 1999, when they moved for an extension of time
to file their position papers and affidavits. They wanted another 30
days on top of the 30 days set by the MCTC, which strictly should
have been 10 days only. In this regard, petitioners could not claim
that they were denied sufficient time to file their position papers
and affidavits before the trial court. Further, they cannot validly
invoke our ruling 25 in Bayubay, for in that case there was no order
at all terminating the preliminary conference and requiring the
parties to submit position papers and affidavits. HDATCc
We note with dismay petitioners' insistence that we order the MCTC
"to conduct the requisite preliminary conference." The summary
character of ejectment suits will be disregarded if we allow
petitioners to further delay this case by allowing a second
preliminary conference. Ejectment by way of forcible entry and
unlawful detainer cases are summary proceedings, designed to
provide an expeditious means of protecting actual possession or the
right to possession over the property involved. It is a timely
procedure designed to remedy the delay in the resolution of such
cases. 26
Lastly, petitioners aver that private respondent failed to prove her
allegation of ownership of Lot 1227 as it is only based on a tax
declaration which is not an evidence of ownership. They also claim
that their possession of the lot was not and could not be by mere
tolerance. However, this is a factual matter best left to the trial
courts.
What we have now is sufficient evidence showing that private
respondent has a better right to possess Lot 1227. The
commissioners' report and sketch plan show that the 19 petitioners
occupy the lot, which corroborate private respondent's allegation
and disprove petitioners' defense that Lot 1227 is a shoreline; or
that Lot 1227 is a social forest area. While not a conclusive evidence
of ownership, private respondent's tax declaration constitutes proof
that she has a claim of title over the lot. It has been held that:
Although tax declarations or realty tax payment of property are not
conclusive evidence of ownership, nevertheless, they are
good indicia of possession in the concept of owner for no one in his
right mind would be paying taxes for a property that is not in his
actual or at least constructive possession. They constitute at least
proof that the holder has a claim of title over the property. The
voluntary declaration of a piece of property for taxation purposes
manifests not only one's sincere and honest desire to obtain title to
the property and announces his adverse claim against the State and
all other interested parties, but also the intention to contribute
needed revenues to the Government. Such an act strengthens
one's bona fide claim of acquisition of ownership. 27
The lower courts did not err in adjudicating the issue of possession.
Mere absence of title over the lot is not a ground for the courts to
withhold relief from the parties in an ejectment case. Plainly stated,
the trial court has validly exercised its jurisdiction over the
ejectment cases below. The policy behind ejectment suits is to
prevent breaches of the peace and criminal disorder, and to compel
the party out of possession to respect and resort to the law alone to
obtain what she claims is hers. The party deprived of possession
must not take the law into his or her own hands. 28 For their part,
herein petitioners could not be barred from defending themselves
before the court adequately, as a matter of law and right.
However, petitioners in their defense should show that they are
entitled to possess Lot 1227. If they had any evidence to prove their
defenses, they should have presented it to the MCTC with their
position papers and affidavits. But they ignored the court's order
and missed the given opportunity to have their defenses heard, the
very essence of due process. 29 Their allegations were not only
unsubstantiated but were also disproved by the plaintiff's
evidence. DSHcTC
In sum, we find no reversible error much less any grave abuse of
discretion committed by the Court of Appeals. A person who
occupies the land of another at the latter's tolerance or permission,
without any contract between them, is necessarily bound by an
implied promise that he will vacate upon demand, failing which a
summary action for ejectment is the proper remedy against
him. 30 His status is analogous to that of a lessee or tenant whose
term of lease has expired but whose occupancy continued by
tolerance of the owner. In such a case, the date of unlawful
deprivation or withholding of possession is to be counted from the
date of the demand to vacate. 31
WHEREFORE, the instant petition is DENIED for lack of merit. The
Decision of the Court of Appeals dated March 30, 2001 and its
Resolution dated October 18, 2001 are AFFIRMED.
Costs against petitioners.
SO ORDERED.
Davide, Jr., C.J., Ynares-Santiago, Carpio and Azcuna, JJ., concur.
||| (Ganila v. Court of Appeals, G.R. No. 150755, June 28, 2005)




SECOND DIVISION
[G.R. No. 132197. August 16, 2005.]
ROSS RICA SALES CENTER, INC. and JUANITO KING & SONS,
INC., petitioners, vs. SPOUSES GERRY ONG and ELIZABETH
ONG, respondents.
Ernesto L. Abijay and Zosa & Quijano Law Offices for petitioners.
Edgar F. Gica for respondents.
SYLLABUS
1.REMEDIAL LAW; APPEALS; DISMISSAL OF APPEAL; FILING OF
MOTION FOR RECONSIDERATION DEEMED AN EFFECTIVE
WITHDRAWAL OF THE DEFECTIVE NOTICE OF APPEAL. Since the
unlawful detainer case was filed with the MTC and affirmed by the
RTC, petitioners should have filed a Petition for Review with the
Court of Appeals and not a Notice of Appeal with the RTC. However,
we consider this to have been remedied by the timely filing of the
Motion for Reconsideration on the following day. Section 3, Rule 50
of the Rules of Court allows the withdrawal of appeal at any time, as
a matter of right, before the filing of the appellee's brief. Applying
this rule contextually, the filing of the Motion for Reconsideration
may be deemed as an effective withdrawal of the defective Notice
of Appeal. Perforce, the period of appeal was tolled by the Motion
for Reconsideration and started to run again from the receipt of the
order denying the Motion for Reconsideration. A Motion for
Additional Time to File the Petition was likewise filed with the Court
of Appeals. Counting fifteen (15) days from receipt of the denial of
the Motion for Reconsideration and the ten (10)-day request for
additional period, it is clear that respondents filed their Petition for
Review on time.
2.ID.; ID.; ID.; PETITION FOR REVIEW BEFORE THE COURT OF
APPEALS; PROPER MODE OF APPEAL FROM A DECISION OF THE
REGIONAL TRIAL COURT. Petitioners invoke to the ruling in People
v. De la Cruz that once a notice of appeal is filed, it cannot be validly
withdrawn to give way to a motion for reconsideration. The factual
circumstances in the two cases are different. De la Cruz is a criminal
case, governed by criminal procedure. Section 3, Rule 122 of the
Rules of Court provides that the proper mode of appeal from a
decision of the RTC is a notice of appeal and an appeal is deemed
perfected upon filing of the notice of appeal. In the case at bar, a
petition for review before the Court of Appeals is the proper mode
of appeal from a decision of the RTC. Since the filing of the notice of
appeal is erroneous, it is considered as if no appeal was interposed.
3.ID.; SPECIAL CIVIL ACTIONS; UNLAWFUL DETAINER; AN
ALLEGATION THAT THE DEFENDANT IS UNLAWFULLY WITHHOLDING
POSSESSION FROM THE PLAINTIFF IS DEEMED SUFFICIENT WITHOUT
NECESSARILY EMPLOYING THE TERMINOLOGY OF THE LAW. Well-
settled is the rule that what determines the nature of an action as
well as which court has jurisdiction over it are the allegations of the
complaint and the character of the relief sought. Respondents
contend that the complaint did not allege that petitioners'
possession was originally lawful but had ceased to be so due to the
expiration of the right to possess by virtue of any express or implied
contract. The emphasis placed by the Court of Appeals on the
presence of a contract as a requisite to qualify the case as one of
unlawful detainer contradicts the various jurisprudence dealing on
the matter. In Javelosa v. Court of the Appeals, it was held that the
allegation in the complaint that there was unlawful withholding of
possession is sufficient to make out a case for unlawful detainer. It is
equally settled that in an action for unlawful detainer, an allegation
that the defendant is unlawfully withholding possession from the
plaintiff is deemed sufficient, without necessarily employing the
terminology of the law. Hence, the phrase "unlawful withholding"
has been held to imply possession on the part of defendant, which
was legal in the beginning, having no other source than a contract,
express or implied, and which later expired as a right and is being
withheld by defendant. In Rosanna B. Barba v. Court of Appeals, we
held that a simple allegation that the defendant is unlawfully
withholding possession from plaintiff is sufficient. Based on this
premise, the allegation in the Complaint that: . . . . despite demand
to vacate, the defendants have refused and still refuse to vacate said
lots, thus, unlawfully withholding possession of said lots from
plaintiffs and depriving plaintiffs of the use of their lots; is already
sufficient to constitute an unlawful detainer case.
4.ID.; ID.; ID.; SUMMARY IN NATURE; TECHNICALITIES OR DETAILS
OF PROCEDURE SHOULD BE CAREFULLY AVOIDED. In the subject
complaint, petitioners alleged that they are the registered owners of
the lots covered by TCT Nos. 36466, 36467 and 36468. By their
implied tolerance, they have allowed respondents, the former
owners of the properties, to remain therein. Nonetheless, they
eventually sent a letter to respondents asking that the latter vacate
the said lots. Respondents refused, thereby depriving petitioners of
possession of the lots. Clearly, the complaint establishes the basic
elements of an unlawful detainer case, certainly sufficient for the
purpose of vesting jurisdiction over it in the MTC. Respondents
would like to capitalize on the requisites as cited in the case of
Raymundo dela Paz v. Panis. But the citation is a mere reiteration of
Sec. 1, Rule 70 of the Rules of Court. The case does not provide for
rigid standards in the drafting of the ejectment complaint. The case
of Co Tiamco v. Diaz justifies a more liberal approach, thus: . . . The
principle underlying the brevity and simplicity of pleadings in
forcible entry and unlawful detainer cases rests upon considerations
of public policy. Cases of forcible entry and detainer are summary in
nature, for they involve perturbation of social order which must be
restored as promptly as possible and, accordingly, technicalities or
details of procedure should be carefully avoided.
5.ID.; ID.; ID.; QUESTION OF POSSESSION IS PRIMORDIAL WHILE THE
ISSUE OF OWNERSHIP IS GENERALLY UNESSENTIAL. The issue
involved in accion reivindicatoria is the recovery of ownership of real
property. This differs from accion publiciana where the issue is the
better right of possession or possession de jure, and accion
interdictal where the issue is material possession or possession de
facto. In an action for unlawful detainer, the question of possession
is primordial while the issue of ownership is generally unessential.
6.ID.; ID.; ID.; PARTY ONLY SEEKS TO RECOVER PHYSICAL
POSSESSION OF THE PROPERTY; CLAIM OF OWNERSHIP OVER THE
SUBJECT PROPERTY WILL NOT DEPRIVE THE MUNICIPAL TRIAL
COURT OF JURISDICTION. Neither the allegation in petitioners'
complaint for ejectment nor the defenses thereto raised by
respondents sufficiently convert this case into an accion
reivindicatoria which is beyond the province of the MTC to decide.
Petitioners did not institute the complaint for ejectment as a means
of claiming or obtaining ownership of the properties. The
acknowledgment in their pleadings of the fact of prior ownership by
respondents does not constitute a recognition of respondents'
present ownership. This is meant only to establish one of the
necessary elements for a case of unlawful detainer, specifically the
unlawful withholding of possession. Petitioners, in all their
pleadings, only sought to recover physical possession of the subject
property. The mere fact that they claim ownership over the parcels
of land as well did not deprive the MTC of jurisdiction to try the
ejectment case.
7.ID.; ID.; ID.; ID.; ID.; PENDING ACTIONS FOR DECLARATION OF
NULLITY OF DEED OF SALE AND TRANSFER CERTIFICATE OF TITLE
AND QUIETING OF TITLE ON THE SAME PROPERTY WILL NOT ABATE
THE EJECTMENT CASE; RATIONALE. Even if respondents claim
ownership as a defense to the complaint for ejectment, the
conclusion would be the same for mere assertion of ownership by
the defendant in an ejectment case will not therefore oust the
municipal court of its summary jurisdiction. This Court in Ganadin v.
Ramos stated that if what is prayed for is ejectment or recovery of
possession, it does not matter if ownership is claimed by either
party. Therefore, the pending actions for declaration of nullity of
deed of sale and Transfer Certificates of Title and quieting of title in
Civil Case No. MAN-2356 will not abate the ejectment case. In Drilon
v. Gaurana, this Court ruled that the filing of an action for
reconveyance of title over the same property or for annulment of
the deed of sale over the land does not divest the MTC of its
jurisdiction to try the forcible entry or unlawful detainer case before
it, the rationale being that, while there may be identity of parties
and subject matter in the forcible entry case and the suit for
annulment of title and/or reconveyance, the rights asserted and the
relief prayed for are not the same.
8.ID.; ID.; ID.; ID.; ID.; LOWER COURT'S ADJUDICATION OF
OWNERSHIP IS MERELY PROVISIONAL. In Oronce v. Court of
Appeals, this Court held that the fact that respondents had
previously filed a separate action for the reformation of a deed of
absolute sale into one of pacto de retro sale or equitable mortgage
in the same Court of First Instance is not a valid reason to frustrate
the summary remedy of ejectment afforded by law to the plaintiff.
Consequently, an adjudication made in an ejectment proceeding
regarding the issue of ownership should be regarded as merely
provisional and, therefore, would not bar or prejudice an action
between the same parties involving title to the land. The foregoing
doctrine is a necessary consequence of the nature of forcible entry
and unlawful detainer cases where the only issue to be settled is the
physical or material possession over the real property, that is,
possession de facto and not possession de jure. The Court reiterated
this in the case of Tecson v. Gutierrez when it ruled: We must stress,
however, that before us is only the initial determination of
ownership over the lot in dispute, for the purpose of settling the
issue of possession, although the issue of ownership is inseparably
linked thereto. As such, the lower court's adjudication of ownership
in the ejectment case is merely provisional, and our affirmance of
the trial courts' decisions as well, would not bar or prejudice an
action between the same parties involving title to the property, if
and when such action is brought seasonably before the proper
forum. The long settled rule is that the issue of ownership cannot be
subject of a collateral attack. In Apostol v. Court of Appeals, this
Court had the occasion to clarify this: . . . Under Section 48
of Presidential Decree No. 1529, a certificate of title shall not be
subject to collateral attack. It cannot be altered, modified or
cancelled, except in a direct proceeding for that purpose in
accordance with law. The issue of the validity of the title of the
respondents can only be assailed in an action expressly instituted for
that purpose. Whether or not the petitioners have the right to claim
ownership over the property is beyond the power of the court a quo
to determine in an action for unlawful detainer.
D E C I S I O N
TINGA, J p:
In a Decision 1 dated 6 January 1998, the Former First Division of the
Court of Appeals overturned the decisions of the Municipal Trial
Court (MTC) and the Regional Trial Court (RTC) of Mandaue City,
ruling instead that the MTC had no jurisdiction over the subject
complaint for unlawful detainer. This petition for review prays for
the reversal of the aforesaid Court of Appeals' Decision.
The case originated from a complaint for ejectment filed by
petitioners against respondents, docketed as Civil Case No. 2376,
before the MTC of Mandaue City, Branch I. In the complaint,
petitioners alleged the fact of their ownership of three (3) parcels of
land covered by Transfer Certificates of Title (TCT) Nos. 36466,
36467 and 36468. Petitioners likewise acknowledged respondent
Elizabeth Ong's ownership of the lots previous to theirs. On 26
January 1995, Atty. Joseph M. Baduel, representing Mandaue Prime
Estate Realty, wrote respondents informing them of its intent to use
the lots and asking them to vacate within thirty (30) days from
receipt of the letter. But respondents refused to vacate, thereby
unlawfully withholding possession of said lots, so petitioners alleged.
Ross Rica Sales Center, Inc. and Juanito King and Sons, Inc.
(petitioners) had acquired the lands from Mandaue Prime Estate
Realty through a sale made on 23 March 1995. In turn, it appears
that Mandaue Prime Estate Realty had acquired the properties from
the respondents through a Deed of Absolute Sale dated 14 July
1994. However, this latter deed of sale and the transfers of title
consequential thereto were subsequently sought to be annulled by
respondents in a complaint filed on 13 February 1995 before the
Mandaue RTC against Mandaue Prime Estate Realty. 2 Per record,
this case is still pending resolution.
Meanwhile, the MYC resolved the ejectment case on 24 April 1996,
with the decision ordering respondents to vacate the premises in
question and to peacefully turn over possession thereof to
petitioners.
On appeal, the RTC rendered on 1 March 1997 a judgment affirming
the MTC's decision in its entirety.
On 8 May 1997, respondents filed a notice of appeal. However, on
the following day, they filed a motion for reconsideration.
On 23 June 1997, the RTC issued an Order which concurrently gave
due course to respondents' notice of appeal filed on 8 May 1997;
denied their motion for reconsideration dated 9 May 1997, 3 and
granted petitioners' motion for immediate execution pending
appeal.
In a Petition for Certiorari with Injunction filed with the Court of
Appeals and treated as a Petition for Review, the appellate court
ruled that the MTC had no jurisdiction over said case as there was
no contract between the parties, express or implied, as would
qualify the same as one for unlawful detainer. Thus, the
assailed Orders of the MTC and RTC were set aside.
Petitioners then took this recourse via Petition for Review under
Rule 45 of the Rules of Court. The principal issues raised before this
Court are: (i) whether the RTC decision has already become final and
executory at the time the petition for review was filed; (ii) whether
the allegations in the complaint constitute a case for unlawful
detainer properly cognizable by the MTC; and, (iii) whether
petitioners, as registered owners, are entitled to the possession of
the subject premises.
We resolve the first argument to be without merit.
The following sequence of events is undisputed:
(1)On 1 March 1997, the RTC rendered the questioned decision
affirming the judgment of the MTC.
(2)On 28 April 1997, respondents received a copy of the
aforementioned decision.
(3)On 8 May 1997, respondents filed a Notice of Appeal with the
RTC. SAcaDE
(4)On 9 May 1997, respondents filed likewise with the RTC a Motion
for Reconsideration of the aforementioned 1 March 1997 decision.
(5)On 23 June 1997, the RTC of Mandaue issued an Order denying
respondents' Motion for Reconsideration.
(6)On 9 July 1997, respondents received a copy of the
aforementioned 23 June 1997 Order.
(7)On 24 July 1997, respondents filed with the Court of Appeals their
motion for an additional period of ten (10) days within which to file
their Petition for Review.
(8)On 30 July 1997, respondents filed with the Court of Appeals
their Petition for Review.
Petitioners assert that the Petition for Review was filed beyond the
fifteen (15)-day period for appeal. They theorize that the period
started running on 28 April 1995, the date of receipt of the RTC
decision, and ended on 13 May 1997. According to them, this
reglementary period could not have been interrupted by the filing
on 9 May 1997 of the Motion for Reconsideration because of the
filing one day earlier of the Notice of Appeal. This Notice of
Appeal dated 8 May 1997, albeit the wrong mode of appeal,
expressly manifested their intention to file a petition for review to
either the Court of Appeals or the Supreme Court. 4
Petitioners further argue that respondents, after having filed
the Notice of Appeal which was given due course by the RTC, cannot
take an inconsistent stand such as filing a Motion for
Reconsideration. Such filing, therefore, did not toll the fifteen (15)-
day period which started running from the date of receipt of the RTC
decision on 28 April 1997 and ended on 13 May 1997.
Respondents, in their Comment, 5 submit that the filing of
the Notice of Appeal dated 8 May 1997 was improper, and as such
did not produce any legal effect. Therefore, the filing of the Motion
for Reconsideration immediately on the following day cured this
defect. The RTC refused to subscribe respondents' position. It
justified the denial of the Motion for Reconsideration on the ground
that the respondents had already filed a Notice of Appeal. The Order
dated 23 June 1997 stated:
On record is a Notice of Appeal by Certiorari filed by Defendants on
May 8, 1997.
Likewise filed by Defendants on May 9, 1997 is a Motion for
Reconsideration.
Considering the Notice of Appeal filed earlier which the court hereby
approves, the Motion for Reconsideration is DENIED.
The Motion for Immediate Execution Pending Appeal being
meritorious, is GRANTED. 6 (Emphasis in the original.)
Strangely enough, the Court of Appeals passed no comment on this
point when it took cognizance of respondents' position and reversed
the RTC. But does this necessarily mean that the RTC was correct
when it declared that the Motion for Reconsiderationwas barred by
the filing of the Notice of Appeal, no matter how erroneous the
latter mode was?
Rule 42 governs the mode of appeal applicable in this case. Sec. 1
provides:
Section 1.How appeal taken; time for filing. A party desiring to
appeal from a decision of the RTC rendered in the exercise of its
appellate jurisdiction may file a verified petition for review with the
Court of Appeals, paying at the same time to the clerk of said court
the corresponding docket and other lawful fees, depositing the
amount of P500.00 for costs, and furnishing the Regional Trial Court
and the adverse party with a copy of the petition. The petition shall
be filed and served within fifteen (15) days from notice of the
decision sought to be reviewed or of the denial of petitioner's
motion for new trial or reconsideration filed in due time after
judgment. Upon proper motion and the payment of the full amount
of the docket and other lawful fees and the deposit for costs before
the expiration of the reglementary period, the Court of Appeals may
grant an additional period of fifteen (15) days only within which to
file the petition for review. No further extension shall be granted
except for the most compelling reason and in no case to exceed
fifteen (15) days.
Since the unlawful detainer case was filed with the MTC and
affirmed by the RTC, petitioners should have filed a Petition for
Review with the Court of Appeals and not a Notice of Appeal with
the RTC. However, we consider this to have been remedied by the
timely filing of the Motion for Reconsideration on the following
day. Section 3, Rule 50 of the Rules of Court allows the withdrawal
of appeal at any time, as a matter of right, before the filing of the
appellee's brief. Applying this rule contextually, the filing of
the Motion for Reconsideration may be deemed as an effective
withdrawal of the defective Notice of Appeal.
Perforce, the period of appeal was tolled by the Motion for
Reconsideration and started to run again from the receipt of the
order denying the Motion for Reconsideration. A Motion for
Additional Time to File the Petition was likewise filed with the Court
of Appeals. Counting fifteen (15) days from receipt of the denial of
the Motion for Reconsideration and the ten (10)-day request for
additional period, it is clear that respondents filed their Petition for
Review on time.
Petitioners invoke to the ruling in People v. De la Cruz 7 that once a
notice of appeal is filed, it cannot be validly withdrawn to give way
to a motion for reconsideration. The factual circumstances in the
two cases are different.
De la Cruz is a criminal case, governed by criminal
procedure. Section 3, Rule 122 of the Rules of Court provides that
the proper mode of appeal from a decision of the RTC is a notice of
appeal and an appeal is deemed perfected upon filing of the notice
of appeal.
In the case at bar, a petition for review before the Court of Appeals
is the proper mode of appeal from a decision of the RTC. Since the
filing of the notice of appeal is erroneous, it is considered as if no
appeal was interposed.
Now on the second and more important issue raised by petitioners:
whether the Complaint satisfies the jurisdictional requirements for a
case of unlawful detainer properly cognizable by the MTC.
The MTC considered itself as having jurisdiction over the ejectment
complaint and disposed of the same in favor of petitioners. Said
ruling was affirmed by the RTC. The Court of Appeals reversed the
lower courts and found the complaint to be one not for unlawful
detainer based on two (2) grounds, namely: that the allegations fail
to show that petitioners were deprived of possession by force,
intimidation, threat, strategy or stealth; and that there is no
contract, express or implied, between the parties as would qualify
the case as one of unlawful detainer.

We disagree with the Court of Appeals.
The complaint for unlawful detainer contained the following
material allegations:
xxx xxx xxx
3.That plaintiffs are the owners of Lot No. 2, which is covered by
T.C.T. No. 36466 of the Register of Deeds of Mandaue City, Lot No.
1-A which is covered by T.C.T. No. 36467 of the Register of Deeds of
Mandaue City and Lot No. 86-A which is covered by T.C.T. No. 36468
of the Register of Deeds of Mandaue City, all situated in the City of
Mandaue. Copies of said Transfer Certificate of Titles are hereto
attached as Annexes "A", "B", and "C" respectively and made an
integral part hereof;
4.That defendant Elizabeth Ong is the previous registered owner of
said lots;
5.That as the previous registered owner of said lots, defendant
Elizabeth Ong and her husband and co-defendant Jerry Ong have
been living in the house constructed on said lots;
6.That on May 6, 1995, plaintiffs, through the undersigned counsel,
wrote defendants a letter informing them or their intent to use said
lots and demanded of them to vacate said lots within 30 days from
receipt of said letter. Copy of said letter is hereto attached as Annex
"D" and made an integral part thereof;
7.That despite demand to vacate, the defendants have refused and
still refuse to vacate said lots, thus, unlawfully withholding
possession of said lots from plaintiffs and depriving plaintiffs of the
use of their lots;
8.That in unlawfully withholding the possession of said lots from the
plaintiffs, plaintiffs have suffered damages in the form of unearned
rentals in the amount of P10,000.00 a month
xxx xxx xxx 8
Well-settled is the rule that what determines the nature of an action
as well as which court has jurisdiction over it are the allegations of
the complaint and the character of the relief sought. 9
Respondents contend that the complaint did not allege that
petitioners' possession was originally lawful but had ceased to be so
due to the expiration of the right to possess by virtue of any express
or implied contract. IASEca
The emphasis placed by the Court of Appeals on the presence of a
contract as a requisite to qualify the case as one of unlawful
detainer contradicts the various jurisprudence dealing on the
matter.
In Javelosa v. Court of the Appeals, 10 it was held that the allegation
in the complaint that there was unlawful withholding of possession
is sufficient to make out a case for unlawful detainer. It is equally
settled that in an action for unlawful detainer, an allegation that the
defendant is unlawfully withholding possession from the plaintiff is
deemed sufficient, without necessarily employing the terminology of
the law. 11
Hence, the phrase "unlawful withholding" has been held to imply
possession on the part of defendant, which was legal in the
beginning, having no other source than a contract, express or
implied, and which later expired as a right and is being withheld by
defendant. 12 In Rosanna B. Barba v. Court of Appeals, 13 we held
that a simple allegation that the defendant is unlawfully withholding
possession from plaintiff is sufficient.
Based on this premise, the allegation in the Complaint that:
. . . . despite demand to vacate, the defendants have refused and
still refuse to vacate said lots, thus, unlawfully withholding
possession of said lots from plaintiffs and depriving plaintiffs of the
use of their lots; 14
is already sufficient to constitute an unlawful detainer case.
In the subject complaint, petitioners alleged that they are the
registered owners of the lots covered by TCT Nos. 36466, 36467 and
36468. By their implied tolerance, they have allowed respondents,
the former owners of the properties, to remain therein.
Nonetheless, they eventually sent a letter to respondents asking
that the latter vacate the said lots. Respondents refused, thereby
depriving petitioners of possession of the lots. Clearly, the complaint
establishes the basic elements of an unlawful detainer case,
certainly sufficient for the purpose of vesting jurisdiction over it in
the MTC.
Respondents would like to capitalize on the requisites as cited in the
case of Raymundo dela Paz v. Panis. 15 But the citation is a mere
reiteration of Sec. 1, Rule 70 16 of the Rules of Court. The case does
not provide for rigid standards in the drafting of the ejectment
complaint. The case of Co Tiamco v. Diaz 17 justifies a more liberal
approach, thus:
. . . The principle underlying the brevity and simplicity of pleadings in
forcible entry and unlawful detainer cases rests upon considerations
of public policy. Cases of forcible entry and detainer are summary in
nature, for they involve perturbation of social order which must be
restored as promptly as possible and, accordingly, technicalities or
details of procedure should be carefully avoided. 18
Moreover, petitioners fail to mention any of the incidents of the
pending case involving the annulment of deed of sale and title over
said property. Petitioners know better than to question this in an
ejectment proceeding, which brings us to the nature of the action in
this case.
Respondents insist that the RTC, and not the MTC, had jurisdiction
over the action, it being an accion reivindicatoria according to them,
on the ground that petitioners were constantly claiming ownership
over the lands in the guise of filing an action for ejectment. In
their Comment, 19 respondents maintain that they occupy the
subject lots as the legal owners. Petitioners, on the other hand, are
seeking recovery of possession under a claim of ownership which is
tantamount to recovery of possession based on alleged title to the
lands, and therefore is within the original jurisdiction of the RTC, so
respondents conclude.
This contention is not tenable.
The issue involved in accion reivindicatoria is the recovery of
ownership of real property. This differs from accion
publiciana where the issue is the better right of possession or
possession de jure, and accion interdictal where the issue is material
possession or possession de facto. In an action for unlawful detainer,
the question of possession is primordial while the issue of ownership
is generally unessential. 20
Neither the allegation in petitioners' complaint for ejectment nor
the defenses thereto raised by respondents sufficiently convert this
case into an accion reivindicatoria which is beyond the province of
the MTC to decide. Petitioners did not institute the complaint for
ejectment as a means of claiming or obtaining ownership of the
properties. The acknowledgment in their pleadings of the fact of
prior ownership by respondents does not constitute a recognition of
respondents' present ownership. This is meant only to establish one
of the necessary elements for a case of unlawful detainer,
specifically the unlawful withholding of possession. Petitioners, in all
their pleadings, only sought to recover physical possession of the
subject property. The mere fact that they claim ownership over the
parcels of land as well did not deprive the MTC of jurisdiction to try
the ejectment case.
Even if respondents claim ownership as a defense to the complaint
for ejectment, the conclusion would be the same for mere assertion
of ownership by the defendant in an ejectment case will not
therefore oust the municipal court of its summary
jurisdiction. 21 This Court in Ganadin v. Ramos 22 stated that if what
is prayed for is ejectment or recovery of possession, it does not
matter if ownership is claimed by either party. Therefore, the
pending actions for declaration of nullity of deed of sale and
Transfer Certificates of Title and quieting of title in Civil Case No.
MAN-2356 will not abate the ejectment case.
In Drilon v. Gaurana, 23 this Court ruled that the filing of an action
for reconveyance of title over the same property or for annulment
of the deed of sale over the land does not divest the MTC of its
jurisdiction to try the forcible entry or unlawful detainer case before
it, the rationale being that, while there may be identity of parties
and subject matter in the forcible entry case and the suit for
annulment of title and/or reconveyance, the rights asserted and the
relief prayed for are not the same. 24
In Oronce v. Court of Appeals, 25 this Court held that the fact that
respondents had previously filed a separate action for the
reformation of a deed of absolute sale into one of pacto de
retro sale or equitable mortgage in the same Court of First Instance
is not a valid reason to frustrate the summary remedy of ejectment
afforded by law to the plaintiff. Consequently, an adjudication made
in an ejectment proceeding regarding the issue of ownership should
be regarded as merely provisional and, therefore, would not bar or
prejudice an action between the same parties involving title to the
land. The foregoing doctrine is a necessary consequence of the
nature of forcible entry and unlawful detainer cases where the only
issue to be settled is the physical or material possession over the
real property, that is, possession de facto and not possession de jure.
The Court reiterated this in the case of Tecson v. Gutierrez 26 when
it ruled:
We must stress, however, that before us is only the initial
determination of ownership over the lot in dispute, for the purpose
of settling the issue of possession, although the issue of ownership is
inseparably linked thereto. As such, the lower court's adjudication of
ownership in the ejectment case is merely provisional, and our
affirmance of the trial courts' decisions as well, would not bar or
prejudice an action between the same parties involving title to the
property, if and when such action is brought seasonably before the
proper forum. IECcaA
The long settled rule is that the issue of ownership cannot be subject
of a collateral attack.

In Apostol v. Court of Appeals, 27 this Court had the occasion to
clarify this:
. . . Under Section 48 of Presidential Decree No. 1529, a certificate of
title shall not be subject to collateral attack. It cannot be altered,
modified or cancelled, except in a direct proceeding for that purpose
in accordance with law. The issue of the validity of the title of the
respondents can only be assailed in an action expressly instituted for
that purpose. Whether or not the petitioners have the right to claim
ownership over the property is beyond the power of the court a
quo to determine in an action for unlawful detainer. 28
With the conclusion of the second issue in favor of petitioners, there
is no need to discuss the third assignment of error which is related
to the second issue.
WHEREFORE, the Petition is GRANTED. The Decision of the Court of
Appeals dated 6 January 1998 is REVERSED and SET ASIDE and
the Decision dated 24 April 1996 of the Municipal Trial Court of
Mandaue City REINSTATED and AFFIRMED. Costs against
respondents.
SO ORDERED.
Puno, Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ., concur.
||| (Ross Rica Sales Center Inc. v. Spouses Ong, G.R. No. 132197,
August 16, 2005)































FIRST DIVISION
[G.R. No. 165177. August 25, 2005.]
LILIA V. PERALTA-LABRADOR, petitioner, vs. SILVERIO BUGARIN,
substituted by his widow, CONSOLACION BUGARIN, 1 respondent.
Luperio F. Villanueva and Jethro L.F. Villanueva for petitioner.
Michael Fabunan for respondent.
SYLLABUS
1.REMEDIAL LAW; SPECIAL CIVIL ACTIONS; FORCIBLE ENTRY;
NATURE OF ACTION FOR FORCIBLE ENTRY, EXPLAINED. In Lopez v.
David Jr., it was held that an action for forcible entry is a quieting
process and the one year time bar for filing a suit is in pursuance of
the summary nature of the action. Thus, we have nullified
proceedings in the MTCs when it improperly assumed jurisdiction of
a case in which the unlawful deprivation or withholding of
possession had exceeded one year. After the lapse of the one-year
period, the suit must be commenced in the RTC via an accion
publiciana, a suit for recovery of the right to possess. It is an
ordinary civil proceeding to determine the better right of possession
of realty independently of title. It also refers to an ejectment suit
filed after the expiration of one year from the accrual of the cause of
action or from the unlawful withholding of possession of the realty
independently of title. Likewise, the case may be instituted before
the same court as an accion reivindicatoria, which is an action to
recover ownership as well as possession.
2.ID.; ID.; ID.; JURISDICTION OF A COURT IS DETERMINED BY THE
ALLEGATIONS IN THE COMPLAINT; SUSTAINED IN CASE AT BAR.
Corollarily, jurisdiction of a court is determined by the allegations of
the complaint. Thus, in ascertaining whether or not the action falls
within the exclusive jurisdiction of the inferior courts, the averments
of the complaint and the character of the relief sought are to be
examined. It is clear that petitioner's averment make out a case for
forcible entry because she alleged prior physical possession of the
subject lot way back in 1976, and the forcible entry thereon by
respondent. Considering her allegation that the unlawful possession
of respondent occurred two years prior to the filing of the complaint
on January 18, 1996, the cause of action for forcible entry has
prescribed and the MTC had no jurisdiction to entertain the case.
Petitioner's complaint therefore should have been filed with the
proper RTC. It is settled that jurisdiction over the subject matter
cannot be waived by the parties or cured by their silence,
acquiescence or even express consent. Hence, the failure of
respondent to insist on the defenses of lack of cause of action and
prescription stated in his Amended Answer with Counterclaim will
not vest the MTC with jurisdiction over the case.
D E C I S I O N
YNARES-SANTIAGO, J p:
Challenged in this petition for review on certiorari is the March 12,
2004 decision 2 of the Court of Appeals in CA-G.R. SP No. 57475,
which affirmed with modification the January 26, 2000
judgment 3 of the Regional Trial Court (RTC) of Iba, Zambales,
Branch 71, in Civil Case No. RTC-1590-I, which in turn affirmed the
decision 4 dated May 16, 1999 of the Municipal Trial Court (MTC) of
San Felipe, Zambales, in Civil Case No. 328, and its September 6,
2004 resolution 5 denying reconsideration thereof.
On January 18, 1996, petitioner Lilia V. Peralta-Labrador filed a case
for "Recovery of Possession and Ownership," docketed as Civil Case
No. 328, with the MTC of San Felipe, Zambales. She alleged that she
is the owner of Cadastral Lot No. 2650, with an area of 400 sq. m.
located at Sitio Caarosipan, Barangay Manglicmot, San Felipe,
Zambales, having purchased the same in 1976 from spouses Artemio
and Angela Pronto. In 1977, she was issued Tax Declaration No.
10462 and paid the taxes due thereon. 6
In 1990, the Department of Public Works and Highways constructed
a road which traversed Cadastral Lot No. 2650 thereby separating
108 sq. m. from the rest of petitioner's lot, for which she was issued
Tax Declaration No. 02-2460R in 1991. 7
Sometime in 1994, respondent Silverio Bugarin forcibly took
possession of the 108 sq. m. lot and refused to vacate the same
despite the pleas of petitioner. Hence, on January 18, 1996, she
instituted a complaint for recovery of possession and ownership
against respondent. HEDCAS
In his Answer with Counterclaims, 8 respondent contended that the
area claimed by petitioner is included in the 4,473 square meter lot,
covered by the Original Certificate of Title (OCT) No. P-13011; and
that he has been in continuous possession and occupation thereof
since 1955. In his Amended Answer with Counterclaim, 9 however,
respondent failed to allege that the questioned lot is covered by the
OCT No. P-13011, and instead asserted that he planted fruit bearing
trees in the property. Respondent further pleaded the defenses of
lack of cause of action and prescription.
On May 16, 1999, the court a quo ruled in favor of respondent
declaring him as the owner of the controverted lot on the basis of
the OCT No. P-13011. The complaint was dismissed for failure of
petitioner to prove prior physical possession and ownership thereof.
The dispositive portion thereof, reads:
WHEREFORE, all the foregoing premises considered and for failure
on the part of the plaintiff to establish the preponderance of
evidence of prior actual physical possession and present title over
the lot in her favor, let the instant case be ordered DISMISSED, and
the defendant be awarded the rightful possession and ownership of
the same and the plaintiff is hereby ordered to pay FIFTEEN
THOUSAND (P15,000.00) PESOS as reasonable Attorney's fee and
FIVE THOUSAND (P5,000.00) PESOS as appearance fee plus costs.
SO ORDERED. 10
The RTC affirmed the assailed decision, 11 hence petitioner filed a
petition for review before the Court of Appeals which was however
denied for insufficiency of evidence to prove ownership or prior
actual physical possession. The appellate court deleted the
monetary awards in favor of respondent as well as the declaration of
the MTC that respondent is the owner of the questioned lot on the
ground that the OCT No. P-13011, relied upon by said court was not
formally offered in evidence, hence, cannot be considered by the
court. The decretal portion thereof, states:
WHEREFORE, in view of the foregoing discussion, the instant petition
is hereby PARTIALLY GRANTED. The assailed Decision dated January
26, 2000, in Civil Case No. RTC 1590 I of the Regional Trial Court
(RTC), Branch 71, Iba, Zambales, and Decision dated May 16, 1999,
in Civil Case No. 328 of the Municipal Trial Court of San Felipe,
Zambales are MODIFIED by deleting the declaration of ownership as
to the disputed 108 square meters and the monetary award in favor
of respondent Silverio Bugarin. However, the dismissal of the
complaint is AFFIRMED. cHCaIE
SO ORDERED. 12
The motion for reconsideration filed by petitioner was denied.
Hence the instant petition.
Pertinent portion of Section 1, Rule 70 of the Revised Rules of Civil
Procedure, provides:
SECTION 1. Who may institute proceedings, and when. . . . a
person deprived of the possession of any land or building by force,
intimidation, threat, strategy, or stealth, . . . may at any time within
one (1) year after such unlawful deprivation or withholding of
possession, bring an action in the proper Municipal Trial Court
against the person or persons unlawfully withholding or depriving of
possession, or any person or persons claiming under them, for the
restitution of such possession, together with the damages and costs.
(Emphasis supplied)
In Lopez v. David Jr., 13 it was held that an action for forcible entry is
a quieting process and the one year time bar for filing a suit is in
pursuance of the summary nature of the action. Thus, we have
nullified proceedings in the MTCs when it improperly assumed
jurisdiction of a case in which the unlawful deprivation or
withholding of possession had exceeded one year. After the lapse of
the one year period, the suit must be commenced in the
RTC via an accion publiciana, a suit for recovery of the right to
possess. It is an ordinary civil proceeding to determine the better
right of possession of realty independently of title. It also refers to
an ejectment suit filed after the expiration of one year from the
accrual of the cause of action or from the unlawful withholding of
possession of the realty independently of title. Likewise, the case
may be instituted before the same court as an accion reivindicatoria,
which is an action to recover ownership as well as possession. 14
Corollarily, jurisdiction of a court is determined by the allegations of
the complaint. Thus, in ascertaining whether or not the action falls
within the exclusive jurisdiction of the inferior courts, the averments
of the complaint and the character of the relief sought are to be
examined. 15
In the instant case, petitioner's complaint alleges that:
2.That plaintiff is the owner of a parcel of land denominated as
Cadastral lot No. 2650, San Felipe Cadastre, situated at sitio
Caarosipan, Barangay Manglicmot, San Felipe, Zambales which she
bought in 1976 from Spouses Artemio Pronto and Angela Merano
when she was still a widow, with the following boundaries: North,
Alipio Abad, East, Antonio Cueva, South, Juan Borja, and West, Old
Provincial Road, containing an area of 108 square meters, declared
under Tax Declaration No. 002-1860R and assessed at P1,120.00;
3.That plaintiff has been in open, continuous, exclusive and
adverse as well as notorious possession of the said lot and in the
concept of an owner since she [acquired] it in 1976 until the time
when defendant took possession forcibly, two years ago;
4.That in or before 1990 the land was traversed by a new National
Highway and the land was segregated from a bigger portion of the
land, the western portion is now the land in question and since the
new provincial road which traversed the whole land of the plaintiff,
the old highway which is west of Lot 2650 shall belong to the
plaintiff in compensation of the portion of her lot traversed by the
new highway, said old highway is also taken by defendant
unlawfully; 16
It is clear that petitioner's averment make out a case for forcible
entry because she alleged prior physical possession of the subject lot
way back in 1976, and the forcible entry thereon by respondent.
Considering her allegation that the unlawful possession of
respondent occurred two years 17 prior to the filing of the complaint
on January 18, 1996, the cause of action for forcible entry has
prescribed and the MTC had no jurisdiction to entertain the case.
Petitioner's complaint therefore should have been filed with the
proper RTC.
It is settled that jurisdiction over the subject matter cannot be
waived by the parties or cured by their silence, acquiescence or even
express consent. 18 Hence, the failure of respondent to insist on the
defenses of lack of cause of action and prescription stated in his
Amended Answer with Counterclaim will not vest the MTC with
jurisdiction over the case. cTECHI
On this point, the Court held in Bongato v. Malvar 19 that:
It is wise to be reminded that forcible entry is a quieting process,
and that the restrictive time bar is prescribed to complement the
summary nature of such process. Indeed, the one-year period within
which to bring an action for forcible entry is generally counted from
the date of actual entry to the land. However, when entry is made
through stealth, then the one-year period is counted from the time
the plaintiff learned about it. After the lapse of the one-year period,
the party dispossessed of a parcel of land may file either an accion
publiciana, which is a plenary action to recover the right of
possession; or an accion reivindicatoria, which is an action to
recover ownership as well as possession.
On the basis of the foregoing facts, it is clear that the cause of action
for forcible entry filed by respondents had already prescribed when
they filed the Complaint for ejectment on July 10, 1992. Hence, even
if Severo Malvar may be the owner of the land, possession thereof
cannot be wrested through a summary action for ejectment of
petitioner, who had been occupying it for more than one (1) year.
Respondents should have presented their suit before the RTC in
an accion publiciana or an accion reivindicatoria, not before the
MTCC in summary proceedings for forcible entry. Their cause of
action for forcible entry had prescribed already, and the MTCC had
no more jurisdiction to hear and decide it.

xxx xxx xxx
Further, a court's lack of jurisdiction over the subject matter cannot
be waived by the parties or cured by their silence, acquiescence or
even express consent. A party may assail the jurisdiction of the court
over the action at any stage of the proceedings and even on appeal.
That the MTCC can take cognizance of a motion to dismiss on the
ground of lack of jurisdiction, even if an answer has been belatedly
filed we likewise held in Bayog v. Natino[.]
Moreover, even if the MTC has jurisdiction over the subject matter,
the complaint should still be dismissed because petitioner failed to
prove that the controverted 108 sq. m. lot is part of Cadastral Lot
No. 2650. Petitioner admitted that she has never seen the Cadastral
Map of San Felipe, Zambales, and relied only on the Survey
Notification Card 20 from the Bureau of Lands, 21 with a sketch of
Cadastral Lot No. 2650. Said card, however, does not reflect the 108
sq. m. lot subject of this case. Neither did petitioner cause the
survey of Cadastral Lot No. 2650 after the construction of a new
road to prove that the segregated portion on the western side is
part thereof. Ei incumbit probotio qui dicit, non qui negat. He who
asserts, not he who denies, must prove. 22 Failing to discharge this
burden, the dismissal of the complaint is proper. HaTAEc
In the same vein, ownership of the lot in question cannot be
awarded to respondent considering that OCT No. P-13011, 23 and
the Survey Plan 24 were not formally offered in evidence. While the
issue of ownership may be passed upon in ejectment cases for the
sole purpose of determining the nature of possession, 25 no
evidence conclusively show that the lot in question is covered by
said OCT No. P-13011 or any other title of respondent.
WHEREFORE, the May 16, 1999 decision of the Municipal Trial Court
of San Felipe, Zambales, the January 26, 2000 decision of the
Regional Trial Court, Branch 71, Iba, Zambales, and the March 12,
2004 decision of the Court of Appeals, are ANNULLED and SET ASIDE
for lack of jurisdiction. The complaint in Civil Case No. 328 is
DISMISSED. SHDAEC
SO ORDERED.
Davide, Jr., C.J., Quisumbing, Carpio and Azcuna, JJ., concur.
Footnotes
||| (Peralta-Labrador v. Bugarin, G.R. No. 165177, August 25, 2005)

































SECOND DIVISION
[G.R. No. 127382. August 17, 2004.]
DR. JESUS SERIA and ENRIQUETA SERIA (deceased), represented
by DR. JESUS SERIA, JR., ANTONIO SERIA, VIOLETA SERIA TAN,
REYNALDO SERIA and EMMANUEL SERIA, petitioners, vs. VICTOR
CABALLERO, TEODORO DONELA, OLIVER DONELA, COURT OF
APPEALS, and THE HONORABLE REGIONAL TRIAL COURT, BRANCH
20, MISAMIS ORIENTAL, respondents.
D E C I S I O N
CALLEJO, SR., J p:
Before us is a petition for review on certiorari of the Decision 1 of
the Court of Appeals (CA) dated August 23, 1996, affirming the
dismissal of the complaint for quieting of title, recovery of
possession, and damages by the Regional Trial Court (RTC) of
Misamis Oriental, Cagayan de Oro City, in Civil Case No. 8716.
The Antecedents
On August 11, 1982, Dr. Jesus Seria and his wife, Enriqueta Seria
filed a Complaint for quieting of title, recovery of possession, and
damages with a prayer for a writ of preliminary mandatory
injunction against respondents Victor Caballero and his tenants,
Teodoro Donela and Oliver Donela. When Dr. Seria died on August
6, 1983, he was substituted by his children, petitioners Jesus, Jr.,
Antonio, Violeta, Reynaldo and Emmanuel. 2
The petitioners alleged in their complaint that they are the absolute
owners and have been in actual and constructive possession for
thirty-five (35) years of a parcel of land described as follows:
Lot No. 3533-A, Cad-237, Cagayan Cadastre
Tax Declaration No. 02161
Location -Mantadiao, Opol,
Misamis Oriental
Area - 2.5000 has.
Boundaries:
North - Alejo Seria
South - T. Sabornido
East - A. Seria & T. Sabornido
West - F. Caballero 3
The petitioners averred that sometime in March 1982, they
discovered that respondent Caballero was claiming ownership over
the said land and offering it for sale or mortgage to third parties.
They also discovered that the respondents Donelas were occupying
the land as tenants and caretakers of the land. 4
The petitioners claimed that their father, Dr. Seria, bought the land
from Lucia Vda. de Marbella who inherited it from her father,
Ramon Neri. 5 They presented a Deed of Sale 6 dated August 23,
1947 showing that Dr. Seria bought 5 hectares of ricefield,
bounded on the North by Raymundo Seria, on the East by Teofilo
Saburnido, on the South by Obdelio Caballero, on the West by
Obdullo Caballero, from Lucia Vda. de Marbella. Dr. Seria was
issued Tax Declaration No. 4029 allegedly for the said property. As
indicated in the tax declaration and subsequent tax declarations
issued in the name of Dr. Seria, they were issued for Cadastral Lot
No. 3533 and covered a 2.5-hectare ricefield with the same
boundary owners as those in the complaint. 7 The petitioners also
averred that they regularly paid taxes thereon since 1947 up to the
present. 8
In his answer, respondent Caballero alleged that he was the lawful
owner, and had been in actual physical possession of the disputed
land since time immemorial. He averred that the disputed land is
part of Cadastral Lot No. 3533, C-7 of the Cagayan Cadastre and
originally owned by his grandfather, Eustaquio Caballero. 9
The respondents averred that Eustaquio Caballero declared the
entire parcel of land for tax purposes even before the war. Tax
Declaration No. 2442 was issued in lieu of the records that were
destroyed during the war.
This tax declaration indicated that the 119,490 square-meter parcel
of land was located at Pontacon, Iponan, Cagayan de Oro City,
bounded on North by Rustico Dablio, on the East by J. Seria and T.
Saburnido, on the South by Victor Obsioma, and on the West by
Victorino Caballero. 10
Emiliana Ibarat, respondent Caballero's sister, testified that when
Eustaquio Caballero died in 1944, the land was divided among his
three children, Vicenta, Benita and Victorino, the father of
respondent Caballero. Lot A, with an area of 39,625 square meters,
was given to Victorino, which was later inherited by the respondent.
Lot B, with an area of 71,450 square meters, was given to Benita;
and Lot C, with only 7,938 square meters was given to Vicenta. Lots
B and C were, thereafter, sold to one Gaga Yasay. Because of the
trouble between the petitioners and the respondents, Yasay agreed
to buy only a portion of Lot A. 11
The land was surveyed during the trial and it was determined that it
now consisted of only 23,373 square meters, 12 and not 25,000
square meters as claimed by the petitioners. Gliceria Legaspi,
respondent Caballero's other sister, also testified that the disputed
land was now bounded on the North by Seria and Nangcas, on the
East by Teofilo Saburnido, on the South by Gaga Yasay, and on the
West by Nangcas. 13
The RTC rendered judgment 14 on January 21, 1992, dismissing the
complaint, and upholding the right of the respondents over the land.
The dispositive portion reads:
WHEREFORE, judgment is hereby rendered in favor of the defendant
Victor Caballero and against the plaintiffs herein, to wit:
1.Ordering the dismissal of the complaint with costs.
2.Ordering the defendant Victor Caballero as the absolute and
lawful owner and possessor of the land in question.
3.Ordering the plaintiffs, their heirs, lawyers, servants or privies not
to disturb or molest the possession and ownership of Victor
Caballero over the land in question.
4.Ordering the plaintiffs to pay to defendant Victor Caballero, jointly
and severally the sum of FIVE THOUSAND (P5,000.00) pesos for
expenses of litigation, and THREE THOUSAND (P3,000.00) pesos for
and as attorney's fees having been compelled to retain the services
of counsel to protect his interest herein. TaSEHD
SO ORDERED. 15
The trial court ruled that it was not clearly shown that the land
bought by Dr. Seria from Lucia Vda. de Marbella was the same land
owned by Victor Caballero, and that the petitioners failed to show
that Lucia Vda. de Marbella bought the land from Eustaquio
Caballero, the original owner and cadastral claimant of the land. It
also noted that the deed of sale between Lucia Vda. de Marbella and
Dr. Seria showed that the land had an area of 5 hectares, whereas,
the petitioners only claimed 2.5 hectares. Furthermore, the
boundaries of the land stated in the complaint did not coincide with
what was stated in the Deed of Sale, or in Tax Declaration No. 2442
in the name of Eustaquio Caballero. The trial court ruled that the
petitioners failed to explain these discrepancies, and that there was
no showing that Tax Declaration No. 2442 was cancelled by Tax
Declaration No. 4029 in the name of Dr. Seria. The trial court
interpreted this to mean that Eustaquio Caballero's right as owner of
the land remained.
Dissatisfied, the petitioners appealed the case to the CA, which
rendered a Decision 16 affirming in toto the decision of the RTC. The
petitioners filed a Motion for Reconsideration on September 30,
1996. 17 The CA denied the motion. 18
Hence, the instant petition.
The petitioners assign the following errors:
1.THAT IT IS ERROR FOR THE HONORABLE COURT OF APPEALS TO
UPHOLD THE HONORABLE RTC ON THE ISSUE THAT THE ALLEGED
IDENTITY OF THE LAND IN LITIGATION IS UNESTABLISHED BETWEEN
THE PARTIES-LITIGANTS.
2.THAT IT IS ERROR FOR THE HONORABLE COURT OF APPEALS TO
FAIL TO APPRECIATE THE 35-YEAR ACQUISITIVE PRESCRIPTION IN
FAVOR OF THE PLAINTIFFS-APPELLANTS. 19
The issues in this petition are, therefore, the following: (1) whether
the petitioners were able to establish the identity of the land being
claimed by them; and (2) whether acquisitive prescription should be
appreciated in favor of the petitioners. IDSaTE
The Ruling of the Court
The first issue deals clearly with a question of fact which is beyond
the province of this Court in a petition for review on certiorari. Well-
entrenched is the rule that the Court's jurisdiction in a petition for
review is limited to reviewing or revising errors of law allegedly
committed by the appellate court. Factual findings of the Court of
Appeals are conclusive on the parties and not reviewable by this
Court and they carry even more weight when the Court of
Appeals affirms the factual findings of the trial court. 20 The
exceptions to this rule are the following:
(1)when the conclusion is a finding grounded entirely on
speculations, surmises or conjectures; (2) when the inference made
is manifestly mistaken, absurd or impossible; (3) when there is grave
abuse of discretion; (4) when the judgment is based on
misapprehension of facts; (5) when the findings of facts are
conflicting; (6) when the Court of Appeals, in making its findings,
went beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee; (7) when the findings of
the Court of Appeals are contrary to those of the trial court; (8)
when the findings of fact are conclusions without citation of specific
evidence on which they are based; (9) when the Court of Appeals
manifestly overlooked certain relevant facts not disputed by the
parties, which, if properly considered, would justify a different
conclusion; and (10) when the findings of fact of the Court of
Appeals are premised on the absence of evidence and are
contradicted by the evidence on record. 21
We find no cogent reason to reverse the findings of the CA. None of
the aforementioned exceptions is present in this case. The CA was
correct in concluding that the petitioners failed to establish that the
parcel of land in the possession of the respondents is the same as
that subject of their complaint.
The CA noted that the land subject of the complaint has boundaries
different from the land in possession of the respondents. In fact, the
land described in the complaint appears to be different from the
land described in the Deed of Sale which the petitioners invoke as
the basis of their ownership.
First. The petitioners alleged in their complaint that the boundaries
of their property are as follows:

North - Alejo Seria
South - T. Sabornido
East - A. Seria & T. Sabornido
West - F. Caballero 22
On the other hand, the Deed of Sale provides that the property sold
to them has the following boundaries:
North - Raymundo Seria
South - Obdullo Caballero
East - Teofilo Saburnido
West - Obdullo Caballero 23
Second. The complaint 24 of the petitioners states that the property
they are claiming has an area of 2.5 hectares. On the other hand, the
Deed of Sale 25 provides that the subject property has an area of 5
hectares.
Third. The complaint alleged that the property is located in
"Mantadiao, Opol, Misamis Oriental," 26 while the Deed of Sale
shows that the property purchased is located in "Puntakon, Igpit,
Cagayan Or. Misamis." 27
We agree with the CA that there was no showing that Tax
Declaration No. 2442 in the name of Eustaquio Caballero was
cancelled. Absent any specific statement therein to that effect, it
cannot be presumed that Tax Declaration No. 4029 in the name of
Dr. Seria cancelled Tax Declaration No. 2442. IEAHca
Moreover, the land covered by Tax Declaration No. 2442 is different
from that covered by Tax Declaration No. 4029 for the following
reasons:
The boundary owners of the land as indicated in Tax Declaration No.
2442 differ from those stated in Tax Declaration No. 4029. The
boundary owners as indicated in Tax Declaration No. 2442 are as
follows:
North - Rustico Dablio
South -Victor Obsioma
East - J. Seria & T. Saburnido
West - Victorino Caballero 28
Under Tax Declaration No. 4029, on the other hand, the boundary
owners are as follows:
North - Alejo Seria
South - Teofilo Saburnido
East - A. Seria [and] T. Saburnido
West - Eustaquio Caballero 29
Moreover, Tax Declaration No. 2442 covers an area of 119,490
square meters 30 while Tax Declaration No. 4029 covers only 25,000
square meters or 2.5 hectares. 31
The petitioners argue that the Deed of Sale and Tax Declaration No.
4029 should not be compared to Tax Declaration No. 2442 and the
Technical Description of Cadastral Lot No. 3533 because the former
refers only to a portion of the area referred to by the
latter. 32 While the petitioners are correct on this point, such
mistake would still not justify a different conclusion. The fact
remains that the documentary and testimonial evidence presented
by the petitioners did not prove the identity of the land being
claimed. The petitioners did not present evidence to prove that the
land registered in the name of Eustaquio Caballero was sold to Lucia
Vda. de Marbella or her predecessor-in-interest from whom they
purchased the land subject of their complaint.
The failure to establish the identity of the land is obviously fatal to
the petitioners' case. In Beo vs. Court of Appeals, 33 a case which
also involves an action for possession and quieting of title, the Court
had the occasion to state:
. . . [B]ecause petitioners failed to explain the discrepancy or present
other evidence to prove with certainty the location and area of the
land they seek to recover, respondent court correctly applied the
invariable rule that a person who claims ownership of real property
is duty-bound to clearly identify the land being claimed, in
accordance with the title on which he anchors his right of ownership.
When the record does not show that the land subject matter of the
action for recovery of possession has been exactly determined, such
action cannot prosper, as in the case of petitioners. In sum, proof of
ownership coupled with identity of the land is the basic rule.
Corollarily, the rule is likewise well-settled that in order that an
action for recovery of possession may prosper, it is indispensable
that he who brings the action fully proves not only his ownership but
also the identity of the property claimed, by describing the location,
area and boundaries thereof. As the appellate court succinctly
stated, he who claims to have a better right to the property must
clearly show that the land possessed by the other party is the very
land that belongs to him. 34
On the second issue, the CA ruled that inasmuch as the petitioners
failed to establish that the parcel of land in possession of the
respondents is the same as the subject of their complaint, their
claim of acquisitive prescription is clearly untenable.
The petitioners argue that they would not have regularly paid taxes
on the land since 1947 had they not believed that they owned the
same. 35 The respondents, for their part, aver that the petitioners
were only able to prove seven (7) years of actual possession of the
land through cultivation by their tenants. They argue that such
seven-year period of cultivation cannot be considered in the
petitioners' favor, since the witness who testified on this fact did not
personally know the boundaries of the land cultivated, or whether it
was the same land bought by Dr. Seria. The respondents contend
that acquisitive prescription applies only when there is no dispute as
to the identity of the property. 36
We agree with the respondents. Since the property has not been
clearly identified by the petitioners, their claim of acquisitive
prescription cannot be considered. Insufficient identification of the
portion of land claimed in absolute ownership cannot ripen into
ownership. Possession as a means of acquiring ownership, while it
may be constructive, is not a mere fiction. 37
Assuming, however, that the disputed land has been clearly
identified, acquisitive prescription will still not lie in favor of the
petitioners because they were not able to prove that they have been
in possession of the property for the requisite number of years.
Prescription requires public, peaceful, uninterrupted and adverse
possession of the property in the concept of an owner for ten years,
in case the possession is in good faith and with just title. 38
Aside from the testimony of Leonardo Vacalares that certain tenants
of the petitioners cultivated the land for a total of seven years, the
petitioners did not present any other evidence to show that they
have been in actual possession of the property for at least ten years.
The petitioners' argument that the payment of taxes on the property
since May 31, 1948 constitutes proof of their possession of the
subject land for thirty-five years is untenable. Tax declarations and
receipts are not conclusive evidence of ownership. At most, they
constitute mere prima facie proof of ownership of the property for
which taxes have been paid. In the absence of actual, public and
adverse possession, the declaration of the land for tax purposes
does not prove ownership. 39
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The
Decision of the Court of Appeals is AFFIRMED. No costs.
SO ORDERED. ESCacI
Puno, Austria-Martinez, Tinga and Chico-Nazario, JJ ., concur.
||| (Seri, G.R. No. 127382, August 17, 2004)























FIRST DIVISION
[G.R. No. L-22006. July 28, 1975.]
BASILIO PEREZ and PETRA MONTALBO, petitioners, vs. NICOLAS
MENDOZA, MARGARITA MACALALAD and the HONORABLE COURT
OF APPEALS, respondents.
Pedro T. Panganiban for petitioners.
Julio D. Enriquez, Sr. for respondents.
SYNOPSIS
In 1922, Felisa Montalbo-Ortega exchanged the land she inherited
from her father with the land of her aunt, Andrea Montalbo,
because the latter wanted to donate a piece of land to the
municipality of Taysan, Batangas, to be used as a school site and the
municipality preferred the land belonging to Felisa as it was adjacent
to the other properties of the municipality. After the exchange,
Andrea donated almost one-half of the land to the municipality and
gave the other to her daughter Margarita when the latter married
Nicolas Mendoza in 1972. Since then, Margarita and Nicolas
possessed and occupied the land continuously, in the concept of
owners. When Nicolas sought the transfer of the property in their
names he submitted the deed of exchange of property executed by
Felisa and Andrea in the presence of, and witnessed by the
Municipal Secretary, Rafael Manahan. When Basilio Perez came to
know of the alleged deed of exchange, he had it investigated and
found that the signature of the municipal secretary was forged.
Accused of falsification of private document, Mendoza was
convicted; but the Court of Appeals acquitted him for insufficiency
of evidence.
On March 20, 1959, petitioner Basilio and his wife Petra brought an
action against respondent spouses Margarita and Nicolas for
quieting of title, alleging that the land in dispute was inherited by
Petra and Felisa from Estanislao Montalbo who died in 1918; that
the heirs partitioned said land in 1934 and the share of Felisa, the
land in question, was sold by her husband, Jose Ortega, and her
children to petitioners; that they leased the said parcel of land to
respondents in 1946, but that when the lease expired in 1951, the
latter refused to return the land prompting the former to file an
unlawful detainer action which was still pending during the trial of
this case. The trial court dismissed the complaint and declared
respondents with a better right over the property in litigation. The
Court of Appeals affirmed the decision of the trial court in toto.
Finding no reversible error, Supreme Court affirmed the judgment
under review with costs against petitioners.
SYLLABUS
1.JUDGMENT; RES JUDICATA; FINDINGS OF FACT IN A CRIMINAL
CASE CONCERNING THE OWNERSHIP OF REAL PROPERTY CANNOT
BE PLEADED AS RES JUDICATA IN A CIVIL ACTION. The
pronouncements or findings of fact in a criminal case concerning the
possession and ownership of a parcel of land do not constitute the
law on the matter, and cannot be taken or adopted as a basis for
deciding the question of ownership of said land in subsequent civil
action because there is no identity of parties in the two cases and
the object or subject matter in the criminal case is different. The
judgment in the criminal action cannot be used as evidence in the
civil case where the issue is ownership of a piece of land. It is the
rule that the plea of res judicata generally cannot be interposed
except where the parties, facts and questions are the same, and a
judgment in a criminal case cannot be pleaded as res judicata in a
civil action.
2.PROPERTY; MODE OF ACQUIRING OWNERSHIP POSSESSION MAY
RIPEN INTO OWNERSHIP. The claim of private respondents that
they are the owners of the land in dispute must be upheld on the
ground that they were in actual and continuous possession of the
land, openly, adversely, and in the concept of owners thereof since
1927 thereby acquiring ownership of the land through acquisitive
prescription.
3.ID.; POSSESSION; PRESUMPTION OF OWNERSHIP. Possession is
an indicium of ownership of the thing possessed and to the
possessor goes the presumption that he holds the thing under a
claim of ownership. Article 433 of the Civil Code provides that
"(A)ctual possession under claim of ownership raises a disputable
presumption of ownership. The true owner must resort to judicial
process for the recovery of the property."
4.ID. ;ID.; CO-POSSESSION; RULE ON PREFERENCES UNDER ARTICLE
538 OF THE CIVIL CODE. Article 538 of the Civil Code provides that
possession as a fact cannot be recognized at the same time in two
different personalities except in the cases of co-possession. Should a
question arise regarding the fact of possession, the present
possessor shall be preferred; if there are two possessors, the one
longer in possession; if the dates of possession are the same, the
one who presents a title; and if all these conditions are equal, the
thing shall be placed in judicial deposit pending determination of its
possession or ownership through proper proceedings.
5.EVIDENCE; WEIGHT; EFFECT OF PRESENTING A FORGED
DOCUMENT IN EVIDENCE. The rule that the introduction of a
forged document by a witness renders his testimony practically
worthless is applicable to a situation where the particular document
or receipt introduced was found to be entirely false as to its
contents, handwriting, and signature but not to a situation where all
that was found to be false is the signature of a witnessing official.
6.PARTITION; PARTIES; DEED OF PARTITION BINDS ONLY PARTIES
THERETO. A deed of partition binds only the parties thereto but
does not affect third persons in the absence of proof that they
participated one way or another in the preparation of the
document. Any recital in the deed of partition concerning the
property under litigation cannot be used as evidence to prejudice
third persons and their successors-in-interest or place them in
estoppel as to their claims over said property. Res inter alios acta
alteri nocera nondebet. A transaction between two parties ought not
to operate to the prejudice of a third person or stranger.
7.APPEALS; FINDINGS OF FACT; FINDINGS OF FACT OF LOWER
COURT GENERALLY BINDING UPON THE APPELLATE COURT. It is a
well-entrenched precept in Philippine jurisprudence that findings of
fact of the lower court are as a rule conclusive and binding upon the
appellate court.
D E C I S I O N
MUOZ PALMA, J p:
Civil Case 689 of the Court of First Instance of Batangas was an
action to quiet title over a piece of land filed on March 20, 1959, by
spouses Basilio Perez and Petra Montalbo with spouses Nicolas
Mendoza and Margarita Macalalad as defendants. According to the
complaint, the land in controversy is located in barrio Dagatan,
municipality of Taysan, Batangas, with an area of approximately
4,765 sq. meters, declared for taxation purposes in the name of the
"Heirs of Estanislao Montalbo", and is "bounded on the north by a
school site on the east by Calixto Flores, on the south by a creek, and
on the west by a creek and the land of Gregorio Mendoza." On the
basis of the evidence adduced by the parties, the trial court then
presided by Hon. Lorenzo Relova rendered judgment on February
19, 1962, dismissing the complaint and declaring the spouses
Mendoza "to have a better right to the property in question." 1
Spouses Perez elevated the Relova decision to the Court of Appeals
which, however, affirmed in toto the findings of the court a quo, and
declared that "upon the evidence it has been shown by a great
preponderance that the land in question belongs to the
defendants." 2
The case is now before Us on a petition for certiorari filed by
spouses Perez.
The findings of fact both of the trial court and the Court of Appeals
may be briefly summarized as follows:
The litigated parcel of land was originally part of a bigger tract
owned by Estanislao Montalbo. When Estanislao died in 1918, his
properties passed on to his children Petra, Felisa, and Pedro all
surnamed Montalbo, and because Pedro died single the two women
remained as the only heirs. By mutual agreement Petra and Felisa
divided between themselves the lands of their father and the parcel
of which the litigated land was a part was assigned to Felisa.
Sometime in 1922 Felisa exchanged the above-mentioned parcel
with a land belonging to her aunt, Andrea Montalbo, a sister of her
father. The reason for the exchange was that Andrea wanted to
donate a piece of land to the municipality for use as a school site
and the land of Felisa was what the municipality preferred as it was
adjacent to other properties of the municipality. (Exh. 5 for
defendants Mendoza) Upon her acquisition of Felisa's
aforementioned land, Andrea donated to the municipality the
northern portion thereof which constituted almost one-half of the
entire parcel, and since then that portion was declared for taxation
purposes by the municipality together with its adjoining properties
(Exhs. 6, 6-A, 6-B). In 1927 the remainder of the lot was given by
Andrea Montalbo to her daughter Margarita Macalalad on the
occasion of her marriage to Nicolas Mendoza, and from the time of
their marriage the couple possessed the said property. That
donation was confirmed subsequently in a public instrument dated
August 15, 1951 (Exh. 2 for the Mendozas). Nicolas Mendoza sought
to transfer the tax declaration of the property to his name and of his
wife and for that purpose he submitted a deed of exchange of
property dated January 14, 1922, allegedly executed by Felisa
Montalbo and Andrea Montalbo in the presence of the municipal
secretary Rafael Manahan (Exh. 5). When Basilio Perez came to
know about the supposed deed of exchange, he had it investigated
and upon discovering that the signature of Rafael Manahan
appearing on the document was forged, he filed a criminal
complaint before the Fiscal's office which led to an accusation for
falsification of private document against Andrea Montalbo and
Nicolas Mendoza. Only Nicolas Mendoza was arraigned and tried
and was convicted by the Court of First Instance of Batangas, but on
appeal he was acquitted by the Court of Appeals for insufficiency of
evidence to show that he participated in affixing the signature of
Rafael Manahan or that he was aware of the falsity of the document
in question when he presented it to the tax assessor's
office. 3 Notwithstanding the forged signature of Rafael Manahan on
the document Exhibit 5, there is sufficient evidence to prove that an
exchange of property did in fact occur in 1922 between Andrea and
Felisa Montalbo, and that Felisa's land passed on to Andrea who in
turn gave part of it to the municipality and part to her daughter,
Margarita; hence, the decision in favor of the spouses Mendoza.

On the other hand, petitioners contend that the disputed property
was inherited by Petra and Felisa Montalbo from their father
Estanislao who died in 1918 and since that date the two sisters were
in possession of said land. In 1934 a deed of partition of the various
properties of Estanislao was executed between Petra and the heirs
of Felisa, and the land in question was divided equally between
them; among those who signed as witnesses to that agreement was
Andrea Montalbo (Exh. D for petitioners). In 1952 Felisa's husband,
Jose Ortega, and children sold their one-half share to spouses Petra
Montalbo and Basilio Perez, now petitioners, but the deed of sale
was lost a year after. Sometime in 1946 petitioners leased the
property to the Mendozas and when the lease expired in 1951 they
demanded for the return of the land but the Mendozas refused and
so petitioners had to file an ejectment suit before the justice of the
peace court of Taysan which was still pending at the time of the trial
of the civil case in 1960. (tsn. witness Basilio Perez, December 15,
1960, pp. 16-34).
For not giving credit to the foregoing evidence, petitioners now
assail the adverse decision of respondent court on four assigned
errors.
1.Petitioners contend that respondent court erred in considering the
criminal case for falsification res adjudicata on the matter of
ownership of the land in litigation when the "question of ownership
was not actually and directly in issue in the criminal case and the
latter was not the proper vehicle for the determination of the
ownership of the land." (p. 9, petitioners brief) Petitioners refer to
portions in the decision of respondent court, viz:
"The land in question, together with that portion that was acquired
by the municipality of Taysan, the identity of which is admitted by
the parties, belonged to Felisa Montalbo, as held is the decision of
the Court of Appeals, thus 'The said parcel of land previously
belonged to Felisa Montalbo (married to Jose Ortega), who inherited
it from her deceased father, the aforecited Estanislao Montalbo;',
and the land in question was donated propter nuptias by Andrea
Montalbo to Margarita Macalalad and Nicolas Mendoza, the
defendants, (Margarita Macalalad is the daughter of Andrea
Montalbo) on the occasion of their marriage on February 27, 1927,
as found and held in the decision of the Court of Appeals, thus
'and this land was acquired by the donor (Andrea Montalbo) by
means of a barter with her own parcel of land planted with bamboos
and mango trees'.
"Upon the basis of the findings of fact and conclusion arrived at in
the decision of the Court of Appeals, it clearly appears that although
the document of exchange of the lands was found to be falsified,
nevertheless the Court found upon the facts as demonstrated by the
evidence that the land in question 'previously belonged to Felisa
Montalbo (married to Jose Ortega), who inherited it from her
deceased father, the aforesaid Estanislao Montalbo . . .'; that said
land was donated propter nuptias by Andrea Montalbo to the
defendants on the occasion of their marriage on February 27, 1927;
and that 'this land was acquired by the donor by means of a barter
with her own parcel of land planted with bamboos and mango
trees'. From the context of the decision the natural and logical
inference is that factually the exchange of the lands had been
consummated. . . ." (pp. 6-7, CA decision at pp. 20-21, rollo;
emphasis supplied to indicate disputed statements)
Undoubtedly, there is merit to the contention of petitioners that the
pronouncements or findings of fact made by the Court of Appeals in
the criminal case concerning the possession and ownership of the
land now in litigation in the civil case, do not constitute the law on
the matter and cannot be taken or adopted as a basis for deciding
the question of ownership of said land in this civil case. Since there is
no identity of parties in the two cases the petitioners here not
being parties in the criminal case and the object or subject matter
in the criminal prosecution is different, the latter being concerned
with the guilt or innocence of accused Nicolas Mendoza for
falsification of private document, it follows that the judgment in the
criminal action cannot be used as evidence in the civil case where
the issue is ownership of a piece of land. It is the rule that the plea
of res judicata generally cannot be interposed except where the
parties, facts, and questions are the same, 4 hence, the judgment in
a criminal case cannot be pleaded as res judicata in a civil action. 5
But whatever error was committed by respondent court in this
regard, the same is not sufficient to nullify the appealed decision.
Analyzing the decision of respondent court. We see that the latter
made its own appraisal and evaluation of the evidence existing in
the record relative to the possession and ownership of the land in
question. Thus it said that the conclusions arrived at by the Court of
Appeals in the criminal case to wit (1) that there was an exchange of
lands consummated between Andrea and Felisa and (2) that the
exchanged land was later donated by Andrea to her daughter
Margarita in 1927, "can hardly be doubted if we take account of the
undisputed fact that the defendants have been in possession of the
land since 1927, and the plaintiffs (meaning spouses Perez) have not
attempted to disturb defendants' possession of the land until 1952
when said plaintiffs filed an action of unlawful detainer against the
defendants." (p. 7 of appealed decision at p. 21, SC rollo; italics
supplied) Continuing, respondent court expounded:
"Contrary to the allegation in the complaint 'That plaintiffs were
in possession of the land prior and up to January, 1946, when the
same was leased to the defendants . . .', and the testimony of Basilio
Perez to the same tenor, the evidence has conclusively shown that
the defendants have been in continuous possession of the land since
1927 to the present time, and they have built a house on the land in
1928 where they have resided and lived to the present, as testified to
by the defendant Mendoza, . . .
"The plaintiffs have intended, however, with the support of the
testimony of Basilio Perez, that the possession of the defendants
since 1946 was that of a mere lessee of the land. On this matter, the
trial court said, 'the records do not show any documentary evidence
to support such contention. Nor is any document, say receipts of
payment of rentals presented to bolster their theory. On the
contrary their averment has been strongly denied by the defendants
and the records show that it was only in 1952 that a civil action was
instituted by the plaintiffs against the defendants in the Justice of
the Peace Court of Taysan, Batangas, for detainer and damages', and
said allegation of possession of the defendants as lessees of the land
is not supported by positive and convincing evidence." We find no
reason to disagree with the foregoing findings of fact and conclusion
of the trial court because the same is supported by the
preponderance of evidence, and the plaintiffs have not pointed to Us
any fact of significance or influence which have been disregarded by
the court other than the testimony of Basilio Perez who testified
about the supposed contract of lease." (pp. 21-22, 23, ibid.;
emphasis supplied)
Digging further into the evidence of herein petitioners, respondent
court found for itself that the agreement of partition dated May 27,
1934, Exhibit D, is not incontrovertible proof that in 1934 the
litigated property belonged in common to Petra and the heirs of
Felisa Montalbo both of whom may have been guided by the fact
that the property was still declared for taxation purposes in the
name of Estanislao Montalbo, and that the document of partition
"did not overcome the evidence on record that Andrea Montalbo
became the owner of the land, and that since 1927 the defendants
have been in continuous possession of the land, openly, adversely
and in the concept of owners thereby acquiring ownership of the
land through acquisitive prescription." (p. 10 of CA decision at p. 24,
SC rollo).
Independently therefore of the pronouncements of the Court of
Appeals in the criminal case, respondent court examined the
evidence in this civil case and made its own findings of fact on the
basis of which it affirmed the decision of the trial court.
We could have stopped here and resolved this petition under well-
entrenched precepts in Philippine jurisprudence that findings of fact
of the Court of Appeals are as a rule conclusive and binding upon
this Court; 6 nonetheless, to set our mind at rest that the
conclusions of respondent court were not grounded on speculation,
surmises or conjectures, 7 We went over the evidence before Us.
Certain salient facts strongly support the claim of respondents
Mendoza over the property in dispute:
First, the northern boundary of the land in controversy is
undisputably a school site which originally was part of a bigger tract
belonging to Estanislao Montalbo. This is admitted by petitioner
Basilio Perez who to a question propounded by his counsel, Atty.
Panganiban, declared:
"Mr. Panganiban: (Counsel of petitioners).
Q.According to these tax declarations which you said covers the land
in question, the boundaries on the north, school site; on the east,
land of Calixto Flores; on the south, estero; and on the west, estero
and Gregoria Mendoza, why is it that there is a discrepancy?
A.Because from the whole parcel of land a portion was taken for the
school site, and that which remains now is the land in question, sir."
(tsn December 15, 1960, pp. 22-23)
No explanation however was offered by Perez as to how that
portion became a school site. On the other hand, there is evidence
of respondent Mendoza that because Andrea Montalbo wanted to
donate a piece of land to be used as a school site and the
municipality preferred the location of the land inherited by Felisa
from her father, the two women exchanged lands after which
Andrea gave one-half of the property to the municipality while the
remaining portion which is the land now in litigation was
donated propter nuptias to her daughter Margarita way back in
1927. (tsn October 24,1961, pp. 14-18) This donation of Andrea was
not disproved by any evidence of petitioners. On the part of
respondents Mendoza, their documentary evidence, Exhibits 6, 6-A
and 6-B, show that the municipality of Taysan declared the donated
property in its name as early as July, 1925, which supports
respondents' claim that the exchange of properties between Andrea
and Felisa Montalbo took place sometime in 1922.

Second, the provincial authorities dealt with the Mendozas for the
widening of the provincial road which traverses the land in question.
Nicolas Mendoza testified that the land covered by the complaint
actually consists of two lots which he described in his sketch, Exhibit
1, with letters "A" and "B" respectively, separated by a provincial
road leading to the municipality of Lobo; that lot "A" which is the
bigger parcel is the one donated to his wife, Margarita, by Andrea
Montalbo on the occasion of their marriage in 1927 (Exh. 2); while
lot "B" was bought from Donata Mendoza in 1951 as shown by the
deed of sale, Exhibit 7; that sometime in 1937-38, the province
widened the provincial road traversing the two lots, and he and his
wife were approached by the provincial authorities more
particularly, Engineer Ramirez, for them to give without
compensation from lot "A" a stretch of land of one meter in width to
widen said road, and they agreed. At that time Donata Mendoza still
owned lot "B" and she was also asked to give part of her land for the
road but she was paid for the value of the plants destroyed in the
process. (tsn October 24, 1961, pp. 32-34) For his part, petitioner
Perez admitted during the cross-examination conducted by the
opposite counsel, Atty. Julio Enriquez, that the provincial authorities
did not deal with him at all during the widening of that particular
road. (tsn September 25, 1961, p. 34) This is of marked significance,
because if it were true as claimed by petitioners that they were in
possession of the property since the death of Estanislao Montalbo in
1918 or even after the deed of partition in 1934, they would have
been the persons approached by the authorities for the widening of
the road. The fact that the Mendozas were the ones who gave away
part of the land for the widening of the Lobo road shows that they
were in possession of the property and were living there at the time.
Third, respondents Mendoza have been in possession of the
property since 1927 in concept of owners thereof. We have the
testimony of respondent Nicolas Mendoza that after the land was
donated to his wife in 1927 they built a house on it and lived there
continuously, witness referring particularly to what he described as
lot "A" in his sketch Exhibit 1. (tsn October 24, 1961, pp. 7, 30-31)
Respondent's testimony was found both by the trial and appellate
courts credible because (1) petitioner Basilio Perez himself admitted
during cross-examination that even before the last world war the
Mendozas had constructed a house on the land in litigation (tsn
September 25, 1971, pp. 37-39; see Exh. E-3) which admission
disproves the allegation in the complaint and Perez' testimony that
it was only in 1946 when the Mendozas occupied the property as
lessees; (2) the testimony of Nicolas Mendoza was corroborated by
witness Adriano Gonzales, a retired justice of the peace of Taysan,
Batangas, who declared that he knew the Mendozas since 1937 and
he saw them living on the land in question and they have not
changed residence at all since he had known them (tsn December 6,
1961, pp. 5-6); and (3) the respondents Mendoza were the ones who
were living on the propertyand not the petitionersat the time the
provincial government in 1937 widened the Lobo road which crosses
said land.
The court a quo and the respondent appellate court did not err
when they upheld the claim of ownership of the Mendozas
principally on the ground that the latter were in actual possession of
the property since 1927 and were sought to be dispossessed by
petitioners herein only in 1952 when an ejectment suit was filed
against them.
Possession is an indicium of ownership of the thing possessed and to
the possessor goes the presumption that he holds the thing under a
claim of ownership. 8 Article 433 of the Civil Code provides that
"(A)ctual possession under claim of ownership raises a disputable
presumption of ownership. The true owner must resort to judicial
process for the recovery of the property." In Chan vs. Court of
Appeals, et al., L-27488, June 30, 1970, 33 SCRA 737, this Court
upheld the finding of the Court of Appeals that the litigated property
belonged to the private respondents therein based on their
possession of the property, not only because such findings of fact of
the appellate court are conclusive and binding on this Court but
because the conclusion is in accordance with Articles 433 and 531 of
the Civil Code. 9
As we have here conflicting claims of possession by the parties over
the land in controversy and because the fact of possession cannot
be recognized at the same time in two different personalities except
in cases of co-possession, the present possessor is to be preferred
pursuant to Article 538 of the Civil Code which We quote:
"Possession as a fact cannot be recognized at the same time in two
different personalities except in the cases of co-possession. Should a
question arise regarding the fact of possession, the present
possessor shall be preferred; if there are two possessors, the one
longer in possession; if the dates of the possession are the same, the
one who presents a title; and if all these conditions are equal, the
thing shall be placed in judicial deposit pending determination of its
possession or ownership through proper proceedings." 10
The pretension of petitioners that the possession of the Mendozas is
that of a mere lessee was not believed by the trial judge and the
appellate court not only because of the absence of any written or
oral evidence on the matter other than the bare testimony of
petitioner Basilio Perez, but also due to the circumstances present in
the case which We indicated and enumerated at pages 7 to 9 of this
decision. In fine, it is a fact that the Mendozas are presently in
possession of the property and the presumption of ownership in
their favor has not been successfully rebutted by evidence that they
are mere lessees of the land in their possession as claimed by
petitioners.
2.In their second assigned error, petitioners contend that
respondent court should not have given weight to the evidence of
respondent Mendoza because the latter's Exhibit 5 was proven to be
a falsified document.
To recall, Exhibit 5 is the alleged deed of exchange or barter of lands
between Andrea and Felisa Montalbo dated January 14, 1922. On
this point, petitioners overlook the fact that Exhibit 5 was made the
basis of a criminal accusation of falsification of private document
solely on the allegation that the signature of Rafael Manahan, the
person before whom the parties to the document allegedly
appeared, was not his. There was no finding in that criminal case as
per decision rendered therein that the barter or exchange of lands
between Andrea and Felisa Montalbo did not in effect take place. On
the contrary, what appears in said decision offered by petitioners as
their Exhibit J are the following findings of the Court of Appeals, viz:
that the land donated by Andrea Montalbo to her daughter
Margarita Macalalad "was acquired by the donor by means of a
barter with her own parcel of land planted with bamboos and
mango trees"; that while it is true that because of this presentation
of the falsified document appellant (now respondent Nicolas
Mendoza) was able to secure the declaration of the property
donated in his name, no criminal liability should be imposed upon
him in the absence of any evidence that he presented said exhibit
with the knowledge that it was forged "especially if we take into
consideration the fact that he and his wife were and are still in
possession of the land donated since 1927"; that in fact, the color
and appearance of the document in question show that it is not a
new document but an old one thus confirming Mendoza's theory
that it was executed in or about the year 1922 as appearing in the
document or five years before his marriage. (pp. 1, 5, 6 of Exh. J,
folder of exhibits) Thus, if the document Exhibit 5 was held to be
forged, it was simply because the municipal secretary, Rafael
Manahan, did not sign it and not for any other reason. What is
material and relevant to the civil case is that both the trial court and
respondent appellate court found for a fact that there was an
exchange of lands between Andrea and Felisa Montalbo on the basis
of evidence other than the disputed Exhibit 5. As to what the
evidence is, has been discussed above.
Petitioners cite Gonzales vs. Mauricio, 53 Phil. 728 where this Court
stated inter alia that the introduction of a forged instrument by a
witness renders the testimony of the latter practically worthless.
That statement however is not applicable to the situation before Us
because in Gonzalez the particular document or receipt referred to
was found to be entirely false as to its contents, handwriting, and
signature, whereas here all that was found to be false is the
signature of a witnessing official.
3.The last argument of petitioners is the object of the third assigned
error. It is contended that the appellate court erred in not giving
effect to the deed of partition, Exhibit D, notwithstanding the fact
that the name of Andrea Montalbo appears in the document as one
of the witnesses thereto.
Exhibit D appears to be a document dated May 27, 1934, wherein
certain properties allegedly belonging to Estanislao Montalbo were
divided between Petra Montalbo and Jose Ortega, husband of
deceased Felisa Montalbo. Petitioner Basilio Perez declared that one
of the parcels of land mentioned in the document is the land now in
litigation which is particularly marked as Exhibit D-1. He also
testified that Exhibit D was signed by him and his wife, Petra
Montalbo, by Jose Ortega, husband of deceased Felisa Montalbo,
and thumbmarked by the latter's children all in his presence. (tsn
December I5, 1960, pp. 19-24) Surprisingly, however, Basilio Perez
did not at all mention during the course of his testimony that the old
woman Andrea Montalbo, signed the deed of partition as a witness.
We have gone over the transcript of Basilio Perez' declaration on
direct and cross-examination (tsn December 15, 1960, pp. 15-34;
September 25, 1961, pp. 3-40) and at no instance did he ever state
that Andrea Montalbo was present during the preparation of the
document, that she read or knew the contents thereof which by the
way consists of six handwritten pages, and that she signed her name
on the document. It was incumbent upon petitioners to identify the
signature of Andrea Montalbo on the document if her signature was
truly there. As a matter of fact, examining the document Exhibit D
We entertain doubts whether the name referred to by petitioners is
"Andrea Montalbo", for, as written, it also can read "Maria
Montalbo". At any rate, whatever is the import of said deed of
partition, the same binds only the parties thereto but does not
affect third persons such as Andrea Montalbo or the herein
Mendozas in the absence of proof that they participated in one way
or another in the preparation and execution of the document. As it
is, Andrea Montalbo was a stranger to that deed of partition and any
recital therein concerning the property under litigation cannot be
used as evidence to prejudice her and her successors-in-interest or
place her in estoppel as to her claims over the property. Res inter
alias acta alteri nocere non debet. A transaction between two
parties ought not to operate to the prejudice of a third person or
stranger. 11

4.In the fourth assignment of error, petitioners claim that the
appellate court should have rendered a decision in their favor. That
both the trial court and respondent appellate court have correctly
evaluated the evidence, has been clearly demonstrated by Us.
IN VIEW OF ALL THE ABOVE CONSIDERATIONS, We find no reversible
error in the decision under review and We AFFIRM the same with
costs against petitioners.
So Ordered.
Castro (Chairman), Makasiar, Esguerra and Martin, JJ., concur.
Teehankee, J., is on leave.
||| (Perez v. Mendoza, G.R. No. L-22006, July 28, 1975)





FIRST DIVISION
[G.R. No. 101929. January 6, 1993.]
BENJAMIN DIZON, ZACARIAS DIZON, AFRICA DIZON, PERFECTO
DIZON, CARMEN DIZON (Heirs of Paula Galang), JULIA GALANG,
CONSOLACION TABORA, ABELARDO TABORA, CECILIA TABORA,
AVELINA TABORA, TRINIDAD TABORA, REMEDIOS TABORA,
VIRGINIA TABORA, DELFIN TABORA, PENINA TABORA, FRANCISCO
TABORA, CIPRIANA GALANG, RUFINO DELOS SANTOS, PEPITO
DELOS SANTOS (Heirs of Donata Vergara), ARNEO VERGARA,
BENIGNO VERGARA, JOSE VERGARA, SCION VERGARA, DEMETRIA
VERGARA (all heirs of Dionisio Galang), petitioners, vs. COURT OF
APPEALS, AUREO REYES, AURELIO SAMIA, ALFONSO SAMIA,
POTENCIANO GALANG, LEONCIA GARCIA, BIENVENIDO TAPNIO,
LYDIA BALINGIT VDA. DE GARCIA, BENEDICTO GARCIA, ROMULADO
GARCIA, AMY GARCIA, ALEXANDER GARCIA, LUDIVINA GARCIA,
MONTANO GUEVARRA, CORAZON LAMPA, RUDY LAMPA,
EDUARDO LAMPA, ILLUMINADA GUEVARRA, CARMELITA
MASANQUE VDA. DE GARCIA, MA. CONCEPCION AQUINO VDA. DE
GUEVARRA, HONZAI GUEVARRA, RODA REBECCA GUEVARRA,
RUTH GUEVARRA, minors represented by their mother Ma.
Concepcion Vda. de Guevarra, PRIMITIVA GUEVARRA, JOSIAS N.
GARCIA, LUCITA M. GARCIA, VICTOR M. GARCIA, LUTERO M.
GARCIA, SAMSON M. GARCIA, FELIXBERTO M. GARCIA, JR.,
HERMENIGILDA GARCIA, CONSTANCIO GARCIA, REYNALDO
GARCIA, AGAPITA GARCIA, ERNESTO GARCIA, NORICO GARCIA,
PACIFICO GARCIA, NORMANDO GARCIA, ARTURO GARCIA, ESTELLA
GARCIA, DIOSDADO GARCIA (representing LEONCIA GARCIA),
GREGORIA MENDOZA, ELEUTERIA BAUTISTA, PEDRO ATIENZA,
BENITA SAMANIEGO, NENE SAMANIEGO (representing FLAVIANA
GALANG), LETICIA REYES, MANUEL REYES (representing MARCIANA
GALANG), CARMEN ROQUE VDA. DE DIMABUYU, PORFIRIO R.
DIMABUYU, CARMEN R. DIMABUYU, CARIDAD R. DIMABUYU,
PEDRO R. DIMABUYU, MARCOS DIMABUYU (representing
GERTRUDES GALANG), respondents.
Herminio Z. Canlas for petitioners.
Lagunsad, Juan, Rubin & Cabaron Law Office for respondents.
SYLLABUS
1.CIVIL LAW; LAND TITLES AND DEEDS; TORRENS SYSTEM OF LAND
REGISTRATION; TORRENS TITLE; INDEFEASIBLE AND
INCONTROVERTIBLE UPON EXPIRATION OF ONE YEAR PERIOD FROM
ENTRY OF DECREE; CASE AT BAR. It is a fact that Dionisio Galang's
ownership over the disputed lots (3548 and 3562) had been
judicially confirmed on 19 May 1919 in Cadastral Case No. 14,
G.L.R.O. No. 51, which is a proceeding in rem and hence binding "on
the whole world." OCT No. 1056 (9010) and OCT No. 1057 (9102)
were, as a consequence, issued on 9 January 1922. None of Galang's
co-heirs objected to or protested their issuance. These titles became
indefeasible and incontrovertible. Then it was only after sixty-one
(61) years or on 24 March 1983 that the descendants of Galang's co-
heirs asserted co-ownership claims over the subject lots.
2.REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF THE TRIAL
COURT, UPHELD ON APPEAL. It is true that Galang executed an
affidavit, unnotarized at that, on 27 June 1920. However, as can be
gleaned from the foregoing, there is no reference to Lot Nos. 3548
and 3562. Said affidavit is not therefore a sufficient basis or support
for what is alleged by respondents as a partition among Dionisio and
his now deceased sisters. It does not, as correctly stated by the trial
court, amount to anything insofar as the two (2) lots involved in this
case are concerned. We likewise agree with the trial court that in
the absence of definite proof establishing respondents'
link/relationship to their alleged predecessors-in-interest, i.e., the
Galang sisters, they do not have any cause of action, and the suit for
partition must necessarily fall.
D E C I S I O N
PADILLA, J p:
In this petition for review on certiorari, petitioners seek to nullify the
decision * of the Court of Appeals, dated 29 April 1991, in CA-G.R.
CV. No. 14312, the dispositive portion of which reads as follows:
"WHEREFORE, the appealed judgment is hereby REVERSED; and the
Deed of Extra-Judicial Settlement of the Estate of the deceased
Dionisio Galang (Exh. 'D'), in so far as it relates to Lots 3548 and
3562 of the Bacolor Cadastre, and Transfer Certificates of Title Nos.
182670-R and 182671-R issued by virtue thereof are hereby
declared null and void.
"Conformably, the Register of Deeds concerned is hereby ordered to
cancel the said titles; and subject Lots 3548 and 3562 are hereby
adjudicated to the heirs of the deceased co-owners to be partitioned
among them as follows:
a.one-sixth to the Heirs of Marciana Galang;
b.one-sixth to the Heirs of Dionisio Galang;
c.one-sixth to the Heirs of Flaviana Galang;
d.one-sixth to the Heirs of Gertrudes Galang;
e.one-sixth to the Heirs of Potenciana Galang;
f.one-sixth to the Heirs of Leoncia Galang.
"Costs against defendants-appellees.
"SO ORDERED." 1
It appears that on 21 August 1984, Aureo Reyes, et al. (hereafter
"respondents") filed an amended complaint before the Regional
Trial Court of San Fernando, Pampanga, docketed as Civil Case No.
6752, for the annulment of a deed of extra-judicial settlement and
partition of the estate of Dionisio Galang, claiming to have been
deprived thereby of their shares, as co-owners, in Lot Nos. 3548 and
3562 Bacolor cadastre, and that OCT Nos. 9010 and 9102, issued in
the name of Dionisio Galang, covering said lots, are fraudulent and
should therefore be annulled and cancelled. cdrep
The facts of the case, as culled from the Court of Appeals decision,
are as follows:
The spouses Hilario Galang and Martina Laxamana owned two (2)
lots located in San Agustin, Potrero, Municipality of Bacolor,
Province of Pampanga. They had six (6) children, namely, Dionisio,
Marciana, Potenciana, Flaviana, Leonora and Gertrudes.
The spouses (Hilario and Martina) mortgaged the aforesaid lots to
Camilo Angeles. It is alleged by the respondents that Dionisio Galang
redeemed these lots in his own name, despite the fact that part of
the funds used for the redemption came from his sisters. 2 A
cadastral survey involving the two (2) lots was conducted, and on 19
May 1919, the Court of First Instance ordered the issuance in
Cadastral Case No. 14, of OCT Nos. 9010 (for lot 3548) and 9102 (for
lot 3562) in the name solely of Dionisio Galang (hereafter Galang).
Respondents, who are heirs of Galang's sisters, claim that Galang
and his five (5) sisters had partitioned the subject lots on 27 June
1920, as embodied in an unnotarized affidavit executed by Galang
(Exh. "C"). As a consequence thereof, Galang's sisters constructed
their houses on Lot 3548. The structures passed on from generation
to generation, with each of Galang's sisters and their descendants
enjoying the benefits therefrom. No one questioned for disturbed
them until the petitioners (heirs of Galang) informed them that the
lots in question were titled in Galang's name and had been
partitioned, on the basis of a Deed of Extrajudicial Partition (Exh.
"D"), into three (3) equal parts corresponding to his (Galang's) three
(3) children; that petitioners had succeeded in subdividing the lots
and in obtaining titles thereto in their name (TCT Nos. 182670-R and
182671-R) despite their (respondents') earlier demands for an
extrajudicial settlement of their dispute.
Petitioners, on the other hand, contend that the cadastral case
which culminated in the issuance of the original certificates of title
over the subject lots in the sole name of Galang, was a proceeding in
rem, thus binding on the whole world; that when original certificates
of title (OCT Nos. 9010 and 9102) were issued on 9 January 1922 to
Galang, respondents did not raise any objection until March 1983
when they filed the complaint in Civil Case No. 6752, or after a lapse
of sixty-one (61) years.
The trial court 3 upheld Galang's titles over the lots which, as
aforestated, had been issued as early as 1922 in his name. The trial
court further held that respondents' action had long prescribed,
having been filed only on 24 March 1983, or after a lapse of sixty-
one (61) long years from the issuance of said titles. The court also
noted respondents' failure to establish their relationship to Galang's
five (5) sisters, premising their claim solely on an unsubstantiated
assertion that they are descendants of the deceased Galang
sisters. 4 The presence or construction of the houses on Lot No.
3548 was also not considered as evidence in respondents' favor,
since no proof was submitted establishing respondents' right to
occupy the place. The documentary evidence (Exh. "C" and "C-1")
allegedly showing co-ownership among Dionisio and his co-heirs,
was likewise ignored by the trial court as this did not specifically
refer to the disputed Lots 3548 and 3562. llcd
On appeal by the respondents, respondent Court of Appeals
reversed the trial court by upholding respondents' rights. It focused
on two (2) issues. Thus
"Are the properties in question owned in common by the
predecessors-in-interest of appellants and appellees? And has
appellants' present action for partition prescribed?" 5
The appellate court declared that co-ownership existed between
respondents' predecessors-in-interest and those of petitioners, on
the basis of Galang's affidavit which, although unnotarized, was
nonetheless an ancient document, pursuant to Sec. 22, Rule 132 of
the Rules of Court, since it was executed on 27 June 1920. As such,
proof of its due execution and authentication could be dispensed
with, according to the appellate court.
Hence, this recourse in turn by the petitioners.
We find the petition impressed with merit.
It is a fact that Dionisio Galang's ownership over the disputed lots
(3548 and 3562) had been judicially confirmed on 19 May 1919 in
Cadastral Case No. 14, G.L.R.O. No. 51, which is a proceeding in
rem and hence binding "on the whole world." OCT No. 1056 (9010)
and OCT No. 1057 (9102) were, as a consequence, issued on 9
January 1922. None of Galang's co-heirs objected to or protested
their issuance. These titles became indefeasible and
incontrovertible. Then it was only after sixty-one (61) years or on 24
March 1983 that the descendants of Galang's co-heirs asserted co-
ownership claims over the subject lots.

It is true that Galang executed an affidavit, unnotarized at that, on
27 June 1920 which states in part as follows (per English translation
[Exh. "C-1]): 6
That on this date, I have received from all my sisters and nephews
who are my co-heirs, namely Potenciana Galang, Flaviana Galang,
Gertrudes Galang, who are may sisters, and Silverio Garcia and
Hilarion Samia, in their own names and for their brothers and sisters
who are also co-heirs, the sum of ONE HUNDRED AND SIX PESOS
(P106.00), Philippine Currency, as complete payment for the
discharge of the land we co-inherited, which is the one we
partitioned this date also, which was mortgaged to the Angeles
family." 7
However, as can be gleaned from the foregoing, there is no
reference to Lot Nos. 3548 and 3562. Said affidavit is not therefore a
sufficient basis or support for what is alleged by respondents as a
partition among Dionisio and his now deceased sisters. It does not,
as correctly stated by the trial court, amount to anything insofar as
the two (2) lots involved in this case are concerned: LLpr
"Even their presentation of the document purportedly executed by
Dionisio Galang on June 27, 1920 (Exh. "C" and "C-1) where the
latter acknowledges that he and his co-heirs named therein are co-
owners of a certain property which they had mortgaged to a certain
family surnamed Angeles does not amount to anything for nothing
in this document shows that it pertains to the two lots involved
herein. It merely referred to a certain 'land' which Dionisio Galang
and his co-heirs 'co-inherited' and partitioned without any indication
as to which property is being referred to." 8
We likewise agree with the trial court that in the absence of definite
proof establishing respondents' link/relationship to their alleged
predecessors-in-interest, i.e., the Galang sisters, they do not have
any cause of action, and the suit for partition must necessarily fall.
The trial court aptly observed:
". . . the plaintiffs thru their witnesses Bienvenido Tapnio, Marcos
Dimabuyu, Pedro Atienza, and Carmelita Galang, tried to prove that
all the plaintiffs herein are heirs and direct descendants,
respectively, of Marciana Galang, Potenciana Galang, Flaviana
Galang, Leoncia Galang and Gertrudes Galang who, in their lifetime,
together with their late brother Dionisio Galang, are the co-owners
of these two lots, namely, Lots Nos. 3548 and 3562. Lamentably, all
that was proved in the process by the plaintiffs thru these witnesses
despite several proddings and suggestions made by the court
toward this end was that each of these plaintiffs are just related to
one another in varying degrees of relationship. They failed to
establish their connection or relationship with any of these five
sisters save for their unfounded averment that they are indeed
descendants and heirs of these deceased individuals." 9
WHEREFORE, the petition is GRANTED. The appealed decision of the
Court of Appeals is hereby SET ASIDE and the decision of the trial
court dated 3 October 1986 in Civil Case No. 6752 is hereby
REINSTATED. No costs.
SO ORDERED.
Cruz, Grio-Aquino and Bellosillo, JJ ., concur.
||| (Dizon v. Court of Appeals, G.R. No. 101929, January 06, 1993)




SECOND DIVISION
[G.R. No. 93213. August 9, 1991.]
LUCIO TAN ALIM, petitioner, vs. HON. COURT OF APPEALS and
PACIFIC COAST TIMBER PRODUCTS, INC.,respondents.
Celestino R. Calautit for petitioner.
Jose S. Santos, Jr. for private respondent.
SYLLABUS
1.CIVIL LAW; OBLIGATIONS AND CONTRACTS; TERMS OF A WRITTEN
CONTRACT BINDING UPON THE PARTIES; LITERAL MEANING OF THE
STIPULATION FOLLOWED IN THE INTERPRETATION OF ITS
PROVISIONS. Nothing is more settled than the rule that the terms
of a written contract are binding on the parties thereto. In the
interpretation of the provisions of a written contract, the courts
should follow the literal meaning of the stipulation. Otherwise, the
evident intention of the parties must prevail (Art. 1370, Civil Code)
(Spouses Roberto E. Fermin and Maylinda Ferraren v. Hon. Court of
Appeals, et al., G.R. 95146, May 6, 1991).
2.REMEDIAL LAW; PROVISIONAL REMEDIES; DELIVERY OF PERSONAL
PROPERTY; RESTORATION BY MEANS OF WRIT OF REPLEVIN.
There is no merit in the petitioner's allegation that the seizure was
wrongful for which he must be compensated. The ownership or right
of possession over the subject equipment belonged to the Pacific
Coast Timber Products, Inc. at the time it was seized. The seizure of
the equipment was ordered by the trial court for its restoration by
means established in the laws of procedure. Thus, the requisites for
the issuance of the writ of replevin (Sec. 2, Rule 60) have been
satisfied.
3.ID.; ID.; ID.; ID.; NATURE OF THE WRIT OF REPLEVIN. The writ is
a provisional remedy in replevin suits. It is in the "nature of a
possessory action and the applicant who seeks the immediate
possession of the property need not be the holder of the legal title
to the property." It is sufficient that at the time he applied for a writ
of replevin he is found to be "entitled to a possession thereof" as
stated in Section 2, Rule 60 of the Rules of Court (Yang v. Valdez, 177
SCRA 141 [1989]).
4.CIVIL LAW; TORTS AND DAMAGES; AWARD OF DAMAGES; LACK OF
BASIS THEREOF. The Appellate Court correctly observed that the
trial court was right in holding that "the plaintiff may not anymore
be judicially compelled to deliver the tractor to the defendant since
after the expiration of the lease period, it is legally entitled to its
possession, as the owner thereof ". It is very clear therefore, that
Alim is not entitled to any award of damages based on the foregoing
facts and evidence presented. Neither can he claim moral and
exemplary damages. The records show that the petitioner was not
able to adduce any evidence before the trial court to prove facts
upon which the award for such damages may be predicated. In fact,
even in the petition and memorandum for the petitioner, there was
no discussion of the evidence upon which Alim relies for his claim.
5.ID.; ID.; MORAL DAMAGES; CONCEPT. Moral damages have to
do with injury personal to the awardee such as physical sufferings
and the like, while exemplary damages are imposed by way of
example or correction for the public good (Makabili v. Court of
Appeals, 157 SCRA 253 [1988]). Indisputably, moral damages cannot
generally be awarded in the absence of bad faith (De Aparico v.
Paraguya, 150 SCRA 279 [1987]). Otherwise stated, moral damages
can be awarded if they are the proximate results of a wrongful act or
omission (Filinvest Credit Corporation v. Mendez, 152 SCRA 593
[1987]).
6.ID.; ID.; EXEMPLARY DAMAGES; BASIS FOR THE AWARD THEREOF.
Exemplary damages are not awarded if the defendant had not
acted in a wanton, oppressive or malevolent manner (Zenith
Insurance Corporation v. Court of Appeals, 185 SCRA 398 [1990]),
neither can claim for exemplary damages be granted in the absence
of gross or reckless negligence (Delos Santos, et al. v. Court of
Appeals, G.R. 51165, June 21, 1990), which misfeasance is not true
in the case at bar.
7.REMEDIAL LAW; PROVISIONAL REMEDY; REPLEVIN; REPLEVIN
BOND; PURPOSE. A replevin bond is simply intended to indemnify
the defendant against any loss that he may suffer by being
compelled to surrender the possession of the disputed property
pending the trial of the action. He cannot recover on the bond as for
a reconversion when he has failed to have the judgment entered for
the return of the property.
8.ID.; ID.; ID.; ID.; SURETY NOT LIABLE IN THE BOND UNTIL THE
JUDGMENT IS ENTERED AND RESTORATION OF PROPERTY DECREED.
Nor is the surety liable for payment of the judgment for damages
rendered against the plaintiff on a counterclaim or punitive damages
for fraudulent or wrongful acts committed by the plaintiffs and
unconnected with the defendant's deprivation of possession by the
plaintiff. Even where the judgment was that the defendant was
entitled to the property, but no order was made requiring the
plaintiff to return it or assessing damages in default of a return, it
was declared that until judgment was entered that the property
should be restored, there could be no liability on the part of the
sureties (Sapugay v. Court of Appeals, 183 SCRA 464 [1990]).
D E C I S I O N
PARAS, J p:
This is a petition for review on certiorari of the February 27, 1990
decision * of the Court of Appeals in CA-G.R. CV No. 10603 entitled
"PACIFIC COAST TIMBER PRODUCTS, INC. vs. LUCIO TAN ALIM",
affirming the decision ** of the Regional Trial Court of Quezon City,
Branch LXXXIX in Civil Case No. Q-24970 which dismissed private
respondent's complaint, but allowed the petitioner to exercise his
option to buy the tractor in question, which decision was later
amended in its Order, dated September 19, 1985, partially granting
petitioner's motion for reconsideration but denying his plea therein
to grant damages for unrealized income in his logging business due
to the alleged irregular and illegal seizure of the said equipment
leased to him. Cdpr
The case arose out of a Lease Contract with Option To Buy, dated
January 5, 1977, which was entered into by and between
respondent PACIFIC COAST TIMBER PRODUCTS, INC., as lessor, and
petitioner LUCIO TAN ALIM, as lessee, for a term of fifteen months
over a unit of tractor at a monthly rental of P10,000.00 subject to
the stipulation, among others, that after payment of five months,
the lessee is given an option to purchase the equipment at the price
of P150,000.00, in which event the rental paid shall be considered as
part payment of the consideration and that the subject equipment
has to remain at the lessee's jobsite at PARCEL III-R, between
Dianawan Creek and Bazal, San Joaquin, Baler (Original Record, p. 7;
Exhibit "1" and Exhibit "A").
However, upon its delivery on January 15, 1977, the tractor was
discovered to be defective. Consequently, petitioner Alim informed
the private respondent's manager at San Luis, Quezon of such fact in
his letter, dated January 25, 1977, relaying likewise the need for the
tractor's reconditioning or replacement with another unit in good
running condition and the immediate repair thereof as may be
arranged by him with the Manila Office (Ibid., p. 96, Exhibit "2"). The
Logging Manager of the respondent corporation, Luis O. Barredo,
issued a certification on June 11, 1977 that a defective tractor was
delivered to the petitioner (Ibid., p. 98, Exhibit "5"). The amount of
P5,000.00 for the repair of the tractor was then paid by the private
respondent to petitioner Alim on January 29, 1977 (Ibid., p. 97,
Exhibit "4"). Petitioner Alim expended the amount of P36,130.60 for
its repair and reconditioning, as specifically contained in his letter to
respondent corporation of June 25, 1977 (Ibid., p. 99, Exhibit "3").
On July 1, 1977, the parties amended the lease contract with
petitioner's obligation to execute a Deed of Chattel Mortgage for his
three motor vehicles in favor of the respondent to guarantee his
undertaking in the amended lease contract (Ibid., pp. 101-102; Rollo,
pp. 12-13). Respondent corporation's counsel, Lino M. Patajo,
formally informed Alim in a letter dated March 16, 1978 that under
the amended contract wherein payment of rentals commenced in
August, 1977, the latter failed to pay rentals for seven months, from
September, 1977 to February, 1978 in the amount of P70,000.00, for
which reason the contract of lease as well as the option to buy, are
automatically terminated. The same counsel likewise sent a notice
of default in obligation secured by the Chattel Mortgage
(Ibid., Exhibit "C"; p. 11, Exhibit "D"; Original Records, p. 12).
However, the petition for extrajudicial foreclosure thereon was
returned by the sheriff unsatisfied (Ibid., p. 12). Thereafter, a
complaint for recovery of possession with replevin (of a unit of
tractor (Ibid., pp. 13-15-A; Rollo, pp. 15-18), was filed by private
respondent before the then Court of First Instance of Quezon City
due to petitioner's refusal to pay the arrears and to deliver the
subject equipment.
Upon the filing of a bond by Pacific Coast Timber Products, Inc.,
furnished by Pioneer Insurance and Surety Corporation in the sum of
P300,000.00 (Ibid., p. 26), the trial court issued a writ of replevin for
the seizure and delivery of the property in question on April 13,1978
(Ibid., p. 36; Rollo, p. 20). On April 16, 1978, Deputy Sheriff Reynaldo
P. Lopez of the then Court of First Instance of Aurora Sub-province
at Baler, Quezon, seized the tractor from the petitioner and turned it
over to the respondent corporation on April 26, 1973 (Ibid ., p. 45,
Sheriff's Return of Service).
In his answer (Ibid., pp. 38-43), the petitioner deemed having
defaulted in the payment of rentals and claimed to have sustained
damages for unrealized income in his logging business as a result of
the wrongful seizure of the tractor (Rollo, p. 21).
Both parties having failed to reach an agreement at the pre-trial, the
case was tried on the merits. LLphil
In the order of the trial court dated December 17, 1980, respondent
corporation's motion to recall or lift the Order of Seizure and to
cancel the replevin bond the same having already served their
purposes, (Ibid., pp. 142-143), which was opposed by petitioner Alim
(Ibid., pp. 144-146), was denied for lack of merit since the case was
still pending in court (Ibid., p. 149).

On the scheduled hearing of July 14, 1981, both parties failed to
attend. Hence, the dismissal of the case (Ibid., p. 158). However, the
order of dismissal was reconsidered upon explanation of the parties
(Ibid., p. 159). The case was finally resolved in favor of petitioner
Alim on July 31, 1985 by the trial court (RTC, Quezon City), the
dispositive portion of which states:
"ACCORDINGLY, judgment is hereby rendered dismissing the
plaintiff's complaint, and allowing the defendant within fifteen days
from and after this judgment becomes final and executory to
exercise his option under the Lease Contract with Option to Buy, as
amended, to buy the tractor, in question, by paying to the plaintiff
the balance of P90,000.00 after deducting from the purchase price
of P150,000.00, in rentals, already paid by him, and ordering the
plaintiff to pay to the defendant the amount of P36,130.60 as
reimbursement for the expenses for repairs made by the defendant
on the tractor which may be offsetted from the remaining purchase
price of P90,000.00 if the defendant exercises his option to buy, plus
reasonable attorney's fees in the amount of P5,000.00, with costs
against the plaintiff.
SO ORDERED." (Rollo, pp. 32-33)
The said decision was, however, partially modified upon motion for
reconsideration of the petitioner, dated August 19, 1985 (Original
Record, pp. 259-261), in its Order dated September 19, 1985, in this
wise:
"ACCORDINGLY, judgment is hereby rendered dismissing the
plaintiff's complaint, and allowing the defendant, within fifteen (15)
days from and after (sic) this judgment becomes final and executory,
to exercise his option under the Lease Contract with Option To Buy,
as amended, to buy the tractor, in question by paying to the plaintiff
the balance of P80,000.00 after deducting from the purchase price
of P150,000.00, the amount of P70,000.00 in rentals, already paid by
him, and ordering the plaintiff to pay to the defendant the amount
of P36,130.60 as reimbursement for the expenses for repairs made
by the defendant on the tractor, which may be offsetted (sic) from
the remaining purchase price of P80,000.00, if the defendant
exercises his option to buy, plus reasonable attorney's fees in the
amount of P5,000.00, with costs against the plaintiff " (Rollo, pp. 37-
A-38).
Not satisfied with the modified decision, petitioner Alim appealed,
claiming damages because of the wrongful seizure of the tractor, but
the same was affirmed by the Court of Appeals which denied said
petitioner's claim for compensation and concurred with the
following findings of the trial court:
"However, since the fifteen (15) month lease period provided in the
contract had already expired . . . the plaintiff may not be judicially
compelled to deliver the tractor to defendant since after the
expiration of the lease period, it is legally entitled to its possession,
as the owner thereof " (Rollo, p. 62)
Petitioner's motion for reconsideration was denied by the Court of
Appeals in its resolution dated April 30, 1990 (Rollo, p. 65). Hence,
this petition.
The issues raised in this case are: (1) whether or not the fifteen (15)
month lease period had commenced from August 1977 and expired
in October 1978; (2) whether or not the petitioner is entitled to
collect/recover damages as prayed for in the complaint; and (3)
whether or not petitioner is entitled to recover the sum of
P300,000.00 from the replevin bond, all of which may be
synthesized in one pivotal issue, the interpretation of the
"Amendment to Contract of Lease" (Exhibit "6", Original Records, p.
9) in relation to the "Original Lease Contract with Option to Buy
(Exhibit "1". Original Records, p. 7).
Both the trial court and the Court of Appeals are of the view that
there is no amendment as to the duration of the Contract of Lease;
that the contract expired as originally stipulated on April 5, 1978 and
that when the tractor was seized by virtue of a writ of replevin on
August 16,1978, the contract of lease had expired and the lessee
Alim was consequently not entitled to damages.
A careful review of the records shows that in the original contract, it
was expressly stipulated that the lease shall be for a period of fifteen
(15) months (Exhibit "1". par. 2) and that the lessee is given an
option to purchase the equipment for ONE HUNDRED FIFTY
THOUSAND (P150,000.00) PESOS, after Alim has completed and
religiously paid the 5-month rentals which shall be considered as
part payment of the consideration (Ibid., par. 4).
On the other hand, there is no provision in the amended contract as
to the period of the lease. Instead, it provides that "All provisions of
the original lease contract not amended by the foregoing provisions
shall remain in full force and effect." (Exhibit "6", par. 5). The
alteration is evidently focused on the period for the right to exercise
the option to buy. Originally, the period was five (5) months of
regular payment but under the amended contract, the period was
changed to fifteen (15) months, unquestionably including the period
from the commencement of the original contract on January 7,
1977, as specifically provided in paragraph 4 thereof, which states:
"4.The monthly rentals of the equipment which on the date of the
execution of this amendment to the original lease contract have not
been paid shall be considered as paid obligation of LESSEE to
LESSOR, the payment of which will be the subject of negotiation
between LESSOR and LESSEE."
The letter of Atty. Lino M. Patajo, counsel of respondent
corporation, on which Alim heavily relied in his arguments in his
favor, unmistakably confirms the fact of non-extension of the lease
agreement when he spoke of the commencement of the payment of
the rentals, not on the commencement of the new period of lease
(Exhibit "C", Original Records, p. 11). Inevitably, the courts cannot go
beyond what appears in the documents submitted by the
parties. LLphil
Nothing is more settled than the rule that the terms of written
contract are binding on the parties thereto. In the interpretation of
the provisions of a written contract, the courts should follow the
literal meaning of the stipulation. Otherwise, the evident intention
of the parties must prevail (Art. 1370, Civil Code) (Spouses Roberto
E. Fermin and Maylinda Ferraren v. Hon. Court of Appeals, et al.,
G.R. 95146, May 6, 1991).
There is therefore no merit in the petitioner's allegation that the
seizure was wrongful for which he must be compensated. The
ownership or right of possession over the subject equipment
belonged to the Pacific Coast Timber Products, Inc. at the time it was
seized. The seizure of the equipment was ordered by the trial court
for its restoration by means established in the laws of procedure.
Thus, the requisites for the issuance of the writ of replevin (Sec. 2,
Rule 60) have been satisfied.
The writ is a provisional remedy in replevin suits. It is in the "nature
of a possessory action and the applicant who seeks the immediate
possession of the property need not be the holder of the legal title
to the property." It is sufficient that at the time he applied for a writ
of replevin he is found to be "entitled to a possession thereof" as
stated in Section 2, Rule 60 of the Rules of Court (Yang v. Valdez, 177
SCRA 141 [1989]).
The Appellate Court correctly observed that the trial court was right
in holding that "the plaintiff may not anymore be judicially
compelled to deliver the tractor to the defendant since after the
expiration of the lease period, it is legally entitled to its possession,
as the owner thereof (p. 5, RTC decision; Rollo, p. 31)". It is very
clear therefore, that Alim is not entitled to any award of damages
based on the foregoing facts and evidence presented. Neither can
he claim moral and exemplary damages. The records show that the
petitioner was not able to adduce any evidence before the trial
court to prove facts upon which the award for such damages may be
predicated. In fact, even in the petition and memorandum for the
petitioner, there was no discussion of the evidence upon which Alim
relies for his claim.
Moral damages have to do with injury personal to the awardee such
a physical sufferings and the like, while exemplary damages are
imposed by way of example or correction for the public good
(Makabili v. Court of Appeals, 157 SCRA 253 [1988]).
Indisputably, moral damages cannot generally be awarded in the
absence of bad faith (De Aparico v. Paraguya, 150 SCRA 279 [1987]).
Otherwise stated, moral damages can be awarded if they are the
proximate results of a wrongful act or omission (Filinvest Credit
Corporation v. Mendez, 152 SCRA 593 [1987]), while exemplary
damages are not awarded if the defendant had not acted in a
wanton, oppressive or malevolent manner (Zenith Insurance
Corporation v. Court of Appeals, 185 SCRA 398 [1990]), neither can
claim for exemplary damages be granted in the absence of gross or
reckless negligence (Delos Santos, et al. v. Court of Appeals, G.R.
51165, June 21, 1990), which misfeasance is not true in the case at
bar.
A replevin bond is simply intended to indemnify the defendant
against any loss that he may suffer by being compelled to surrender
the possession of the disputed property pending the trial of the
action. He cannot recover on the bond as for a reconversion when
he has failed to have the judgment entered for the return of the
property. Nor is the surety liable for payment of the judgment for
damages rendered against the plaintiff on a counterclaim or punitive
damages for fraudulent or wrongful acts committed by the plaintiffs
and unconnected with the defendant's deprivation of possession by
the plaintiff. Even where the judgment was that the defendant was
entitled to the property, but no order was made requiring the
plaintiff to return it or assessing damages in default of a return, it
was declared that until judgment was entered that the property
should be restored, there could be no liability on the part of the
sureties (Sapugay v. Court of Appeals, 183 SCRA 464 [1990]). cdll

PREMISES CONSIDERED, the instant petition is DISMISSED and the
assailed decision is AFFIRMED.
SO ORDERED.
Melencio-Herrera, Padilla, Sarmiento and Regalado, JJ ., concur.
||| (Alim v. Court of Appeals, G.R. No. 93213, August 09, 1991)














Limitations on Real Right of Ownership.
EN BANC
[G.R. No. 10572. December 21, 1915.]
FRANCIS A. CHURCHILL and STEWART TAIT, plaintiffs-appellees, vs.
JAMES J. RAFFERTY, Collector of Internal Revenue, defendant-
appellant.
Attorney-General Avancena for appellant.
Aitken & DeSelms for appellees.
SYLLABUS
1.CONSTITUTIONAL LAW; SCOPE OF INQUIRY IN TESTING VALIDITY
OF A LAW. Unless a law be so repugnant to the supreme law that
it appears clearly that constitutional limitations have been
overstepped by the legislature, courts should not declare a
legislative enactment invalid. Merely to doubt its validity is to
resolve the doubt in favor of its validity.
2.ID.; INTERNAL REVENUE; INJUNCTION TO RESTRAIN COLLECTION
OF A TAX. A provision in an internal revenue law prohibiting the
courts from enjoining the collection of an internal revenue tax is not
invalid as opposed to the "due process" and "equal protection of the
law" clauses of the bill of rights of the Organic Act. Such legislation,
both Federal and State, has been upheld by the United States
Supreme Court.
3.ID.; ID.; ID.; JURISDICTION OF COURTS. Nor is such a provision of
law invalid as curtailing the jurisdiction of the courts of the
Philippine Islands as fixed by section 9 of the Organic Act: (a)
because jurisdiction was never conferred upon Philippine courts to
enjoin the collection of taxes imposed by the Philippine Commission;
and (b) because, in the present case, another adequate remedy has
been provided by payment and protest.
4.ID.; POLICE POWER; NATURE AND SCOPE IN GENERAL. If a law
relates to the public health, safety, morals, comfort, or general
welfare of the community, it is within the scope of the police power
of the State. Within such bounds the wisdom, expediency, or
necessity of the law does not concern the courts.
5.ID.; ID.; NOT LIMITED TO ANY PARTICULAR SUBJECT. From
whatever direction the social, economic, or general welfare of the
people is menaced, there is legal justification for the exercise of the
police power; and the use of private property may be regulated or
restricted to whatever extent may be necessary to preserve inviolate
these declared essentials to the well being of the public.
6.ID.; ID.; THINGS OFFENSIVE TO THE SENSES OF SMELL OR
HEARING. It has long been recognized that uses of private
property which are offensive to the senses of smell of hearing may
be so regulated or segregated as to disturb as little as possible the
pursuits of other persons.
7.ID., ID.; SIGHT. It is not the adoption of a new principle but
simply the extension of a well established principle to hold that the
police power may also regulate and restrict uses of private property
when devoted to advertising which is offensive to the sight.
8. ID.; ID.; ID.; BILLBOARDS. The indiscriminate use of outdoor
advertising tends to mar not only natural outdoor landscapes but
whatever of civic beauty has been attained by the expenditure of
public moneys for parks, boulevards, and buildings. The widespread
agitation in many European countries, as well as in the United
States, against the so-called billboards the most common form of
this kind of advertising shows that they are a source of annoyance
and irritation to the public and interfere with the proper enjoyment
of outdoor life by the general public. This justifies their suppression
or regulation to the extent that they interfere with the right of the
public.
D E C I S I O N
TRENT, J p:
The judgment appealed from in this case perpetually restrains and
prohibits the defendant and his deputies from collecting and
enforcing against the plaintiffs and their property the annual tax
mentioned and described in subsection (b) of section 100 of Act No.
2339, effective July 1, 19]4, and from destroying or removing any
sign, signboard, or billboard, the property of the plaintiffs, for the
sole reason that such sign, signboard, or billboard is, or may be
offensive to the sight; and decrees the cancellation of the bond
given by the plaintiffs to secure the issuance of the preliminary
injunction granted soon after the commencement of this action.
This case divides itself into two parts and gives rise to two main
questions; (1) that relating to the power of the court to restrain by
injunction the collection of the tax complained of, and (2) that
relating to the validity of those provisions of subsection (b) of
section 100 of Act No. 2339, conferring power upon the Collector of
Internal Revenue to remove any sign, signboard, or billboard upon
the ground that the same is offensive to the sight or is otherwise
nuisance.
The first question is one of jurisdiction and is of vital importance to
the Government. The sections of Act No. 2339, which bear directly
upon the subject, are 139 and 140. The first expressly forbids the
use of an injunction to stay the collection of any internal revenue
tax; the second provides a remedy for any wrong in connection with
such taxes, and this remedy was intended to be exclusive, thereby
precluding the remedy by injunction, which remedy is claimed to be
constitutional. The two sections, then, involve the right of a
dissatisfied taxpayer to use an exceptional remedy to test the
validity of any tax or to determine any other question connected
therewith, and the question whether the remedy by injunction is
exceptional.
Preventive remedies of the courts are extraordinary and are not the
usual remedies. The origin and history of the writ of injunction show
that it has always been regarded as an extraordinary, preventive
remedy, as distinguished from the common course of the law to
redress evils after they have been consummated. No injunction
issues as of course, but is granted only upon the oath of a party and
when there is no adequate remedy at law. The Government does, by
sections 139 and 140, take away the preventive remedy of
injunction, if it ever existed, and leaves the taxpayer, in a contest
with it, to the same ordinary remedial actions which prevail between
citizen and citizen. The Attorney-General, on behalf of the
defendant, contends that there is no provisions of the paramount
law which prohibits such a course. While, on the other hand, counsel
for plaintiffs urge that the two sections are unconstitutional because
(a) they attempt to deprive aggrieved taxpayers of all substantial
remedy for the protection of their property, thereby, in effect,
depriving them of their property without due process of law; and (b)
they attempt to diminish the jurisdiction of the courts, as conferred
upon them by Acts Nos. 136 and 190, which jurisdiction was ratified
and confirmed by the Act of Congress of July 1, 1902.
In the first place, it has been suggested that section 139 does not
apply to the tax in question because the section, in speaking of a
"tax," means only legal taxes; and that an illegal tax (the one
complained of) is not a tax, and, therefore, does not fall within the
inhibition of the section, and may be restrained by injunction. There
is no force in this suggestion. The inhibition applies to all internal
revenue taxes imposed, or authorized to be imposed, by Act No.
2339. (Snyder vs. Marks, 109 U. S., 189.) And, furthermore, the mere
fact that a tax is illegal, or that the law, by virtue of which it is
imposed, is unconstitutional, does not authorize a court of equity to
restrain its collection by injunction. There must be a further showing
that there are special circumstances which bring the case under
some well recognized head of equity jurisprudence, such as that
irreparable injury, multiplicity of suits, or a cloud upon title to real
estate will result, and also that there is, as we have indicated, no
adequate remedy at law. This is the settled law in the United States,
even in the absence of statutory enactments such as sections 139
and 140. (Hannewinkle vs. Mayor, etc., of Georgetown, 82 U. S., 547;
Indiana Mfg. Co. vs. Koehne 188 U. S., 681; Ohio Tax Cases, 232 U. S.,
576, 587; Pittsburgh C. C. & St. L. R. Co. vs. Board of Public Works,
172 U. S., 32; Shelton vs. Platt, 139 U. S., 591; State Railroad Tax
Cases, 92 U. S., 575.) Therefore, this branch of the case must be
controlled by sections 139 and 140, unless the same be held
unconstitutional, and consequently, null and void.
"The right and power of judicial tribunals to declare whether
enactments of the legislature exceed the constitutional limitations
and are invalid has always been considered a grave responsibility, as
well as a solemn duty. The courts invariably give the most careful
consideration to questions involving the interpretation and
application of the Constitution, and approach constitutional
questions with great deliberation, exercising their power in this
respect with the greatest possible caution and even reluctance; and
they should never declare a statute void, unless its invalidity is, in
their judgment, beyond reasonable doubt. To justify a court in
pronouncing a legislative act unconstitutional, or a provision of a
state constitution to be in contravention of the Constitution of the
United States, the case must be so clear as to be free from doubt,
and the conflict of the statute with the constitution must be
irreconcilable, because it is but a decent respect to the wisdom, the
integrity, and the patriotism of the legislative body by which any law
is passed to presume in favor of its validity until the contrary is
shown beyond reasonable doubt. Therefore, in no doubtful case will
the judiciary pronounce a legislative act to be contrary to the
constitution. To doubt the constitutionality of a law is to resolve the
doubt in favor of its validity." (6 Ruling Case Law, secs. 71, 72, and
73, and cases cited therein.)
It is also the settled law in the United States that "due process of
law" does not always require, in respect to the Government, the
same process that is required between citizens, though it generally
implies and includes regular allegations, opportunity to answer, and
a trial according to some well settled course of judicial proceedings.
The case with which we are dealing is in point. A citizen's property,
both real and personal, may be taken, and usually is taken, by the
government in payment of its taxes without any judicial proceedings
whatever. In this country, as well as in the United States, the officer
charged with the collection of taxes is authorized to seize and sell
the property of delinquent taxpayers without applying to the courts
for assist- ance, and the constitutionality of the law authorizing this
procedure never has been seriously questioned. (City of
Philadelphia vs. [Diehl] The Collector, 5 Wall., 720; Nicholl vs. U. S., 7
Wall., 122, and cases cited.) This must necessarily be the course,
because it is upon taxation that the Government chiefly relies to
obtain the means to carry on its operations, and it is of the utmost
importance that the modes adopted to enforce the collection of the
taxes levied should be summary and interfered with as little as
possible. No government could exist if every litigious man were
permitted to delay the collection of its taxes. This principle of public
policy must be constantly borne in mind in determining cases such
as the one under consideration.

With these principles to guide us, we will proceed to inquire
whether there is any merit in the two propositions insisted upon by
counsel for the plaintiffs. Section 5 of the Philippine Bill provides:
"That no law shall be enacted in said Islands which shall deprive any
person of life, liberty, or property without due process of law, or
deny to any person therein the equal protection of the law."
The origin and history of these provisions are well-known. They are
found in substance in the Constitution of the United States and in
that of every state in the Union.
Section 3224 of the Revised Statutes of the United States, effective
since 1867, provides that: "No suit for the purpose of restraining the
assessment or collection of any tax shall be maintained in any
court."
Section 139, with which we have been dealing, reads: "No court shall
have authority to grant an injunction to restrain the collection of any
internal-revenue tax."
A comparison of these two sections show that they are essentially
the same. Both expressly prohibit the restraining of taxes by
injunction. If the Supreme Court of the United States has clearly and
definitely held that the pro- visions of section 3224 do not violate
the "due process of law" and "equal protection of the law" clauses in
the Constitution, we would be going too far to hold that section 139
violates those same provisions in the Philippine Bill. That the
Supreme Court of the United States has so held, cannot be doubted.
In Cheatham vs. United States (92 U. S., 85, 89) which involved the
validity of an income tax levied by an act of Congress prior to the
one in issue in the case of Pollock vs. Farmers' Loan & Trust Co. (157
U. S., 429) the court, through Mr. Justice Miller, said: "If there
existed in the courts, state or National, any general power of
impeding or controlling the collection of taxes, or relieving the
hardship incident to taxation, the very existence of the government
might be placed in the power of a hostile judiciary. (Dows vs. The
City of Chicago, 11 Wall., 108.) While a free course of remonstrance
and appeal is allowed within the departments before the money is
finally exacted, the General Government has wisely made the
payment of the tax claimed, whether of customs or of internal
revenue, a condition precedent to a resort to the courts by the parts
against whom the tax is assessed. In the internal revenue branch it
has further prescribed that no such suit shall be brought until the
remedy by appeal has been tried; and, if brought after this, it must
be within six months after the decision on the appeal. We regard
this as a condition on which alone the government consents to
litigate the lawfulness of the original tax. It is not a hard condition.
Few governments have conceded such a right on any condition. If
the compliance with this condition requires the party aggrieved to
pay the money, he must do it."
Again, in State Railroad Tax Cases (92 U. S., 575, 613), the court said:
"That there might be no misunderstanding of the universality of this
principle, it was expressly enacted, in 1867, that 'no suit for the
purpose of restraining the assessment or collection of any tax shall
be maintained in any court.' (Rev. Stat., sec. 3224.) And though this
was intended to apply alone to taxes levied by the United States, it
shows the sense of Congress of the evils to be feared if courts of
justice could, in any case, interfere with the process of collecting
taxes on which the government depends for its continued existence.
It is a wise policy. It is founded in the simple philosophy derived
from the experience of ages, that the payment of taxes has to be
enforced by summary and stringent means against a reluctant and
often adverse sentiment; and to do this successfully, other
instrumentalities and other modes of procedure are necessary, than
those which belong to courts of justice."
And again, in Snyder vs. Marks (109 U. S., 189), the court said: "The
remedy of a suit to recover back the tax after it is paid is provided by
statute, and a suit to restrain its collection i,. forbidden. The remedy
so given is exclusive, and no other remedy can be substituted for it.
Such has been the current of decisions in the Circuit Courts of the
United States, and we are satisfied it is a correct view of the law."
In the consideration of the plaintiffs' second proposition, we will
attempt to show (1) that the Philippine courts never have had, since
the American occupation, the power to restrain by injunction the
collection of any tax imposed by the Insular Government for its own
purpose and benefit, and (2) that assuming that our courts had or
have such power, this power has not been diminished or curtailed
by sections 139 and 140.
We will first review briefly the former and present systems of
taxation. Upon the American occupation of the Philippines, there
was found a fairly complete system of taxation. This system was
continued in force by the mili- tary authorities, with but few
changes, until the Civil Government assumed charge of the subject.
The principal sources of revenue under the Spanish regime were
derived from customs receipts, the so-called industrial taxes, the
urbana taxes, the stamp tax, the personal cedula tax, and the sale of
the public domain. The industrial and urbana taxes constituted
practically an income tax of some 5 per cent on the net income of
persons engaged in industrial and commercial pursuits and on the
income of owners of improved city property. The sale of stamped
paper and adhesive stamps, which the law required to be used,
constituted the stamp tax. The cedula tax was a graduated tax,
ranging from nothing up to P37.50. The revenue derived from the
sale of the public domain was not considered a tax. The American
authorities at once abolished the cedula tax, but later restored it in a
modified form, charging for each cedula twenty centavos, an
amount which was supposed to be just sufficient to cover the cost of
issuance. The urbana tax was abolished by Act No. 223, effective
September 6, 1901.
The "Municipal Code" (Act No. 82) and the Provincial Government
Act (No. 83), both enacted in 1901, authorize municipal councils and
provincial boards to impose an ad valorem tax on real estate. The
Municipal Code did not apply to the city of Manila. This city was
given a special charter (Act No. 183), effective August 30, 1901.
Under this charter the Municipal Board of Manila is authorized and
empowered to impose taxes upon real estate and, like municipal
councils, to license and regulate certain occupations. Customs
matters were completely reorganized by Act No. 355, effective at
the port of Manila on February 7, 1902, and at other ports in the
Philippine Islands the day after the receipt of a certified copy of the
Act. The Internal Revenue Law of 1904 (Act No. 1189), repealed all
existing laws, ordinances, etc., imposing taxes upon the persons,
objects, or occupations taxed under that act, and all industrial taxes
and stamp taxes imposed under the Spanish regime were
eliminated, but the industrial tax was continued in force until
January 1, 1905. This Internal Revenue Law did not take away from
municipal councils, provincial boards, and the Municipal Board of
the city of Manila the power to impose taxes upon real estate. This
Act (No. 1189), with its amendments, was repealed by Act No. 2339,
an act "revising and consolidating the laws relative to internal
revenue."
Section 84 of Act No. 82 provides that "No court shall entertain any
suit assailing the validity of a tax assessed under this act until the
taxpayer shall have paid, under protest, the taxes assessed against
him, . . . ."
This inhibition was inserted in section 17 of Act No. 83 and applies to
taxes imposed by provincial boards. The inhibition was not inserted
in the Manila Charter until the passage of Act No. 1793, effective
October 12, 1907. Act No. 355 expressly makes the payment of the
exactions claimed a condition precedent to a resort to the courts by
dissatisfied importers. Section 52 of Act No. 1189 provides "That no
courts shall have authority to grant an injunction restraining the
collection of any taxes imposed by virtue of the provisions of this
Act, but the remedy of the taxpayer who claims that he is unjustly
assessed or taxed shall be by payment under protest of the sum
claimed from him by the Collector of Internal Revenue and by action
to recover back the sum claimed to have been illegally collected."
Sections 139 and 140 of Act No. 2339 contain, as we have indicated,
the same prohibition and remedy. The result is that the courts have
been expressly forbidden, in every act creating or imposing taxes or
imposts enacted by the legislative body of the Philippines since the
American occupation, to entertain any suit assailing the validity of
any tax or impost thus imposed until the tax shall have been paid
under protest. The only taxes which have not been brought within
the express inhibition were those included in that part of the old
Spanish system which completely disappeared on or before January
1, 1905, and possibly the old customs duties which disappeared in
February, 1902.
Section 56 of the Organic Act (No. 136), effective June 16, 19019
provides that "Courts of First Instance shall have original jurisdiction:
xxx xxx xxx
"2.In all civil actions which involve the . . . legality of any tax, impost,
or assessment, . . .
"7.Said courts and their judges, or any of them, shall have power to
issue writs of injunction, mandamus, certiorary, prohibition, quo
warranto, and habeas corpus in their respective provinces and
districts, in the manner provided in the Code of Civil Procedure."
The provisions of the Code of Civil Procedure (Act No. 190), effective
October 1, 1901, which deals with the subject of injunctions, are
sections 162 to 172, inclusive. Injunctions, as here defined, are of
two kinds; preliminary and final. The former may be granted at any
time after the commencement of the action and before final
judgment, and the latter at the termination of the trial as the relief
or part of the relief prayed for (sec. 162). Any judge of the Supreme
Court may grant a preliminary injunction in any action pending in
that court or in any Court of First Instance. A preliminary injunction
may also be granted by a judge of the Court of First Instance in
actions pending in his district in which he has original jurisdiction
(sec. 163). But such injunctions may be granted only when the
complaint shows facts entitling the plaintiff to the relief demanded
(sec. 166), and before a final or permanent injunction can be
granted, it must appear upon the trial of the action that the plaintiff
is entitled to have commission or continuance of the acts
complained of perpetually restrained (sec. 171). These provisions
authorize the institution in Courts of First Instance of what are
known as "injunction suits," the sole object of which is to obtain the
issuance of final injunction. They alos authorize the granting of
injunctions as aiders in ordinary civil actions. We have defined in
Devesa vs.Arbes (13 Phil Rep., 273), an injunction to be "A 'special
remedy' adopted in that code (Act 190) from American practice, and
originally borrowed from English legal procedure, which was there
issued by the authority and under the seal of a court of equity,
and limited, as in other cases where equitable relief is sought, to
those cases where there is no 'plain, adequate, and complete remedy
at law,' which will not be granted while the rights between the
parties are undetermined, except in extraordinary cases where
material and irreparable in- jury will be done,' which cannot be
compensated in damages . . . "

By paragraph 2 of section 56 of Act No. 136, supra, and the
provisions of the various subsequent Acts heretofore mentioned,
the Insular Government has consented to litigate with aggrieved
persons the validity of any original tax or impost imposed by it on
condition that this be done in ordinary civil actions after the taxes or
exactions shall have been paid. But it is said that paragraph 2
confers original jurisdiction upon Courts of First Instance to hear and
determine "all civil actions" which involve the validity of any tax,
impost or assessment, and that if the all-inclusive words "all" and
"any" be given their natural and unrestricted meaning, no action
wherein that question is involved can arise over which such courts
do not have jurisdiction. (Barrameda vs. Moir, 25 Phil. Rep., 44.) This
is true. But the term "civil actions" had its well defined meaning at
the time the paragraph was enacted. The same legislative body
which enacted paragraph 2 on June 16, 1901, had, just a few months
prior to that time, defined the only kind of action in which the
legality of any tax imposed by it might be assailed. (Sec. 84, Act 82,
enacted January 31, 1901, and sec. 17, Act No. 83, enacted February
6, 1901.) That kind of action being payment of the tax under protest
and an ordinary suit to recover and no other, there can be no doubt
that Courts of First Instance have jurisdiction over all such actions.
The subsequent legislation on the same subject shows clearly that
the Commission, in enacting paragraph 2, supra, did not intend to
change or modify in any way section 84 of Act No. 82 and section 17
of Act No. 83, but, on the contrary, it was intended that "civil
actions," mentioned in said paragraph, should be understood to
mean, in so far as testing the legality of taxes were concerned, only
those of the kind and character provided for in two sections above
mentioned. It is also urged that the power to restrain by injunction
the collection of taxes of imposts is conferred upon Courts of First
Instance by paragraph 7 of section 56, supra. This paragraph does
empower those courts to grant injunctions, both preliminary and
final, inany civil action pending in their districts, provided always,
that the complaint shows facts entitling the plaintiff to the relief
demanded. injunction suits, such as the one at bar, are "civil
actions," but of a special or extraordinary character. It cannot be
said that the Commission intended to give a broader or different
meaning to the word "action," used in Chapter 9 of the Code of Civil
Procedure in connection with injunctions, than it gave to the same
word found in paragraph 2 of section 56 of the Organic Act. The
Insular Government, in exercising the power conferred upon it by
the Congress of the United States, has declared that the citizens and
residents of this country shall pay certain specified taxes and
imposts. The power to tax necessarily carries with it the power to
collect the taxes. This being true, the weight of authority supports
the proposition that the Government may fix the conditions upon
which it will consent to litigate the validity of its original taxes.
(Tenessee vs. Sneed, 96 U.S., 69.)
We must, therefore, conclude that paragraphs 2 and 7 of section 56
of Act No. 136, construed in the light of the prior and subsequent
legislation to which we have referred, and the legislative and judicial
history of the same subject in the United States with which the
Commission was familiar, do not empower Courts of First Instance
to interfere by injunction with the collection of the taxes in question
in this case.
If we are in error as to the scope of paragraphs 2 and 7, supra, and
the Commission did intend to confer the power upon the courts to
restrain the collection of taxes, it does not necessarily follow that
this power or jurisdiction has been taken away by section 139 of Act
No. 2339, for the reason that all agree that an injunction will not
issue in any case if there is an adequate remedy at law. The very
nature of the writ itself prevents its issuance under such
circumstances. Legislation forbidding the issuing of injunctions in
such cases is unnecessary. So the only to be here determined is
whether the remedy provided for in section 140 of Act 2339 is
adequate. If it is, the writs which form the basis of this appeal should
not have been issued. If this is the correct view, the authority to
issue injunctions will not have been taken away by section 139, but
rendered inoperative only by reason of an adequate remedy having
been made available.
The legislative body of the Philippine Islands has declared from the
beginning (Act No. 82) that payment under protest and suit to
recover is an adequate remedy to test the legality of any tax or
impost, and that this remedy is exclusive. Can we say that the
remedy is not adequate or that it is not exclusive, or both? The
plaintiffs in the case at bar are the first, in so far as we are, to
question either the adequacy or exclusiveness of this remedy. We
will refer to a few cases in the United States where statutes similar
to sections 139 and 140 have been construed and applied.
In May, 1874, one Bloomstein presented a petition to the circuit
court, sitting in Nashville, Tennessee, stating that his real and
personal property had been assessed for state taxes in the year 1872
to the amount of $132.60; that he tendered to the collector this
amount in "funds receivable by law for such purposes; and that the
collector refused to receive the same. He prayed for an alternative
writ of mandamus to compel the collector to receive the bills in
payment for such taxes, or to show cause to the contrary. To this
petition the collector, in his answer, set up the defense that the
petitioner's suit was expressly prohibited by the Act of the General
Assembly of the State of Tennessee, passed in 1873. The petition
was dismissed and the relief prayed for refused. An appeal to the
supreme court of the State resulted in the affirmance of the
judgment of the lower court. The case was then carried to the
Supreme Court of the United States (Tennessee vs. Sneed, 96 U. S.,
69), where the judgment was again affirmed.
The two sections of the Act of [March 21,] 1873, drawn in question
in that case, read as follows:
"1.That in all cases in which an officer, charged by law with the
collection of revenue due the State, shall institute any proceeding,
or take any steps for the collection of the same, alleged or claimed
to be due by said officer from any citizen, the party against whom
the proceeding or step is taken shall, if he conceives the same to be
unjust or illegal, or against any statute or clause of the Constitution
of the State, pay the same under protest; and, upon his making said
payment, the officer or collector shall pay such revenue into the
State Treasury, giving notice at the time of payment to the
Comptroller that the same was paid under protest; and the party
paying said revenue may, at any time within thirty days after making
said payment, and not longer thereafter, sue the said officer having
collected said sum, for the recovery thereof. And the same may be
tried in any court having the jurisdiction of the amount and parties;
and, if it be determined that the same was wrongfully collected, as
not being due from said party to the State, for any reason going to
the merits of the same, then the court trying the case may certify of
record that the same was wrongfully paid and ought to be refunded;
and thereupon the Comptroller shall issue his warrant for the same,
which shall be paid in preference to other claims on the Treasury.
"2.That there shall be no other remedy, in any case of the collection
of revenue, or attempt to collect revenue illegally, or attempt to
collect revenue in funds only receivable by said officer under the
law, the same being other or different funds than such as the tax
payer may tender, or claim the right to pay, than that above
provided; and no writ for the prevention of the collection of any
revenue claimed, or to hinder or delay the collection of the game,
shall in anywise issue, either injunction, supersedeas, prohibition, or
any other writ or process whatever; but in all cases in which, for any
reason, any person shall claim that the tax so collected was
wrongfully or illegally collected, the remedy for said party shall be as
above provided, and in no other manner."
In discussing the adequacy of the remedy provided by the Tennessee
Legislature, as above set forth, the Supreme Court of the United
States, in the case just cited, said: "This remedy is simple and
effective. A suit at law to recover money unlawfully exacted is as
speedy, as easily tried, and less complicated than a proceeding
by mandamus. . . . In revenue cases, whether arising upon its
(United States) Internal Revenue Laws or those providing for the
collection of duties upon foreign imports, it (United States) adopts
the rule prescribed by the State of Tennes- see. It requires the
contestant to pay the amount as fixed by the Government, and gives
him power to sue the collector, and in such suit to test the legality
of' the tax. There is nothing illegal or even harsh in this. It is a wise
and reasonable precaution for the security of the Government."
Thomas C. Platt commenced an action in the Circuit Court of the
United States for the Eastern District of Tennessee to restrain the
collection of a license tax from the company which he represented.
The defense was that sections 1 and 2 of the Act of 1873, supra,
prohibited the bringing of that suit. This case also reached the
Supreme Court of the United States. (Sheltonvs. Platt, 159 U. S.,
591.) In speaking of the inhibitory provisions of sections 1 and 2 of
the Act of 1873, the court said: "This Act has been sanctioned and
applied by the Courts of Tennessee. (Nashville vs. Smith, 86 Tenn.,
213; Louisville & N. R. Co. vs. State, 8 Heisk., 663, 804.) It is, as
counsel observe, similar to the Act of Congress forbidding suit for
the purpose of restraining the assessment or collection of taxes
under the Internal Revenue Laws, in respect to which this court held
that the remedy by suit to recover back the tax after payment,
provided for by the Statute, was exclusive, (Snyder vs. Marks, 109 U.
S., 189 [27:901]; 14 Stat., 152, 475.) Legislation of this character has
been called for by the embarrassments resulting from the
improvident employment of the writ of injunction in arresting the
collection of the public revenue; and, even in its absence, the strong
arm of the court of chancery ought not to be interposed in that
direction except where resort to that court is grounded upon the
settled principles which govern its jurisdiction."

In Louisville & N. R. R. Co. vs. State (8 Heisk. [64 Tenn.], 663, 804),
cited by the Supreme Court of the United States in
Shelton vs. Platt, supra, the court said: "It was urged that this statute
(sections 1 and 2 of the Act of 1873, supra) is unconstitutional and
void, as it deprives the citizen of the remedy by certiorari,
guaranteed by the organic law."
By the 10th section of the sixth article of the Constitution,
[Tennessee] it is provided that: "The judges or justices of inferior
courts of law and equity shall have power in all civil cases to issue
writs of certiorari, to remove any cause, or the transcript of the
record thereof, from any inferior jurisdiction into such court of law,
on sufficient cause, supported by oath or affirmation."
The court held the act valid as not being in conflict with these
provisions of the State constitution.
In Eddy vs. The Township of Lee (73 Mich., 123), the complainants
sought to enjoin the collection of certain taxes for the year 1886.
The defendants, in support of their demurrer, insisted that the
remedy by injunction had been taken away by section 107 of the Act
of 1885, which section reads as follows: "No injunction shall issue to
stay proceedings for the assessment or collection of taxes under this
Act."
It was claimed by the complainants that the above quoted
provisions of the Act of 1885 were unconstitutional and void as
being in conflict with article 6, sec. 8, of the Constitution. which
provides that: "The circuit courts shall have original jurisdiction in all
matters, civil and criminal, not excepted in this Constitution, and not
prohibited by law. . . . They shall also have power to issue writs of
habeas corpus, mandamus, injunction, quo warranto, certiorari, and
other writs necessary to carry into effect their orders, judgments,
and decrees."
Mr. Justice Champlin, speaking for the court, said: "I have no doubt
that the Legislature has the constitutional authority, where it has
provided a plain, adequate, and complete remedy at law to recover
back taxes illegally assessed and collected, to take away the remedy
by injunction to restrain their collection."
Section 9 of the Philippine Bill reads in part as follows: "That the
Supreme Court and the Courts of First Instance of the Philippine
Islands shall possess and exercise jurisdiction as heretofore provided
and such additional jurisdiction as shall hereafter be prescribed by
the Government of said Islands, subject to the power of said
Government to change the practice and method of procedure."
It will be seen that this section has not taken away from the
Philippine Government the power to change the practice and
method of procedure. If sections 139 and 140, considered together,
and this must always be done, are nothing more than a mode of
procedure, then it would seem that he Legislature did not exceed its
constitutional authority in enacting them. Conceding for the
moment that the duly authorized procedure for the determination
of the validity of any tax, impost, or assessment was by injunction
suits and that this method was available to aggrieved taxpayers prior
to the passage of Act No. 2339, may the Legislature change this
method of procedure ? That the Legislature has the power to do
this, there can be no doubt, provided some other adequate remedy
is substituted in lieu thereof. In speaking of the modes of enforcing
rights created by contracts, the Supreme Court of the United States,
in Tennessee vs. Sneed. supra, said: "The rule seems to be that in
modes of proceeding and of forms to enforce the contract the
Legislature has the control, and may enlarge, limit or alter them,
provided that it does not deny a remedy, or so embarrass it with
conditions and restrictions as seriously to impair the value of the
right."
In that case the petitioner urged that the Acts of 1873 were laws
impairing the obligation of the contract contained in the charter of
the Bank of Tennessee, which contract was entered into with the
State in 1838. It was claimed that this was done by placing such
impediments and obstructions in the way of its enforcement,
thereby so impairing the remedies as practically to render the
obligation of no value. In disposing of this contention, the court said:
"If we assume that prior to 1873 the relator had authority to
prosecute his claim against the State by mandamus, and that by the
statutes of that year the further use of that form was prohibited to
him, the question remains, whether an effectual remedy was left to
him or provided for him. We think the regulation of the statute gave
him an abundant means of enforcing such right as he possessed. It
provided that he might pay his claim to the collector under protest,
giving notice thereof to the Comptroller of the Treasury; that at any
time within thirty days thereafter he might sue the officer making
the collection; that the case should be tried by any court having
jurisdiction and, if found in favor of the plaintiff on the merits, the
court should certify that the same was wrongfully paid and ought to
be refunded and the Comptroller should thereupon issue his
warrant therefor, which should be paid in preference to other claims
on the Treasury."
But great stress is laid upon the fact that the plaintiffs in the case
under consideration are unable to pay the taxes assessed against
them and that if the law is enforced, they will be compelled to
suspend business. This point may be best answered by quoting from
the case of Youngblood vs. Sexton (32 Mich., 406), wherein Judge
Cooley, speaking for the court, said: "But if this consideration is
sufficient to justify the transfer of a controversy from a court of law
a court of equity, then every controversy where money is demanded
may be made the subject of equitable cognizance. To enforce
against a dealer a promissory note may in some cases as effectually
break up his business as to collect from him a tax of equal amount.
This is not what is known to the law as irreparable injury. The courts
have never recognized the consequences of the mere enforcement
of a money demand as falling within that category."
Certain specified sections of Act No. 2339 were amended by Act No.
2432, enacted December 23, 1914, effective January 1, 1915, by
imposing increased and additional taxes. Act No. 2432 was amended
by Act No. 2445. Taxes imposed byAct No. 2432, as amended, were
ratified by the Congress of the United States on March 4, 1915. The
opposition manifested against the taxes imposed by Acts Nos. 2339
and 2432 is a matter of local history. A great many businessmen
thought the taxes thus imposed were too high. If the collection of
the new taxes on signs, signboards, and billboards may be
restrained, we see no well-founded reason why injunctions cannot
be granted restraining the collection of all or at least a number of
the other increased taxes. The fact that this may be done, shows the
wisdom of the Legislature in denying the use of the writ of injunction
to restrain the collection of any tax imposed by the Acts. When this
was done, an equitable remedy was made available to all dissatisfied
taxpayers.
The question now arises whether, the case being one of which the
court below had no jurisdiction, this court, on appeal, shall proceed
to express an opinion upon the validity of provisions of subsection
(b) of section 100 of Act No. 2339, imposing the taxes complained
of. As a general rule, an opinion of the merits of a controversy ought
to be declined when the court is powerless to give the relief
demanded. But it is claimed that this case is, in many particulars,
exceptional. It is true that it has been argued on the merits, and
there is no reason for any suggestion or suspicion that it is not a
bona fide controversy. The legal points involved in the merits have
been presented with force, clearness, and great ability by the
learned counsel of both sides. If the law assailed were still in force,
we would feel that an opinion on its validity would be justifiable,
but, as the amendment became effective on January 1, 1915, we
think it advisable to proceed no further with this branch of the case.
The next question arises in connection with the supplementary
complaint, the object of which is to enjoin the Collector of Internal
Revenue from removing certain billboards, the property of the
plaintiffs located upon private lands in the Province of Rizal. The
plaintiffs allege that the bill- boards here in question "in no sense
constitute a nuisance and are not deleterious to the health, morals,
or general welfare of the community, or of any persons." The
defendant denies these allegations in his answer and claims that
after due investigation made upon the complaints of the British and
German Consuls, he "decided that the billboard complained of was
and still is offensive to the sight, and is otherwise a nuisance." The
plaintiffs proved by Mr. Churchill that the "billboards were quite a
distance from the road and that they were strongly built, not
dangerous to the safety of the people, and contained no advertising
matter which is filthy, indecent, or deleterious to the morals of the
community." The defendant presented no testimony upon this
point. In the agreed statement of facts submitted by the parties, the
plaintiffs "admit that the billboards mentioned were and still are
offensive to the sight."
The pertinent provisions of subsection (b) of section 100 of Act No.
2339 read: "If after due investigation the Collector of Internal
Revenue shall decide that any sign, signboard, or billboard displayed
or exposed to public view is offensive to the sight or is otherwise a
nuisance, he may by summary order direct the removal of such sign,
signboard, or billboard, and if same is not removed within ten days
after he has issued such order he may himself cause its removal, and
the sign, signboard, or billboard shall thereupon be forfeited to the
Government, and the owner thereof charged with the expenses of
the removal so effected. When the sign, signboard, or billboard
ordered to be removed as herein provided shall not comply with the
provisions of the general regulations of the Collector of Internal
Revenue, no rebate or refund shall be allowed for any portion of a
year for which the taxes may have been paid. Otherwise, the
Collector of Internal Revenue may in his discretion make a
proportionate refund of the tax for the portion of the year
remaining for which the taxes were paid. An appeal may be had
from the order of the Collector of Internal Revenue to the Secretary
of Finance and Justice whose decision thereon shall be final."

The Attorney-General, on behalf of the defendant, says: "The
question which the case presents under this head for determination,
resolves itself into this inquiry: Is the suppression of advertising signs
displayed or exposed to public view, which are admittedly offensive
to the sight, conducive to the public interest?"
And counsel for the plaintiffs states the question thus: "We contend
that portion of section 100 of Act No. 2339, empowering the
Collector of Internal Revenue to remove billboards as nuisances, if
objectionable to the sight, is unconstitutional, as constituting a
deprivation of property without due process of law."
From the position taken by counsel for both sides, it is clear that our
inquiry is limited to the question whether the enactment assailed by
the plaintiffs was a legitimate exercise of the police power of the
Government; for all property is held subject to that power.
As a consequence of the foregoing, all discussion and authorities
cited, which go to the power of the state to authorize administrative
officers to find, as a fact, that legitimate trades, callings, and
businesses are, under certain circumstances, statutory nuisances,
and whether the procedure prescribed for this purpose is due
process of law, are foreign to the issue here presented.
There can be no doubt that the exercise of the police power of the
Philippine Government belongs to the Legislature and that this
power is limited only by the Acts of Congress and those fundamental
principles which lie at the foundation of all republican forms of
government. An Act of the Legislature which is obviously and
undoubtedly foreign to any of the purposes of the police power and
interferes with the ordinary enjoyment of property would, without
doubt, be held to be invalid. But where the Act is reasonably within
a proper consideration of and care for the public health, safety, or
comfort, it should not be disturbed by the courts. The courts cannot
substitute their own views for what is proper in the premises for
those of the Legislature. In Munn vs. Illinois (94 U. S., 113), the
United States Supreme Court states the rule thus: "If no state of
circumstances could exist to justify such statute, then we may
declare this one void because in excess of the legislative power of
this state; but if it could, we must presume it did. Of the propriety of
legislative interference, within the scope of the legislative power, a
legislature is the exclusive judge."
This rule is very fully discussed and declared in
Powell vs. Pennsylvania (127 U. S., 678) the "oleo-margarine"
case. (See also Crowley vs. Christensen, 137 U. S., 86, 87;
Camfield vs. U. S., 167 U. S., 518.) While the state may interfere
wherever the public interests demand it, and in this particular a
large discretion is necessarily vested in the legislature to determine,
not only what the interest of the public require, but what measures
are necessary for the protection of such interests; yet, its
determination in these matters is not final or conclusive, but is
subject to the supervision of the courts. (Lawton vs. Steele, 152 U.
S., 133.) Can it be said judicially that signs, signboards, and
billboards, which are admittedly offensive to the sight, are not with
the category of things which interfere with the public safety,
welfare, and comfort, and therefore beyond the reach of the police
power of the Philippine Government?
The numerous attempts which have been made to limit by definition
the scope of the police power are only interesting as illustrating its
rapid extension within comparatively recent years to points
heretofore deemed entirely within the field of private liberty and
property rights. Blackstone's definition of the police power was as
follows: "The due regulation and domestic order of the kingdom,
whereby the individuals of the state, like members of a well
governed family, are bound to conform their general behavior to the
rules of propriety, good neighborhood, and good manners, to be
decent, industrious, and inoffensive in their respective stations."
(Commentaries, vol. 4, p. 162.)
Chanceller Kent considered the police power the authority of the
state "to regulate unwholesome trades, slaughter houses,
operations offensive to the senses." Chief Justice Shaw of
Massachusetts defined it as follows: "The power vested in the
legislature by the constitution to make, ordain, and establish all
manner of wholesome and reasonable laws, statutes, and
ordinances, either with penalties or without, not repugnant to the
constitution, as they shall judge to be for the good and welfare of
the commonwealth, and of the subjects of the same."
(Com. vs. Alger, 7 Cush., 53.)
In the case of Butchers' Union Slaughter-house, etc. Co. vs. Crescent
City Live Stock Landing, etc. Co. (111 U. S., 746), it was suggested
that the public health and public morals are matters of legislative
concern of which the legislature cannot divest itself. (See
State vs. Mountain Timber Co. [1913], 75 Wash., 581, where these
definitions are collated.)
In Champer vs. Greencastle (138 Ind., 339), it was said: "The police
power of the State, so far, has not received a full and complete
definition. It may be said, however, to be the right of the State, or
state functionary, to prescribe regulations for the good order, peace,
health, protection, comfort, convenience and morals of the
community, which do not . . . violate any of the provisions of the
organic law." (Quoted with approval in Hopkins vs. Rich- mond [Va.,
1915], 86 S. E., 139.)
In Com. vs. Plymouth Coal Co. ([1911] 232 Pa., 141), it was said: "The
police power of the state is difficult of definition, but it has been
held by the courts to be the right to prescribe regulations for the
good order, peace, health, protection, comfort, convenience and
morals of the community, which does not encroach on a like power
vested in congress or state legislatures by the federal constitution,
or does not violate the provisions of the organic law; and it has been
expressly held that the fourteenth amendment to the federal
constitution was not designed to interfere with the exercise of that
power by the state."
In People vs. Brazee ([Mich., 1914], 149 N. W., 1053), it was said: "It
[the police power] has for its object the improvement of social and
economic conditions affecting the community at large and
collectively with a view to bring about 'the greatest good of the
greatest number.' Courts have consistently and wisely declined to
set any fixed limitations upon subjects calling for the exercise of this
power. It is elastic and is exercised from time to time as varying
social conditions demand correction."
In 8 Cyc., 863, it is said: "Police power is the name given to that
inherent sovereignty which it is the right and duty of the
government or its agents to exercise whenever public policy, in a
broad sense, demands, for the benefit of society at large, regulations
to guard its morals, safety, health, order or to insure in any respect
such economic conditions as an advancing civilization of a high
complex character requires." (As quoted with approval in
Stettler vs. O'Hara [19141, 69 Ore, 519.)
Finally, the Supreme Court of the United States has said in Noble
State Bank vs. Haskell (219 U. S. C1911], 575): "It may be said in a
general way that the police power extends to all the great public
needs. It may be put forth in aid of what is sanctioned by usage, or
held by the prevailing morality or strong and preponderart opinion
to be greatly and immediately necessary to the public welfare."
This statement, recent as it is, has been quoted with approval by
several courts. (Cunningham vs. Northwestern Imp. Co. [1911], 44
Mont., 180; State vs. Mountain Timber Co. [1913], 75 Wash, 581;
McDavid vs. Bank of Bas Minette [Ala., 1915], 69 Sou., 452;
Hopkins vs. City of Richmond [Va., 1915], 86 S. E., 139;
State vs. Philipps [Miss. 1915], 67 Sou., 651.)
It was said in Com. vs. Alger (7 Cush., 53, 85), per Shaw, C. J., that: "It
is much easier to perceive and realize the existence and sources of
this police power than to mark its boundaries, or to prescribe limits
to its exercise." In Stone vs. Mississippi (101 U. S., 814), it was said:
"Many attempts have been made in this court and elsewhere to
define the police power, but never with entire success. It is always
easier to determine whether a particular case comes within the
general scope of the power, than to give an abstract definition of the
power itself, which will be in all respects accurate."
Other courts have held the same view of efforts to evolve a
satisfactory definition of the police power. Manifestly, definitions
which fail to anticipate cases properly within the scope of the police
power are deficient. It is necessary, therefore, to confine our
discussion to the principle involved and determine whether the
cases as they come up are within that principle. The basic idea of
civil polity in the United States is that government should interfere
with individual effort only to the extent necessary to preserve a
healthy social and economic condition of the country. State
interference with the use of private property may be exercised in
three ways. First, through the power of taxation, second, through
the power of eminent domain, and third, through the police power.
By the first method it is assumed that the individual receives the
equivalent of the tax in the form of protection and benefit he
receives from the government as such. By the second method he
receives the market value of the property taken from him. But under
the third method the benefits he derives are only such as may arise
from the maintenance of a healthy economic standard of society
and is often referred to as damnum absgue injuria.
(Com. vs. Plymouth Coal Co. 232 Pa., 141, Bemis vs. Guirl Drainage
Co., 182 Ind., 36.) There was a time when state interference with the
use of private property under the guise of the police power was
practically confined to the suppression of common nuisances. At the
present day, however, industry is organized along lines which make
it possible for large combinations of capital to profit at the expense
of the socio-economic progress of the nation by controlling prices
and dictating to industrial workers wages and conditions of labor.
Not only this but the universal use of mechanical contrivances by
producers and common carriers has enormously increased the toll of
human life and limb in the production and distribution of
consumption goods. To the extent that these businesses affect not
only the public health, safety, and morals, but also the general social
and economic life of the nation, it has been and will continue to be
necessary for the state to interfere by regulation. By so doing, it is
true that the enjoyment of private property is interfered with in no
small degree and in ways that would have been considered entirely
unnecessary in years gone by. The regulation of rates charged by
common carriers, for instance, or the limitation of hours of work in
industrial establishments have only a very indirect bearing upon the
public health, safety, and morals, but do bear directly upon social
and economic conditions. To permit each individual unit of society
to feel that his industry will bring a fair return; to see that his work
shall be done under conditions that will not either immediately or
eventually ruin his health; to prevent the artificial inflation of prices
of the things which are necessary for his physical well being are
matters which the individual is no longer capable of attending to
himself. It is within the province of the police power to render
assistance to the people to the extent that may be necessary to
safeguard these rights. Hence, laws providing for the regulation of
wages and hours of labor of coal miners (Rail & River Coal
Co. vs. Ohio Industrial Commission, 236 U. S., 338); prohibiting the
payment of wages in company store orders (Keokee Coke
Co. vs. Taylor, 234 U. S., 224); requiring payment of employees of
railroads and other industrial concerns in legal tender and requiring
salaries to be paid semimonthly (Erie R. R. Co. vs. Williams, 233 U. S.,
685); providing a maximum number of hours of labor for women
(Miller vs. Wilson, U. S. Sup. Ct. [Feb. 23, 1915], Adv. Opns., p. 342);
prohibiting child labor (Sturges & Burn vs. Beauchamp, 231 U. S.,
320); restricting the hours of labor in public laundries (In re Wong
Wing, 167 Cal., 109); limiting hours of labor in industrial
establishment generally (State vs. Bunting, 71 Ore., 259); Sunday
Closing Laws (State vs. Nicholls [Ore., 1915], 151 Pac., 473;
People vs. C. Klinck Packing Co. [N. Y., 1915], 108 N. E., 278;
Hiller vs. State [Md., 1914], 92 Atl., 842; State vs. Penny, 42 Mont.,
118; City of Springfield vs. Richter, 257 Ill., 578, 580;
State vs.Hondros [S. C., 1915], 84 S. E., 781); have all been upheld as
a valid exercise of the police power. Again, workmen's
compensation laws have been quite generally upheld. These
statutes discard the common law theory that employers are not
liable for industrial accidents and make them responsible for all
accidents resulting from trade risks, it being considered that such
accidents are a legitimate charge against production and that the
employer by controlling the prices of his product may shift the
burden to the community. Laws requiring state banks to join in
establishing a depositors' guarantee fund have also been upheld by
the Federal Supreme Court in Noble State Bank vs. Haskell (219 U. S.,
104), and Assaria State Bank vs. Dolley (219 U. S., 121).

Offensive noises and smells have been for a long time considered
susceptible of suppression in thickly populated districts. Barring
livery stables from such locations was approved of in
Reinman vs. Little Rock (U. S. Sup. Ct. [Apr. 5, 1915], U. S. Adv.
Opns., p. 511). And a municipal ordinance was recently upheld
(People vs. Ericsson, 263 Ill., 368), which prohibited the location of
garages within two hundred feet of any hospital, church, or school,
or in any block used exclusively for residential purposes, unless the
consent of the majority of the property owners be obtained. Such
statutes as these are usually upheld on the theory of safeguarding
the public health. But we apprehend that in point of fact they have
little bearing upon the health of the normal person, but a great deal
to do with his physical comfort and convenience and not a little to
do with his peace of mind. Without entering into the realm of
psychology, we think it quite demonstrable that sight is as valuable
to a human being as any of his other senses, and that the proper
ministration to this sense conduces as much to his contentment as
the care bestowed upon the senses of hearing or smell, and
probably as much as both together. Objects may be offensive to the
eye as well as to the nose or ear. Man's esthetic feelings are
constantly being appealed to through his sense of sight. Large
investments have been made in theaters and other forms of
amusement, in paintings and spectacular displays, the success of
which depends in great part upon the appeal made through the
sense of sight. Moving picture shows could not be possible without
the sense of sight. Governments have spent millions on parks and
boulevards and other forms of civic beauty, the first aim of which is
to appeal to the sense of sight. Why, then, should the Government
not interpose to protect from annoyance this most valuable of man's
senses as readily as to protect him from offensive noises and smells?
The advertising industry is a legitimate one. It is at the same time a
cause and an effect of the great industrial age through which the
worid is now passing. Millions are spent each year in this manner to
guide the consumer to the articles which he needs. The sense of
sight is the primary essential to advertising success. Billboard
advertising, as it is now conducted, is a comparatively recent form of
advertising. It is conducted out of doors and along the arteries of
travel, and compels attention by the strategic locations of the
boards, which obstruct the range of vision at points where travelers
are most likely to direct their eyes. Beautiful landscapes are marred
or may not be seen at all by the traveler because of the gaudy array
of posters announcing a particular kind of breakfast food, or
underwear, the coming of a circus, an incomparable soap, nostrums
or medicines for the curing of all the ills to which the flesh is heir,
etc., etc. It is quite natural for people to protest against this
indiscriminate and wholesale use of the landscape by advertisers
and the intrusion of tradesmen upon their hours of leisure and
relaxation from work. Outdoor life must lose much of its charm and
pleasure if this form of advertising is permitted to continue
unhampered until it converts the streets and highways into veritable
canyons through which the world must travel in going to work or in
search of outdoor pleasure.
The success of billboard advertising depends not so much upon the
use of private property as it does upon the use f the channels of
travel used by the general public. Suppose that the owner of private
property, who so vigorously objects to the restriction of this form of
advertising, should require the advertiser to paste his posters upon
the billboards so that they would face the interior of the property
instead of the exterior. Billboard advertising would die a natural
death if this were done, and its real dependency not upon the
unrestricted use of private property but upon the unrestricted use of
the public highways is at once apparent. Ostensibly located on
private property, the real and sole value of the billboard is its
proximity to the public thoroughfares. Hence, we conceive that the
regulation of billboards and their restriction is not so much a
regulation of private property as it is a regulation of the use of the
streets and other public thoroughfares.
We would not be understood as saying that billboard advertising is
not a legitimate business any more than we would say that a livery
stable or an automobile garage is not. Even a billboard is more
sightly than piles of rubbish or an open sewer. But all these
businesses are offensive to the senses under certain conditions.
It has been urged against ministering to the sense of sight that
tastes are so diversified that there is no safe standard of legislation
in this direction. We answer in the language of the Supreme Court in
Noble State Bank vs. Haskell (219 U. S., 104), and which has already
been adopted by several state courts (see supra), that "the
prevailing morality or strong and preponderating opinions demands
such legislation. The agitation against the unrestrained development
of the billboard business has produced results in nearly all the
countries of Europe. (Ency. Britannica, vol. 1, pp. 237-240.) Many
drastic ordinances and state laws have been passed in the United
States seeking to make the business amenable to regulation. But
their regulation in the United States is hampered by what we
conceive an unwarranted restriction upon the scope of the police
power by the courts. If the police power may be exercised to
encourage a healthy social and economic condition in the country,
and if the comfort and convenience of the people are included
within those subjects, everything which encroaches upon such
territory is amenable to the police power. A source of annoyance
and irritation to the public does not minister to the comfort and
convenience of the public. And we are of the opinion that the
prevailing sentiment is manifestly against the erection of billboards
which are offensive to the sight.
We do not consider that we are in conflict with the decision in
Eubank vs. Richmond (226 U. S., 137), where a municipal ordinance
establishing a building line to which property owners must conform
was held unconstitutional. As we have pointed out, billboard
advertising is not so much a use of private property as it is a use of
the public thoroughfares. It derives its value to the owner solely
because the posters are exposed to the public gaze. It may well be
that the state may not require private property owners to conform
to a building line, but may prescribe the conditions under which they
shall make use of the adjoining streets and highways. Nor is the law
in question to be held invalid as denying equal protection of the
laws. In Keokee Coke Co. vs. Taylor (234 U. S., 224), it was said: "It is
more pressed that the act discriminates unconstitutionally against
certain classes. But while there are differences of opinion as to the
degree and kind of discrimination permitted by the Fourteenth
Amendment, it is established by repeated decisions that a statute
aimed at what is deemed an evil, and hitting it presumably where
experience shows it to be most felt, is not to be upset by thinking up
and enumerating other instances to which it might have been
applied equally well, so far as the court can see. That is for the
legislature to judge unless the case is very clear."
But we have not overlooked the fact that we are not in harmony
with the highest courts of a number of the states in the American
Union upon this point. Those courts being of the opinion that
statutes which are prompted and inspired by esthetic considerations
merely, having for their sole purpose the promotion and
gratification of the esthetic sense, and not the promotion or
protection of the public safety, the public peace and good order of
society, must be held invalid and contrary to constitutional
provisions holding inviolate the rights of private property. Or, in
other words, the police power cannot interfere with private
property rights for purely esthetic purposes. The courts, taking this
view, rest their decisions upon the proposition that the esthetic
sense is disassociated entirely from any relation to the public health,
morals, comfort, or general welfare and is, therefore, beyond the
police power of the state. But we are of the opinion, as above
indicated, that unsightly advertisements or signs, signboards, or
billboards which are offensive to the sight, are not disassociated
from the general welfare of the public. This is not establishing a new
principle, but carrying 2 well recognized principle to further
application. (Fruend on Police Power, p. 166.)
For the foregoing reasons the judgment appealed from is hereby
reversed and the action dismissed upon the merits, with costs. So
ordered.
Arellano, C.J., Torres, Carson and Araullo, JJ., concur.
DECISION ON THE MOTION FOR A REHEARING, JANUARY 24, 1916.
TRENT, J.:
Counsel for the plaintiffs call our attention to the case of Ex
parte Young (209 U. S., 123); and say that they are of the opinion
that this case "is the absolutely determinative of the question of
jurisdiction in injunctions of this kind. We did not refer to this case in
our former opinion because we were satisfied that the reasoning of
the case is not applicable to sections 100(b), 139 and 140 of Act No.
2339. The principles announced in the Young case are stated as
follows: "It may therefore be said that when the penalties for
disobedience are by fines so enormous and imprisonment so severe
as to intimidate the company and its officers from resorting to the
courts to test the validity of the legislation, the result is the same as
if the law in terms prohibited the company from seeking judicial
construction of laws which deeply affect its rights.
"It is urged that there is no principle upon which to base the claim
that a person is entitled to disobey a statute at least once, for the
purpose of testing its validity without subjecting himself to the
penalties for disobedience provided by the statute in case it is valid.
This is not an accurate statement of the case. Ordinarily a law
creating offenses in the nature of misdemeanors or felonies relates
to a subject over which the jurisdiction of the legislature is complete
in any event. In the case, however, of the establishment of certain
rates without any hearing, the validity of such rates necessarily
depends upon whether they are high enough to permit at least
sorne return upon the investment (how much it is not now
necessary to state), and an inquiry as to that fact is a proper subject
of judicial investigation. If it turns out that the rates are too low for
that purpose, then they are illegal. Now, to impose upon a party
interested the burden of obtaining a judicial decision of such a
question (no prior hearing having ever been given) only upon the
condition that, if unsuccessful, he must suffer imprisonment and pay
fines as provided in these acts, is, in effect, to close up all
approaches to the courts, and thus prevent any hearing upon the
question whether the rates as provided by the acts are not too low,
and therefore invalid. The distinction is obvious between a case
where the validity of the act depends upon the existence of a fact
which can be determined only after investigation of a very
complicated and technical character, and the ordinary case of a
statute upon a subject requiring no such investigation and over
which the jurisdiction of the legislature is complete in any event."

An examination of the sections of our Internal Revenue Law and of
the circumstances under which and the purposes for which they
were enacted, will show that, unlike the statutes under
consideration in the above cited case, their enactment involved no
attempt on the part of the Legislature to prevent dissatisfied
taxpayers "from resorting to the courts to test the validity of the
legislation ;" no effort to prevent any inquiry as to their validity.
While section 139 does prevent the testing of the validity of
subsection (b) of section 100 in injunction suits instituted for the
purpose of restraining the collection of internal revenue taxes,
section 140 provides a complete remedy for that purpose. And
furthermore, the validity of subsection (b) does not depend upon
"the existence of a fact which can be determined only after
investigation of a very complicated and technical character," but the
jurisdiction of the Legislature over the subject with which the
subsection deals is complete in any event." The judgment of the
court in the Young case rests upon the proposition that the
aggrieved parties had no adequate remedy at law.
Neither did we overlook the case of General Oil Co. vs. Crain (209 U.
S.j 211), decided the same day and citing Ex parteYoung, supra. In
that case the plaintiff was a Tennessee corporation, with its principal
place of business in Memphis, Tennessee. It was engaged in the
manufacture and sale of coal- oil, etc. Its wells and plant were
located in Pennsylvania and Ohio. Memphis was not only its place of
business, at which place it sold oil to the residents of Tennessee, but
also a distributing point to which oils were shipped from
Pennsylvania and Ohio and unloaded into various tanks for the
purpose of being forwarded to the Arkansas. Louisiana. and
Mississippi customers. Notwithstanding the fact that the company
separated its oils,which were designated to meet the requirements
of the orders from those States, from the oils for sale in Tennessee,
the defendant insisted that he had a right, under the Act of the
Tennessee Legislature, approved April 21, 1899, to inspect all the
oils unlocated in Memphis, whether for sale in that State or not, and
charge and collect for such inspection a regular fee of twenty-five
cents per barrel. The company, being advised that the defendant
had no such right, instituted this action in the inferior State court for
the purpose of enjoining the defendant, upon the grounds stated in
the bill, from inspecting or attempting to inspect its oils. Upon trial,
the preliminary injunction which had been granted at the
commencement of the action, was continued in force. Upon appeal,
the supreme court of the State of Tennessee decided that the suit
was one against the State and reversed the judgment of the
Chancellor. In the Supreme Court of the United States, where the
case was reviewed upon a writ of error, the contentions of the
parties were stated by the court as follows: "It is contended by
defendant in error that this court is without jurisdiction because no
matter sought to be litigated by plaintiff in error was determined by
the Supreme Court of Tennessee. The court simply held, it is said,
that, under the laws of the State, it had no jurisdiction to entertain
the suit for any purpose. And it is insisted 'that this holding involved
no Federal question, but only the powers and jurisdiction of the
courts of the State of Tennessee, in respect to which the Supreme
Court of Tennessee is the final arbiter.'
"Opposing these contentions, plaintiff in error urges that whether a
suit is one against a State cannot depend upon the declaration of a
statute, but depends upon the essential nature of the suit, and that
the Supreme Court recognized that the statute 'added nothing to
the axiomatic principle that the State, as a sovereign, is not subject
to suit save by its own consent.' And it is hence insisted that the
court by dismissing the bill gave effect to the law which was
attacked. It is further insisted that the bill undoubtedly present
rights under the Constitution of the United States and conditions
which entitle plaintiff in error to an injunction for the protection of
such rights, and that a statute of the State which operates to deny
such rights, or such relief, 'is itself in conflict with the Constitution of
the United States.' "
That statute of Tennessee, which the supreme court of that State
construed and held to be prohibitory of the suit, was an act passed
February 28, 1873, which provides: "That no court in the State of
Tennessee has, nor shall hereafter have, any power, jurisdiction, or
authority to entertain any suit against the State, or any officer acting
by the authority of the State, with a view to reach the State, its
treasury, funds or property; and all such suits now pending, or
hereafter brought, shall be dissmissed as to the State, or such
officer, on motion, plea or demurrer of the law officer of the State,
or counsel employed by the State."
The Supreme Court of the United States, after reviewing many cases,
said: "Necessarily, to give adequate protection to constitutional
rights a distinction must be made between valid and invalid state
laws, as determining the character of the suit against state officers.
And the suit at bar illustrates the necessity. If a suit against state
officers is precluded in the national courts by the Eleventh
Amendment to the Constitution, and may be forbidden by a State to
its courts, as it is contended in the case at bar that it may be,
without power of review by this court, it must be evident that an
easy way is open to prevent the enforcement of many provisions of
the Constitution; and the Fourteenth Amendment, which is directed
at state action, could be nullified as to much of its operation. . . . It
being then the right of a party to be protected against a law which
violates a constitutional right, whether by its terms or the manner of
its enforcement, it is manifest that a decision which denies such
protection gives effect to the law, and the decision is reviewable by
this court."
The court then proceeded to consider whether the law of 1899
would, if administered against the oils in question, violate any
constitutional right of the plaintiff and after finding and adjudging
that the oils were not in movement through the States, that they
had reached the destination of their first shipment, and were held
there, not in necessary delay of means of transportation but for the
business purposes and profit of the company, and resting its
judgment upon the taxing power of the State, affirmed the decree of
the supreme court of the State of Tennessee.
From the foregoing it will be seen that the Supreme Court of
Tennessee dismissed the case for want of jurisdiction because the
suit was one against the State, which was prohibited by the
Tennessee Legislature. The Supreme Court of the United States took
jurisdiction of the controversy for the reasons above quoted and
sustained the Act of 1899 as a revenue law.
The case of Tennessee vs. Sneed (96 U. S., 69), and helton vs. Platt
(139 U. S., 591), relied upon in our former opinion, were not cited in
General Oil Co. vs. Crain, supra, because the questions presented
and the statutes under consideration were entirely different. The
Act approved March 31, 1873, expressly prohibits the courts from
restraining the collection of any tax, leaving the dissatisfied taxpayer
to his exclusive remedy payment under protest and suit to
recover while the Act approved February 28, 1873, prohibits suits
against the State.
In upholding the statute which authorizes the removal of signboards
or billboards upon the sole ground that they are offensive to the
sight, we recognized the fact that we are not in harmony with
various state courts in the American Union. We have just examined
the decision of the Supreme Court of the State of Illinois in the
recent case (October [December], 1914) of The Thomas Cusack
Co. vs. City of Chicago (267 Ill., 344), wherein the court upheld the
validity of a municipal ordinance, which reads as follows:
"707. Frontage consents required. It shall be unlawful for any
person, firm or corporation to erect or construct any bill-board or
sign-board in any block on any public street in which one-half of the
buildings on both sides of the street are used exclusively for
residence purposes, without first obtaining the consent, in writing,
of the owners or duly authorized agents of said owners owning a
majority of the frontage of the property, on both sides of the street,
in the block in which such bill-board or signboard is to be erected,
constructed or located. Such written consent shall be filed with the
commissioner of buildings before a permit shall be issued for the
erection, construction or location of such bill-board or sign-board."
The evidence which the Illinois court relied upon was the danger of
fires, the fact that billboards promote the commission of various
immoral and filthy acts by disorderly persons, and the inadequate
police protection furnished to residential districts. The last objection
has no virtue unless one or the other of the other objections are
valid. If the billboard industry does, in fact, promote such municipal
evils to a noticeable extent, it seems a curious inconsistency that a
majority of the property owners on a given block may legalize the
business. However, the decision is undoubtedly a considerable
advance over the views taken by other high courts in the United
States and distinguishes several Illinois decisions. It is an advance
because it per- mits the supression of billboards where they are
undesirable. The ordinance which the court approved will no doubt
cause the virtual suppression of the business in the residential
districts. Hence, it is recognized that under certain circumstances
billboards may be suppressed as an unlawful use of private property.
Logically, it would seem that the premise of fact relied upon is not
very solid. Objections to the billboard upon police, sanitary, and
moral grounds have been, as pointed out by counsel for Churchill
and Tait, duly considered by numerous high courts in the United
States, and, with one exception, have been rejected as without
foundation. The exception is the Supreme Court of Missouri, which
advances practically the same line of reasoning as has the Illinois
court in Ihis recent case. (St. Louis Gunning Advt. Co. vs. City of St.
Louis, 137 S. W., 929.) In fact, the Illinois court, in Haller Sign
Works vs. Physical Culture Training School (249 Ill., 436),
"distinguished" in the recent case, said: "There is nothing inherently
dangerous to the health or safety of the public in structures that are
properly erected for advertising purposes."

If a billboard is so constructed as to offer no room for objections on
sanitary or moral grounds, it would seem that the ordinance above
quoted would have to be sustained upon the very grounds which we
have advanced in sustaining our own statute.
It might be well to note that billboard legislation in the United States
is attempting to eradicate a business which has already been firmly
established. This business was allowed to expand unchecked until its
very extent called attention to its objectionable features. In the
Philippine Islands such legislation has almost anticipated the
business, which is not yet of such proportions that it can be said to
be fairly established. It may be that the courts in the United States
have committed themselves to a course of decisions with respect to
billboard advertising, the full consequences of which were not
perceived for the reason that the development of the business has
been so recent that the objectionable features of it did not present
themselves clearly to the courts nor to the people. We, in this
country, have the benefit of the experience of the people of the
United States and may make our legislation preventive rather than
corrective. There are in this country, moreover, on every hand in
those districts where Spanish civilization has held sway for so many
centuries, examples of architecture now belonging to a past age, and
which are attractive not only to the residents of the country but to
visitors. If the billboard industry is permitted without constraint or
control to hide these historic sites from the passerby, the country
will be less attractive to the tourist and the people will suffer a
distinct economic loss.
The motion for a rehearing is therefore denied.
Arellano, C.J., Torres and Carson, JJ., concur.

||| (Churchill v. Rafferty, G.R. No. 10572, December 21, 1915)


































EN BANC
[G.R. No. L-59234. September 30, 1982.]
TAXICAB OPERATORS OF METRO MANILA, INC., FELICISIMO
CABIGAO and ACE TRANSPORTATION
CORPORATION, petitioners, vs. THE BOARD OF TRANSPORTATION
and THE DIRECTOR OF THE BUREAU OF LAND
TRANSPORTATION, respondents.
Mariano P. Brion, Jr. for petitioners.
The Solicitor General for respondents.
SYNOPSIS
Petitioners who are taxicab operators assail the constitutionality of
Memorandum Circular No. 77-42 issued by the Board of
Transportation (BOT) providing for the phasing out and replacement
of old and dilapidated taxicabs; as well as Implementing Circular No.
52 issued pursuant thereto by the Bureau of Land Transportation
(BLT) instructing personnel of the BLT within the National Capital
Region to implement the said BOT Circular, and formulating a
schedule of phase-out of vehicles to be allowed and accepted for
registration as public conveyances. Petitioners allege that the
questioned Circulars did not afford them procedural and substantive
due process, equal protection of the law, and protection against
arbitrary and unreasonable classification and standard. Among
others, they question the issuance of the Circulars without first
calling them to a conference or requiring them to submit position
papers or other documents enforceability thereof only in Metro
Manila; and their being applicable only to taxicabs and not to other
transportation services.
The Supreme Court held that there was no denial of due process
since calling the taxicab operators or persons who may be affected
by the questioned Circulars to a conference or requiring them to
submit position papers or other documents is only one of the
options open to the BOT which is given wide discretionary authority
under P.D. No. 101; and fixing a six- year ceiling for a car to be
operated as taxicab is a reasonable standard adopted to apply to all
vehicles affected uniformly, fairly, and justly. The Court also ruled
that neither has the equal protection clause been violated by initially
enforcing the Circulars only in Metro Manila since it is of common
knowledge that taxicabs in this city, compared to those of other
places, are subjected to heavier traffic pressure and more constant
use, thus making for a substantial distinction; nor by non-application
of the Circulars to other transportation services because the said
Circulars satisfy the criteria required under the equal protection
clause, which is the uniform operation by legal means so that all
persons under identical or similar circumstances would be accorded
the same treatment both in privilege conferred and the liabilities
imposed.
SYLLABUS
1.CONSTITUTIONAL LAW; CONSTITUTIONALITY OF LAWS;
MEMORANDUM CIRCULAR PROVIDING FOR PHASING-OUT AND
REPLACEMENT OF OLD AND DILAPIDATED TAXICABS; ISSUANCE NOT
VIOLATIVE OF DUE PROCESS; CALLING TAXICAB OPERATORS TO
CONFERENCE OR REQUIRING SUBMISSION OF POSITION PAPERS OR
DOCUMENTS, ONLY ONE OF OPTIONS GIVEN TO BOARD OF
TRANSPORTATION IN FORMULATING POLICIES. It is clear from the
provision of Section 2 of P.D. 101 aforequoted, that the leeway
accorded the Board gives it a wide range of choice in gathering
necessary information or data in the formulation of any policy, plan
or program. It is not mandatory that it should first call a conference
or require the submission of position papers or other documents
from operators or persons who maybe affected, this being only one
of the options open to the Board, which is given wide discretionary
authority. Petitioners cannot justifiably claim, therefore, that they
were deprived of procedural due process. Neither can they state
with certainty that public respondents had not availed of other
sources of inquiry prior to issuing the challenged Circulars.
Operators of public conveyances are not the only primary sources of
the data and information that may be desired by the BOT.
2.ID.; ID.; ID.; ID.; PUBLIC HEARING, NOT A DUE PROCESS
REQUIREMENT. Dispensing with a public hearing prior to the
issuance of the Circulars is neither violative of procedural due
process. As held in Central Bank vs. Hon. Cloribel and Banco Filipino,
44 SCRA 307(1972); "Previous notice and hearing as elements of due
process, are constitutionally required for the protection of life or
vested property rights, as well as of liberty, when its limitations or
loss takes place in consequence of a judicial or quasi-judicial
proceedings, generally dependent upon a past act or even which has
to be established or ascertained. It is nor essential to the validity of
general rules or regulations promulgated to govern future conduct
of a class or persons or enterprises, unless the law provides
otherwise.''
3.ID.; ID.; ID.; ID.; SIX-YEAR CEILING FOR CARS TO OPERATE AS
TAXICAB, MEETS DUE PROCESS REQUIREMENT FOR SUPPLYING
REASONABLE STANDARD. Petitioners farther take the position
that fixing the ceiling at six (6) years is arbitrary and oppressive
because of roadworthiness of taxicabs depends upon their kind of
maintenance and the use to which they are subjected, and,
therefore, their actual physical condition should be taken into
consideration at the time of registration. As public respondents
contend, however, it is impractical to subject every taxicab to
constant and recurring evaluation, not to speak of the fact that it
can open the door to the adoption of multiple standards, possible
collusion, and evens graft and corruption. A reasonable standard
must be adopted to apply to all vehicles affected uniformly, fairly ,
and justly, The span of six years supplies that reasonable standard.
The product of experience shows that by that time taxis have fully
depreciated, their cost recovered, and a fair return on investment
obtained.
4.ID.; ID.; ID.; ISSUANCE NOT VIOLATIVE OF EQUAL PROTECTION
CLAUSE; ENFORCING CIRCULAR INITIALLY IN METRO MANILA ONLY.
At the outset it should be pointed out that implementation
outside Metro Manila is also envisioned in Memorandum Circular
No. 77-42. The Board's reason for enforcing the Circular initially in
Metro Manila is that taxicabs in this city, compared to those of other
places, are subjected to heavier traffic pressure and more constant
use. This is of common knowledge. Considering that traffic
conditions are not the same in every city, a substantial distinction
exist so that infringement of the equal protection clause can hardly
be successfully claimed.
5.ID.; ID.; ID.; ID.; ID.; A VALID EXERCISE OF POLICE POWER. As
enunciated in the preambular clauses of the challenged BOT
Circular, the overriding consideration is the safety and comfort of
the riding public from the dangers posed by old and dilapidated
taxis. The State, in the exercise of its police power, can prescribe
regulations to promote the health, morals, peace, good order, safety
and general welfare of the people. It can prohibit all things hurtful to
comfort, safety and welfare of society. (Edu vs. Ericta, 35 SCRA 48
[1970]. It may also regulate property rights. (Samson vs. Mayor of
Bacolod City, 60 SCRA 267 [1974]. In the language of Chief Justice
Enrique M. Fernando "the necessities imposed by public welfare
may justify the exercise of governmental authority to regulate even
if thereby certain groups may plausibly assert that their interests are
disregarded". (The Constitution of the Philippines, Second Edition, p.
548.)
6.ID.; ID.; ID.; ID.; NONE APPLICATION TO OTHER TRANSPORTATION
SERVICES. In so far as the non-application of the assailed Circulars
to other transportation services is concerned, it need only be
recalled that the equal protection clause does not imply that the
same treatment be accorded all and sundry. It applies to things or
persons identically or similarly situated. It permits of classification of
the object or subject of the law provided classification is reasonable
or based on substantial distinction, which make for real differences,
and that it must apply equally to each member of the class. (People
vs. Vera, 65 Phil. 56; People vs. Cayat, 68 Phil. 12; Central Bank vs.
Cloribel, 44 SCRA 307 [1972]; Anucension vs. National Labor Union,
80 SCRA 350 [1977] citing Victoriano vs. Elizalde Rope Workers'
Union, 59 SCRA 54 [1974] & Basa vs. Federacion Obrera de la
Industria Tabaquera y Otros Trabajadores de Filipinas, 61 SCRA 93
[1974]). What is required under the equal protection clause is the
uniform operation by legal means so that all persons under identical
or similar circumstance would be accorded the same treatment both
in privilege conferred and the liabilities imposed. (Gumabon vs.
Director of Prisons, 37 SCRA 420 [1971]). The challenged Circulars
satisfy the foregoing criteria.
7.ID., ID., DECLARATION OF UNCONSTITUTIONALITY REQUIRES
CLEAR AND CATEGORICAL INFRINGEMENT OF RIGHT. Evident
then is the conclusion that the questioned Circulars do not suffer
from any constitutional infirmity. To declare a law unconstitutional,
the infringement of constitutional right must be clear, categorical
and undeniable.
D E C I S I O N
MELENCIO-HERRERA, J p:
This Petition for "Certiorari, Prohibition and Mandamus with
Preliminary Injunction and Temporary Restraining Order" filed by
the Taxicab Operators of Metro Manila, Inc., Felicisimo Cabigao and
Ace Transportation, seeks to declare the nullity of Memorandum
Circular No. 77-42, dated October 10, 1977, of the Board of
Transportation, and Memorandum Circular No. 52, dated August 16,
1980, of the Bureau of Land Transportation.
Petitioner Taxicab Operators of Metro Manila, Inc. (TOMMI) is a
domestic corporation composed of taxicab operators, who are
grantees of Certificates of Public Convenience to operate taxicabs
within the City of Manila and to any other place in Luzon accessible
to vehicular traffic. Petitioners Ace Transportation Corporation and
Felicisimo Cabigao are two of the members of TOMMI, each being
an operator and grantee of such certificate of public convenience.
On October 10, 1977, respondent Board of Transportation (BOT)
issued Memorandum Circular No. 77-42 which reads:

SUBJECT: Phasing out and Replacement of
Old and Dilapidated Taxis
"WHEREAS, it is the policy of the government to insure that only safe
and comfortable units are used as public conveyances;
WHEREAS, the riding public, particularly in Metro-Manila, has, time
and again, complained against, and condemned, the continued
operation of old and dilapidated taxis;
WHEREAS, in order that the commuting public may be assured of
comfort, convenience, and safety, a program of phasing out of old
and dilapidated taxis should be adopted;
WHEREAS, after studies and inquiries made by the Board of
Transportation, the latter believes that in six years of operation, a
taxi operator has not only covered the cost of his taxis, but has
made reasonable profit for his investments;
NOW, THEREFORE, pursuant to this policy, the Board hereby
declares that no car beyond six years shall be operated as taxi, and
in implementation of the same hereby promulgates the following
rules and regulations:
1.As of December 31, 1977, all taxis of Model 1971 and earlier are
ordered withdrawn from public service and thereafter may no
longer be registered and operated as taxis. In the registration of
cards for 1978, only taxis of Model 1972 and later shall be accepted
for registration and allowed for operation;
2.As of December 31, 1978, all taxis of Model 1972 are ordered
withdrawn from public service and thereafter may no longer be
registered and operated as taxis. In the registration of cars for 1979,
only taxis of Model 1973 and later shall be accepted for registration
and allowed for operation; and every year thereafter, there shall be
a six-year lifetime of taxi, to wit:
1980 Model 1974
1981 Model 1975, etc.
All taxis of earlier models than those provided above are hereby
ordered withdrawn from public service as of the last day of
registration of each particular year and their respective plates shall
be surrendered directly to the Board of Transportation for
subsequent turnover to the Land Transportation Commission.
For an orderly implementation of this Memorandum Circular, the
rules herein shall immediately be effective in Metro-Manila. Its
implementation outside Metro Manila shall be carried out only after
the project has been implemented in Metro Manila and only after
the date has been determined by the Board." 1
Pursuant to the above BOT circular, respondent Director of the
Bureau of Land Transportation (BLT) issued Implementing Circular
No. 52, dated August 15, 1980, instructing the Regional Director, the
MV Registrars and other personnel of BLT, all within the National
Capitol Region, to implement said Circular, and formulating a
schedule of phase-out of vehicles to be allowed and accepted for
registration as public conveyances. To quote said Circular:
"Pursuant to BOT Memo Circular No. 77-42, taxi units with year
models over six (6) years old are now banned from operating as
public utilities in Metro Manila. As such the units involved should be
considered as automatically dropped as public utilities and,
therefore, do not require any further dropping order from the BOT.
"Henceforth, taxi units within the National Capitol Region having
year models over 6 years old shall be refused registration. The
following schedule of phase-out is herewith prescribed for the
guidance of all concerned:
"Year ModelAutomatic Phase-Out Year
1980
19741981
19751982
19761983
1977
etc.etc.
Strict compliance here is desired." 2
In accordance therewith, cabs of model 1971 were phase-out in
registration year 1978; those of model 1972, in 1979; those of model
1973, in 1980; and those of model 1974, in 1981.
On January 27, 1981, petitioners filed a Petition with the BOT,
docketed as Case No. 80-7553, seeking to nullify MC No. 77-42 or to
stop its implementation; to allow the registration and operation in
1981 and subsequent years of taxicabs of model 1974, as well as
those of earlier models which were phased-out, provided that, at
the time of registration, they are roadworthy and fit for operation.
On February 16, 1981, petitioners filed before the BOT a
"Manifestation and Urgent Motion", praying for an early hearing of
their petition. The case was heard on February 20, 1981. Petitioners
presented testimonial and documentary evidence, offered the same,
and manifested that they would submit additional documentary
proofs. Said proofs were submitted on March 27, 1981 attached to
petitioners' pleading entitled, "Manifestation, Presentation of
Additional Evidence and Submission of the Case for Resolution." 3
On November 28, 1981, petitioners filed before the same Board a
"Manifestation and Urgent Motion to Resolve or Decide Main
Petition" praying that the case be resolved or decided not later than
December 10, 1981 to enable them, in case of denial, to avail of
whatever remedy they may have under the law for the protection of
their interests before their 1975 model cabs are phased-out on
January 1, 1982.
Petitioners, through its President, allegedly made personal follow-
ups of the case, but was later informed that the records of the case
could not be located.
On December 29, 1981, the present Petition was instituted wherein
the following queries were posed for consideration by this Court:
"A.Did BOT and BLT promulgate the questioned memorandum
circulars in accord with the manner required byPresidential Decree
No. 101, thereby safeguarding the petitioners' constitutional right to
procedural due process?
B.Granting arguendo, that respondents did comply with the
procedural requirements imposed by Presidential Decree No. 101,
would the implementation and enforcement of the assailed
memorandum circulars violate the petitioners' constitutional rights
to.
(1)Equal protection of the law;
(2)Substantive due process; and
(3)Protection against arbitrary and unreasonable classification and
standard?
On Procedural and Substantive Due Process:
Presidential Decree No. 101 grants to the Board of Transportation
the power
"4.To fix just and reasonable standards, classification, regulations,
practices, measurements, or service to be furnished, imposed,
observed, and followed by operators of public utility motor
vehicles."
Section 2 of said Decree provides procedural guidelines for said
agency to follow in the exercise of its powers:
"Sec. 2.Exercise of powers. In the exercise of the powers granted
in the preceding section, the Board shall proceed promptly along the
method of legislative inquiry.
Apart from its own investigation and studies, the Board, in its
discretion, may require the cooperation and assistance of the
Bureau of Transportation, the Philippine Constabulary, particularly
the Highway Patrol Group, the support agencies within the
Department of Public Works, Transportation and Communications,
or any other government office or agency that may be able to
furnish useful information or data in the formulation of the Board of
any policy, plan or program in the implementation of this Decree.
The Board may also call conferences, require the submission of
position papers or other documents, information, or data by
operators or other persons that may be affected by the
implementation of this Decree, or employ any other suitable means
of inquiry. "
In support of their submission that they were denied procedural due
process, petitioners contend that they were not called upon to
submit their position papers, nor were they ever summoned to
attend any conference prior to the issuance of the questioned BOT
Circular.
It is clear from the provision aforequoted, however, that the leeway
accorded the Board gives it a wide range of choice in gathering
necessary information or data in the formulation of any policy, plan
or program. It is not mandatory that it should first call a conference
or require the submission of position papers or other documents
from operators or persons who may be affected, this being only one
of the options open to the Board, which is given wide discretionary
authority. Petitioners cannot justifiably claim, therefore, that they
were deprived of procedural due process. Neither can they state
with certainty that public respondents had not availed of other
sources of inquiry prior to issuing the challenged Circulars Operators
of public conveyances are not the only primary sources of the data
and information that may be desired by the BOT.
Dispensing with a public hearing prior to the issuance of the
Circulars is neither violative of procedural due process. As held in
Central Bank vs. Hon. Cloribel and Banco Filipino, 44 SCRA 307
(1972):
"Previous notice and hearing as elements of due process, are
constitutionally required for the protection of life or vested property
rights, as well as of liberty, when its limitation or loss takes place in
consequence of a judicial or quasi-judicial proceeding, generally
dependent upon a past act or event which has to be established or
ascertained. It is not essential to the validity of general rules or
regulations promulgated to govern future conduct of a class or
persons or enterprises, unless the law provides otherwise."
(Emphasis supplied)
Petitioners further take the position that fixing the ceiling at six (6)
years is arbitrary and oppressive because the road-worthiness of
taxicabs depends upon their kind of maintenance and the use to
which they are subjected, and, therefore, their actual physical
condition should be taken into consideration at the time of
registration. As public respondents contend, however, it is
impractical to subject every taxicab to constant and recurring
evaluation, not to speak of the fact that it can open the door to the
adoption of multiple standards, possible collusion, and even graft
and corruption. A reasonable standard must be adopted to apply to
all vehicles affected uniformly, fairly, and justly. The span of six years
supplies that reasonable standard. The product of experience shows
that by that time taxis have fully depreciated, their cost recovered,
and a fair return on investment obtained. They are also generally
dilapidated and no longer fit for safe and comfortable service to the
public specially considering that they are in continuous operation
practically 24 hours everyday in three shifts of eight hours per shift.
With that standard of reasonableness and absence of arbitrariness,
the requirement of due process has been met.

On Equal Protection of the Law:
Petitioners alleged that the Circular in question violates their right to
equal protection of the law because the same is being enforced in
Metro Manila only and is directed solely towards the taxi industry.
At the outset it should be pointed out that implementation outside
Metro Manila is also envisioned in Memorandum Circular No. 77-42.
To repeat the pertinent portion:
"For an orderly implementation of this Memorandum Circular, the
rules herein shall immediately be effective in Metro Manila. Its
implementation outside Metro Manila shall be carried out only after
the project has been implemented in Metro Manila and only after
the date has been determined by the Board." 4
In fact, it is the understanding of the Court that implementation of
the Circulars in Cebu City is already being effected, with the BOT in
the process of conducting studies regarding the operation of
taxicabs in other cities.
The Board's reason for enforcing the Circular initially in Metro
Manila is that taxicabs in this city, compared to those of other
places, are subjected to heavier traffic pressure and more constant
use. Thus is of common knowledge. Considering that traffic
conditions are not the same in every city, a substantial distinction
exists so that infringement of the equal protection clause can hardly
be successfully claimed.
As enunciated in the preambular clauses of the challenged BOT
Circular, the overriding consideration is the safety and comfort of
the riding public from the dangers posed by old and dilapidated
taxis. The State, in the exercise of its police power, can prescribe
regulations to promote the health, morals, peace, good order, safety
and general welfare of the people. It can prohibit all things hurtful to
comfort, safety and welfare of society. 5 It may also regulate
property rights. 6 In the language of Chief Justice Enrique M.
Fernando "the necessities imposed by public welfare may justify the
exercise of governmental authority to regulate even if thereby
certain groups may plausibly assert that their interests are
disregarded". 7
In so far as the non-application of the assailed Circulars to other
transportation services is concerned, it need only be recalled that
the equal protection clause does not imply that the same treatment
be accorded all and sundry. It applies to things or persons identically
or similarly situated. It permits of classification of the object or
subject of the law provided classification is reasonable or based on
substantial distinction, which make for real differences, and that it
must apply equally to each member of the class. 8What is required
under the equal protection clause is the uniform operation by legal
means so that all persons under identical or similar circumstance
would be accorded the same treatment both in privilege conferred
and the liabilities imposed. 9 The challenged Circulars satisfy the
foregoing criteria.
Evident then is the conclusion that the questioned Circulars do not
suffer from any constitutional infirmity. To declare a law
unconstitutional, the infringement of constitutional right must be
clear, categorical and undeniable. 10
WHEREFORE, the Writs prayed for are denied and this Petition is
hereby dismissed. No costs.
SO ORDERED.
Fernando, C.J., Barredo, Makasiar, Concepcion Jr., Guerrero, Abad
Santos, De
Castro, Plana, Escolin, Vasquez, Relova and Gutierrez,Jr., JJ., concur.
Teehankee and Aquino, JJ., in the result.
||| (Taxicab Operators of Metro Manila, Inc. v. Board of
Transportation, G.R. No. L-59234, September 30, 1982)































EN BANC
[G.R. No. L-20620. August 15, 1974.]
REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. CARMEN M.
VDA. DE CASTELLVI, ET AL., defendants-appellees.
Office of the Solicitor General for plaintiff-appellant.
C .A. Mendoza & A.V . Raquiza and Alberto Cacnio & Associates for
defendant-appellees.
D E C I S I O N
ZALDIVAR, J p:
Appeal from the decision of the Court of First Instance of Pampanga
in its Civil Case No. 1623, an expropriation proceeding.
Plaintiff-appellant, the Republic of the Philippines, (hereinafter
referred to as the Republic) filed, on June 26, 1959, a complaint for
eminent domain against defendant-appellee, Carmen M. vda. de
Castellvi, judicial administratrix of the estate of the late Alfonso de
Castellvi hereinafter referred to as Castellvi), over a parcel of land
situated in the barrio of San Jose, Floridablanca, Pampanga,
described as follows:
"A parcel of land, Lot No. 199-B Bureau of Lands Plan Swo-23666.
Bounded on the NE by Maria Nieves Toledo-Gozun; on the SE by
national road; on the SW by AFP reservation, and on the NW by AFP
reservation. Containing an area of 759,299 square meters, more or
less, and registered in the name of Alfonso Castellvi under TCT No.
13631 of the Register of Deeds of Pampanga . . .";
and against defendant-appellee Maria Nieves Toledo Gozun
(hereinafter referred to as Toledo-Gozun), over two parcels of land
described as follows:
"A parcel of land (Portion of Lot 1-B, Blk-1, Bureau of Lands Plan Psd,
26254. Bounded on the NE by Lot 3, on the SE by Lot 3; on the SW by
Lot 1-B, Blk. 2 (equivalent to Lot 199-B Swo 23666; on the NW by
AFP military reservation. Containing an area of 450,273 square
meters, more or less, and registered in the name of Maria Nieves
Toledo-Gozun under TCT No. 8708 of the Register of Deeds of
Pampanga. . . .", and
"A parcel of land (Portion of Lot 3, Blk-1, Bureau of Lands Plan Psd
26254. Bounded on the NE by Lot No. 3, on the SE by school lot and
national road, on the SW by Lot 1-B Blk 2 (equivalent to Lot 199-B
Swo 23666), on the NW by Lot 1-B, Blk-1. Containing an area of
88,772 square meters, more or less, and registered in the name of
Maria Nieves Toledo Gozun under TCT No. 8708 of the Register of
Deeds of Pampanga, . . ."
In its complaint, the Republic alleged, among other things, that the
fair market value of the above-mentioned lands, according to the
Committee on Appraisal for the Province of Pampanga, was not
more than P2,000 per hectare, or a total market value of
P259,669.10; and prayed, that the provisional value of the lands be
fixed at P259,669.10, that the court authorizes plaintiff to take
immediate possession of the lands upon deposit of that amount
with the Provincial Treasurer of Pampanga; that the court appoints
three commissioners to ascertain and report to the court the just
compensation for the property sought to be expropriated, and that
the court issues thereafter a final order of condemnation.
On June 29, 1959 the trial court issued an order fixing the
provisional value of the lands at P259,669.10.
In her "motion to dismiss" filed on July 14, 1959, Castellvi alleged,
among other things, that the land under her administration, being a
residential land, had a fair market value of P15.00 per square meter,
so it had a total market value of P11,389,485.00; that the Republic,
through the Armed Forces of the Philippines, particularly the
Philippine Air Force, had been, despite repeated demands, illegally
occupying her property since July 1, 1956, thereby preventing her
from using and disposing of it, thus causing her damages by way of
unrealized profits. This defendant prayed that the complaint be
dismissed, or that the Republic be ordered to pay her P15.00 per
square meter, or a total of P11,389,485.00, plus interest thereon at
6% per annum from July 1, 1956; that the Republic be ordered to
pay her P5,000,000.00 as unrealized profits, and the costs of the
suit.
By order of the trial court, dated August, 1959, Amparo C. Diaz,
Dolores G. viuda de Gil, Paloma Castellvi, Carmen Castellvi, Rafael
Castellvi, Luis Castellvi, Natividad Castellvi de Raquiza, Jose Castellvi
and Consuelo Castellvi were allowed to intervene as parties
defendants. Subsequently, Joaquin V. Gozun, Jr., husband of
defendant Nieves Toledo Gozun, was also allowed by the court to
intervene as a party defendant.
After the Republic had deposited with the Provincial Treasurer of
Pampanga the amount of P259,669.10, the trial court ordered that
the Republic be placed in possession of the lands. The Republic was
actually placed in possession of the lands on August 10, 1959. 1
In her "motion to dismiss", dated October 22, 1959, Toledo-Gozun
alleged, among other things, that her two parcels of land were
residential lands, in fact a portion with an area of 343,303 square
meters had already been subdivided into different lots for sale to
the general public, and the remaining portion had already been set
aside for expansion sites of the already completed subdivisions; that
the fair market value of said lands was P15.00 per square meter, so
they had a total market value of P8,085,675.00; and she prayed that
the complaint be dismissed, or that she be paid the amount of
P8,085,675.00, plus interest thereon at the rate of 6% per annum
from October 13, 1959, and attorney's fees in the amount of
P50,000.00.
Intervenors Jose Castellvi and Consuelo Castellvi in their answer,
filed on February 11, 1960, and also intervenor Joaquin Gozun, Jr.,
husband of defendant Maria Nieves Toledo-Gozun, in his motion to
dismiss, dated May 27, 1960, all alleged that the value of the lands
sought to be expropriated was at the rate of P15.00 per square
meter.
On November 4, 1959, the trial court authorized the Provincial
Treasurer of Pampanga to pay defendant Toledo-Gozun the sum of
P107,609.00 as provisional value of her lands. 2 On May 16, 1960
the trial Court authorized the Provincial Treasurer of Pampanga to
pay defendant Castellvi the amount of P151,859.80 as provisional
value of the land under her administration, and ordered said
defendant to deposit the amount with the Philippine National Bank
under the supervision of the Deputy Clerk of Court. In another order
of May 16, 1960 the trial Court entered an order of condemnation. 3
The trial Court appointed three commissioners: Atty. Amadeo Yuzon,
Clerk of Court, as commissioner for the court; Atty. Felicisimo G.
Pamandanan, counsel of the Philippine National Bank Branch at
Floridablanca, for the plaintiff; and Atty. Leonardo F. Lansangan,
Filipino legal counsel at Clark Air Base, for the defendants. The
Commissioners, after having qualified themselves, proceeded to the
performance of their duties.
On March 15, 1961 the Commissioners submitted their report and
recommendation, wherein, after having determined that the lands
sought to be expropriated were residential lands, they
recommended unanimously that the lowest price that should be
paid was P10.00 per square meter, for both the lands of Castellvi
and Toledo-Gozun; that an additional P5,000.00 be paid to Toledo-
Gozun for improvements found on her land; that legal interest on
the compensation, computed from August 10, 1959, be paid after
deducting the amounts already paid to the owners, and that no
consequential damages be awarded. 4 The Commissioners' report
was objected to by all the parties in the case by defendants
Castellvi and Toledo-Gozun, who insisted that the fair market value
of their lands should be fixed at P15.00 per square meter; and by the
Republic, which insisted that the price to be paid for the lands
should be fixed at P0.20 per square meter. 5
After the parties-defendants and intervenors had filed their
respective memoranda, and the Republic, after several extensions of
time, had adopted as its memorandum its objections to the report of
the Commissioners, the trial court, on May 26, 1961, rendered its
decision 6 the dispositive portion of which reads as follows:
"WHEREFORE, taking into account all the foregoing circumstances,
and that the lands are titled, . . . the rising trend of land values,. . .
and the lowered purchasing power of the Philippine peso, the court
finds that the unanimous recommendation of the commissioners of
ten (P10.00) pesos per square meter for the three lots of the
defendants subject of this action is fair and just."
xxx xxx xxx
"The plaintiff will pay 6% interest per annum on the total value of
the lands of defendant Toledo-Gozun since (sic) the amount
deposited as provisional value from August 10, 1959 until full
payment is made to said defendant or deposit therefor is made in
court.
"In respect to the defendant Castellvi, interest at 6% per annum will
also be paid by the plaintiff to defendant Castellvi from July 1, 1956
when plaintiff commenced its illegal possession of the Castellvi land
when the instant action had not yet been commenced to July 10,
1959 when the provisional value thereof was actually deposited in
court, on the total value of the said (Castellvi) land as herein
adjudged. The same rate of interest shall be paid from July 11, 1959
on the total value of the land herein adjudged minus the amount
deposited as provisional value, or P151,859.80, such interest to run
until full payment is made to said defendant or deposit therefor is
made in court. All the Intervenors having failed to produce evidence
in support of their respective interventions, said interventions are
ordered dismissed.
"The costs shall be charged to the plaintiff."
On June 21, 1961 the Republic filed a motion for a new trial and/or
reconsideration, upon the grounds of newly-discovered evidence,
that the decision was not supported by the evidence, and that the
decision was against the law, against which motion defendants
Castellvi and Toledo-Gozun filed their respective oppositions. On
July 8, 1961 when the motion of the Republic for new trial and/or
reconsideration was called for hearing, the Republic filed a
supplemental motion for new trial upon the ground of additional
newly-discovered evidence. This motion for new trial and/or
reconsideration was denied by the court on July 12, 1961.

On July 17, 1961 the Republic gave notice of its intention to appeal
from the decision of May 26, 1961 and the order of July 12, 1961.
Defendant Castellvi also filed, on July 17, 1961, her notice of appeal
from the decision of the trial court.
The Republic filed various ex-parte motions for extension of time
within which to file its record on appeal. The Republic's record on
appeal was finally submitted on December 6, 1961.
Defendants Castellvi and Toledo-Gozun filed not only a joint
opposition to the approval of the Republic's record on appeal, but
also a joint memorandum in support of their opposition. The
Republic also filed a memorandum in support of its prayer for the
approval of its record on appeal. On December 27, 1961 the trial
court issued an order declaring both the record on appeal filed by
the Republic, and the record on appeal filed by defendant Castellvi
as having been filed out of time, thereby dismissing both appeals.
On January 11, 1962 the Republic filed a "motion to strike out the
order of December 27, 1961 and for reconsideration", and
subsequently an amended record oil appeal, against which motion
the defendants Castellvi and Toledo-Gozun filed their opposition. On
July 26, 1962 the trial court issued an order, stating that "in the
interest of expediency, the questions raised may be properly and
finally determined by the Supreme Court," and at the same time it
ordered the Solicitor General to submit a record on appeal
containing copies of orders and pleadings specified therein. In an
order dated November 19, 1962, the trial court approved the
Republic's record on appeal as amended.
Defendant Castellvi did not insist on her appeal. Defendant Toledo-
Gozun did not appeal.
The motion to dismiss the Republic's appeal was reiterated by
appellees Castellvi and Toledo-Gozun before this Court, but this
Court denied the motion.
In her motion of August 11, 1964, appellee Castellvi sought to
increase the provisional value of her land. The Republic, in its
comment on Castellvi's motion, opposed the same. This Court
denied Castellvi's motion in a resolution dated October 2, 1964.
The motion of appellees, Castellvi and Toledo-Gozun, dated October
6, 1969, praying that they be authorized to mortgage the lands
subject of expropriation, was denied by this Court or October 14,
1969.
On February 14, 1972, Attys. Alberto Cacnio, and Associates, counsel
for the estate of the late Don Alfonso de Castellvi in the
expropriation proceedings, filed a notice of attorney's lien, stating
that as per agreement with the administrator of the estate of Don
Alfonso de Castellvi they shall receive by way of attorney's fees, "the
sum equivalent to ten per centum of whatever the court may finally
decide as the expropriated price of the property subject matter of
the case."
Before this Court, the Republic contends that the lower court erred:
1.In finding the price of P10 per square meter of the lands subject of
the instant proceedings as just compensation;
2.In holding that the "taking" of the properties under expropriation
commenced with the filing of this action;
3.In ordering plaintiff-appellant to pay 6% interest on the adjudged
value of the Castellvi property to start from July of 1956;
4.In denying plaintiff-appellant's motion for new trial based on
newly discovered evidence.
In its brief, the Republic discusses the second error assigned as the
first issue to be considered. We shall follow the sequence of the
Republic's discussion.
1.In support of the assigned error that the lower court erred in
holding that the "taking" of the properties under expropriation
commenced with the filing of the complaint in this case, the
Republic argues that the "taking" should be reckoned from the year
1947 when by virtue of a special lease agreement between the
Republic and appellee Castellvi, the former was granted the "right
and privilege" to buy the property should the lessor wish to
terminate the lease, and that in the event of such sale, it was
stipulated that the fair market value should be as of the time of
occupancy; and that the permanent improvements amounting to
more than half a million pesos constructed during a period of twelve
years on the land, subject of expropriation, were indicative of an
agreed pattern of permanency and stability of occupancy by the
Philippine Air Force in the interest of national security. 7
Appellee Castellvi, on the other hand, maintains that the "taking" of
property under the power of eminent domain requires two essential
elements, to wit: (1) entrance and occupation by condemnor upon
the private property for more than a momentary or limited period,
and (2) devoting it to a public use in such a way as to oust the owner
and deprive him of all beneficial enjoyment of the property. This
appellee argues that in the instant case the first element is wanting,
for the contract of lease relied upon provides for a lease from year
to year; that the second element is also wanting, because the
Republic was paying the lessor Castellvi a monthly rental of P445.58;
and that the contract of lease does not grant the Republic the "right
and privilege" to buy the premises "at the value at the time of
occupancy." 8
Appellee Toledo-Gozun did not comment on the Republic's
argument in support of the second error assigned, because as far as
she was concerned the Republic had not taken possession of her
lands prior to August 10, 1959. 9
In order to better comprehend the issues raised in the appeal, in so
far as the Castellvi property is concerned, it should be noted that the
Castellvi property had been occupied by the Philippine Air Force
since 1947 under a contract of lease, typified by the contract marked
Exh. 4-Castellvi, the pertinent portions of which read:
"CONTRACT OF LEASE
"This AGREEMENT OF LEASE MADE AND ENTERED into by and
between INTESTATE ESTATE OF ALFONSO DE CASTELLVI,
represented by CARMEN M. DE CASTELLVI Judicial Administratrix x x
x hereinafter called the LESSOR and THE REPUBLIC OF THE
PHILIPPINES represented by MAJ. GEN. CALIXTO DUQUE, Chief of
Staff of the ARMED FORCES OF THE PHILIPPINES, hereinafter called
the LESSEE,
"WITNESSETH:
"1.For and in consideration of the rentals hereinafter reserved and
the mutual terms, covenants and conditions of the parties, the
LESSOR has, and by these presents does, lease and let unto the
LESSEE the following described land together with the
improvements thereon and appurtenances thereof, viz:
'Un Terreno, Lote No. 27 del Plano de subdivision Psu 34752, parte
de la hacienda de Campauit, situado en el Barrio de San Jose,
Municipio de Floridablanca, Pampanga . . . midiendo una extension
superficial de cuatro milliones once mil cuatro cientos trienta y cinco
(4,001,435) [sic] metros cuadrados, mas o menos.
'Out of the above described property, 75.93 hectares thereof are
actually occupied and covered by this contract.
'Above lot is more particularly described in TCT No. 1016, province
of Pampanga . . .
of which premises, the LESSOR warrants that he/she/they/is/are the
registered owner(s) and with full authority to execute a contract of
this nature.
"2.The term of this lease shall be for the period beginning July 1,
1952 the date the premises were occupied by the PHILIPPINE AIR
FORCE, AFP until June 30, 1953, subject to renewal for another year
at the option of the LESSEE or unless sooner terminated by the
LESSEE as hereinafter provided.
"3.The LESSOR hereby warrants that the LESSEE shall have quiet,
peaceful and undisturbed possession of the demised premises
throughout the full term or period of this lease and the LESSOR
undertakes without cost to the LESSEE to eject all trespassers, but
should the LESSOR fail to do so, the LESSEE at its option may
proceed to do so at the expense of the LESSOR. The LESSOR further
agrees that should he/she/they sell or encumber all or any part of
the herein described premises during the period of this lease, any
conveyance will be conditioned on the right of the LESSEE
hereunder.
"4.The LESSEE shall pay to the LESSOR as monthly rentals under this
lease the sum of FOUR HUNDRED FIFTY-FIVE PESOS &
58/100(P455.58) . . .
"5.The LESSEE may, at anytime prior to the termination of this lease,
use the property for any purpose or purposes and, at its own costs
and expense make alteration, install facilities and fixtures and erect
additions . . . which facilities or fixtures . . . so placed in, upon or
attached to the said premises shall be and remain property of the
LESSEE and may be removed therefrom by the LESSEE prior to the
termination of this lease. The LESSEE shall surrender possession of
the premises upon the expiration or termination of this lease and if
so required by the LESSOR, shall return the premises in substantially
the same condition as that existing at the time same were first
occupied by the AFP, reasonable and ordinary wear and tear and
damages by the elements or by circumstances over which the
LESSEE has no control excepted: PROVIDED, that if the LESSOR so
requires the return of the premises in such condition, the LESSOR
shall give written notice thereof to the LESSEE at least twenty (20)
days before the termination of the lease and provided, further, that
should the LESSOR give notice within the time specified above, the
LESSEE shall have the right and privilege to compensate the LESSOR
at the fair value or the equivalent, in lieu of performance of its
obligation, if any, to restore the premises. Fair value is to be
determined as the value at the time of occupancy less fair wear and
tear and depreciation during the period of this lease.
"6.The LESSEE may terminate this lease at any time during the term
hereof by giving written notice to the LESSOR at least thirty (30) days
in advance . . ."
"7.The LESSEE should not be responsible, except under special
legislation for any damages to the premises by reason of combat
operations, acts of GOD, the elements or other acts and deeds not
due to the negligence on the part of the LESSEE.

"8.This LEASE AGREEMENT supersedes and voids any and all
agreements and undertakings, oral or written, previously entered
into between the parties covering the property herein leased, the
same having been merged herein. This AGREEMENT may not be
modified or altered except by instrument in writing only duly signed
by the parties." 10
It was stipulated by the parties, that "the foregoing contract of lease
(Exh. 4, Castellvi) is 'similar in terms and conditions, including the
date', with the annual contracts entered into from year to year
between defendant Castellvi and the Republic of the Philippines (p.
17, t.s.n., Vol. III)". 11 It is undisputed, therefore, that the Republic
occupied Castellvi's land from July 1, 1947, by virtue of the above-
mentioned contract, on a year to year basis (from July 1 of each year
to June 30 of the succeeding year) under the terms and conditions
therein stated.
Before the expiration of the contract of lease on June 30, 1956 the
Republic sought to renew the same but Castellvi refused. When the
AFP refused to vacate the leased premises after the termination of
the contract, on July 11, 1956, Castellvi wrote to the Chief of Staff,
AFP, informing the latter that the heirs of the property had decided
not to continue leasing the property in question because they had
decided to subdivide the land for sale to the general public,
demanding that the property be vacated within 30 days from receipt
of the letter, and that the premises be returned in substantially the
same condition as before occupancy (Exh. 5 Castellvi). A follow-up
letter was sent on January 12, 1957, demanding the delivery and
return of the property within one month from said date (Exh. 6
Castellvi). On January 30, 1957, Lieutenant General Alfonso Arellano,
Chief of Staff, answered the letter of Castellvi, saying that it was
difficult for the army to vacate the premises in view of the
permanent installations and other facilities worth almost
P500,000.00 that were erected and already established on the
property, and that, there being no other recourse, the acquisition of
the property by means of expropriation proceedings would be
recommended to the President (Exhibit "7" Castellvi).
Defendant Castellvi then brought suit in the Court of First Instance
of Pampanga, in Civil Case No. 1458, to eject the Philippine Air Force
from the land. While this ejectment case was pending, the Republic
instituted these expropriation proceedings, and, as stated earlier in
this opinion, the Republic was placed in possession of the lands on
August 10, 1959. On November 21, 1959, the Court of First Instance
of Pampanga, dismissed Civil Case No. 1458, upon petition of the
parties, in an order which, in part, reads as follows:
"1.Plaintiff has agreed, as a matter of fact has already signed an
agreement with defendants, whereby she has agreed to receive the
rent of the lands, subject matter of the instant case from June 30,
1966 up to 1959 when the Philippine Air Force was placed in
possession by virtue of an order of the Court upon depositing the
provisional amount as fixed by the Provincial Appraisal Committee
with the Provincial Treasurer of Pampanga;
"2.That because of the above-cited agreement wherein the
administratrix decided to get the rent corresponding to the rent
from 1956 up to 1959 and considering that this action is one of
illegal detainer and/or to recover the possession of said land by
virtue of nonpayment of rents, the instant case now has become
moot and academic and/or by virtue of the agreement signed by
plaintiff, she has waived her cause of action in the above-entitled
case." 12
The Republic urges that the "taking " of Castellvi's property should
be deemed as of the year 1947 by virtue of afore-quoted lease
agreement. In American Jurisprudence, Vol. 26, 2nd edition, Section
157, on the subject of "Eminent Domain, we read the definition of
"taking" (in eminent domain) as follows:
"'Taking' under the power of eminent domain may be defined
generally as entering upon private property for more than a
momentary period, and, under the warrant or color of legal
authority, devoting it to a public use, or otherwise informally
appropriating or injuriously affecting it in such a way as substantially
to oust the owner and deprive him of all beneficial enjoyment
thereof." 13
Pursuant to the aforecited authority, a number of circumstances
must be present in the "taking" of property for purposes of eminent
domain.
First, the expropriator must enter a private property. This
circumstance is present in the instant case, when by virtue of the
lease agreement the Republic, through the AFP, took possession of
the property of Castellvi.
Second, the entrance into private property must be for more than a
momentary period. "Momentary" means, "lasting but a moment; of
but a moment's duration" (The Oxford English Dictionary, Volume VI,
page 596); "lasting a very short time; transitory; having a very brief
life; operative or recurring at every moment" (Webster's Third
International Dictionary, 1963 edition.) The word "momentary"
when applied to possession or occupancy of (real) property should
be construed to mean "a limited period" not indefinite or
permanent. The aforecited lease contract was for a period of one
year, renewable from year to year. The entry on the property, under
the lease, is temporary, and considered transitory. The fact that the
Republic, through the AFP, constructed some installations of a
permanent nature does not alter the fact that the entry into the land
was transitory, or intended to last a year, although renewable from
year to year by consent of the owner of the land. By express
provision of the lease agreement the Republic, as lessee, undertook
to return the premises in substantially the same condition as at the
time the property was first occupied by the AFP. It is claimed that
the intention of the lessee was to occupy the land permanently, as
may be inferred from the construction of permanent improvements.
But this "intention" cannot prevail over the clear and express terms
of the lease contract. Intent is to be deduced from the language
employed by the parties, and the terms of the contract, when
unambiguous, as in the instant case, are conclusive in the absence of
averment and proof of mistake or fraud the question being not
what the intention was, but what is expressed in the language used.
(City of Manila v. Rizal Park Co., Inc., 53 Phil. 515, 525); Magdalena
Estate, Inc. v. Myrick, 71 Phil. 344, 348). Moreover, in order to judge
the intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered (Art. 1371, Civil
Code). If the intention of the lessee (Republic) in 1947 was really to
occupy permanently Castellvi's property, why was the contract of
lease entered into on year to year basis? Why was the lease
agreement renewed from year to year? Why did not the Republic
expropriate this land of Castellvi in 1949 when, according to the
Republic itself, it expropriated the other parcels of land that it
occupied at the same time as the Castellvi land, for the purpose of
converting them into a jet air base?" 14 It might really have been the
intention of the Republic to expropriate the lands in question at
some future time, but certainly mere notice much less an implied
notice of such intention on the part of the Republic to expropriate
the lands in the future did not, and could not, bind the landowner,
nor bind the land itself. The expropriation must be actually
commenced in court (Republic vs. Baylosis, et al., 96 Phil. 461, 484).
Third, the entry into the property should be under warrant or color
of legal authority. This circumstance in the "taking" may be
considered as present in the instant case, because the Republic
entered the Castellvi property as lessee.
Fourth, the property must be devoted to a public use or otherwise
informally appropriated or injuriously affected. It may be conceded
that the circumstance of the property being devoted to public use is
present because the property was used by the air force of the AFP.
Fifth, the utilization of the property for public use must be in such a
way as to oust the owner and deprive him of all beneficial
enjoyment of the property. In the instant case, the entry of the
Republic into the property and its utilization of the same for public
use did not oust Castellvi and deprive her of all beneficial enjoyment
of the property. Castellvi remained as owner, and was continuously
recognized as owner by the Republic, as shown by the renewal of
the lease contract from year to year, and by the provision in the
lease contract whereby the Republic undertook to return the
property to Castellvi when the lease was terminated. Neither was
Castellvi deprived of all the beneficial enjoyment of the property,
because the Republic was bound to pay, and had been paying,
Castellvi the agreed monthly rentals until the time when it filed the
complaint for eminent domain on June 26, 1959.
It is clear, therefore, that the "taking" of Castellvi's property for
purposes of eminent domain cannot be considered to have taken
place in 1947 when the Republic commenced to occupy the property
as lessee thereof. We find merit in the contention of Castellvi that
two essential elements in the "taking" of property under the power
of eminent domain, namely: (1) that the entrance and occupation by
the condemnor must be for a permanent, or indefinite period, and
(2) that in devoting the property to public use the owner was ousted
from the property and deprived of its beneficial use, were not
present when the Republic entered and occupied the Castellvi
property in 1947.
Untenable also is the Republic's contention that although the
contract between the parties was one of lease on a year to year
basis, it was "in reality a more or less permanent right to occupy the
premises under the guise of lease with the 'right and privilege' to
buy the property should the lessor wish to terminate the lease," and
"the right to buy the property is merged as an integral part of the
lease relationship . . . so much so that the fair market value has been
agreed upon, not as of the time of purchase, but as of the time of
occupancy". 15 We cannot accept the Republic's contention that a
lease on a year to year basis can give rise to a permanent right to
occupy, since by express legal provision a lease made for a
determinate time, as was the lease of Castellvi's land in the instant
case, ceases upon the day fixed, without need of a demand (Article
1669, Civil Code). Neither can it be said that the right of eminent
domain may be exercised by simply leasing the premises to be
expropriated (Rule 67, Section 1, Rules of Court). Nor can it be
accepted that the Republic would enter into a contract of lease
where its real intention was to buy, or why the Republic should
enter into a simulated contract of lease ("under the guise of lease",
as expressed by counsel for the Republic) when all the time the
Republic had the right of eminent domain, and could expropriate
Castellvi's land if it wanted to without resorting to any guise
whatsoever. Neither can we see how a right to buy could be merged
in a contract of lease in the absence of any agreement between the
parties to that effect. To sustain the contention of the Republic is to
sanction a practice whereby in order to secure a low price for a land
which the government intends to expropriate (or would eventually
expropriate) it would first negotiate with the owner of the land to
lease the land (for say ten or twenty years) then expropriate the
same when the lease is about to terminate, then claim that the
"taking" of the property for the purposes of the expropriation be
reckoned as of the date when the Government started to occupy the
property under the lease, and then assert that the value of the
property being expropriated be reckoned as of the start of the lease,
in spite of the fact that the value of the property, for many good
reasons, had in the meantime increased during the period of the
lease. This would be sanctioning what obviously is a deceptive
scheme, which would have the effect of depriving the owner of the
property of its true and fair market value at the time when the
expropriation proceedings were actually instituted in court. The
Republic's claim that it had the "right and privilege" to buy the
property at the value that it had at the time when it first occupied
the property as lessee nowhere appears in the lease contract. What
was agreed expressly in paragraph No. 5 of the lease agreement was
that, should the lessor require the lessee to return the premises in
the same condition as at the time the same was first occupied by the
AFP, the lessee would have the "right and privilege" (or option) of
paying the lessor what it would fairly cost to put the premises in the
same condition as it was at the commencement of the lease, in lieu
of the lessee's performance of the undertaking to put the land in
said condition. The "fair value" at the time of occupancy, mentioned
in the lease agreement, does not refer to the value of the property if
bought by the lessee, but refers to the cost of restoring the property
in the same condition as of the time when the lessee took
possession of the property. Such fair value cannot refer to the
purchase price, for purchase was never intended by the parties to
the lease contract. It is a rule in the interpretation of contracts that
"However general the terms of a contract may be, they shall not be
understood to comprehend things that are distinct and cases that
are different from those upon which the parties intended to agree"
(Art. 1372, Civil Code)

We hold, therefore, that the "taking' of the Castellvi property should
not be reckoned as of the year 1947 when the Republic first
occupied the same pursuant to the contract of lease, and that the
just compensation to be paid for the Castellvi property should not
be determined on the basis of the value of the property as of that
year. The lower court did not commit an error when it held that the
"taking" of the property under expropriation commenced with the
filing of the complaint in this case.
Under Section 4 of Rule 67 of the Rules of Court, 16 the "just
compensation" is to be determined as of the date of the filing of the
complaint. This Court has ruled that when the taking of the property
sought to be expropriated coincides with the commencement of the
expropriation proceedings, or takes place subsequent to the filing of
the complaint for eminent domain, the just compensation should be
determined as of the date of the filing of the complaint. (Republic vs.
Philippine National Bank, L-14158, April 12, 1961, 1 SCRA 957, 961-
962). In the instant case, it is undisputed that the Republic was
placed in possession of the Castellvi property, by authority of the
court, on August 10, 1959. The "taking" of the Castellvi property for
the purposes of determining the just compensation to be paid must,
therefore, be reckoned as of June 26, 1959 when the complaint for
eminent domain was filed.
Regarding the two parcels of land of Toledo-Gozun, also sought to
be expropriated, which had never been under lease to the Republic,
the Republic was placed in possession of said lands, also by authority
of the court, on August 10, 1959. The taking of those lands,
therefore, must also be reckoned as of June 26, 1959, the date of
the filing of the complaint for eminent domain.
2.Regarding the first assigned error discussed as the second issue
the Republic maintains that, even assuming that the value of the
expropriated lands is to be determined as of June 26, 1959, the price
of P10.00 per square meter fixed by the lower court "is not only
exorbitant but also unconscionable, and almost fantastic". On the
other hand, both Castellvi and Toledo-Gozun maintain that their
lands are residential lands with a fair market value of not less than
P15.00 per square meter.
The lower court found, and declared, that the lands of Castellvi and
Toledo-Gozun are residential lands. The finding of the lower court is
in consonance with the unanimous opinion of the three
commissioners who, in their report to the court, declared that the
lands are residential lands.
The Republic assails the finding that the lands are residential,
contending that the plans of the appellees to convert the lands into
subdivision for residential purposes were only on paper, there being
no overt acts on the part of the appellees which indicated that the
subdivision project had been commenced, so that any compensation
to be awarded on the basis of the plans would be speculative. The
Republic's contention is not well taken. We find evidence showing
that the lands in question had ceased to be devoted to the
production of agricultural crops, that they had become adaptable for
residential purposes, and that the appellees had actually taken steps
to convert their lands into residential subdivisions even before the
Republic filed the complaint for eminent domain.
In the case of City of Manila vs. Corrales (Phil. 82, 98) this Court laid
down basic guidelines in determining the value of the property
expropriated for public purposes. This Court said:
"In determining the value of land appropriated for public
purposes, the same consideration are to be regarded as in a sale of
property between private parties. The inquiry, in such cases, must
be what is the property worth in the market, viewed not merely with
reference to the uses to which it is at the time applied, but with
reference to the uses to which it is plainly adapted, that is to say,
What is it worth from its availability for valuable uses?
"So many and varied are the circumstances to be taken into account
in determining the value of property condemned for public
purposes, that it is practically impossible to formulate a rule to
govern its appraisement in all cases. Exceptional circumstances will
modify the most carefully guarded rule, but, as a general thing, we
should say that the compensation of the owner is to be estimated by
reference to the use for which the property is suitable, having
regard to the existing business or wants of the community, or such
as may be reasonably expected in the immediate future. (Miss. and
Rum River Boom Co. vs. Patterson, 98 U.S., 403)."
In expropriation proceedings, therefore, the owner of the land has
the right to its value for the use for which it would bring the most in
the market. 17 The owner may thus show every advantage that his
property possesses, present and prospective, in order that the price
it could be sold for in the market may be satisfactorily
determined. 18 The owner may also show that the property is
suitable for division into village or town lots. 19
The trial court, therefore, correctly considered, among other
circumstances, the proposed subdivision plans of the lands sought to
be expropriated in finding that those lands are residential lots. This
finding of the lower court is supported not only by the unanimous
opinion of the commissioners, as embodied in their report, but also
by the Provincial Appraisal Committee of the province of Pampanga
composed of the Provincial Treasurer, the Provincial Auditor and the
District Engineer. In the minutes of the meeting of the Provincial
Appraisal Committee, held on May 14, 1959 (Exh. 13-Castellvi) We
read in its Resolution No. 10 the following:
"3.Since 1957 the land has been classified as residential in view of its
proximity to the air base and due to the fact that it was not being
devoted to agriculture. In fact, there is a plan to convert it into a
subdivision for residential purposes. The taxes due on the property
have been paid based on its classification as residential land;"
The evidence shows that Castellvi broached the idea of subdividing
her land into residential lots as early as July 11, 1956 in her letter to
the Chief of Staff of the Armed Forces of the Philippines. (Exh. 5-
Castellvi) As a matter of fact, the layout of the subdivision plan was
tentatively approved by the National Planning Commission on
September 7, 1956. (Exh. 8-Castellvi). The land of Castellvi had not
been devoted to agriculture since 1947 when it was leased to the
Philippine Army. In 1957 said land was classified as residential, and
taxes based on its classification as residential had been paid since
then (Exh. 13-Castellvi). The location of the Castellvi land justifies its
suitability for a residential subdivision. As found by the trial court, "It
is at the left side of the entrance of the Basa Air Base and bounded
on two sides by roads (Exh. 13-Castellvi), paragraphs 1 and 2, Exh.
12-Castellvi), the poblacion, (of Floridablanca) the municipal
building, and the Pampanga Sugar Mills are closed by. The barrio
schoolhouse and chapel are also near (T.S.N. November 23, 1960, p.
68)". 20
The lands of Toledo-Gozun (Lot 1-B and Lot 3) are practically of the
same condition as the land of Castellvi. The lands of Toledo-Gozun
adjoin the land of Castellvi. They are also contiguous to the Basa Air
Base, and are along the road. These lands are near the barrio
schoolhouse, the barrio chapel, the Pampanga Sugar Mills, and the
poblacion of Floridablanca (Exhs. 1, 3 and 4-Toledo-Gozun). As a
matter of fact, regarding lot 1-B it had already been surveyed and
subdivided, and its conversion into a residential subdivision was
tentatively approved by the National Planning Commission on July 8,
1959 (Exhs. 5 and 6 Toledo-Gozun). As early as June, 1958, no less
than 32 man connected with the Philippine Air Force among them
commissioned officers, non-commission officers, and enlisted men
had requested Mr. and Mrs. Joaquin D. Gozun to open a subdivision
on their lands in question (Exhs. 8, 8-A to 8-ZZ-Toledo-Gozun). 21
We agree with the findings, and the conclusions, of the lower court
that the lands that are the subject of expropriation in the present
case, as of August 10, 1959 when the same were taken possession of
by the Republic, were residential lands and were adaptable for use
as residential subdivisions. Indeed, the owners of these lands have
the right to their value for the use for which they would bring the
most in the market at the time the same were taken from them. The
most important issue to be resolved in the present case relates to
the question of what is the just compensation that should be paid to
the appellees.
The Republic asserts that the fair market value of the lands of the
appellees is P.20 per square meter. The Republic cites the case of
Republic vs. Narciso, et al., L-6594, which this Court decided on May
18, 1956. The Narciso case involved lands that belonged to Castellvi
and Toledo-Gozun, and to one Donata Montemayor, which were
expropriated by the Republic in 1949 and which are now the site of
the Basa Air Base. In the Narciso case this Court fixed the fair market
value at P.20 per square meter. The lands that are sought to be
expropriated in the present case being contiguous to the lands
involved in the Narciso case, it is the stand of the Republic that the
price that should be fixed for the lands now in question should also
be at P.20 per square meter.
We can not sustain the stand of the Republic. We find that the price
of P.20 per square meter, as fixed by this Court in the Narciso case,
was based on the allegation of the defendants (owners) in their
answer to the complaint for eminent domain in that case that the
price of their lands was P2,000.00 per hectare and that was the price
that they asked the court to pay them. This Court said, then, that the
owners of the land could not be given more than what they had
asked, notwithstanding the recommendation of the majority of the
Commission on Appraisal which was adopted by the trial court
that the fair market value of the lands was P3,000.00 per hectare.
We also find that the price of P.20 per square meter in the Narciso
case was considered the fair market value of the lands as of the year
1949 when the expropriation proceedings were instituted, and at
that time the lands were classified as sugar lands, and assessed for
taxation purposes at around P400.00 per hectare, or P.04 per square
meter. 22 While the lands involved in the present case, like the lands
involved in the Narciso case, might have a fair market value of P.20
per square meter in 1949, it can not be denied that ten years later,
in 1959, when the present proceedings were instituted, the value of
those lands had increased considerably. The evidence shows that
since 1949 those lands were no longer cultivated as sugar lands, and
in 1959 those lands were already classified, and assessed for
taxation purposes, as residential lands. In 1959 the land of Castellvi
was assessed at P1.00 per square meter. 23

The Republic also points out that the Provincial Appraisal Committee
of Pampanga, in its resolution No. 5 of February 15, 1957 (Exhibit D),
recommended the sum of P.20 per square meter as the fair
valuation of the Castellvi property. We find that this resolution was
made by the Republic the basis in asking the court to fix the
provisional value of the lands sought to be expropriated at
P259,669.10, which was approved by the court. 24 It must be
considered, however, that the amount fixed as the provisional value
of the lands that are being expropriated does not necessarily
represent the true and correct value of the land. The value is only
"provisional" or "tentative", to serve as the basis for the immediate
occupancy of the property being expropriated by the condemnor.
The records show that this resolution No. 5 was repealed by the
same Provincial Committee on Appraisal in its resolution No. 10 of
May 14, 1959 (Exhibit 13-Castellvi). In that resolution No. 10, the
appraisal committee stated that "The Committee has observed that
the value of the land in this locality has increased since 1957 . . .",
and recommended the price of P1.50 per square meter. It follows,
therefore, that, contrary to the stand of the Republic, that resolution
No. 5 of the Provincial Appraisal Committee can not be made the
basis for fixing the fair market value of the lands of Castellvi and
Toledo-Gozun.
The Republic further relied on the certification of the Acting
Assistant Provincial Assessor of Pampanga, dated February 8, 1961
(Exhibit K), to the effect that in 1950 the lands of Toledo-Gozun were
classified partly as sugar land and partly as urban land, and that the
sugar land was assessed at P.40 per square meter, while part of the
urban land was assessed at P.40 per square meter and part at P.20
per square meter; and that in 1956 the Castellvi land was classified
as sugar land and was assessed at P450.00 per hectare, or P.045 per
square meter. We can not also consider this certification of the
Acting Assistant Provincial Assessor as a basis for fixing the fair
market value of the lands of Castellvi and Toledo-Gozun because, as
the evidence shows, the lands in question, in 1957, were already
classified and assessed for taxation purposes as residential lands.
The certification of the assessor refers to the year 1950 as far as the
lands of Toledo-Gozun are concerned, and to the year 1956 as far as
the land of Castellvi is concerned. Moreover, this Court has held that
the valuation fixed for the purposes of the assessment of the land
for taxation purposes can not bind the landowner where the latter
did not intervene in fixing it. 25
On the other hand, the Commissioners, appointed by the court to
appraise the lands that were being expropriated, recommended to
the court that the price of P10.00 per square meter would be the
fair market value of the lands. The commissioners made their
recommendation on the basis of their observation after several
ocular inspections of the lands, of their own personal knowledge of
land values in the province of Pampanga, of the testimonies of the
owners of the land, and other witnesses, and of documentary
evidence presented by the appellees. Both Castellvi and Toledo-
Gozun testified that the fair market value of their respective land
was at P15.00 per square meter. The documentary evidence
considered by the commissioners consisted of deeds of sale of
residential lands in the town of San Fernando and in Angeles City, in
the province of Pampanga, which were sold at prices ranging from
P8.00 to P20.00 per square meter (Exhibits 15, 16, 17, 18, 19, 20, 21,
22, 23-Castellvi). The commissioners also considered the decision in
Civil Case No. 1531 of the Court of First Instance of Pampanga,
entitled Republic vs. Sabina Tablante, which was an expropriation
case filed on January 13, 1959, involving a parcel of land adjacent to
the Clark Air Base in Angeles City, where the court fixed the price at
P18.00 per square meter (Exhibit 14-Castellvi). In their report, the
commissioners, among other things, said:
". . . This expropriation case is specially pointed out, because the
circumstances and factors involved therein are similar in many
respects to the defendants' lands in this case. The land in Civil Case
No. 1531 of this Court and the lands in the present case (Civil Case
No. 1623) are both near the air bases, the Clark Air Base and the
Basa Air Base respectively. There is a national road fronting them
and are situated in a first-class municipality. As added advantage it
may be said that the Basa Air Base land is very near the sugar mill at
Del Carmen, Floridablanca, Pampanga, owned by the Pampanga
Sugar Mills. Also just stone's throw away from the same lands is a
beautiful vacation spot at Palacol, a sitio of the town of
Floridablanca, which counts with a natural swimming pool for
vacationists on weekends. These advantages are not found in the
case of the Clark Air Base. The defendants' lands are nearer to the
poblacion of Floridablanca then Clark Air Base is nearer (sic) to the
poblacion of Angeles, Pampanga.
"The deeds of absolute sale, according to the undersigned
commissioners, as well as the land in Civil Case No. 1531 are
competent evidence, because they were executed during the year
1959 and before August 10 of the same year. More specifically so
the land at Clark Air Base which coincidentally is the subject matter
in the complaint in said Civil Case No. 1531, it having been filed on
January 13, 1959 and the taking of the land involved therein was
ordered by the Court of First Instance of Pampanga on January 15,
1959, several months before the lands in this case were taken by the
plaintiffs. . .
"From the above and considering further that the lowest as well as
the highest price per square meter obtainable in the market of
Pampanga relative to subdivision lots within its jurisdiction in the
year 1959 is very well known by the Commissioners, the Commission
finds that the lowest price that can be awarded to the lands in
question is P10.00 per square meter." 26
The lower court did not altogether accept the findings of the
Commissioners based on the documentary evidence, but it
considered the documentary evidence as basis for comparison in
determining land values. The lower court arrived at the conclusion
that "the unanimous recommendation of the commissioners of ten
(P10.00) pesos per square meter for the three lots of the defendants
subject of this action is fair and just". 27 In arriving at its conclusion,
the lower court took into consideration, among other circumstances,
that the lands are titled, that there is a rising trend of land values,
and the lowered purchasing power of the Philippine peso.
In the case of Manila Railroad Co. vs. Caligsihan, 40 Phil. 326, 328,
this Court said:
"A court of first instance or, on appeal, the Supreme Court, may
change or modify the report of the commissioners by increasing or
reducing the amount of the award if the facts of the case so justify.
While great weight is attached to the report of the commissioners,
yet a court may substitute therefor its estimate of the value of the
property as gathered from the record in certain cases, as, where the
commissioners have applied illegal principles to the evidence
submitted to them, or where they have disregarded a clear
preponderance of evidence, or where the amount allowed is either
palpably inadequate or excessive." 28
The report of the commissioners of appraisal in condemnation
proceedings are not binding, but merely advisory in character, as far
as the court is concerned. 29 In our analysis of the report of the
commissioners, We find points that merit serious consideration in
the determination of the just compensation that should be paid to
Castellvi and Toledo-Gozun for their lands. It should be noted that
the commissioners had made ocular inspections of the lands and
had considered the nature and similarities of said lands in relation to
the lands in other places in the province of Pampanga, like San
Fernando and Angeles City. We cannot disregard the observations of
the commissioners regarding the circumstances that make the lands
in question suited for residential purposes their location near the
Basa Air Base, just like the lands in Angeles City that are near the
Clark Air Base, and the facilities that obtain because of their
nearness to the big sugar central of the Pampanga Sugar mills, and
to the flourishing first class town of Floridablanca. It is true that the
lands in question are not in the territory of San Fernando and
Angeles City, but, considering the facilities of modern
communications, the town of Floridablanca may be considered
practically adjacent to San Fernando and Angeles City. It is not out of
place, therefore, to compare the land values in Floridablanca to the
land values in San Fernando and Angeles City, and form an idea of
the value of the lands in Floridablanca with reference to the land
values in those two other communities.
The important factor in expropriation proceeding is that the owner
is awarded the just compensation for his property. We have
carefully studied the record, and the evidence, in this case, and after
considering the circumstances attending the lands in question. We
have arrived at the conclusion that the price of P10.00 per square
meter, as recommended by the commissioners and adopted by the
lower court, is quite high. It is Our considered view that the price of
P5.00 per square meter would be a fair valuation of the lands in
question and would constitute a just compensation to the owners
thereof. In arriving at this conclusion We have particularly taken into
consideration the resolution of the Provincial Committee on
Appraisal of the province of Pampanga informing, among others,
that in the year 1959 the land of Castellvi could he sold for from
P3.00 to P4.00 per square meter, while the land of Toledo-Gozun
could be sold for from P2.50 to P3.00 per square meter. The Court
has weighed all the circumstances relating to this expropriations
proceedings, and in fixing the price of the lands that are being
expropriated the Court arrived at a happy medium between the
price as recommended by the commissioners and approved by the
court, and the price advocated by the Republic. This Court has also
taken judicial notice of the fact that the value of the Philippine peso
has considerably gone down since the year 1959. 30 Considering
that the lands of Castellvi and Toledo-Gozun are adjoining each
other, and are of the same nature, the Court has deemed it proper
to fix the same price for all these lands.

3.The third issue raised by the Republic relates to the payment of
interest. The Republic maintains that the lower court erred when it
ordered the Republic to pay Castellvi interest at the rate of 6% per
annum on the total amount adjudged as the value of the land of
Castellvi, from July 1, 1956 to July 10, 1959. We find merit in this
assignment of error.
In ordering the Republic to pay 6% interest on the total value of the
land of Castellvi from July 1, 1956 to July 10, 1959, the lower court
held that the Republic had illegally possessed the land of Castellvi
from July 1, 1956, after its lease of the land had expired on June 30,
1956, until August 10, 1959 when the Republic was placed in
possession of the land pursuant to the writ of possession issued by
the court. What really happened was that the Republic continued to
occupy the land of Castellvi after the expiration of its lease on June
30, 1956, so much so that Castellvi filed an ejectment case against
the Republic in the Court of First Instance of
Pampanga. 31 However, while that ejectment case was pending, the
Republic filed the complaint for eminent domain in the present case
and was placed in possession of the land on August 10, 1959, and
because of the institution of the expropriation proceedings the
ejectment case was later dismissed. In the order dismissing the
ejectment case, the Court of First Instance of Pampanga said:
"Plaintiff has agreed, as a matter of fact has already signed an
agreement with defendants, whereby she had agreed to receive the
rent of the lands, subject matter of the instant case from June 30,
1956 up to 1959 when the Philippine Air Force was placed in
possession by virtue of an order of the Court upon depositing the
provisional amount as fixed by the Provincial Appraisal Committee
with the Provincial Treasurer of Pampanga; . . ."
If Castellvi had agreed to receive the rentals from June 30, 1956 to
August 10, 1959, she should be considered as having allowed her
land to be leased to the Republic until August 10, 1959, and she
could not at the same time be entitled to the payment of interest
during the same period on the amount awarded her as the just
compensation of her land. The Republic, therefore, should pay
Castellvi interest at the rate of 6% per annum on the value of her
land, minus the provisional value that was deposited, only from July
10, 1959 when it deposited in court the provisional value of the
land.
4.The fourth error assigned by the Republic relates to the denial by
the lower court of its motion for a new trial based on nearly
discovered evidence. We do not find merit in this assignment of
error.
After the lower court had decided this case on May 26, 1961, the
Republic filed a motion for a new trial, supplemented by another
motion, both based upon the ground of newly discovered evidence.
The alleged newly discovered evidence in the motion filed on June
21, 1961 was a deed of absolute sale executed on January 25,
1961, showing that a certain Serafin Francisco had sold to Pablo L.
Narciso a parcel of sugar land having an area of 100,000 square
meters with a sugar quota of 100 piculs, covered by P.A. No. 1701,
situated in Barrio Fortuna, Floridablanca, for P14,000, or P.14 per
square meter.
In the supplemental motion, the alleged newly discovered evidence
were: (1) a deed of sale of some 35,000 square meters of land
situated at Floridablanca for P7,500.00 (or about P.21 per square
meter) executed in July, 1959, by the spouses Evelyn D. Laird and
Cornelio G. Laird in favor of spouses Bienvenido S. Aguas and
Josefina Q. Aguas; and (2) a deed of absolute sale of a parcel of land
having an area of 4,120,101 square meters, including the sugar
quota covered by Plantation Audit No. 16-1345, situated at
Floridablanca, Pampanga, for P860.00 per hectare (a little less than
P.09 per square meter) executed on October 22, 1957 by Jesus
Toledo y Mendoza in favor of the Land Tenure Administration.
We find that the lower court acted correctly when it denied the
motions for a new trial.
To warrant the granting of a new trial based on the ground of newly
discovered evidence, it must appear that the evidence was
discovered after the trial; that even with the exercise of due
diligence, the evidence could not have been discovered and
produced at the trial; and that the evidence is of such a nature as to
alter the result of the case if admitted. 32 The lower court correctly
ruled that these requisites were not complied with.
The lower court, in a well-reasoned order, found that the sales made
by Serafin Francisco to Pablo Narciso and that made by Jesus Toledo
to the Land Tenure Administration were immaterial and irrelevant,
because those sales covered sugarlands with sugar quotas, while the
lands sought to be expropriated in the instant case are residential
lands. The lower court also concluded that the land sold by the
spouses Laird to the spouses Aguas was a sugar land.
We agree with the trial court. In eminent domain proceedings, in
order that evidence as to the sale price of other lands may be
admitted in evidence to prove the fair market value of the land
sought to be expropriated, the lands must, among other things, be
shown to be similar.
But even assuming, gratia argumenti, that the lands mentioned in
those deeds of sale were residential, the evidence would still not
warrant the grant of a new trial, for said evidence could have been
discovered and produced at the trial, and they cannot be considered
newly discovered evidence as contemplated in Section 1(b) of Rule
37 of the Rules of Court. Regarding this point, the trial court said:
"The Court will now show that there was no reasonable diligence
employed.
"The land described in the deed of sale executed by Serafin
Francisco, copy of which is attached to the original motion, is
covered by a Certificate of Title issued by the Office of the Register
of Deeds of Pampanga. There is no question in the mind of the court
but this document passed through the Office of the Register of
Deeds for the purpose of transferring the title or annotating the sale
on the certificate of title. It is true that Fiscal Lagman went to the
Office of the Register of Deeds to check conveyances which may be
presented in the evidence in this case as it is now sought to be done
by virtue of the motions at bar, Fiscal Lagman, one of the lawyers of
the plaintiff, did not exercise reasonable diligence as required by the
rules. The assertion that he only went to the office of the Register of
Deeds 'now and then' to check the records in that office only shows
the half-hazard [sic] manner by which the plaintiff looked for
evidence to be presented during the hearing before the
Commissioners, if it is at all true that Fiscal Lagman did what he is
supposed to have done according to Solicitor Padua. It would have
been the easiest matter for plaintiff to move for the issuance of a
subpoenaduces tecum directing the Register of Deeds of Pampanga
to come to testify and to bring with him all documents found in his
office pertaining to sales of land in Floridablanca adjacent to or near
the lands in question executed or recorded from 1958 to the
present. Even this elementary precaution was not done by plaintiff's
numerous attorneys.
"The same can be said of the deeds of sale attached to the
supplementary motion. They refer to lands covered by certificate of
title issued by the Register of Deeds of Pampanga. For the same
reason they could have been easily discovered if reasonable
diligence has been exerted by the numerous lawyers of the plaintiff
in this case. It is noteworthy that all these deeds of sale could be
found in several government offices, namely, in the Office of the
Register of Deeds of Pampanga, the Office of the Provincial Assessor
of Pampanga, the Office of the Clerk of Court as a part of notarial
reports of notaries public that acknowledged these documents, or in
the archives of the National Library. In respect to Annex 'B' of the
supplementary motion copy of the document could also be found in
the Office of the Land Tenure Administration, another government
entity. Any lawyer with a modicum of ability handling this
expropriation case would have right away though [sic] of digging up
documents diligently showing conveyances of lands near or around
the parcels of land sought to be expropriated in this case in the
offices that would have naturally come to his mind such as the
offices mentioned above, and had counsel for the movant really
exercised the reasonable diligence required by the Rule'
undoubtedly they would have been able to find these documents
and/or caused the issuance of subpoena duces tecum. . . .
"It is also recalled that during the hearing before the Court of the
Report and Recommendation of the Commissioners and objection
thereto, Solicitor Padua made the observation:
'I understand, Your Honor, that there was a sale that took place in
this place of land recently where the land was sold for P0.20 which is
contiguous to this land.'
"The Court gave him permission to submit said document subject to
the approval of the Court. . . This was before the decision was
rendered, and later promulgated on May 26, 1961 or more than one
month after Solicitor Padua made the above observation. He could
have, therefore, checked up the alleged sale and moved for a
reopening to adduce further evidence. He did not do so. He forgot to
present the evidence at a more propitious time. Now, he seeks to
introduce said evidence under the guise of newly-discovered
evidence. Unfortunately, the Court cannot classify it as newly-
discovered evidence, because under the circumstances, the correct
qualification that can be given is 'forgotten evidence'. Forgotten
evidence, however, is not newly-discovered evidence." 33
The granting or denial of a motion for new trial is, as a general rule,
discretionary with the trial court, whose judgment should not be
disturbed unless there is a clear showing of abuse of
discretion. 34 We do not see any abuse of discretion on the part of
the lower court when it denied the motions for a new trial.

WHEREFORE, the decision appealed from is modified, as follows:
(a)the lands of appellees Carmen vda. de Castellvi and Maria Nieves
Toledo-Gozun, as described in the complaint, are declared
expropriated for public use;
(b)the fair market value of the lands of the appellees is fixed at
P5.00 per square meter;
(c)the Republic must pay appellee Castellvi the sum of
P3,796,495.00 as just compensation for her one parcel of land that
has an area of 759,299 square meters, minus the sum of
P151,859.80 that she withdrew out of the amount that was
deposited in court as the provisional value of the land, with interest
at the rate of 6% per annum from July 10, 1959 until the day full
payment is made or deposited in court;
(d)the Republic must pay appellee Toledo-Gozun the sum of
P2,695,225.00 as the just compensation for her two parcels of land
that have a total area of 539,045 square meters, minus the sum of
P107,809.00 that she withdrew out of the amount that was
deposited in court as the provisional value of her lands, with interest
at the rate of 6%, per annum from July 10, 1959 until the day full
payment is made or deposited in court;
(e)the attorney's lien of Atty. Alberto Cacnio is enforced; and
(f)the costs should be paid by appellant Republic of the Philippines,
as provided in Section 12, Rule 67, and in Section 13 Rule 141, of the
Rules of Court.
IT IS SO ORDERED.
Makalintal, C . J ., Barredo, Antonio, Esguerra, Fernandez, Muoz
Palma and Aquino, JJ ., concur.
Castro, Fernando, Teehankee and Makasiar, J J ., did not take part.
||| (Republic v. Vda. de Castellvi, G.R. No. L-20620, August 15, 1974)
































FIRST DIVISION
[G.R. No. L-34915. June 24, 1983.]
CITY GOVERNMENT OF QUEZON CITY and CITY COUNCIL OF
QUEZON CITY, petitioners, vs. HON. JUDGE VICENTE G. ERICTA as
Judge of the Court of First Instance of Rizal, Quezon City, Branch
XVIII; HIMLAYANG PILIPINO, INC., respondents.
City Fiscal for petitioners.
Manuel Villaruel, Jr. and Feliciano Tumale for respondents.
SYLLABUS
1.ADMINISTRATIVE LAW; CITY ORDINANCE; REGULATING THE
ESTABLISHMENT, MAINTENANCE AND OPERATION OF PRIVATE
MEMORIAL TYPE CEMETERIES; NOT JUSTIFIABLE; CASE AT BAR.
We find the stand of the private respondent as well as the decision
of the respondent Judge to be well-founded. We quote with
approval the lower court's ruling which declared null and void
Section 9 of the questioned city ordinance: "The issue is: Is Section 9
of the ordinance in question a valid exercise of the police power? An
examination of the Charter of Quezon City (Rep. Act No. 537), does
not reveal any provision that would justify the ordinance in question
except the provision granting police power to the City. Section 9
cannot be justified under the power granted to Quezon City to tax,
fix the license fee, and regulate such other business, trades, and
occupation as may he established or practised in the City (Sub-
sections 'C,' Sec. 12, R.A. 537). The power to regulate does not
include the power to prohibit (People vs. Esguerra, 81 Phil. 33 Vega
vs. Municipal Board of Iloilo, L-6765, May 12, 1954; 39 N.J. Law, 70,
Mich. 396). A fortiori, the power to regulate does not include the
power to confiscate. The ordinance in question not only confiscates
but also prohibits the operation of a memorial park cemetery,
because under Section 13 of said ordinance, 'Violation of the
provision thereof is punishable with a fine and/or imprisonment and
that upon conviction thereof the permit to operate and maintain a
private cemetery shall be revoked or cancelled.' The confiscatory
clause and the penal provision in effect deter one from operating a
memorial park cemetery. Neither can the ordinance in question be
justified under sub-section 't,' Section 12 of Republic Act 537. There
is nothing in the above provision which authorizes confiscation."
2.ID.; ID.; NOT A VALID EXERCISE OF POLICE POWER. We now
come to the question whether or not Section 9 of the ordinance in
question is a valid exercise of police power. The police power of
Quezon City is defined in sub-section 00, Sec. 12,Rep. Act 537. Police
power is usually exercised in the form of mere regulation or
restriction in the use of liberty or property for the promotion of the
general welfare. It does not involve the taking or confiscation of
property with the exception of a few cases where there is a
necessity to confiscate private property in order to destroy it for the
purpose of protecting the peace and order and of promoting the
general welfare as for instance, the confiscation of an illegally
possessed article, such as opium and firearms. "It seems to the court
that Section 9 of Ordinance No. 6118, Series of 1964 of Quezon City
is not a mere police regulation but an outright confiscation. It
deprives a person of his private property without due process of law,
nay, even without compensation."
3.POLITICAL LAW; POLICE POWER; DEFINITION AND CONCEPT.
Police power is defined by Freund as 'the power of promoting the
public welfare by restraining and regulating the use of liberty and
property' (Quoted in Political Law by Taada and Carreon, V-II, p.
50). It is usually exerted in order to merely regulate the use and
enjoyment of property of the owner. If he is deprived of his property
outright, it is not taken for public use but rather to destroy in order
to promote the general welfare. In police power, the owner does
not recover from the government for injury sustained in
consequence thereof.
4.ADMINISTRATIVE LAW; CITY ORDINANCE; LACK OF REASONABLE
RELATION BETWEEN SETTING ASIDE OF 6% OF THE TOTAL AREA OF
ALL PRIVATE CEMETERIES AND THE GENERAL WELFARE. There is
no reasonable relation between the setting aside of at least six (6)
percent of the total area of all private cemeteries for charity burial
grounds of deceased paupers and the promotion of health, morals.
good order, safety, or the general welfare of the people. The
ordinance is actually a taking without compensation of a certain
area from a private cemetery to benefit paupers who are charges of
the municipal corporation. Instead of building or maintaining a
public cemetery for this purpose, the city passes the burden to
private cemeteries.
5.ID.; ID.; AUTHORITY OF CITY TO PROVIDE ITS OWN PUBLIC
CEMETERIES; LAW AND PRACTICE. The expropriation without
compensation of a portion of private cemeteries is not covered by
Section 12(t) of Republic Act 537, the Revised Charter of Quezon City
which empowers the city council to prohibit the burial of the dead
within the center of population of the city and to provide for their
burial in a proper place subject to the provisions of general law
regulating burial grounds and cemeteries. When the Local
Government Code, Batas Pambansa Blg. 337 provides in Section
177(g) that a sangguniang panlungsod may "provide for the burial of
the dead in such place and in such manner as prescribed by law or
ordinance" it simply authorizes the city to provide its own city
owned land or to buy or expropriate private properties to construct
public cemeteries. This has been the law and practice in the past. It
continues to the present.
6.ID.; MUNICIPAL CORPORATION; GENERAL WELFARE CLAUSE;
BROAD AND LIBERAL INTERPRETATION; STRETCH INTERPRETATION
NO LONGER FEASIBLE IN THE CASE AT BAR. As a matter of fact,
the petitioners rely solely on the general welfare clause or on
implied powers of the municipal corporation, not on any express
provision of law as statutory basis of their exercise of power. The
clause has always received broad and liberal interpretation but we
cannot stretch it to cover this particular taking. Moreover, the
questioned ordinance was passed after Himlayang Pilipino, Inc. had
incorporated, received necessary licenses and permits, and
commenced operating. The sequestration of six percent of the
cemetery cannot even be considered as having been impliedly
acknowledged by the private respondent when it accepted the
permits to commence operations.
D E C I S I O N
GUTIERREZ, JR., J p:
This is a petition for review which seeks the reversal of the decision
of the Court of First Instance of Rizal, Branch XVIII declaring Section
9 of Ordinance No. 6118, S-64, of the Quezon City Council null and
void.
Section 9 of Ordinance No. 6118, S-64, entitled "ORDINANCE
REGULATING THE ESTABLISHMENT, MAINTENANCE AND OPERATION
OF PRIVATE MEMORIAL TYPE CEMETERY OR BURIAL GROUND
WITHIN THE JURISDICTION OF QUEZON CITY AND PROVIDING
PENALTIES FOR THE VIOLATION THEREOF" provides:
"Sec. 9.At least six (6) percent of the total area of the memorial park
cemetery shall be set aside for charity burial of deceased persons
who are paupers and have been residents of Quezon City for at least
5 years prior to their death, to be determined by competent City
Authorities. The area so designated shall immediately be developed
and should be open for operation not later than six months from the
date of approval of the application."
For several years, the aforequoted section of the Ordinance was not
enforced by city authorities but seven years after the enactment of
the ordinance, the Quezon City Council passed the following
resolution: LexLib
"RESOLVED by the council of Quezon assembled, to request, as it
does hereby request the City Engineer, Quezon City, to stop any
further selling and/or transaction of memorial park lots in Quezon
City where the owners thereof have failed to donate the required
6% space intended for paupers burial."
Pursuant to this petition, the Quezon City Engineer notified
respondent Himlayang Pilipino, Inc. in writing that Section 9 of
Ordinance No. 6118, S-64 would be enforced.
Respondent Himlayang Pilipino reacted by filing with the Court of
First Instance of Rizal, Branch XVIII at Quezon City, a petition for
declaratory relief, prohibition and mandamus with preliminary
injunction (Sp. Proc. No. Q-16002) seeking to annul Section 9 of the
Ordinance in question. The respondent alleged that the same is
contrary to the Constitution, the Quezon City Charter, the Local
Autonomy Act, and the Revised Administrative Code.
There being no issue of fact and the questions raised being purely
legal, both petitioners and respondent agreed to the rendition of a
judgment on the pleadings. The respondent court, therefore,
rendered the decision declaring Section 9 of Ordinance No. 6118, S-
64 null and void.
A motion for reconsideration having been denied, the City
Government and City Council filed the instant petition. cdlex
Petitioners argue that the taking of the respondent's property is a
valid and reasonable exercise of police power and that the land is
taken for a public use as it is intended for the burial ground of
paupers. They further argue that the Quezon City Council is
authorized under its charter, in the exercise of local police power,
"to make such further ordinances and resolutions not repugnant to
law as may be necessary to carry into effect and discharge the
powers and duties conferred by this Act and such as it shall deem
necessary and proper to provide for the health and safety, promote
the prosperity, improve the morals, peace, good order, comfort and
convenience of the city and the inhabitants thereof, and for the
protection of property therein."
On the other hand, respondent Himlayang Pilipino, Inc. contends
that the taking or confiscation of property is obvious because the
questioned ordinance permanently restricts the use of the property
such that it cannot be used for any reasonable purpose and deprives
the owner of all beneficial use of his property.
The respondent also stresses that the general welfare clause is not
available as a source of power for the taking of the property in this
case because it refers to "the power of promoting the public welfare
by restraining and regulating the use of liberty and property." The
respondent points out that if an owner is deprived of his property
outright under the State's police power, the property is generally
not taken for public use but is urgently and summarily destroyed in
order to promote the general welfare. The respondent cites the case
of a nuisance per se or the destruction of a house to prevent the
spread of a conflagration. LexLib

We find the stand of the private respondent as well as the decision
of the respondent Judge to be well-founded. We quote with
approval the lower court's ruling which declared null and void
Section 9 of the questioned city ordinance:
"The issue is: Is Section 9 of the ordinance in question a valid
exercise of the police power?
"An examination of the Charter of Quezon City (Rep. Act No. 5371),
does not reveal any provision that would justify the ordinance in
question except the provision granting police power to the City.
Section 9 cannot be justified under the power granted to Quezon
City to tax, fix the license fee, and regulate such other business,
trades, and occupation as may be established or practiced in the
City.' (Sub-sections 'C', Sec. 12, R.A. 537).
"The power to regulate does not include the power to prohibit
(People vs. Esguerra, 81 Phil. 33, Vega vs. Municipal Board of Iloilo,
L-6765, May 12, 1954; 39 N.J. Law, 70, Mich. 396). A fortiori, the
power to regulate does not include the power to confiscate. The
ordinance in question not only confiscates but also prohibits the
operation of a memorial park cemetery, because under Section 13 of
said ordinance, 'Violation of the provision thereof is punishable with
a fine and/or imprisonment and that upon conviction thereof the
permit to operate and maintain a private cemetery shall be revoked
or cancelled.' The confiscatory clause and the penal provision in
effect deter one from operating a memorial park cemetery. Neither
can the ordinance in question be justified under sub-section 't',
Section 12 of Republic Act 537which authorizes the City Council to

"'prohibit the burial of the dead within the center of population of
the city and provide for their burial in such proper place and in such
manner as the council may determine, subject to the provisions of
the general law regulating burial grounds and cemeteries and
governing funerals and disposal of the dead.'(Sub-sec. (t), Sec.
12,Rep. Act No. 537).
There is nothing in the above provision which authorizes
confiscation or as euphemistically termed by the respondents,
'donation.'
We now come to the question whether or not Section 9 of the
ordinance in question is a valid exercise of police power. The police
power of Quezon City is defined in sub-section 00, Sec. 12, Rep. Act
537 which reads as follows:
"(00)To make such further ordinance and regulations not repugnant
to law as may be necessary to carry into effect and discharge the
powers and duties conferred by this act and such as it shall deem
necessary and proper to provide for the health and safety, promote,
the prosperity, improve the morals, peace, good order, comfort and
convenience of the city and the inhabitants thereof, and for the
protection of property therein; and enforce obedience thereto with
such lawful fines or penalties as the City Council may prescribe
under the provisions of subsection (jj) of this section.'
"We start the discussion with a restatement of certain basic
principles. Occupying the forefront in the bill of rights is the
provision which states that 'no person shall be deprived of life,
liberty or property without due process of law' (Art. III, Section 1
subparagraph 1, Constitution).
"On the other hand, there are three inherent powers of government
by which the state interferes with the property rights, namely (1)
police power, (2) eminent domain, (3) taxation. These are said to
exist independently of the Constitution as necessary attributes of
sovereignty.
"Police power is defined by Freund as 'the power of promoting the
public welfare by restraining and regulating the use of liberty and
property' (Quoted in Political Law by Taada and Carreon, V-II, p.
50). It is usually exerted in order to merely regulate the use and
enjoyment of property of the owner. If he is deprived of his property
outright, it is not taken for public use but rather to destroy in order
to promote the general welfare. In police power, the owner does
not recover from the government for injury sustained in
consequence thereof. (12 C.J. 623). It has been said that police
power is the most essential of government powers, at times the
most insistent, and always one of the least limitable of the powers of
government (Ruby vs. Provincial Board, 39 Phil. 660; Ichong vs.
Hernandez, L-7995, May 31, 1957). This power embraces the whole
system of public regulation (U.S. vs. Linsuya Fan, 10 Phil. 104). The
Supreme Court has said that police power is so far-reaching in scope
that it has almost become impossible to limit its sweep. As it derives
its existence from the very existence of the state itself, it does not
need to be expressed or defined in its scope. Being coextensive with
self-preservation and survival itself, it is the most positive and active
of all governmental processes, the most essential, insistent and
illimitable. Especially it is so under the modern democratic
framework where the demands of society and nations have
multiplied to almost unimaginable proportions. The field and scope
of police power have become almost boundless, just as the fields of
public interest and public welfare have become almost all embracing
and have transcended human foresight. Since the Courts cannot
foresee the needs and demands of public interest and welfare, they
cannot delimit beforehand the extent or scope of the police power
by which and through which the state seeks to attain or achieve
public interest and welfare. (Ichong vs. Hernandez, L-7995, May 31,
1957).
"The police power being the most active power of the government
and the due process clause being the broadest limitation on
governmental power, the conflict between this power of
government and the due process clause of the Constitution is
oftentimes inevitable.
"It will be seen from the foregoing authorities that police power is
usually exercised in the form of mere regulation or restriction in the
use of liberty or property for the promotion of the general welfare.
It does not involve the taking or confiscation of property with the
exception of a few cases where there is a necessity to confiscate
private property in order to destroy it for the purpose of protecting
the peace and order and of promoting the general welfare as for
instance, the confiscation of an illegally possessed article, such as
opium and firearms.
"It seems to the court that Section 9 of Ordinance No. 6118, Series
of 1964 of Quezon City is not a mere police regulation but an
outright confiscation. It deprives a person of his private property
without due process of law, nay, even without compensation."
In sustaining the decision of the respondent court, we are not
unmindful of the heavy burden shouldered by whoever challenges
the validity of duly enacted legislation, whether national or local. As
early as 1913, this Court ruled in Case v. Board of Health (24 Phil.
250) that the courts resolve every presumption in favor of validity
and, more 90, where the municipal corporation asserts that the
ordinance was enacted to promote the common good and general
welfare. LLpr
In the leading case of Ermita-Malate Hotel and Motel Operators
Association Inc. v. City Mayor of Manila (20 SCRA 849) the Court
speaking through the then Associate Justice and now Chief Justice
Enrique M. Fernando stated:
"Primarily what calls for a reversal of such a decision is the absence
of any evidence to offset the presumption of validity that attaches to
a challenged statute or ordinance. As was expressed categorically by
Justice Malcolm: 'The presumption is all in favor of validity. . . . The
action of the elected representatives of the people cannot be lightly
set aside. The councilors must, in the very nature of things, be
familiar with the necessities of their particular municipality and with
all the facts and circumstances which surround the subject and
necessitate action. The local legislative body, by enacting the
ordinance, has in effect given notice that the regulations are
essential to the well-being of the people. . . . The Judiciary should
not lightly set aside legislative action when there is not a clear
invasion of personal or property rights under the guise of police
regulation.' (U.S. v. Salaveria [1918], 39 Phil. 102, at p. 111. There
was an affirmation of the presumption of validity of municipal
ordinance as announced in the leading Salaveria decision in Eboa v.
Daet, [1950] 85 Phil. 369.).
We have likewise considered the principles earlier stated in Case v.
Board of Health supra:
". . . Under the provisions of municipal charters which are known as
the general welfare clauses, a city, by virtue of its police power, may
adopt ordinances to secure the peace, safety, health, morals and the
best and highest interests of the municipality. It is a well-settled
principle, growing out of the nature of well-ordered and civilized
society, that every holder of property, however absolute and
unqualified may be his title, holds it under the implied liability that
his use of it shall not be injurious to the equal enjoyment of others
having an equal right to the enjoyment of their property, nor
injurious to the rights of the community. All property in the state is
held subject to its general regulations, which are necessary to the
common good and general welfare. Rights of property, like all other
social and conventional rights, are subject to such reasonable
limitations in their enjoyment as shall prevent them from being
injurious, and to such reasonable restraints and regulations,
established by law, as the legislature, under the governing and
controlling power vested in them by the constitution, may think
necessary and expedient. The state, under the police power, is
possessed with plenary power to deal with all matters relating to the
general health, morals, and safety of the people, so long as it does
not contravene any positive inhibition of the organic law and
providing that such power is not exercised in such a manner as to
justify the interference of the courts to prevent positive wrong and
oppression."

but find them not applicable to the facts of this case.
There is no reasonable relation between the setting aside of at least
six (6) percent of the total area of all private cemeteries for charity
burial grounds of deceased paupers and the promotion of health,
morals, good order, safety, or the general welfare of the people. The
ordinance is actually a taking without compensation of a certain
area from a private cemetery to benefit paupers who are charges of
the municipal corporation. Instead of building or maintaining a
public cemetery for this purpose, the city passes the burden to
private cemeteries. LLphil
The expropriation without compensation of a portion of private
cemeteries is not covered by Section 12(t) of Republic Act 537, the
Revised Charter of Quezon City which empowers the city council to
prohibit the burial of the dead within the center of population of the
city and to provide for their burial in a proper place subject to the
provisions of general law regulating burial grounds and cemeteries.
When the Local Government Code, Batas Pambansa Blg. 337
provides in Section 177 (q) that a Sangguniang panlungsod may
"provide for the burial of the dead in such place and in such manner
as prescribed by law or ordinance" it simply authorizes the city to
provide its own city owned land or to buy or expropriate private
properties to construct public cemeteries. This has been the law and
practice in the past. It continues to the present. Expropriation,
however, requires payment of just compensation. The questioned
ordinance is different from laws and regulations requiring owners of
subdivisions to set aside certain areas for streets, parks,
playgrounds, and other public facilities from the land they sell to
buyers of subdivision lots. The necessities of public safety, health,
and convenience are very clear from said requirements which are
intended to insure the development of communities with salubrious
and wholesome environments. The beneficiaries of the regulation,
in turn, are made to pay by the subdivision developer when
individual lots are sold to homeowners.
As a matter of fact, the petitioners rely solely on the general welfare
clause or on implied powers of the municipal corporation, not on
any express provision of law as statutory basis of their exercise of
power. The clause has always received broad and liberal
interpretation but we cannot stretch it to cover this particular
taking. Moreover, the questioned ordinance was passed after
Himlayang Pilipino, Inc. had incorporated, received necessary
licenses and permits, and commenced operating. The sequestration
of six percent of the cemetery cannot even be considered as having
been impliedly acknowledged by the private respondent when it
accepted the permits to commence operations.
WHEREFORE, the petition for review is hereby DISMISSED. The
decision of the respondent court is affirmed.
SO ORDERED.
Teehankee, Melencio-Herrera, Plana, Vasquez and Relova, JJ .,
concur.

||| (City Government of Quezon City v. Ericta, G.R. No. L-34915, June
24, 1983)
















EN BANC
[G.R. No. L-18841. January 27, 1969.]
REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. PHILIPPINE
LONG DISTANCE TELEPHONE COMPANY,defendant-appellant.
Solicitor General Arturo A. Alafriz, Assistant Solicitor General Antonio
A. Torres and Solicitor Camilo D. Quiason for plaintiff- appellant.
Ponce Enrile, Siguion Reyna, Montecillo & Belo for defendant-
appellant.
SYLLABUS
1.CONSTITUTIONAL LAW; EMINENT DOMAIN; EXPROPRIATION OF
PUBLIC SERVICE UTILITIES; PAYMENT OF JUST COMPENSATION LIKE
EXPROPRIATION OF REAL PROPERTY. Where the Republic may not
compel the PLDT to celebrate a contract with it, the Republic may, in
the exercise of the sovereign power of eminent domain, require the
telephone company to permit interconnection of the government
telephone system and that of the PLDT, as the needs of the
government service may require, subject to the payment of just
compensation to be determined by the court. 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 the real
property may, through expropriation, be subjected to an easement
of right of way. The use of the PLDT's lines and services to allow
interservice connection between both telephone systems is not
much different. In either case private property is subjected to a
burden for public use and benefit. If, under Section 6, Article XIII, of
the Constitution, the State may, in the interest of national welfare,
transfer utilities to public ownership upon payment of just
compensation, there is no reason why the State may not require a
public utility to render services in the general interest, provided just
compensation is paid therefor.
2.ID.; ID.; ID.; DISMISSAL OF PETITION BY COURT A QUO NOT
PROPER IN INSTANT CASE. The Republic's cause of action to
compel the PLDT to execute a contract with the former, through the
Bureau, for the use of the facilities of defendant's telephone system
throughout the Philippines under such terms and conditions as the
court might consider reasonable, is predicated upon the radio
telephonic isolation of Bureau's facilities from the outside World if
the severance of the interconnection were to be carried out by the
PLDT, thereby preventing the Bureau of Telecommunications from
properly discharging its functions, to the prejudice of the general
public. Save for the prayer to compel the PLDT to enter into a
contract (and the prayer is no essential part of the pleading), the
averments make out a case for compulsory rendering of inter-
connecting services by the telephone company upon such terms and
conditions as the court may determine to be just. And since the
lower court found that both parties "are practically at one that
defendant (PLDT) is entitled to reasonable compensation from
plaintiff for the reasonable use of the former's telephone facilities"
the lower court should have proceeded to treat the case as one of
condemnation of such services independently of contract and
proceeded to determine the just and reasonable compensation for
the same, instead of dismissing the petition.
3.ID.; ID.; ID.; CFI AND NOT THE PSC HAS AUTHORITY TO EXERCISE
JURISDICTION IN EXPROPRIATION OF PUBLIC UTILITIES. The plea
that the court of first instance had no jurisdiction to entertain the
petition and that the proper forum for the action was the Public
Service Commission, under the law, the Public Service Commission
has no authority to pass upon actions for the taking of private
property under the sovereign right of eminent domain.
Furthermore, while the defendant telephone company is a public
utility corporation whose franchise, equipment and other properties
are under the jurisdiction, supervision and control of the Public
Service Commission, yet the plaintiff's telecommunications network
is a public service owned by the Republic and operated by an
instrumentality of the National Government, hence, exempt under
Section 14 of the Public Service Act, from such jurisdiction,
supervision and control. The Bureau of Telecommunications was
created in pursuance of a state policy reorganizing the government
offices and the determination of state policy is not vested in the
Commission.
4.REMEDIAL LAW; ESTOPPEL; GOVERNMENT NOT ESTOPPED BY THE
MISTAKE OF ITS AGENTS. Section 79, subsection (b), of Executive
Order No. 94, Series of 1947 does not limit the Bureau of
Telecommunications to non-commercial activities or prevents it
from serving the general public. It may be that in its original
prospectuses the Bureau officials had stated that the service would
be limited to government offices; but such limitations could not
block future expansion of the system, as authorized by the terms of
the Executive Order, nor could the officials of the Bureau bind the
Government not to engage in services that are authorized by law. It
is a well-known rule that erroneous application and enforcement of
the law by public officers do not block subsequent correct
application of the statute and that the Government is never
estopped by mistake or error on the part of its agents.
5.CIVIL LAW; CONTRACTS; FREEDOM TO STIPULATE TERMS AND
CONDITIONS; PARTIES CAN NOT BE COERCED. Parties can not be
coerced to enter into a contract where no agreement is had
between them as to the principal terms and conditions of the
contract. Freedom to stipulate such terms and condition is of the
essence of our contractual system, and by express provision of the
statute, a contract may be annulled if tainted by violence,
intimidation or undue influence (Articles 1306, 1336, 1337, Civil
Code of the Philippines).
6.ID.; ID.; FRAUDULENT CONTRACT OR UNFAIR COMPETITION NOT
PRESENT IN CASE AT BAR. The theses that the Bureau's
commercial services constituted unfair competition, and that the
Bureau was guilty of fraud and abuse under its contract, are
untenable: (1) the competition is merely hypothetical, the demand
for telephone service being very much more than the supposed
competitors can supply, (2) the PLDT franchise is non-exclusive, that
it is well-known that defendant PLDT is unable to adequately cope
with the current demands for telephone service and that its right to
just compensation for the services rendered to the Government
telephone system and its users is herein recognized and preserved,
and (3) when the Bureau of Telecommunications subscribed to the
trunk lines, defendant knew or should have known that their use by
the subscriber was more or less public and all embracing in nature
and the acceptance by the defendant of the payment of rentals,
despite its knowledge that the plaintiff had extended the use of the
trunk lines to commercial purposes, implies assent by the defendant
to such extended use. To uphold the PLDT's contention is to
subordinate the needs of the general public to the right of the PLDT
to derive profit from the future expansion of its services under its
non-exclusive franchise.
D E C I S I O N
REYES, J.B.L., J p:
Direct appeals, upon a joint record on appeal, by both the plaintiff
and the defendant from the dismissal, after hearing, by the Court of
First Instance of Manila, in its Civil Case No. 35805, of their
respective complaint and counterclaims, but making permanent a
preliminary mandatory injunction therefore issued against the
defendant on the inter-connection of telephone facilities owned and
operated by said parties.
The plaintiff, Republic of the Philippines, is a political entity
exercising governmental powers through its branches and
instrumentalities, one of which is the Bureau of
Telecommunications. That office was created on 1 July 1947, under
Executive Order No. 94, with the following powers and duties, in
addition to certain powers and duties formerly vested in the
Director of Posts:
"SEC. 79.The Bureau of Telecommunications shall exercise the
following powers and duties:
"(a)To operate and maintain existing wire-telegraph and radio-
telegraph offices, stations, and facilities, and those to be established
to restore the pre-war telecommunication service under the Bureau
of Posts, as well as such additional offices or stations as may
hereafter be established to provide telecommunication service in
places requiring such service;
"(b)To investigate, consolidate, negotiate for, operate and maintain
wire-telephone or radio telephone communication service
throughout the Philippines by utilizing such existing facilities in
cities, towns, and provinces as may be found feasible and under
such terms and conditions or arrangements with the present owners
or operators thereof as may be agreed upon to the satisfaction of all
concerned;
"(c)To prescribe, subject to approval by the Department Head,
equitable rates of charges for messages handled by the system
and/or for timecalls and other services that may be rendered by said
system;
"(d)To establish and maintain coastal stations to serve ships at sea
or aircrafts and, when public interest so requires, to engage in the
international telecommunication service in agreement with other
countries desiring to establish such service with the Republic of the
Philippines; and
"(e)To abide by all existing rules and regulations prescribed by the
International Telecommunication Convention relative to the
accounting, disposition and exchange of messages handled in the
international service, and those that may hereafter be promulgated
by said convention and adhered to by the Government of the
Republic of the Philippines." 1
The defendant, Philippine Long Distance Telephone Company (PLDT
for short), is a public service corporation holding a legislative
franchise, Act 3426, as amended by Commonwealth Act 407, to
install, operate and maintain a telephone system throughout the
Philippines and to carry on the business of electrical transmission of
messages within the Philippines and between the Philippines and
the telephone systems of other countries. 2 The RCA
Communications, Inc., (which is not a party to the present case, but
has contractual relations with the parties) is an American
corporation authorized to transact business in the Philippines and is
the grantee, by assignment, of a legislative franchise to operate a
domestic station for the reception and transmission of long distance
wireless messages (Act 2178) and to operate broadcasting and
radio-telephone and radio-telegraphic communications services (Act
3180) 3

Sometime in 1933, the defendant, PLDT, and the RCA
Communications, Inc., entered into an agreement whereby
telephone messages, coming from the United States and received by
RCA's domestic station, could automatically be transferred to the
lines of PLDT; and vice-versa, for calls collected by the PLDT for
transmission from the Philippines to the United States. The
contracting parties agreed to divide the tolls, as follows: 25% to
PLDT and 75% to RCA. The sharing was amended in 1941 to 30% for
PLDT and 70% for RCA, and again amended in 1947 to a 50-50 basis.
The arrangement was later extended to radio-telephone messages
to and from European and Asiatic countries. Their contract
contained a stipulation that either party could terminate it on a 24-
month notice to the other. 4 On 2 February 1956, PLDT gave notice
to RCA to terminate their contract on 2 February 1956. 5
Soon after its creation in 1947, the Bureau of Telecommunications
set up its own Government Telephone System by utilizing its own
appropriation and equipment and by renting trunk lines of the PLDT
to enable government offices to call private parties. 6 Its application
for the use of these trunk lines was in the usual form of applications
for telephone service, containing a statement, above the signature
of the applicant, that the latter will abide by the rules and
regulations of the PLDT which are on file with the Public Service
Commission. 7 One of the many rules prohibits the public use of the
service furnished the telephone subscriber for his private use. 8 The
Bureau has extended its services to the general public since
1948, 9 using the same trunk lines owned by, and rented from, the
PLDT, and prescribing its (the Bureau's) own schedule of
rates. 10 Through these trunk lines, a Government Telephone
System (GTS) subscriber could make a call to a PLDT subscriber in
the same way that the latter could make a call to the former.
On 5 March 1958, the plaintiff, through the Director of
Telecommunications, entered into an agreement with RCA
Communications, Inc., for a joint overseas telephone service
whereby the Bureau would convey radio-telephone overseas calls
received by RCA's station to and from local residents. 11 Actually,
they inaugurated this joint operation on 2 February 1958, under a
"provisional" agreement. 12
On 7 April 1958, the defendant, Philippine Long Distance Telephone
Company, complained to the Bureau of Telecommunications that
said bureau was violating the conditions under which their Private
Branch Exchange (PBX) is interconnected with the PLDT's facilities,
referring to the rented trunk lines, for the Bureau had used the
trunk lines not only for the use of government offices but even to
serve private persons or the general public, in competition with the
business of the PLDT; and gave notice that if said violations were not
stopped by midnight of 12 April 1958, the PLDT would sever the
telephone connections. 13 When the PLDT received no reply, it
disconnected the trunk lines being rented by the Bureau at midnight
on 12 April 1958. 14 The result was the isolation of the Philippines,
on telephone services, from the rest of the world, except the United
States. 15
At that time, the Bureau was maintaining 5,000 telephones and had
5,000 pending applications for telephone connection. 16 The PLDT
was also maintaining 60,000 telephones and had also 20,000
pending applications. 17 Through the years, neither of them has
been able to fill up the demand for telephone service.
The Bureau of Telecommunications had proposed to the PLDT on 8
January 1958 that both enter into an interconnecting agreement,
with the government paying (on a call basis) for all calls passing
through the interconnecting facilities from the Government
Telephone System to the PLDT. 18 The PLDT replied that it was
willing to enter into an agreement on overseas telephone service to
Europe and Asian countries provided that the Bureau would submit
to the jurisdiction and regulations of the Public Service Commission
and in consideration of 37 1/2% of the gross revenues. 19 In its
memorandum in lieu of oral argument in this Court dated 9 February
1964, on page 8, the defendant reduced its offer to 33 1/3% (1/3) as
its share in the overseas telephone service. The proposals were not
accepted by either party.
On 12 April 1958, plaintiff Republic commenced suit against the
defendant, Philippine Long Distance Telephone Company, in the
Court of First Instance of Manila (Civil Case No. 35805), praying in its
complaint for judgment commanding the PLDT to execute a contract
with plaintiff, through the Bureau, for the use of the facilities of
defendant's telephone system throughout the Philippines under
such terms and conditions as the court might consider reasonable,
and for a writ of preliminary injunction against the defendant
company to restrain the severance of the existing telephone
connections and/or restore those severed.
Acting on the application of the plaintiff, and on the ground that the
severance of telephone connections by the defendant company
would isolate the Philippines from other countries, the court a quo,
on 14 April 1958, issued an order for the defendant:
"(1) to forthwith reconnect and restore the seventy-eight (78) trunk
lines that it has disconnected between the facilities of the
Government Telephone System, including its overseas telephone
services, and the facilities of defendant; (2) to refrain from carrying
into effect its threat to sever the existing telephone communication
between the Bureau of Telecommunications and defendant, and not
to make connection over its telephone system of telephone calls
coming to the Philippines from foreign countries through the said
Bureau's telephone facilities and the radio facilities Of RCA
Communications, Inc.; and (3) to accept and connect through its
telephone system all such telephone calls coming to the Philippines
from foreign countries until further order of this Court."
On 28 April 1958, the defendant company filed its answer, with
counterclaims.
It denied any obligation on its part to execute a contract of services
with the Bureau of Telecommunications; contested the jurisdiction
of the Court of First Instance to compel it to enter into
interconnecting agreements, and averred that it was justified to
disconnect the trunk lines heretofore leased to the Bureau of
Telecommunications under the existing agreement because its
facilities were being used in fraud of its rights. The PLDT further
claimed that the Bureau was engaging in commercial telephone
operations in excess of authority, in competition with, and to the
prejudice of, the PLDT, using defendant's own telephone poles,
without proper accounting of revenues.
After trial, the lower court rendered judgment that it could not
compel the PLDT to enter into an agreement with the Bureau
because the parties were not in agreement; that under Executive
Order 94, establishing the Bureau of Telecommunications, said
Bureau was not limited to servicing government offices alone, nor
was there any in the contract of lease of the trunk lines, since the
PLDT knew, or ought to have known, at the time that their use by
the Bureau was to be public throughout the Islands, hence the
Bureau was neither guilty of fraud, abuse, or misuse of the poles of
the PLDT; and, in view of serious public prejudice that would result
from the disconnection of the trunk lines, declared the preliminary
injunction permanent, although it dismissed both the complaint and
the counterclaims.
Both parties appealed.
Taking up first the appeal of the Republic, the latter complains of the
action of the trial court in dismissing the part of its complaint
seeking to compel the defendant to enter into an interconnecting
contract with it, because the parties could not agree on the terms
and conditions of the interconnection, and of its refusal to fix the
terms and conditions therefor.
We agree with the court below that parties can not be coerced to
enter into a contract where no agreement is had between them as
to the principal terms and conditions of the contract. Freedom to
stipulate such terms and conditions is of the essence of our
contractual system, and by express provision of the statute, a
contract may be annulled if tainted by violence, intimidation or
undue influence (Articles 1306, 1336, 1337, Civil Code of the
Philippines). But the court a quo has apparently overlooked that
while the Republic may not compel the PLDT to celebrate a contract
with it, the Republic may, in the exercise of the sovereign power of
eminent domain, require the telephone company to permit
interconnection of the government telephone system and that of
the PLDT, as the needs of the government service may require,
subject to the payment of just compensation to be determined by
the court. 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. The use of the PLDT's
lines and services to allow interservice connection between both
telephone systems is not much different. In either case private
property is subjected to a burden for public use and benefit. If under
Section 6, Article XIII, of the Constitution, the State may, in the
interest of national welfare, transfer utilities to public ownership
upon payment of just compensation, there is no reason why the
State may not require a public utility to render services in the
general interest, provided just compensation is paid therefor.
Ultimately, the beneficiary of the interconnecting service would be
the users of both telephone systems, so that the condemnation
would be for public use.

The Bureau of Telecommunications, under Section 78(b) of
Executive Order No. 94, may operate and maintain wire telephone
or radio telephone communications throughout the Philippines by
utilizing existing facilities in cities, towns, and provinces under such
terms and conditions or arrangement with present owners or
operators as may be agreed upon to the satisfaction of all
concerned; but there is nothing in this Section that would exclude
resort to condemnation proceedings where unreasonable or unjust
terms and conditions are exacted, to the extent of crippling or
seriously hampering the operations of said Bureau.
A perusal of the complaint shows that the Republic's cause of action
is predicated upon the radio telephonic isolation of the Bureau's
facilities from the outside world if the severance of interconnection
were to be carried out by the PLDT, thereby preventing the Bureau
of Telecommunications from properly discharging its functions, to
the prejudice of the general public. Save for the prayer to compel
the PLDT to enter into a contract (and the prayer is no essential part
of the pleading), the averments make out a case for compulsory
rendering of inter-connecting services by the telephone company
upon such terms and conditions as the court may determine to be
just. And since the lower court found that both parties "are
practically at one that defendant (PLDT) is entitled to reasonable
compensation from plaintiff for the reasonable use of the former's
telephone facilities" (Decision, Record on Appeal, page 224), the
lower court should have proceeded to treat the case as one of
condemnation of such services independently of contract and
proceeded to determine the just and reasonable compensation for
the same, instead of dismissing the petition.
This view we have taken of the true nature of the Republic's petition
necessarily results in overruling the plea of defendant- appellant
PLDT that the court of first instance had no jurisdiction to entertain
the petition and that the proper forum for the action was the Public
Service Commission. That body, under the law, has no authority to
pass upon actions for the taking of private property under the
sovereign right of eminent domain. Furthermore, while the
defendant telephone company is a public utility corporation whose
franchise, equipment and other properties are under the
jurisdiction, supervision and control of the Public Service
Commission (Sec. 13, Public Service Act), yet the plaintiff's
telecommunications network is a public service owned by the
Republic and operated by an instrumentality of the National
Government, hence exempt, under Section 14 of the Public Service
Act, from such jurisdiction, supervision and control. The Bureau of
Telecommunications was created in pursuance of a state policy
reorganizing the government offices
"to meet the exigencies attendant upon the establishment of the
free and independent Government of the Republic of the
Philippines, and for the purpose of promoting simplicity, economy
and efficiency in its operation" (Section 1,Republic Act No. 51)
and the determination of state policy is not vested in the
Commission (Utilities Com. vs. Bartonville Bus Line, 290 Ill. 574; 124
N.E. 373)
Defendant PLDT, as appellant, contends that the court below was in
error in not holding that the Bureau of Telecommunications was not
empowered to engage in commercial telephone business, and in
ruling that said defendant was not justified in disconnecting the
telephone trunk lines it had previously leased to the Bureau. We find
that the court a quo ruled correctly in rejecting both assertions.
Executive Order No. 94, Series of 1947, reorganizing the Bureau of
Telecommunications, expressly empowered the latter in its Section
79, subsection (b), to "negotiate for, operate and maintain wire
telephone or radio telephone communication service throughout
the Philippines," and, in subsection (c), "to prescribe subject to
approval by the Department Head, equitable rates of charges for
messages handled by the system and/or for time calls and other
services that may be rendered by the system." Nothing in these
provisions limits the Bureau to non-commercial activities or prevents
it from serving the general public. It may be that in its original
prospectuses the Bureau officials had stated that the service would
be limited to government offices: but such limitations could not
block future expansion of the system, as authorized by the terms of
the Executive Order, nor could the officials of the Bureau bind the
Government not to engage in services that are authorized by law. It
is a well-known rule that erroneous application and enforcement of
the law by public officers do not block subsequent correct
application of the statute (PLDT vs. Collector of Internal Revenue, 90
Phil. 676), and that the Government is never estopped by mistake or
error on the part of its agents (Pineda vs. Court of First Instance of
Tayabas, 52 Phil. 803, 807; Benguet Consolidated Mining Co. vs.
Pineda, 98 Phil. 711, 724)
The theses that the Bureau's commercial services constituted unfair
competition, and that the Bureau was guilty of fraud and abuse
under its contract, are, likewise, untenable.
First, the competition is merely hypothetical, the demand for
telephone service being very much more than the supposed
competitors can supply. As previously noted, the PLDT had 20,000
pending applications at the time, and the Bureau had another 5,000.
The telephone company's inability to meet the demands for service
are notorious even now. Second, the charter of the defendant
expressly provides:
"Sec. 14.The rights herein granted shall not be exclusive, and the
rights and power to grant to any corporation, association or person
other than the grantee franchise for the telephone or electrical
transmission of messages or signals shall not be impaired or affected
by the granting of this franchise: " (Act 3436)
And third, as the trial court correctly stated, "when the Bureau of
Telecommunications subscribed to the trunk lines, defendant knew
or should have known that their use by the subscriber was more or
less public and all embracing in nature, that is, throughout the
Philippines, if not abroad" (Decision, Record on Appeal, page 216)
The acceptance by the defendant of the payment of rentals, despite
its knowledge that the plaintiff had extended the use of the trunk
lines to commercial purposes, continuously since 1948, implies
assent by the defendant to such extended use. Since this
relationship has been maintained for a long time and the public has
patronized both telephone systems, and their interconnection is to
the public convenience, it is too late for the defendant to claim
misuse of its facilities, and it is not now at liberty to unilaterally
sever the physical connection of the trunk lines.
". . ., but there is high authority for the position that, when such
physical connection has been voluntarily made, under a fair and
workable arrangement and guaranteed by contract and the
continuous line has come to be patronized and established as a
great public convenience, such connection shall not in breach of the
agreement be severed by one of the parties. In that case, the public
is held to have such an interest in the arrangement that its rights
must receive due consideration. This position finds approval in State
ex rel. vs. Cadwaller, 172 Ind. 619, 636, 87 N.E. 650, and is stated in
the elaborate and learned opinion of Chief Justice Myers as follows:
`Such physical connection cannot be required as of right, but if such
connection is voluntarily made by contract, as is here alleged to be
the case, so that the public acquires an interest in its continuance,
the act of the parties in making such connection is equivalent to a
declaration of a purpose to waive the primary right of
independence, and it imposes upon the property such a public
status that it may not be disregarded' citing Mohan v. Mich. Tel.
Co., 132 Mich, 242, 93 N.W. 629, and the reasons upon which it is in
part made to rest are referred to in the same opinion, as follows:
`Where private property is by the consent of the owner invested
with a public interest or privilege for the benefit of the public, the
owner can no longer deal with it as private property only, but must
hold it subject to the rights of the public in the exercise of that
public interest or privilege conferred for their benefit.' Allnut v. Inglis
(1810) 12 East, 527. The doctrine of this early case is the
acknowledged law." (Clinton-Dunn Tel. Co. v. Carolina Tel. & Tel. Co.,
74 S.E. 636, 638)
It is clear that the main reason for the objection of the PLDT lies in
the fact that said appellant did not expect that the Bureau's
telephone system would expand with such rapidity as it has done;
but this expansion is no ground for the discontinuance of the service
agreed upon.
The last issue urged by the PLDT as appellant is its right to
compensation for the use of its poles for bearing telephone wires of
the Bureau of Telecommunications. Admitting that Section 19 of the
PLDT charter reserves to the Government
"the privilege without compensation of using the poles of the
grantee to attach one ten-pin cross-arm, and to install, maintain and
operate wires of its telegraph system thereon: Provided, however,
That the Bureau of Posts shall have the right to place additional
cross-arms and wires on the poles of the grantee by paying a
compensation, the rate of which is to be agreed upon by the
Director of Posts and the grantee; "
the defendant counterclaimed for P8,772.00 for the use of its poles
by the plaintiff, contending that what was allowed free use, under
the aforequoted provision, was one ten-pin cross-arm attachment
and only for plaintiff's telegraph system, not for its telephone
system; that said Section could not refer to the plaintiff's telephone
system, because it did not have such telephone system when
defendant acquired its franchise. The implication of the argument is
that plaintiff has to pay for the use of defendant's poles if such use is
for plaintiff's telephone system and has to pay also if it attaches
more than one (1) ten-pin cross-arm for telegraphic purposes.

As there is no proof that the telephone wires strain the poles of the
PLDT more than the telegraph wires, nor that they cause more
damage than the wires of the telegraph system, or that the
Government has attached to the poles more than one ten-pin in
cross-arm as permitted by the PLDT charter, we see no point in this
assignment of error. So long as the burden to be borne by the PLDT
poles is not increased, we see no reason why the reservation in
favor of the telegraph wires of the government should not be
extended to its telephone line, any time that the government
decided to engage also in this kind of communication.
In the ultimate analysis, the true objection of the PLDT to continue
the link between its network and that of the Government is that the
latter competes "politically" (sic) with its own telephone services.
Considering, however, that the PLDT franchise is non- exclusive; that
it is well-known that defendant PLDT is unable to adequately cope
with the current demands for telephone service, as shown by the
number of pending applications therefor; and that the PLDT's right
to just compensation for the services rendered to the Government
telephone system and its users is herein recognized and preserved,
the objections of defendant-appellant are without merit. To uphold
the PLDT's contention is to subordinate the needs of the general
public to the right of the PLDT to derive profit from the future
expansion of its services under its non-exclusive franchise.
WHEREFORE, the decision of the Court of First Instance, now under
appeal, is affirmed, except in so far as it dismisses the petition of the
Republic of the Philippines to compel the Philippine Long Distance
Telephone Company to continue servicing the Government
telephone system upon such terms, and for a compensation, that
the trial court may determine to be just, including the period
elapsed from the filing of the original complaint or petition. And for
this purpose, the records are ordered returned to the court of origin
for further hearings and other proceedings not inconsistent with this
opinion. No costs.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Ruiz Castro,
Fernando, Capistrano, Teehankee and Barredo, JJ., concur.
||| (Republic v. PLDT Co., G.R. No. L-18841, January 27, 1969)




Us vs causby no full case eh haha

Facts of the Case
Thomas Lee Causby owned a chicken farm outside of Greensboro,
North Carolina. The farm was located near an airport used regularly
by the United States military. According to Causby, noise from the
airport regularly frightened the animals on his farm, resulting in the
deaths of several chickens. The problem became so severe that
Causby was forced to abandon his business. Under an ancient
doctrine of the common law, land ownership extended to the space
above and below the earth. Using this doctrine as a basis, Causby
sued the United States, arguing that he owned the airspace above
his farm. By flying planes in this airspace, he argued, the government
had confiscated his property without compensation, thus violating
the Takings Clause of the Fifth Amendment. The United States Court
of Claims accepted Causby's argument, and ordered the government
to pay compensation.
Question
Did the flying of planes by the United States military over Causby's
farm constitute a violation of the Takings Clause of the Fifth
Amendment?
Conclusion
Yes, to an extent. In a 5-2 opinion authored by Justice William O.
Douglas, the Court concluded that the ancient common law doctrine
"has no place in the modern world." Justice Douglas noted that,
were the Court to accept the doctrine as valid, "every
transcontinental flight would subject the operator to countless
trespass suits. Common sense revolts at the idea." However, while
the Court rejected the unlimited reach above and below the earth
described in the common law doctrine, it also ruled that, "if the
landowner is to have full enjoyment of the land, he must have
exclusive control of the immediate reaches of the enveloping
atmosphere." Without defining a specific limit, the Court stated that
flights over the land could be considered a violation of the Takings
Clause if they led to "a direct and immediate interference with the
enjoyment and use of the land." Given the damage caused by the
particularly low, frequent flights over his farm, the Court determined
that the government had violated Causby's rights, and he was
entitled to compensation. (Chief Justice Harlan Fiske Stone died on
April 22; Justice Robert H. Jackson took no part in the consideration
or decision in the case, leaving the court with 7 members.)












EN BANC
[G.R. No. 4223. August 19, 1908.]
NICOLAS LUNOD, ET AL., plaintiffs-appellees, vs. HIGINO
MENESES, defendant-appellant.
T. Icasiano for appellant.
R. Salinas for appellees.
SYLLABUS
1.REALTY; EASEMENT OF NATURAL. DRAINAGE. Where a
statutory easement exists between adjoining estates, the owner of
the lower lands must not construct any work that may impair or
obstruct an easement which consists in receiving the waters which
naturally, and without the intervention of man, descend from the
more elevated lands, neither shall the owner of the latter construct
any work that may increase the easement. (Arts. 552 and 563 of the
Civil Code, and Law of Waters of August 3, 1866.)
2.ID.; RIGHTS OF OWNER SUBJECT TO EXISTING SERVITUDES.
Every owner may enclose his property by means of walls, dikes,
fences, or any other device, but his right is limited by the easement
with which his estate is charged.
D E C I S I O N
TORRES, J p:
On the 14th of March, 1904, Nicolas Lunod, Juan de la Vega, Evaristo
Rodriguez, Fernando Marcelo, Esteban Villena, Benito Litao, Ventura
Hernandez, and Casimiro Pantanilla, residents of the town of
Bulacan, province of the same name, filed a written complaint
against Eligino Meneses, alleging that they each owned and
possessed farm lands situated in the places known as Maytunas and
Balot, near a small lake named Calalaran; that the defendant is the
owner of a fish-pond and a strip of land situated in Paraanan,
adjoining the said lake on one side, and the River Taliptip on the
other that from time immemorial, and consequently for more than
twenty years before 1901, there existed and still exists in favor of
the rice fields of the plaintiffs a statutory easement permitting the
flow of water over the said land in Paraanan, which easement the
said plaintiffs enjoyed until the year 1901 and consisted in that the
water collected upon their lands and in the Calalaran Lake could
flow through Paraanan into the Taliptip River. From that year
however, the defendant, without any right or reason, converted the
land in Paraanan into a fish pond and by means of a dam and a
bamboo net, prevented the free passage of the water through said
place into the Taliptip River; that in consequence the lands of the
plaintiff became flooded and damaged by the stagnant waters, there
being no outlet except through the land in Paraanan; that their
plantations were destroyed, causing them loss and damage to the
extent of about P1,000, which loss and damage will continue if the
obstructions to the flow of the water are allowed to remain,
preventing its passage through said land and injuring the rice
plantations of the plaintiffs. They therefore asked that judgment be
entered against the defendant, declaring that the said tract of land
in Paraanan is subject to a statutory easement permitting the flow of
water from the property of the plaintiffs, and that, without prejudice
to the issuing of a preliminary injunction, the defendant be ordered
to remove and destroy the obstructions that impede the passage of
the waters through Paraanan, and that in future, and for ever, he
abstain from closing in any manner the aforesaid tract of land; that,
upon judgment being entered, the said injunction be declared to be
final and that the defendant be sentenced to pay to the plaintiffs an
indemnity of P1,000, and the costs in the proceedings; that they be
granted any other and further equitable or proper remedy in
accordance with the facts alleged and proven.
In view of the demurrer interposed by the plaintiffs to the answer of
the defendant, the latter, on the 29th of August, 1904, filed an
amended answer, denying each and every one of the allegations of
the complaint, and alleged that no statutory easement existed nor
could exist in favor of the lands described in the complaint,
permitting the waters to flow over the fish pond that he, together
with his brothers, owned in the sitio of Bambang, the area and
boundaries of which were stated by him, and which he and his
brothers had inherited from their deceased mother, Apolinaria de
Leon; that the same had been surveyed by a land surveyor in
September, 1881; he also denied that he had occupied or converted
any land in the barrio of Bambang into a fish pond; therefore, he
asked the court to enter judgment in his favor, and to sentence the
plaintiffs to pay the costs and corresponding damages.
Upon the evidence adduced by both parties to the suit, the court, on
the 13th of March, 1907, entered judgment declaring that the
plaintiffs were entitled to a decision in their favor, and sentenced
the defendant to remove the dam placed to the east of the
Paraanan passage on the side of the Taliptip River opposite the old
dam in the barrio of Bambang, as well as to remove and destroy the
obstacles to the free passage of the waters through the strip of land
in Paraanan; to abstain in future, and forever, from obstructing or
closing in any manner the course of the waters through the said strip
of land. The request that the defendant be sentenced to pay an
indemnity was denied, and no ruling was made as to costs.
The defendant excepted to the above judgment and furthermore
asked for a new trial which was denied and also excepted to, and,
upon approval of the bill of exceptions, the question was submitted
to this court.
Notwithstanding the defendant's denial in his amended answer, it
appears to have been clearly proven in this case that the lands
owned by the plaintiffs in the aforesaid barrio, as well as the small
adjoining lake, named Calalaran, are located in places relatively
higher than the sitio called Paraanan where the land and fish pond
of the defendant are situated, and which border on the Taliptip
River; that during the rainy season the rain water which falls on the
land of the plaintiffs, and which flows toward the small Calalaran
Lake at flood time, has no outlet to the Taliptip River other than
through the low land of Paraanan; that on the border line between
Calalaran and Paraanan there has existed from time immemorial a
dam, constructed by the community for the purpose of preventing
the salt waters from the Taliptip River, at high tide, from flooding
the land in Calalaran, passing through the lowlands of Paraanan: but,
when rainfall was abundant, one of the residents was designated in
his turn by the lieutenant or justice of the barrio to open the sluice
gate in order to let out the water that flooded the rice fields,
through the land of Paraanan to the above-mentioned river; that
since 1901, the defendant constructed another dam along the
boundary of his fish pond in Paraanan, thereby impeding the outlet
of the waters that flood the fields at Calalaran, to the serious
detriment of the growing crops.
According to article 530 of the Civil Code, an easement is a charge
imposed upon one estate for the benefit of another estate
belonging to a different owner, and the realty in favor of which the
easement is established is called the dominant estate, and the one
charged with it the servient estate.
The lands of Paraanan being the lower are subject to the easement
of receiving and giving passage to the waters proceeding from the
higher lands and the lake of Calalaran; this easement was not
constituted by agreement between the interested parties; it is of a
statutory nature, and the law has imposed it for the common public
utility in view of the difference in the altitude of the lands in the
barrio of Bambang.
Article 552 of the Civil Code provides:
"Lower estates must receive the waters which naturally and without
the intervention of man descend from the higher estates, as well as
the stone or earth which they carry with them.
"Neither may the owner of the lower estate construct works
preventing this easement, nor the one of the higher estate works
increasing the burden."
Article 563 of the said code reads also:
"The establishment, extent, form, and conditions of the easements
of waters to which this section refers shall be governed by the
special law relating thereto in everything not provided for in this
code."
The special law cited is the Law of Waters of August 3, 1866, article
111 of which, treating of natural easements relating to waters,
provides:
"Lands situated at a lower level are subject to receive the waters
that flow naturally, without the work of man, from the higher lands
together with the stone or earth which they carry with them."
Hence, the owner of the lower lands can not erect works that will
impede or prevent such an easement or charge, constituted and
imposed by the law upon his estate for the benefit of the higher
lands belonging to different owners; neither can the latter do
anything to increase or extend the easement.
According to the provisions of law above referred to, the defendant,
Meneses, had no right to construct the works, nor the dam which
blocks the passage, through his lands and the outlet to the Taliptip
River, of the waters which flood the higher lands of the plaintiffs;
and having done so, to the detriment of the easement charged on
his estate, he has violated the law which protects and guarantees
the respective rights and regulates the duties of the owners of the
fields in Calalaran and Paraanan.
It is true that article 388 of said code authorizes every owner to
enclose his estate by means of walls, ditches, fences or any other
device, but his right is limited by the easement imposed upon his
estate.
The defendant Meneses might have constructed the works
necessary to make and maintain a fish pond within his own land, but
he was always under the strict and necessary obligation to respect
the statutory easement of waters charged upon his property, and
had no right to close the passage and outlet of the waters flowing
from the lands of the plaintiffs and the lake of Calalaran into the
Taliptip River. He could not lawfully injure the owners of the
dominant estates by obstructing the outlet to the Taliptip River of
the waters flooding the upper lands belonging to the plaintiffs.

It is perhaps useful and advantageous to the plaintiffs and other
owners of high lands in Calalaran, in addition to the old dike
between the lake of said place and the low lands in Paraanan, to
have another made by the defendant at the border of Paraanan
adjoining the said river, for the purpose of preventing the salt
waters of the Taliptip River flooding, at high tide, not only the
lowlands in Paraanan but also the higher ones of Calalaran and its
lake, since the plaintiffs can not prevent the defendant from
protecting his lands against the influx of salt water; but the
defendant could never be permitted to obstruct the flow of the
waters through his lands to the Taliptip River during the heavy rains,
when the high lands in Calalaran and the lake in said place are
flooded, thereby impairing the right of the owners of the dominant
estates.
For the above reasons, and accepting the findings of the court below
in the judgment appealed from in so far as they agree with the
terms of this decision, we must and do hereby declare that the
defendant, Higino Meneses, as owner of the servient estate, is
obliged to give passage to and allow the flow of the waters
descending from the Calalaran Lake and from the land of the
plaintiffs through his lands in Paraanan for their discharge into the
Taliptip River; and he is hereby ordered to remove any obstacle that
may obstruct the free passage of the waters whenever there may be
either a small or large volume of running water through his lands in
the sitio of Paraanan for their discharge into the Taliptip River; and
in future to abstain from impeding, in any manner, the flow of the
waters coming from the higher lands. The judgment appealed from
is affirmed, in so far as it agrees with this decision, and reversed in
other respects, with the costs of this instance against the appellant.
So ordered.
Carson, Willard and Tracey, JJ., concur.
||| (Lunod v. Meneses, G.R. No. 4223, August 19, 1908)
























Right of Accession (Arts. 440-475 NCC)
Concept/Definition
Kinds of Accession
Discreta (fruits)


EN BANC
[G.R. No. L-2659. October 12, 1950.]
In the matter of the testate estate of Emil Maurice Bachrach,
deceased. MARY MCDONALD BACHRACH,petitioner-appellee, vs.
SOPHIE SEIFERT and ELISA ELIANOFF, oppositors-appellants.
Ross, Selph, Carrascoso & Janda, for appellants.
Delgado & Flores, for appellee.
SYLLABUS
1.USUFRUCT; STOCK DIVIDED CONSIDERED CIVIL FRUIT AND
BELONGS TO USUFRUCTUARY. Under the Massachusetts rule, a
stock dividend is considered part of the capital and belongs to the
remainderman; while under the Pennsylvania rule, all earnings of a
corporation, when declared as dividends in whatever form, made
during the lifetime of the usufructuary, belong to the latter.
2.ID.; ID. The Pennsylvania rule is more in accord with our
statutory laws than the Massachusetts rule. Under section 16 of our
Corporation Law, no corporation may make or declare from its
business. Any dividend, therefore, whether cash or stock, represent
surplus profits. Article 471 of the Civil Code provides that the
usufructuary shall be entitled to receiveall the natural, industrial, and
civil fruits of the property in the usufruct. The stock dividend in
question in this case is a civil fruit of the original investment. The
shares of stock issued in payment of said dividend may be sold
independently of the original shares just as the offspring of a
domestic animal may be sold independently of its mother.
D E C I S I O N
OZAETA, J p:
Is a stock dividend fruit or income, which belongs to the
usufructuary, or is it capital or part of the corpus of the estate, which
pertains to the remainderman? That is the question raised in this
appeal.
The deceased E. M. Bachrach, who left no forced heir except his
widow Mary McDonald Bachrach, in his last will and testament
made varius legacies in cash and willed the remainder of his estate
as follows:
"Sixth: It is my will and do herewith bequeath and devise to my
beloved wife Mary McDonald Bachrach for life all the fruits and
usufruct of the remainder of all my estate after payment of the
legacies, bequests, and gifts provided for above; and she may enjoy
said usufruct and use or spend such fruits as she may in any manner
wish."
The will further provided that upon the death of Mary McDonald
Bachrach, one-half of all his estate "shall be divided share and share
alike by and between my legal heirs, to the exclusion of my
brothers."
The estate of E. M. Bachrach, as owner of 108,000 shares of stock of
the Atok-Big Wedge Mining Co., Inc., received from the latter 54,000
shares representing 50 per cent stock dividend on the said 108,000
shares. On June 10, 1948, Mary McDonald Bachrach, as usufructuary
or life tenant of the estate, petitioned the lower court to authorize
the Peoples Bank and Trust Company, as administrator of the estate
of E. M. Bachrach, to transfer to her the said 54,000 shares of stock
dividend by indorsing and delivering to her the corresponding
certificate of stock, claiming that said dividend, although paid out in
the form of stock, is fruit or income and therefore belonged to her as
usufructuary or life tenant. Sophie Siefert and Elisa Elianoff, legal
heirs of the deceased, opposed said petition on the ground that the
stock dividend in question was not income but formed part of the
capital and therefore belonged not to the usufructuary but to the
remainderman. And they have appealed from the order granting the
petition and overruling their objection.
While appellants admit that a cash dividend is an income, they
contend that a stock dividend is not, but merely represents an
addition to the invested capital. The so-called Massachusetts rule,
which prevails in certain jurisdictions in the United States, supports
appellants' contention. It regards cash dividends, however large, as
income, and stock dividends, however made, as capital. (Minot vs.
Paine, 99 Mass., 101; 96 Am. Dec., 705.) It holds that a stock
dividend is not in any true sense any dividend at all since it involves
no division or severance from the corporate assets of the subject of
the dividend; that it does not distribute property but simply dilutes
the shares as they existed before; and that it takes nothing from the
property of the corporation, and adds nothing to the interests of the
shareholders.
On the other hand, the so-called Pennsylvania rule, which prevails in
various other jurisdictions in the United States, supports appellee's
contention. This rule declares that all earnings of the corporation
made prior to the death of the testator stockholder belong to the
corpus of the estate, and that all earnings, when declared as
dividends in whatever form, made during the lifetime of the
usufructuary or life tenant are income and belong to the
usufructuary or life tenant. (Earp's Appeal, 28 Pa., 368.)
". . . It is clear that testator intended the remaindermen should have
only the corpus of the estate he left in trust, and that all dividends
should go to the life tenants. It is true that profits realized are not
dividends until declared by the proper officials of the corporation,
but distribution of profits, however made, is dividends, and the form
of the distribution is immaterial." (In re Thompson's Estate, 262 Pa.,
278; 105 Atl. 273, 274.)
In Hite vs. Hite (93 Ky., 257; 20 S. W., 778, 780), the Court of Appeals
of Kentucky, speaking thru its Chief Justice, said:
". . . Where a dividend, although declared in stock, is based upon the
earnings of the company, it is in reality, whether called by one name
or another, the income of the capital invested in it. It is but a mode
of distributing the profit. If it be not income, what is it? If it is, then it
is rightfully and equitably the property of the life tenant. If it be
really profit, then he should have it, whether paid in stock or money.
A stock dividend proper is the issue of new shares paid for by the
transfer of a sum equal to their par value from the profit and loss
account to that representing capital stock; and really a corporation
has no right to declare a dividend, either in cash or stock, except
from its earnings; and a singular state of case it seems to us, an
unreasonable one is presented if the company, although it rests
with it whether it will declare a dividend, can bind the courts as to
the proper ownership of it, and by the mode of payment substitute
its will for that of the testator, and favor the life tenants or the
remainder-men, as it may desire. It cannot, in reason, be considered
that the testator contemplated such a result. The law regards
substance, and not form, and such a rule might result not only in a
violation of the testator's intention, but it would give the power to
the corporation to beggar the life tenants, who, in this case, are the
wife and children of the testator, for the benefit of the ramainder-
men, who may perhaps be unknown to the testator, being unborn
when the will was executed. We are unwilling to adopt a rule which
to us seems so arbitrary, and devoid of reason and justice. If the
dividend be in fact a profit, although declared in stock, it should be
held to be income. It has been so held in Pennsylvania and many
other states, and we think it the correct rule. Earp's Appeal, 28 Pa.
St. 368; Cook, Stocks & S. sec. 554. . . ."
We think the Pennsylvania rule is more in accord with our statutory
laws than the Massachusetts rule. Under section 16 of our
Corporation Law, no corporation may make or declare any dividend
except from the surplus profits arising from its business. Any
dividend, therefore, whether cash or stock, represents surplus profits.
Article 471 of the Civil Code provides that the usufructuary shall be
entitled to receive all the natural, industrial, and civil fruits of the
property in usufruct. And articles 474 and 475 provide as follows:
"ART. 474.Civil fruits are deemed to accrue day by day, and belong to
the usufructuary in proportion to the time the usufruct may last.
"ART. 475.When a usufruct is created on the right to receive an
income or periodical revenue, either in money or fruits, or the
interest on bonds or securities payable to bearer, each matured
payment shall be considered as the proceeds or fruits of such right.
"When it consists of the enjoyment of the benefits arising from an
interest in an industrial or commercial enterprise, the profits of
which are not distributed at fixed periods, such profits shall have the
same consideration.
"In either case they shall be distributed as civil fruits, and shall be
applied in accordance with the rules prescribed by the next preceding
article."
The 108,000 shares of stock are part of the property in usufruct. The
54,000 shares of stock dividend are civil fruits of the original
investment. They represent profits, and the delivery of the certificate
of stock covering said dividend is equivalent to the payment of said
profits. Said shares may be sold independently of the original shares,
just as the offspring of a domestic animal may be sold independently
of its mother.
The order appealed from, being in accordance with the above-
quoted provisions of the Civil Code, is hereby affirmed, with costs
against the appellants.
Moran, C.J., Paras, Feria, Pablo, Bengzon, Tuason,
Montemayor and Reyes, JJ., concur.

||| (Bachrach v. Seifert, G.R. No. L-2659, October 12, 1950)







EN BANC
[G.R. No. 35223. September 17, 1931.]
THE BACHRACH MOTOR CO., INC., plaintiff-appellee, vs. TALISAY-
SILAY MILLING CO. ET AL., defendants-appellees. THE PHILIPPINE
NATIONAL BANK, intervenor-appellant.
Ramon J. Lacson for intervenor-appellant.
Mariano Ezpeleta for plaintiff-appellee.
Nolan & Hernaez for defendants-appellees Talisay-Silay Milling Co.
and Cesar Ledesma.
SYLLABUS
1.REAL PROPERTY; CIVIL FRUITS. The bonus which the Talisay-Silay
Milling Co., Inc., had to pay the planters who had mortgaged their
lands to the Philippine National Bank in order to secure the payment
of the company's debt to the bank, is not a civil fruit of the
mortgaged property.
2.ID.; ID. Article 355 of the Civil Code considers three things as civil
truths; (1) rents from building, (2) proceeds from leases of lands, and
(3) the income from perpetual or life annuities or similar sources of
revenue. The phrase "u otras analogas" used (in the original Spanish,
art. 355, last paragraph, Civil Code) in the following context: "Y el
importe de las rentas perpetuas, vitalicias u otras analogas," refers
to "rentas," for the adjectives "otras" and "analogas" agree with the
noun "rentas," as do also the other adjectives "perpetuas" and
"vitalicias."
D E C I S I O N
ROMUALDEZ, J p:
This proceeding originated in a complaint filed by the Bachrach
Motor Co., Inc. against the Talisay-Silay Milling Co., Inc., for the
delivery of the amount of P13,850 or promissory notes or other
instruments of credit for that sum payable on June 30, 1930, as
bonus in favor of Mariano Lacson Ledesma; the complaint further
prays that the sugar central be ordered to render an accounting of
the amounts it owes Mariano Lacson Ledesma by way of bonus,
dividends, or otherwise, and to pay the plaintiff a sum sufficient to
satisfy the judgment mentioned in the complaint, and that the sale
made by said Mariano Lacson Ledesma be declared null and void.
The Philippine National Bank filed a third party claim alleging a
preferential right to receive any amount which Mariano Lacson
Ledesma might be entitled to from the Talisay-Silay Milling Co. as
bonus, because that would be civil fruits of the land mortgaged to
said bank by said debtor for the benefit of the central referred to,
and by virtue of a deed on assignment, and praying that said central
be ordered to deliver directly to the intervening bank said sum on
account of the latter's credit against the aforesaid Mariano Lacson
Ledesma.
The corporation Talisay-Silay Milling Co., Inc., answered the
complaint stating that of Mariano Lacson Ledesma's credit, P7,500
belonged to Cesar Ledesma because he had purchased it, and
praying that it be absolved from the complaint and that the proper
party be named so that the remainder might be delivered.
Cesar Ledesma, in turn, claiming to be the owner by purchase in
good faith and for a consideration of the P7,500 which is a part of
the credit referred to above, answered praying that he be absolved
from the complaint.
The plaintiff Bachrach Motor Co., Inc., answered the third party
claim alleging that its credit against Mariano Lacson Ledesma was
prior and preferential to that of the intervening bank, and praying
that the latter's complaints be dismissed.
At the trial all the parties agreed to recognize and respect the sale
made in Favor of Cesar Ledesma of the P7,500 part of the credit in
question, for which reason the trial court dismissed the complaint
and cross-complaint against Cesar Ledesma authorizing the
defendant central to deliver to him the aforementioned sum of
P7,500. And upon conclusion of the hearing, the court held that the
Bachrach Motor Co., Inc., had a preferred right to receive the
amount of P11,076.02 which was Mariano Lacson Ledesma's bonus,
and it ordered the defendant central to deliver said sum to the
plaintiff.
The Philippine National Bank appeals, assigning the following
alleged errors as committed by the trial court:
"1.In holding that the bonus which the Talisay-Silay Milling Co., Inc.,
bound itself to pay the planters who had mortgaged their land to the
Philippine National Bank to secure the payment of the debt of said
central to said bank is not civil fruits of said land.
"2.In not holding that said bonus became subject to the mortgage
executed by the defendant Mariano Lacson Ledesma to the
Philippine National Bank to secure the payment of his personal debt
to said bank when it fell due.
"3.In holding that the assignment (Exhibit 9, P. N. B.) of said bonus
made on March 7, 1930, by Mariano Lacson Ledesma to the
Philippine National Bank to be applied to the payment of his debt to
said Philippine National Bank is fraudulent.
"4.In holding that the Bachrach Motor Co., Inc., in civil case No.
31597 of the Court of First Instance of Manila levied a valid
attachment upon the bonus in question.
"5.In admitting and considering the supplementary complaint filed
by the Bachrach Motor Co., Inc., alleging as a cause of action the
attachment of the bonus in question which said Bachrach Motor Co.,
Inc., in civil case No. 31821 of the Court of First Instance of Manila
levied after the filing of the original complaint in this case, and after
Mariano Lacson Ledesma in this case had been declared in default.
"6.In holding that the Bachrach Motor Co., Inc., has a preferential
right to receive from the Talisay-Silay Milling Co., Inc., the amount of
P11,076.02 which is in the possession of said corporation as the
bonus to be paid to Mariano Lacson Ledesma, and in ordering the
Talisay-Silay Milling Co., Inc., to deliver said amount to the Bachrach
Motor Co., Inc.
"7.In not holding that the Philippine National Bank has a preferential
right to receive from the Talisay-Silay Milling Co., Inc., the amount of
P11,076.02 held by said corporation as Mariano Lacson Ledesma's
bonus, and in not ordering said Talisay-Silay Milling Co., Inc., to
deliver said amount to the Philippine National Bank.
"8.In not holding that the amended complaint and the
supplementary complaint of the Bachrach Motor Co., Inc., do not
state facts sufficient to constitute a cause of action in favor of the
Bachrach Motor Co., Inc., and against the Talisay-Silay Milling Co.,
Inc., or against the Philippine National Bank."
The appellant bank bases its preferential right upon the contention
that the bonus in question is civil fruits of the land which the owners
had mortgaged for the benefit of the central giving the bonus, and
that, a civil fruits of said land, said bonus was assigned by Mariano
Lacson Ledesma on March 7, 1930, by virtue of the document Exhibit
9 of said intervening institution, which admitted in its brief that "if
the bonus in question is not civil fruits or rent which became subject
to the mortgage in favor of the Philippine National Bank when
Mariano Lacson Ledesma's personal obligation fell due, the
assignment of March 7, 1930 (Exhibit 9, P. N. B.), is null and void, not
because it is fraudulent, for there was no intent of fraud in executing
the deed, that the cause or consideration of the assignment was
erroneous, for it was based upon the proposition that the bonus was
civil fruits of the land mortgaged to the Philippine National Bank." (P.
31.)
The fundamental question, then, submitted to our consideration is
whether or not the bonus in question is civil fruits.
This is how that bonus came to be granted: On December 22, 1923,
the Talisay-Silay Milling Co., Inc., was indebted to the Philippine
National Bank. To secure the payment of its debt, it succeeded in
inducing its planters, among whom was Mariano Lacson Ledesma, to
mortgage their land to the creditor bank. And in order to
compensate those planters for the risk they were running with their
property under that mortgage, the aforesaid central, by a resolution
passed on that same date, i.e., December 22, 1923, and amended on
March 23, 1928, undertook to credit the owners of the plantation
thus mortgaged every year with a sum equal to two per centum of
the debt secured according to the yearly balance, the payment of the
bonus being made at once, or in part from time to time, as soon as
the central became free of its obligations to the aforesaid bank, and
of those contracted by virtue of the contract of supervision, and had
funds which might be so used, or as soon as it obtained from said
bank authority to make such payment. (Exhibits 5, 6; P. N. B.)
Article 355 of the Civil Code considers three things as civil fruits: First,
the rents of buildings; second, the proceeds from leases of lands;
and, third, the income from perpetual or life annuities, or other
similar sources of revenue. It may be noted that according to the
context of the law, the phrase "u otras analogas" refers only to rents
or income, for the adjectives "otras" and "analogas" agree with the
noun "rentas," as do also the other adjectives "perpetuas"
and "vitalicias." That is why we say that by "civil fruits" the Civil Code
understands one of three and only three things, to wit: the rent of a
building, the rent of land, and certain kinds of income. As the bonus
in question is not the rent of a building or of land, the only meaning
of "civil fruits" left to be examined is that of "income."
Assuming that in the broad juridical sense of the word "income" it
might be said that the bonus in question is "income" under article
355 of the Civil Code, it is obvious to inquire whether it is derived
from the land mortgaged by Mariano Lacson Ledesma to the
appellant bank for the benefit of the central; for if it is not obtained
from that land but from something else, it is not civil fruits of that
land, and the bank's contention is untenable.
It is to be noted that the said bonus bears no immediate, but only a
remote and accidental relation to the land mentioned, having been
granted as compensation for the risk of having subjected one's land
to a lien in favor of the bank, for the benefit of the entity granting
said bonus. If this bonus be income or civil fruits of anything, it is
income arising from said risk, or, if one chooses, from Mariano
Lacson Ledesma's generosity in facing the danger for the protection
of the central, but certainly it is not civil fruits or income from the
mortgaged property, which, as far as this case is concerned, has
nothing to do with it. Hence, the amount of the bonus, according to
the resolution of the central granting it, is not based upon the value,
importance or any other circumstance of the mortgaged property,
but upon the total value of the debt thereby secured, according to
the annual balance, which is something quite distinct from and
independent of the property referred to.

Finding no merit in this appeal, the judgment appealed from is
affirmed, without express finding as to costs. So ordered.
Johnson, Street, Malcolm, Villamor, Ostrand, Villa-Realand Imperial,
JJ., concur.

||| (Bachrach Motor Co., Inc. v. Talisay-Silay Milling Co., G.R. No.
35223, September 17, 1931)


































EN BANC
[G.R. No. 133879. November 21, 2001.]
EQUATORIAL REALTY DEVELOPMENT, INC., petitioner, vs. MAYFAIR
THEATER, INC., respondent.
Estelito P. Mendoza for petitioner.
De Borja Medialdea Bello Guevarra & Gerodias Law Offices for
private respondent.
SYNOPSIS
Mayfair Theater, Inc. was a lessee of portions of a building owned by
Carmelo & Bauermann, Inc. Their lease contracts contained a
provision granting Mayfair a right of first refusal to purchase the
subject properties. However, before the contracts ended, the subject
properties were sold by Carmelo to Equatorial Realty Development,
Inc. which prompted Mayfair to file a case for the annulment of the
Deed of Absolute Sale between Carmelo and Equatorial, specific
performance and damages. In 1996, the Court ruled in favor of
Mayfair. Barely five months after Mayfair had submitted its Motion
for Execution, Equatorial filed an action for collection of sum of
money against Mayfair claiming payment of rentals or reasonable
compensation for the defendant's use of the subject premises after
its lease contracts had expired. The lower court debunked the claim
of Equatorial for unpaid back rentals, holding that the rescission of
the Deed of Absolute Sale in the mother case did not confer on
Equatorial any vested or residual propriety rights, even in
expectancy. It further ruled that the Court categorically stated that
the Deed of Absolute Sale had been rescinded subjecting the present
complaint to res judicata. Hence, Equatorial filed the present
petition.
Theoretically, a rescissible contract is valid until rescinded. However,
this general principle is not decisive to the issue of whether
Equatorial ever acquired the right to collect rentals. What is decisive
is the civil law rule that ownership is acquired, not by mere
agreement, but by tradition or delivery. Under the factual
environment of this controversy as found by this Court in the mother
case, Equatorial was never put in actual and effective control or
possession of the property because of Mayfair's timely objection. In
the mother case, this Court categorically denied the payment of
interest, a fruit of ownership. By the same token, rentals, another
fruit of ownership, cannot be granted without mocking this
Court's en banc Decision, which had long become final.
SYLLABUS
1.CIVIL LAW; PROPERTY; CIVIL FRUIT OF OWNERSHIP; RENTALS.
Rent is a civil fruit that belongs to the owner of the property
producing it by right of accession. Consequently and ordinarily, the
rentals that fell due from the time of the perfection of the sale to
petitioner until its rescission by final judgment should belong to the
owner of the property during that period.
2.ID.; SALES; OWNERSHIP OF THE THING SOLD IS TRANSFERRED, NOT
BY CONTRACT ALONE, BUT BY TRADITION OR DELIVERY. By a
contract of sale, "one of the contracting parties obligates himself to
transfer ownership of and to deliver a determinate thing and the
other to pay therefor a price certain in money or its equivalent."
Ownership of the thing sold is a real right, which the buyer acquires
only upon delivery of the thing to him "in any of the ways specified in
Articles 1497 to 1501, or in any other manner signifying an
agreement that the possession is transferred from the vendor to the
vendee." This right is transferred, not by contract alone, but by
tradition or delivery. Non nudis pactis sed traditione dominia rerum
transferantur.
3.ID.; ID.; ID.; THERE IS DELIVERY WHEN THE THING SOLD IS PLACED
UNDER THE CONTROL AND POSSESSION OF THE VENDEE. [T]here
is said to be delivery if and when the thing sold "is placed in the
control and possession of the vendee." Thus, it has been held that
while the execution of a public instrument of sale is recognized by
law as equivalent to the delivery of the thing sold, such constructive
or symbolic delivery, being merely presumptive, is deemed negated
by the failure of the vendee to take actual possession of the land
sold. Delivery has been described as a composite act, a thing in
which both parties must join and the minds of both parties concur. It
is an act by which one party parts with the title to and the possession
of the property, and the other acquires the right to and the
possession of the same. In its natural sense, delivery means
something in addition to the delivery of property or title; it means
transfer of possession. In the Law on Sales, delivery may be either
actual or constructive, but both forms of delivery contemplate "the
absolute giving up of the control and custody of the property on the
part of the vendor, and the assumption of the same by the
vendee." aHDTAI
4.ID.; ID.; ID.; NOT PRESENT IN CASE AT BAR. [T]heoretically, a
rescissible contract is valid until rescinded. However,
thisgeneral principle is not decisive to the issue of whether Equatorial
ever acquired the right to collect rentals. What is decisive is the civil
law rule that ownership is acquired, not by mere agreement, but by
tradition or delivery. Under the factual environment of this
controversy as found by this Court in the mother case, Equatorial
was never put in actual and effective control or possession of the
property because of Mayfair's timely objection.
5.ID.; ID.; ID.; EXECUTION OF CONTRACT OF SALE AS FORM OF
CONSTRUCTIVE DELIVERY HOLDS TRUE ONLY WHEN THERE IS NO
IMPEDIMENT THAT MAY PREVENT THE PASSING OF THE PROPERTY
FROM THE VENDOR TO THE VENDEE. From the peculiar facts of
this case, it is clear that petitioner never took actual
control and possession of the property sold, in view of respondent's
timely objection to the sale and the continued actual possession of
the property. The objection took the form of a court action
impugning the sale which, as we know, was rescinded by a judgment
rendered by this Court in the mother case. It has been held that the
execution of a contract of sale as a form of constructive delivery is a
legal fiction. It holds true only when there is no impediment that may
prevent the passing of the property from the hands of the vendor
into those of the vendee. When there is such impediment, "fiction
yields to reality the delivery has not been effected." Hence,
respondent's opposition to the transfer of the property by way of
sale to Equatorial was a legally sufficient impediment that effectively
prevented the passing of the property into the latter's hands.
6.ID.; ID.; EXECUTION OF PUBLIC INSTRUMENT GIVES RISE ONLY TO
A PRIMA FACIE PRESUMPTION OF DELIVERY. The execution of a
public instrument gives rise, . . . only to a prima facie presumption of
delivery. Such presumption is destroyed when the instrument itself
expresses or implies that delivery was not intended; or when by other
means it is shown that such delivery was not effected, because a
third person was actually in possession of the thing. In the latter
case, the sale cannot be considered consummated.
7.ID.; OBLIGATIONS AND CONTRACTS; RESCISSIBLE CONTRACTS; NOT
ONLY THE LAND AND BUILDING SOLD SHALL BE RETURNED TO THE
SELLER BUT ALSO THE RENTAL PAYMENTS PAID, IF ANY. [T]he
point may be raised that under Article 1164 of the Civil Code,
Equatorial as buyer acquired a right to the fruits of the thing sold
from the time the obligation to deliver the property to petitioner
arose. That time arose upon the perfection of the Contract of Sale on
July 30, 1978, from which moment the laws provide that the parties
to a sale may reciprocally demand performance. Does this mean that
despite the judgment rescinding the sale, the right to the fruits
belonged to, and remained enforceable by, Equatorial? Article 1385
of the Civil Code answers this question in the negative, because
"[r]escission creates the obligation to return the things which were
the object of the contract, together with their fruits, and the price
with its interest; . . . ." Not only the land and building sold, but also
the rental payments paid, if any, had to be returned by the buyer.
8.ID.; SALES; CONTRACT OF SALE; RENTAL PAYMENTS MADE SHOULD
NOT BE CONSTRUED AS A RECOGNITION OF THE BUYER AS NEW
ORDER BUT MERELY TO AVOID IMMINENT EVICTION; CASE AT BAR.
The fact that Mayfair paid rentals to Equatorial during the
litigation should not be interpreted to mean either actual delivery
or ipso facto recognition of Equatorial's title. The CA Records of the
mother case show that Equatorial as alleged buyer of the disputed
properties and as alleged successor-in-interest of Carmelo's rights as
lessor submitted two ejectment suits against Mayfair. Filed in the
Metropolitan Trial Court of Manila, the first was docketed as Civil
Case No. 121570 on July 9, 1987; and the second, as Civil Case No.
131944 on May 28, 1990. Mayfair eventually won them both.
However, to be able to maintain physical possession of the premises
while awaiting the outcome of the mother case, it had no choice but
to pay the rentals. The rental payments made by Mayfair should not
be construed as a recognition of Equatorial as the new owner. They
were made merely to avoid imminent eviction.
9.STATUTORY CONSTRUCTION; GENERAL PROPOSITIONS DO NOT
DECIDE SPECIFIC CASES. As pointed out by Justice Holmes, general
propositions do not decide specific cases. Rather, "laws are
interpreted in the context of the peculiar factual situation of each
case. Each case has its own flesh and blood and cannot be decided
on the basis of isolated clinical classroom principles."
10.CIVIL LAW; SALES; VALID FROM INCEPTION BUT JUDICIALLY
RESCINDED BEFORE IT COULD BE CONSUMMATED; CASE AT BAR.
[T]he sale to Equatorial may have been valid from inception, but it
was judicially rescinded before it could be consummated. Petitioner
never acquired ownership, not because the sale was void, as
erroneously claimed by the trial court, but because the sale was not
consummated by a legally effective delivery of the property sold.
11.ID.; ID.; BUYER IN BAD FAITH; NOT ENTITLED TO ANY BENEFIT;
ENTITLED SOLELY TO THE RETURN OF THE PURCHASE PRICE; MUST
BEAR ANY LOSS. [A]ssuming for the sake of argument that there
was valid delivery, petitioner is not entitled to anybenefits from the
"rescinded" Deed of Absolute Sale because of its bad faith. This being
the law of the mother case decided in 1996, it may no longer be
changed because it has long become final and executory. . . . Thus,
petitioner was and still is entitledsolely to the return of the purchase
price it paid to Carmelo; no more, no less. This Court has firmly ruled
in the mother case that neither of them is entitled to any
consideration of equity, as both "took unconscientious advantage of
Mayfair." In the mother case, this Court categorically denied the
payment of interest, a fruit of ownership. By the same token, rentals,
another fruit of ownership, cannot be granted without mocking this
Court's en banc Decision, which has long become final. Petitioner's
claim of reasonable compensation for respondent's use and
occupation of the subject property from the time the lease expired
cannot be countenanced. If it suffered any loss, petitioner must bear
it in silence, since it had wrought that loss upon itself. Otherwise,
bad faith would be rewarded instead of punished. ICaDHT

12.REMEDIAL LAW; CIVIL PROCEDURE; EFFECT OF FINALITY OF
JUDGMENT; RES JUDICATA; ELUCIDATED. Under the doctrine
of res judicata or bar by prior judgment, a matter that has been
adjudicated by a court of competent jurisdiction must be deemed to
have been finally and conclusively settled if it arises in any
subsequent litigation between the same parties and for the same
cause. Thus, "[a] final judgment on the merits rendered by a court of
competent jurisdiction is conclusive as to the rights of the parties and
their privies and constitutes an absolute bar to subsequent actions
involving the same claim, demand, or cause of action." Res
judicata is based on the ground that "the party to be affected, or
some other with whom he is in privity, has litigated the same matter
in a former action in a court of competent jurisdiction, and should
not be permitted to litigate it again." It frees the parties from
undergoing all over again the rigors of unnecessary suits and
repetitive trials. At the same time, it prevents the clogging of court
dockets. Equally important, it stabilizes rights and promotes the rule
of law.
13.ID.; ID.; ID.; ID.; APPLICABLE IN CASE AT BAR. Suffice it to say
that, clearly, our ruling in the mother case bars petitioner from
claiming back rentals from respondent. Although the court a
quo erred when it declared "void from inception" the Deed of
Absolute Sale between Carmelo and petitioner, our foregoing
discussion supports the grant of the Motion to Dismiss on the ground
that our prior judgment in GR No. 106063 has already resolved the
issue of back rentals. On the basis of the evidence presented during
the hearing of Mayfair's Motion to Dismiss, the trial court found that
the issue of ownership of the subject property has been decided by
this Court in favor of Mayfair. . . . Hence, the trial court decided the
Motion to Dismiss on the basis of res judicata, even if it erred in
interpreting the meaning of "rescinded" as equivalent to "void." In
short, it ruled on the ground raised; namely, bar by prior judgment.
By granting the Motion, it disposed correctly, even if its legal reason
for nullifying the sale was wrong.
MELO, J., concurring opinion:
1.REMEDIAL LAW; CIVIL PROCEDURE; FINAL AND EXECUTORY
DECISION SHOULD BE RESPECTED. Equatorial profited from the
use of the building for all the years when it had no right or, as stated
in our decision, had an inferior right over the property. Mayfair,
which had the superior right, continued to pay rent but it was the
rate fixed in the lease contract with Carmelo. We see no reason for
us to now deviate from the reasoning given in our main decision. The
decision has been final and executory for five (5) years and petitioner
has failed to present any valid and reasonable ground to reconsider,
modify or reverse it. Let that which has been fairly adjudicated
remain final.
2.CIVIL LAW; OBLIGATIONS AND CONTRACTS; RESCISSIBLE
CONTRACTS; REMAINS VALID AND BINDING UPON THE PARTIES
UNTIL THE SAME IS RESCINDED; NOT APPLICABLE TO A PERSON
WHO IS NOT A PRIVY TO A CONTRACT. Equatorial relies on the
Civil Code provision on rescissible contracts to bolster its claim. Its
argument is that a rescissible contract remains valid and binding
upon the parties thereto until the same is rescinded in an
appropriate judicial proceeding. Equatorial conveniently fails to state
that the July 31, 1978 Deed of Absolute Sale was between Equatorial
and Carmelo only. Respondent Mayfair was not a party to the
contract. The deed of sale was surreptitiously entered into between
Carmelo and Equatorial behind the back and in violation of the rights
of Mayfair. Why should the innocent and wronged party now be
made to bear the consequences of an unlawful contract to which it
was not privy? Insofar as Equatorial and Carmelo are concerned,
their 1978 contract may have validly transferred ownership from one
to the other. But not as far as Mayfair is concerned.
3.ID.; ID.; ID.; NON-EXISTENT OR VOID FROM ITS INCEPTION AS FAR
AS THE INJURED THIRD PARTY IS CONCERNED. Mayfair starts its
arguments with a discussion of Article 1381 of the Civil Code that
contracts entered into in fraud of creditors are rescissible. There is
merit in Mayfair's contention that the legal effects are not restricted
to the contracting parties only. On the contrary, the rescission is for
the benefit of a third party, a stranger to the contract. Mayfair
correctly states that as far as the injured third party is concerned, the
fraudulent contract, once rescinded, is non-existent or void from its
inception. Hence, from Mayfair's standpoint, the deed of absolute
sale which should not have been executed in the first place by reason
of Mayfair's superior right to purchase the property and which deed
was cancelled for that reason by this Court, is legally non-existent.
There must be a restoration of things to the condition prior to the
celebration of the contract[.]
4.ID.; ID.; ID.; INJURED THIRD PARTY SHOULD NOT BE GIVEN AN
EMPTY OR VACUOUS VICTORY. [The] Court emphasized in the
main case that the contract of sale between Equatorial and Carmelo
was characterized by bad faith. The Court described the sale as
"fraudulent" in its 1996 decision. It stated that the damages which
Mayfair suffered are in terms of actual injury and lost opportunities,
emphasizing that Mayfair should not be given an empty or vacuous
victory. Moreover, altogether too many suits have been filed in this
case. Four separate petitions have come before us, necessitating full
length decisions in at least 3 of them. The 1996 decision stressed
that the Court has always been against multiplicity of suits. TADIHE
5.ID.; ID.; ID.; BAD FAITH OF THE PRIVIES ON THE EXECUTION OF THE
DEED OF SALE WAS PRESENT. There was bad faith from the
execution of the deed of sale because Equatorial and Carmelo
affirmatively operated with furtive design or with some motive of
self-interest or ill-will or for ulterior purposes (Air France
vs. Carrascoso, 18 SCRA 166 [1966]). There was breach of a known
duty by the two parties to the unlawful contract arising from motives
of interests or ill-will calculated to cause damages to another (Lopez
vs. Pan American World Airways, 123 Phil. 264 [1966]).
6.ID.; ID.; ID.; ID.; PRIVIES COULD NOT AVAIL OF ANY
CONSIDERATIONS BASED ON EQUITY. We ruled that because of
bad faith, neither may Carmelo and Equatorial avail themselves of
considerations based on equity which might warrant the grant of
interests and, in this case, unconscionably increased rentals. . . .
Considering the judgments in our 3 earlier decisions, Mayfair is under
no obligation to pay any interests, whether based on law or equity,
to Carmelo or Equatorial. Mayfair is the wronged entity, the one
which has suffered injury since 1978 or for the 23 years it was
deprived of the property. Equatorial has received rentals and other
benefits from the use of the property during these 23 years, rents
and benefits which would have accrued to Mayfair if its rights had
not been violated. There is no obligation on the part of respondent
Mayfair to pay any increased, additional, back or future rentals or
interests of any kind to petitioner Equatorial under the circumstances
of this case.
7.ID.; ID.; ID.; ID.; NATURAL PERSON AFFECTED IS EVEN ENTITLED TO
MORAL DAMAGES. [I]f Mayfair were a natural person, it could
very well have asked for moral damages instead of facing a lengthy
and expensive suit to pay rentals many times higher than those
stipulated in the contract of lease. Under the Civil Code, Mayfair is
the victim in a breach of contract where Carmelo and Equatorial
acted fraudulently and in bad faith.
VITUG, J., dissenting opinion:
1.CIVIL LAW; OBLIGATIONS AND CONTRACTS; CLASSIFICATION OF
DEFECTIVE CONTRACTS. Civil Law, in its usual sophistication,
classifies defective contracts (unlike the seemingly generic treatment
in Common Law), into, first, the rescissible contracts, which are the
least infirm; followed by, second, the voidable contracts; then, third,
the unenforceable contracts; and, finally, fourth, the worst of all or
the void contracts.
2.ID.; ID.; RESCISSIBLE CONTRACTS; VALID, BINDING AND EFFECTIVE
UNTIL RESCINDED. In terms of their efficaciousness, rescissible
contracts are regarded, among the four, as being the closest to
perfectly executed contracts. A rescissible contract contains all the
requisites of a valid contract and are considered legally binding, but
by reason of injury or damage to either of the contracting parties or
to third persons, such as creditors, it is susceptible to rescission at
the instance of the party who may be prejudiced thereby. A
rescissible contract is valid, binding and effective until it is rescinded.
The proper way by which it can be assailed is by an action for
rescission based on any of the causes expressly specified by law.
3.ID.; ID.; ID.; VALIDLY TRANSFERRED OWNERSHIP OF THE PROPERTY
TO THE BUYER FROM THE TIME THE DEED OF SALE WAS EXECUTED.
[W]hen the Court held the contract to be "deemed rescinded" in
G.R. No. 106063, the Court did not mean a "declaration of nullity" of
the questioned contract. The agreement between petitioner and
Carmelo, being efficacious until rescinded, validly transferred
ownership over the property to petitioner from the time the deed of
sale was executed in a public instrument on 30 July 1978 up to the
time that the decision in G.R. No. 106063 became final on 17 March
1997. It was only from the latter date that the contract had ceased
to be efficacious. The fact that the subject property was in the hands
of a lessee, or for that matter of any possessor with a juridical title
derived from an owner, would not preclude a conferment of
ownership upon the purchaser nor be an impediment from the
transfer of ownership from the seller to the buyer.
4.ID.; ID.; ID.; ID.; GOOD FAITH AND BAD FAITH PLAY NO ROLE;
BUYER IS ENTITLED TO ALL INCIDENTS OF OWNERSHIP INCLUSIVE OF
THE RIGHT TO THE FRUITS OF THE PROPERTY; APPLICABLE IN CASE
AT BAR. Petitioner, being the owner of the property (and none
other) until the judicial rescission of the sale in its favor, was entitled
to all incidents of ownership inclusive of, among its other elements,
the right to the fruits of the property. Rentals or rental value over
that disputed property from 30 July 1978 up to 17 March 1997
should then properly pertain to petitioner. In this respect, the much
abused terms of "good faith" or "bad faith" play no role; ownership,
unlike other concepts, is never described as being either in good faith
or in bad faith.

5.ID.; ID.; RESCISSION OF CONTRACTS DIFFERENTIATED FROM THE
RESOLUTION OF RECIPROCAL OBLIGATIONS. The remedy of
rescission in the case of rescissible contracts under Article 1381 is not
to be confused with the remedy of rescission, or more properly
termed "resolution," of reciprocal obligations under Article 1191 of
the Civil Code. While both remedies presuppose the existence of a
juridical relation that, once rescinded, would require mutual
restitution, it is basically, however, in this aspect alone when the two
concepts coincide. Resolution under Article 1191 would totally
release each of the obligors from compliance with their respective
covenants. It might be worthwhile to note that in some cases,
notably Ocampo vs. Court of Appeals, and Velarde vs. Court of
Appeals, where the Court referred to rescission as being likened to
contracts which are deemed "void at inception" the focal point is the
breach of the obligation involved that would
allow resolution pursuant to Article 1191 of the Civil Code. The
obvious reason is that when parties are reciprocally bound, the
refusal or failure of one of them to comply with his part of the
bargain should allow the other party to resolve their juridical
relationship rather than to leave the matter in a state of continuing
uncertainty. The result of the resolution, when decreed, renders the
reciprocal obligations inoperative "at inception." Upon the other
hand, the rescission of a rescissible contract under Article 1381,
taken in conjunction with Article 1385, is a relief which the law
grants for the protection of a contracting party or a third person
from injury and damage that the contract may cause, or to protect
some incompatible and preferential right created by the contract.
Rescissible contracts are not void ab initio, and the principle, "quod
nullum est nullum producit effectum," in void and inexistent
contracts is inapplicable. Until set aside in an appropriate action
rescissible contracts are respected as being legally valid, binding and
in force. It would be wrong to say that rescissible contracts produce
no legal effects whatsoever and that no acquisition or loss of rights
could meanwhile occur and be attributed to the terminated contract.
The effects of the rescission, prospective in nature, can come about
only upon its proper declaration as such. cHCaIE
SANDOVAL-GUTIERREZ, J., dissenting opinion:
1.CIVIL LAW; SALES; OWNERSHIP IS TRANSFERRED TO THE VENDEE
BY MEANS OF DELIVERY. Firmly incorporated in our Law on Sales
is the principle that ownership is transferred to the vendee by means
of delivery, actual or constructive. There is actual delivery when the
thing sold is placed in the control and possession of the vendee.
Upon the other hand, there is constructive delivery when the delivery
of the thing sold is represented by other signs or acts indicative
thereof. Article 1498 of the Civil Code is in point. It provides that
"When the sale is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the thing which is the
object of the contract, if from the deed the contrary does not appear
or cannot clearly be inferred."
2.ID.; ID.; ID.; PRESENT IN CASE AT BAR. To say that this Court
found no transfer of ownership between Equatorial and Carmelo is
very inaccurate. For one, this Court, in disposing of G.R. No. 106063
explicitly ordered Equatorial to "execute the deeds and documents
necessary to return ownership to Carmelo & Bauermann of the
disputed lots." I suppose this Court would not have made such an
order if it did not recognize the transfer of ownership from Carmelo
to Equatorial under the contract of sale. For why would the Court
order Equatorial to execute the deeds and documents necessary to
return ownership to Carmelo if, all along, it believed
that ownership remained with Carmelo? Furthermore, this Court
explicitly stated in the Decision that Equatorial received rentals from
Mayfair during the pendency of the case. . . . Obviously, this Court
acknowledged the delivery of the property from Carmelo to
Equatorial. As aptly described by Justice Panganiban himself, the sale
between Carmelo and Equatorial had not only been "perfected" but
also "consummated."
3.ID.; PROPERTY; RECEIVING RENTALS IS AN EXERCISE OF ACTUAL
POSSESSION. That actual possession of the property was turned
over by Carmelo to Equatorial is clear from the fact that the latter
received rents from Mayfair. Significantly, receiving rentals is an
exercise of actual possession. Possession, as defined in the Civil Code,
is the holding of a thing or the enjoyment of a right. It may either be
by material occupation or by merely subjecting the thing or right to
the action of our will. Possession may therefore be exercised through
one's self or through another. It is not necessary that the person in
possession should himself be the occupant of the property, the
occupancy can be held by another in the name of the one who claims
possession. In the case at bench, Equatorial exercised possession
over the disputed property through Mayfair. When Mayfair paid its
monthly rentals to Equatorial, the said lessee recognized the superior
right of Equatorial to the possession of the property. And even if
Mayfair did not recognize Equatorial's superior right over the
disputed property, the fact remains that Equatorial was then
enjoying the fruits of its possession.
4.ID.; ID.; DEGREES OF POSSESSION. [I]t will be of aid to lay down
the degrees of possession. The first degree is the mere holding, or
possession without title whatsoever, and in violation of the right of
the owner. Here, both the possessor and the public know that the
possession is wrongful. An example of this is the possession of a thief
or a usurper of land. The second is possession with juridical title, but
not that of ownership. This is possession peaceably acquired, such
that of a tenant, depositary, or pledge. The third is possession with a
just title, or a title sufficient to transfer ownership, but not from the
true owner. An example is the possession of a vendee of a piece of
land from one who pretends to be the owner but is in fact not the
owner thereof. And thefourth is possession with a just title from the
true owner. This is possession that springs from ownership.
Undoubtedly, Mayfair's possession is by virtue of juridical title under
the contract of lease, while that of Equatorial is by virtue of its right
of ownership under the contract of sale.
5.ID.; SALES; TIMELY OBJECTION AND CONTINUED ACTUAL
POSSESSION OF THE PROPERTY OF THE INJURED THIRD PARTY DID
NOT PREVENT THE PASSING OF THE PROPERTY FROM THE SELLER TO
THE BUYER; CASE AT BAR. The fact that Mayfair has remained in
"actual possession of the property," after the perfection of the
contract of sale between Carmelo and Equatorial up to the finality of
this Court's Decision in G.R. No. 106063 (and even up to the present),
could not prevent the consummation of such contract. As I have
previously intimated, Mayfair's possession is not under a claim of
ownership. It cannot in any way clash with the ownership accruing to
Equatorial by virtue of the sale. The principle has always been that
the one who possesses as a mere holder acknowledges in another a
superior right or right of ownership. A tenant possession of the thing
leased as a mere holder, so does the usufructuary of the thing in
usufruct; and the borrower of the thing loaned in commodatum.
None of these holders asserts a claim of ownership in himself over
the thing. Similarly, Mayfair does not claim ownership, but only
possession as a lessee with the prior right to purchase the property.
In G.R. No. 106063, Mayfair's main concern in its action for specific
performance was the recognition of its right of first refusal. Hence,
the most that Mayfair could secure from the institution of its suit
was to be allowed to exercise its right to buy the property upon
rescission of the contract of sale. Not until Mayfair actually exercised
what it was allowed to do by this Court in G.R. No. 106063,
specifically to buy the disputed property for P11,300,000.00, would it
have any right of ownership. How then, at that early stage, could
Mayfair's action be an impediment in the consummation of the
contract between Carmelo and Equatorial? Pertinently, it does not
always follow that, because a transaction is prohibited or illegal,
title, as between the parties to the transaction, does not pass from
the seller, donor, or transferor to the vendee, donee or transferee.
6.ID.; ID.; ID.; BUYER HAS THE RIGHT TO BE PAID WHATEVER
MONTHLY RENTALS DURING THE EXISTENCE OF THE CONTRACT.
[C]onformably to the foregoing disquisition, I maintain that
Equatorial has the right to be paid whatever monthly rentals during
the period that the contract of sale was in existence minus the rents
already paid. In Guzman vs. Court of Appeals, this Court decreed that
upon the purchase of the leased property and the proper notice by
the vendee, the lessee must pay the agreed monthly rentals to the
new owner since, by virtue of the sale, the vendee steps into the
shoes of the original lessor to whom the lessee bound himself to pay.
His belief that the subject property should have been sold to him
does not justify the unilateral withholding of rental payments due to
the new owner of the property. It must be stressed that under Article
1658 of the Civil Code, there are only two instances wherein the
lessee may suspend payment of rent, namely: in case the lessor fails
to make the necessary repairs or to maintain the lessee in peaceful
and adequate enjoyment of the property leased. In this case, the fact
remains that Mayfair occupied the leased property. It derived benefit
from such occupation, thus it should pay the corresponding rentals
due. Nemo cum alterius detrimento locupletari potest. No one shall
enrich himself at the expense of another. TcHCIS
7.ID.; CONTRACTS; PRESENCE OF BAD FAITH DOES NOT PREVENT
THE AWARD OF RENT. Neither should the presence of bad faith
prevent the award of rent to Equatorial. While Equatorial committed
bad faith in entering into the contract with Carmelo, it has been
equitably punished when this Court rendered the contract rescissible.
That such bad faith was the very reason why the contract was
declared rescissible is evident from the Decision itself. To utilize it
again, this time, to deprive Equatorial of its entitlement to the rent
corresponding to the period during which the contract was supposed
to validly exist, would not only be unjust, it would also disturb the
very nature of a rescissible contract.

8.ID.; ID.; RESCISSIBLE CONTRACT AND VOID CONTRACT;
DIFFERENTIATED. Articles 1380 through 1389 of the Civil Code
deal with rescissible contracts. A rescissible contract is one that is
validly entered into, but is subsequently terminated or rescinded for
causes provided for by law. . . . Necessarily, therefore, a rescissible
contract remains valid and binding upon the parties thereto until the
same is rescinded in an appropriate judicial proceeding. On the other
hand, a void contract, which is treated in Articles 1490 through 1422
of the Civil Code, is inexistent and produces no legal effect
whatsoever. The contracting parties are not bound thereby and such
contract is not subject to ratification.
9.ID.; ID.; RESCISSIBLE CONTRACT; VALIDLY TRANSFERRED
OWNERSHIP OF THE SUBJECT PROPERTY TO THE BUYER. This
Court did not declare the Deed of Absolute Sale between Carmelo
and Equatorial void but merely rescissible. Consequently, the
contract was, at inception, valid and naturally, it validly transferred
ownership of the subject property to Equatorial. It bears emphasis
that Equatorial was not automatically divested of its ownership.
Rather, as clearly directed in the dispositive portion of our Decision,
Carmelo should return the purchase price to Equatorial which, in
turn, must execute such deeds and documents necessary to enable
Carmelo to reacquire its ownership of the property.
10.ID.; ID.; ID.; ID.; BUYER HAS THE RIGHT TO DEMAND PAYMENT OF
RENTALS FROM THE LESSEE WITH RIGHT TO REPURCHASE. I must
reiterate that Equatorial purchased the subject property from
Carmelo and became its owner on July 31, 1978. While the contract
of sale was "deemed rescinded" by this Court in G.R. No. 106063,
nevertheless the sale had remained valid and binding between the
contracting parties until March 17, 1997 when the Decision in G.R.
No. 106063 became final.Consequently, being the owner, Equatorial
has the right to demand from Mayfair payment of rentals
corresponding to the period from July 31, 1978 up to March 17,
1997.
D E C I S I O N
PANGANIBAN, J p:
General propositions do not decide specific cases. Rather, laws are
interpreted in the context of the peculiar factual situation of each
proceeding. Each case has its own flesh and blood and cannot be
ruled upon on the basis of isolated clinical classroom principles.
While we agree with the general proposition that a contract of sale
is valid until rescinded, it is equally true that ownership of the thing
sold is not acquired by mere agreement, but by tradition or delivery.
The peculiar facts of the present controversy as found by this Court in
an earlier relevant Decision show that delivery was not actually
effected; in fact, it was prevented by a legally effective impediment.
Not having been the owner, petitioner cannot be entitled to the civil
fruits of ownership like rentals of the thing sold. Furthermore,
petitioner's bad faith, as again demonstrated by the specific factual
milieu of said Decision, bars the grant of such benefits. Otherwise,
bad faith would be rewarded instead of punished.
The Case
Filed before this Court is a Petition for Review 1 under Rule 45 of the
Rules of Court, challenging the March 11, 1998 Order 2 of the
Regional Trial Court of Manila (RTC), Branch 8, in Civil Case No. 97-
85141. The dispositive portion of the assailed Order reads as follows:
"WHEREFORE, the motion to dismiss filed by defendant Mayfair is
hereby GRANTED, and the complaint filed by plaintiff Equatorial is
hereby DISMISSED." 3
Also questioned is the May 29, 1998 RTC Order 4 denying petitioner's
Motion for Reconsideration.
The Facts
The main factual antecedents of the present Petition are matters of
record, because it arose out of an earlier case decided by this Court
on November 21, 1996, entitled Equatorial Realty Development,
Inc. v. Mayfair Theater, Inc. 5 (henceforth referred to as the "mother
case"), docketed as GR No. 106063. IHEAcC
Carmelo & Bauermann, Inc. ("Carmelo") used to own a parcel of
land, together with two 2-storey buildings constructed thereon,
located at Claro M. Recto Avenue, Manila, and covered by TCT No.
18529 issued in its name by the Register of Deeds of Manila.
On June 1, 1967, Carmelo entered into a Contract of Lease with
Mayfair Theater Inc. ("Mayfair") for a period of 20 years. The lease
covered a portion of the second floor and mezzanine of a two-storey
building with about 1,610 square meters of floor area, which
respondent used as a movie house known as Maxim Theater.
Two years later, on March 31, 1969, Mayfair entered into a second
Contract of Lease with Carmelo for the lease of another portion of
the latter's property namely, a part of the second floor of the two-
storey building, with a floor area of about 1,064 square meters; and
two store spaces on the ground floor and the mezzanine, with a
combined floor area of about 300 square meters. In that space,
Mayfair put up another movie house known as Miramar Theater.
The Contract of Lease was likewise for a period of 20 years.
Both leases contained a provision granting Mayfair a right of first
refusal to purchase the subject properties. However, on July 30, 1978
within the 20-year-lease term the subject properties were sold
by Carmelo to Equatorial Realty Development, Inc. ("Equatorial") for
the total sum of P11,300,000, without their first being offered to
Mayfair.
As a result of the sale of the subject properties to Equatorial, Mayfair
filed a Complaint before the Regional Trial Court of Manila (Branch
7) for (a) the annulment of the Deed of Absolute Sale between
Carmelo and Equatorial, (b) specific performance, and (c) damages.
After trial on the merits, the lower court rendered a Decision in favor
of Carmelo and Equatorial. This case, entitled "Mayfair Theater, Inc.
v. Carmelo and Bauermann, Inc., et al.," was docketed as Civil Case
No. 118019.
On appeal (docketed as CA-GR CV No. 32918), the Court of Appeals
(CA) completely reversed and set aside the judgment of the lower
court.
The controversy reached this Court via GR No. 106063. In this mother
case, it denied the Petition for Review in this wise:
"WHEREFORE, the petition for review of the decision of the Court of
Appeals, dated June 23, 1992, in CA-G.R. CV No. 32918, is HEREBY
DENIED. The Deed of Absolute Sale between petitioners Equatorial
Realty Development, Inc. and Carmelo & Bauermann, Inc. is hereby
deemed rescinded; Carmelo & Bauermann is ordered to return to
petitioner Equatorial Realty Development the purchase price. The
latter is directed to execute the deeds and documents necessary to
return ownership to Carmelo & Bauermann of the disputed lots.
Carmelo & Bauermann is ordered to allow Mayfair Theater, Inc. to
buy the aforesaid lots for P11,300,000.00." 6
The foregoing Decision of this Court became final and executory on
March 17, 1997. On April 25, 1997, Mayfair filed a Motion for
Execution, which the trial court granted.
However, Carmelo could no longer be located. Thus, following the
order of execution of the trial court, Mayfair deposited with the clerk
of court a quo its payment to Carmelo in the sum of P11,300,000 less
P847,000 as withholding tax. The lower court issued a Deed of
Reconveyance in favor of Carmelo and a Deed of Sale in favor of
Mayfair. On the basis of these documents, the Registry of Deeds of
Manila canceled Equatorial's titles and issued new Certificates of
Title 7 in the name of Mayfair. TAIaHE
Ruling on Equatorial's Petition for Certiorari and Prohibition
contesting the foregoing manner of execution, the CA in its
Resolution of November 20, 1998, explained that Mayfair had no
right to deduct the P847,000 as withholding tax. Since Carmelo could
no longer be located, the appellate court ordered Mayfair to deposit
the said sum with the Office of the Clerk of Court, Manila, to
complete the full amount of P11,300,000 to be turned over to
Equatorial.
Equatorial questioned the legality of the above CA ruling before this
Court in GR No. 136221 entitled "Equatorial Realty Development, Inc.
v. Mayfair Theater, Inc." In a Decision promulgated on May 12,
2000, 8 this Court directed the trial court to follow strictly the
Decision in GR No. 106063, the mother case. It explained its ruling in
these words:
"We agree that Carmelo and Bauermann is obliged to return the
entire amount of eleven million three hundred thousand pesos
(P11,300,000.00) to Equatorial. On the other hand, Mayfair may not
deduct from the purchase price the amount of eight hundred forty-
seven thousand pesos (P847,000.00) as withholding tax. The duty to
withhold taxes due, if any, is imposed on the seller, Carmelo and
Bauermann, Inc." 9
Meanwhile, on September 18, 1997 barely five months after
Mayfair had submitted its Motion for Execution before the RTC of
Manila, Branch 7 Equatorial filed with the Regional Trial Court of
Manila, Branch 8, an action for the collection of a sum of money
against Mayfair, claiming payment of rentals or reasonable
compensation for the defendant's use of the subject
premises after its lease contracts had expired. This action was the
progenitor of the present case.
In its Complaint, Equatorial alleged among other things that the
Lease Contract covering the premises occupied by Maxim Theater
expired on May 31, 1987, while the Lease Contract covering the
premises occupied by Miramar Theater lapsed on March 31,
1989.10 Representing itself as the owner of the subject premises by
reason of the Contract of Sale on July 30, 1978, it claimed rentals
arising from Mayfair's occupation thereof.
Ruling of the RTC Manila, Branch 8
As earlier stated, the trial court dismissed the Complaint via the
herein assailed Order and denied the Motion for Reconsideration
filed by Equatorial. 11
The lower court debunked the claim of petitioner for unpaid back
rentals, holding that the rescission of the Deed of Absolute Sale in
the mother case did not confer on Equatorial any vested or residual
proprietary rights, even in expectancy.

In granting the Motion to Dismiss, the court a quo held that the
critical issue was whether Equatorial was the owner of the subject
property and could thus enjoy the fruits or rentals therefrom. It
declared the rescinded Deed of Absolute Sale as "void at its inception
as though it did not happen." EScHDA
The trial court ratiocinated as follows:
"The meaning of rescind in the aforequoted decision is to set aside.
In the case of Ocampo v. Court of Appeals, G.R. No. 97442, June 30,
1994, the Supreme Court held that, 'to rescind is to declare a
contract void in its inception and to put an end as though it never
were. It is not merely to terminate it and release parties from further
obligations to each other but to abrogate it from the beginning and
restore parties to relative positions which they would have occupied
had no contract ever been made.'
"Relative to the foregoing definition, the Deed of Absolute Sale
between Equatorial and Carmelo dated July 31, 1978 is void at its
inception as though it did not happen.
"The argument of Equatorial that this complaint for back rentals as
'reasonable compensation for use of the subject property after
expiration of the lease contracts presumes that the Deed of Absolute
Sale dated July 30, 1978 from whence the fountain of Equatorial's
alleged property rights flows is still valid and existing.
xxx xxx xxx
"The subject Deed of Absolute Sale having been rescinded by the
Supreme Court, Equatorial is not the owner and does not have any
right to demand backrentals from the subject property. . . . ." 12
The trial court added: "The Supreme Court in the Equatorial case,
G.R. No. 106063, has categorically stated that the Deed of Absolute
Sale dated July 31, 1978 has been rescinded subjecting the present
complaint to res judicata." 13
Hence, the present recourse. 14
Issues
Petitioner submits, for the consideration of this Court, the following
issues: 15
"A.
The basis of the dismissal of the Complaint by the Regional Trial
Court not only disregards basic concepts and principles in the law on
contracts and in civil law, especially those on rescission and its
corresponding legal effects, but also ignores the dispositive portion
of the Decision of the Supreme Court in G.R. No. 106063 entitled
'Equatorial Realty Development, Inc. & Carmelo & Bauermann, Inc.
vs. Mayfair Theater, Inc.' cSITDa
"B.
The Regional Trial Court erred in holding that the Deed of Absolute
Sale in favor of petitioner by Carmelo & Bauermann, Inc., dated July
31, 1978, over the premises used and occupied by respondent,
having been 'deemed rescinded' by the Supreme Court in G.R. No.
106063, is 'void at its inception as though it did not happen.'
"C.
The Regional Trial Court likewise erred in holding that the aforesaid
Deed of Absolute Sale, dated July 31, 1978, having been 'deemed
rescinded' by the Supreme Court in G.R. No. 106063, petitioner 'is not
the owner and does not have any right to demand backrentals from
the subject property,' and that the rescission of the Deed of Absolute
Sale by the Supreme Court does not confer to petitioner 'any vested
right nor any residual proprietary rights even in expectancy.'
"D.
The issue upon which the Regional Trial Court dismissed the civil
case, as stated in its Order of March 11, 1998, was not raised by
respondent in its Motion to Dismiss.
"E.
The sole ground upon which the Regional Trial Court dismissed Civil
Case No. 97-85141 is not one of the grounds of a Motion to Dismiss
under Sec. 1 of Rule 16 of the 1997 Rules of Civil Procedure."
Basically, the issues can be summarized into two: (1) the substantive
issue of whether Equatorial is entitled to back rentals; and (2) the
procedural issue of whether the court a quo's dismissal of Civil Case
No. 97-85141 was based on one of the grounds raised by respondent
in its Motion to Dismiss and covered by Rule 16 of the Rules of Court.
This Court's Ruling
The Petition is not meritorious.
First Issue:
Ownership of Subject Properties
We hold that under the peculiar facts and circumstances of the case
at bar, as found by this Court en banc in its Decision promulgated in
1996 in the mother case, no right of ownership was transferred from
Carmelo to Equatorial in view of a patent failure to deliver the
property to the buyer.
Rental a Civil
Fruit of Ownership
To better understand the peculiarity of the instant case, let us begin
with some basic parameters. Rent is a civil fruit 16 that belongs to
the owner of the property producing it 17 by right of
accession. 18 Consequently and ordinarily, the rentals that fell due
from the time of the perfection of the sale to petitioner until its
rescission by final judgment should belong to the owner of the
property during that period.
By a contract of sale, "one of the contracting parties obligates
himself to transfer ownership of and to deliver a determinate thing
and the other to pay therefor a price certain in money or its
equivalent." 19
Ownership of the thing sold is a real right, 20 which the buyer
acquires only upon delivery of the thing to him "in any of the ways
specified in articles 1497 to 1501, or in any other manner signifying
an agreement that the possession is transferred from the vendor to
the vendee." 21 This right is transferred, not by contract alone, but
by tradition or delivery. 22 Non nudis pactis sed traditione dominia
rerum transferantur. And there is said to be delivery if and when the
thing sold "is placed in the control and possession of the
vendee." 23 Thus, it has been held that while the execution of a
public instrument of sale is recognized by law as equivalent to the
delivery of the thing sold, 24 such constructive or symbolic delivery,
being merely presumptive, is deemed negated by the failure of the
vendee to take actual possession of the land sold. 25
Delivery has been described as a composite act, a thing in which both
parties must join and the minds of both parties concur. It is an act by
which one party parts with the title to and the possession of the
property, and the other acquires the right to and the possession of
the same. In its natural sense, delivery means something in addition
to the delivery of property or title; it means transfer of
possession. 26 In the Law on Sales, delivery may be either actual or
constructive, but both forms of delivery contemplate "the absolute
giving up of the control and custody of the property on the part of
the vendor, and the assumption of the same by the vendee." 27
Possession Never
Acquired by Petitioner
Let us now apply the foregoing discussion to the present issue. From
the peculiar facts of this case, it is clear that petitioner never
took actual control and possession of the property sold, in view of
respondent's timely objection to the sale and the continued actual
possession of the property. The objection took the form of a court
action impugning the sale which, as we know, was rescinded by a
judgment rendered by this Court in the mother case. It has been held
that the execution of a contract of sale as a form of constructive
delivery is a legal fiction. It holds true only when there is no
impediment that may prevent the passing of the property from the
hands of the vendor into those of the vendee. 28 When there is such
impediment, "fiction yields to reality the delivery has not been
effected." 29
Hence, respondent's opposition to the transfer of the property by
way of sale to Equatorial was a legally sufficient impediment that
effectively prevented the passing of the property into the latter's
hands. IcAaSD
This was the same impediment contemplated in Vda. de Sarmiento
v. Lesaca, 30 in which the Court held as follows:
"The question that now arises is: Is there any stipulation in the sale in
question from which we can infer that the vendor did not intend to
deliver outright the possession of the lands to the vendee? We find
none. On the contrary, it can be clearly seen therein that the vendor
intended to place the vendee in actual possession of the lands
immediately as can be inferred from the stipulation that the vendee
'takes actual possession thereof . . . with full rights to dispose, enjoy
and make use thereof in such manner and form as would be most
advantageous to herself.' The possession referred to in the contract
evidently refers to actual possession and not merely symbolical
inferable from the mere execution of the document.
"Has the vendor complied with this express commitment? She did
not. As provided in Article 1462, the thing sold shall be deemed
delivered when the vendee is placed in
the control and possession thereof, which situation does not here
obtain because from the execution of the sale up to the present the
vendee was never able to take possession of the lands due to the
insistent refusal of Martin Deloso to surrender them claiming
ownership thereof. And although it is postulated in the same article
that the execution of a public document is equivalent to delivery, this
legal fiction only holds true when there is no impediment that may
prevent the passing of the property from the hands of the vendor
into those of the vendee. . . . ." 31
The execution of a public instrument gives rise, therefore, only to
a prima facie presumption of delivery. Such presumption is destroyed
when the instrument itself expresses or implies that delivery was not
intended; or when by other means it is shown that such delivery was
not effected, because a third person was actually in possession of the
thing. In the latter case, the sale cannot be considered
consummated. ESacHC
However, the point may be raised that under Article 1164 of the Civil
Code, Equatorial as buyer acquired a right to the fruits of the thing
sold from the time the obligation to deliver the property to petitioner
arose. 32 That time arose upon the perfection of the Contract of Sale
on July 30, 1978, from which moment the laws provide that the
parties to a sale may reciprocally demand performance. 33 Does this
mean that despite the judgment rescinding the sale, the right to the
fruits 34 belonged to, and remained enforceable by, Equatorial?

Article 1385 of the Civil Code answers this question in the negative,
because "[r]escission creates the obligation to return the things
which were the object of the contract, together with their fruits, and
the price with its interest; . . . ." Not only the land and building sold,
but also the rental payments paid, if any, had to be returned by the
buyer.
Another point. The Decision in the mother case stated that
"Equatorial . . . has received rents" from Mayfair "during all the years
that this controversy has been litigated." The Separate Opinion of
Justice Teodoro Padilla in the mother case also said that Equatorial
was "deriving rental income" from the disputed property. Even
herein ponente's Separate Concurring Opinion in the mother case
recognized these rentals. The question now is: Do all these
statements concede actual delivery? EDHCSI
The answer is "No." The fact that Mayfair paid rentals to Equatorial
during the litigation should not be interpreted to mean either actual
delivery or ipso facto recognition of Equatorial's title.
The CA Records of the mother case 35 show that Equatorial as
alleged buyer of the disputed properties and as alleged successor-in-
interest of Carmelo's rights as lessor submitted two ejectment
suits against Mayfair. Filed in the Metropolitan Trial Court of Manila,
the first was docketed as Civil Case No. 121570 on July 9, 1987; and
the second, as Civil Case No. 131944 on May 28, 1990. Mayfair
eventually won them both. However, to be able to maintain physical
possession of the premises while awaiting the outcome of the
mother case, it had no choice but to pay the rentals.
The rental payments made by Mayfair should not be construed as a
recognition of Equatorial as the new owner. They were made merely
to avoid imminent eviction. It is in this context that one should
understand the aforequoted factual statements in theponencia in
the mother case, as well as the Separate Opinion of Mr. Justice
Padilla and the Separate Concurring Opinion of the herein ponente.
At bottom, it may be conceded that, theoretically, a rescissible
contract is valid until rescinded. However, this general principle is not
decisive to the issue of whether Equatorial ever acquired the right to
collect rentals. What is decisive is the civil law rule that ownership is
acquired, not by mere agreement, but by tradition or delivery. Under
the factual environment of this controversy as found by this Court in
the mother case, Equatorial was never put in actual and effective
control or possession of the property because of Mayfair's timely
objection.
As pointed out by Justice Holmes, general propositions do not decide
specific cases. Rather, "laws are interpreted in the context of the
peculiar factual situation of each case. Each case has its own flesh
and blood and cannot be decided on the basis of isolated clinical
classroom principles." 36
In short, the sale to Equatorial may have been valid from inception,
but it was judicially rescinded before it could be consummated.
Petitioner never acquired ownership, not because the sale was void,
as erroneously claimed by the trial court, but because the sale was
not consummated by a legally effective delivery of the property sold.
Benefits Precluded by
Petitioner's Bad Faith
Furthermore, assuming for the sake of argument that there was
valid delivery, petitioner is not entitled to any benefits from the
"rescinded" Deed of Absolute Sale because of its bad faith. This being
the law of the mother case decided in 1996, it may no longer be
changed because it has long become final and executory. Petitioner's
bad faith is set forth in the following pertinent portions of the
mother case:
"First and foremost is that the petitioners acted in bad faith to
render Paragraph 8 'inutile.'
xxx xxx xxx
"Since Equatorial is a buyer in bad faith, this finding renders the sale
to it of the property in question rescissible. We agree with
respondent Appellate Court that the records bear out the fact that
Equatorial was aware of the lease contracts because its lawyers had,
prior to the sale, studied the said contracts. As such, Equatorial
cannot tenably claim to be a purchaser in good faith, and, therefore,
rescission lies.
xxx xxx xxx
"As also earlier emphasized, the contract of sale between Equatorial
and Carmelo is characterized by bad faith, since it was knowingly
entered into in violation of the rights of and to the prejudice of
Mayfair. In fact, as correctly observed by the Court of Appeals,
Equatorial admitted that its lawyers had studied the contract of
lease prior to the sale. Equatorial's knowledge of the stipulations
therein should have cautioned it to look further into the agreement
to determine if it involved stipulations that would prejudice its own
interests.
xxx xxx xxx
"On the part of Equatorial, it cannot be a buyer in good faith because
it bought the property with notice and full knowledge that Mayfair
had a right to or interest in the property superior to its own. Carmelo
and Equatorial took unconscientious advantage of
Mayfair." 37 (emphasis supplied)
Thus, petitioner was and still is entitled solely to the return of the
purchase price it paid to Carmelo; no more, no less. This Court has
firmly ruled in the mother case that neither of them is entitled to any
consideration of equity, as both "took unconscientious advantage of
Mayfair." 38
In the mother case, this Court categorically denied the payment of
interest, a fruit of ownership. By the same token, rentals, another
fruit of ownership, cannot be granted without mocking this Court's
en banc Decision, which has long become final. AEDHST
Petitioner's claim of reasonable compensation for respondent's use
and occupation of the subject property from the time the lease
expired cannot be countenanced. If it suffered any loss, petitioner
must bear it in silence, since it had wrought that loss upon
itself. Otherwise, bad faith would be rewarded instead of punished.
We uphold the trial court's disposition, not for the reason it gave, but
for (a) the patent failure to deliver the property and (b) petitioner's
bad faith, as above discussed.
Second Issue:
Ground in Motion to Dismiss
Procedurally, petitioner claims that the trial court deviated from the
accepted and usual course of judicial proceedings when it dismissed
Civil Case No. 97-85141 on a ground not raised in respondent's
Motion to Dismiss. Worse, it allegedly based its dismissal on a
ground not provided for in a motion to dismiss as enunciated in the
Rules of Court.
We are not convinced. A review of respondent's Motion to Dismiss
Civil Case No. 97-85141 shows that there were two grounds invoked,
as follows:
"(A)
Plaintiff is guilty of forum-shopping.
"(B)
Plaintiff's cause of action, if any, is barred by prior judgment." 39
The court a quo ruled, inter alia, that the cause of action of
petitioner (plaintiff in the case below) had been barred by a prior
judgment of this Court in GR No. 106063, the mother case.
Although it erred in its interpretation of the said Decision when it
argued that the rescinded Deed of Absolute Sale was "void," we hold,
nonetheless, that petitioner's cause of action is indeed barred by a
prior judgment of this Court. As already discussed, our Decision in GR
No. 106063 shows that petitioner is not entitled to back rentals,
because it never became the owner of the disputed properties due to
a failure of delivery. And even assuming arguendo that there was a
valid delivery, petitioner's bad faith negates its entitlement to the
civil fruits of ownership, like interest and rentals.
Under the doctrine of res judicata or bar by prior judgment, a matter
that has been adjudicated by a court of competent jurisdiction must
be deemed to have been finally and conclusively settled if it arises in
any subsequent litigation between the same parties and for the
same cause. 40 Thus, "[a] final judgment on the merits rendered by a
court of competent jurisdiction is conclusive as to the rights of the
parties and their privies and constitutes an absolute bar to
subsequent actions involving the same claim, demand, or cause of
action." 41 Res judicata is based on the ground that "the party to be
affected, or some other with whom he is in privity, has litigated the
same matter in a former action in a court of competent jurisdiction,
and should not be permitted to litigate it again." 42
It frees the parties from undergoing all over again the rigors of
unnecessary suits and repetitive trials. At the same time, it prevents
the clogging of court dockets. Equally important, it stabilizes rights
and promotes the rule of law.
We find no need to repeat the foregoing disquisitions on the first
issue to show satisfaction of the elements of res judicata. Suffice it to
say that, clearly, our ruling in the mother case bars petitioner from
claiming back rentals from respondent. Although the courta
quo erred when it declared "void from inception" the Deed of
Absolute Sale between Carmelo and petitioner, our foregoing
discussion supports the grant of the Motion to Dismiss on the ground
that our prior judgment in GR No. 106063 has already resolved the
issue of back rentals.
On the basis of the evidence presented during the hearing of
Mayfair's Motion to Dismiss, the trial court found that the issue of
ownership of the subject property has been decided by this Court in
favor of Mayfair. We quote the RTC:
"The Supreme Court in the Equatorial case, G.R. No. 106063 has
categorically stated that the Deed of Absolute Sale dated July 31,
1978 has been rescinded subjecting the present complaint to res
judicata." 43 (Emphasis in the original)
Hence, the trial court decided the Motion to Dismiss on the basis
of res judicata, even if it erred in interpreting the meaning of
"rescinded" as equivalent to "void." In short, it ruled on the ground
raised; namely, bar by prior judgment. By granting the Motion,
it disposed correctly, even if its legal reason for nullifying the sale
was wrong. The correct reasons are given in this Decision.

WHEREFORE, the Petition is hereby DENIED. Costs against
petitioner. ADCTac
SO ORDERED.
Davide, Jr., C.J., Quisumbing, Pardo, Buena, Ynares-
Santiago and Carpio, JJ., concur.
Melo, J., please see concurring opinion.
Puno and Mendoza, JJ., concur and join the concurring opinion of J.
Melo.
Bellosillo, J., join the dissenting opinion of J. Sandoval-Gutierrez.
Vitug, J., please see dissenting opinion.
Kapunan, J., I join the dissenting opinions of JJ. Vitug and Sandoval-
Gutierrez.
De Leon, Jr., J., join the dissenting opinion of J. Vitug.
Sandoval-Gutierrez, J., please see my dissenting opinion.
Separate Opinions
MELO, J., concurring opinion:
While I express my conformity to the ponencia of our distinguished
colleague, Mr. Justice Artemio V. Panganiban, I would just like to
make the following observations:
1.The issue in this case was squarely resolved in our 1996 En
Banc decision in the main case. What petitioner is asking us to do
now is to reverse or modify a judgment which is accurate in every
respect, conformable to law and jurisprudence, and faithful to
principles of fairness and justice.
2.Petitioner's submissions are deceiving. It is trying to collect
unjustified and unbelievably increased rentals by provoking a purely
academic discussion, as far as respondent is concerned, of a non-
applicable provision of the Civil Code on contracts.
3.To grant the petition is to reward bad faith, for petitioner has
deprived respondent of the latter's property rights for twenty-three
(23) years and has forced it to defend its interests in case after case
during that lengthy period. Petitioner now tries to inflict further
injury in the fantastic and groundless amount of P115,947,867.00. To
remand this case to the lower court in order to determine the back
rentals allegedly due to petitioner Equatorial Realty Development
Corporation, Inc. is to encourage continuation of crafty tactics and to
allow the further dissipation of scarce judicial time and resources.
The instant petition arose from a complaint for back rentals,
increased rentals and interests filed by petitioner Equatorial Realty
Development, Inc. (Equatorial) against respondent Mayfair Theater,
Inc. (Mayfair). It has to be adjudicated in the context of three earlier
petitions decided by this Court.
A dispute between the two parties over the ownership of a
commercial lot and building along Claro M. Recto Avenue in Manila
has led to 23 years of protracted litigation, including the filing of 4
petitions with the Court, namely, G.R. No. L-106063, decided on
November 21, 1996 (264 SCRA 483); G.R. No. 103311 decided on
March 4, 1992; G.R. No. 136221, decided on May 12, 2000; and the
present petition, G.R. No. 133879. aSECAD
The case at bar is a classic illustration of how a dubious
interpretation of the dispositive portion of the 1996 decision for
petitioner could lead to 5 more years of bitter litigation after the
initial 18 years of legal proceedings over the first case.
Lease contracts over the subject property were executed on June 1,
1967 and March 31, 1969 by original owner Carmelo and
Bauermann, Inc. (Carmelo) in favor of herein respondent Mayfair.
The leases expired on May 31, 1987 and March 31, 1989,
respectively. The lease contracts embodied provisions giving Mayfair
a right-of-first-refusal should Carmelo sell the property.
In an act characterized as bad faith by this Court, the property, in
violation of the right-of-first-refusal, was sold by Carmelo to herein
petitioner Equatorial, on July 31, 1978 for P11,300,000.00. On
September 13, 1978, Mayfair filed the first case for annulment of the
contract of sale, specific performance of the right-of-first-refusal
provision, and damages. The Regional Trial Court (RTC) of Manila
decided the case in favor of Equatorial on February 7, 1991.
Counterclaims for compensation arising from the use of the premises
were awarded to Equatorial by the 1991 RTC decision.
On June 23, 1992, the Court of Appeals reversed the RTC decision,
thus leading to the first petition, G.R. No. 106063, filed against
Mayfair by both Equatorial and Carmelo.
On November 21, 1996, this Court En Banc rendered its decision (264
SCRA 483 [1996]), disposing:
WHEREFORE, the petition for review of the decision of the Court of
Appeals dated June 23, 1992, in CA-G.R. CV No. 32918, is HEREBY
DENIED. The Deed of Absolute Sale between petitioners Equatorial
Realty Development, Inc. and Carmelo & Bauermann, Inc. is hereby
rescinded; petitioner Carmelo & Bauermann is ordered to return to
petitioner Equatorial Realty Development the purchase price. The
latter is directed to execute the deeds and documents necessary to
return ownership to Carmelo & Bauermann of the disputed lots.
Carmelo and Bauermann is ordered to allow Mayfair Theater, Inc. to
buy the aforesaid lots for P11,300,000.00. IScaAE
In the Court of Appeals decision (CA-G.R. CV No. 32918, June 23,
1992) in the main case, raised to this Court, Mayfair was ordered to
directly pay P11,300,000.00 to Equatorial whereupon Equatorial
would execute the deeds and documents necessary for the transfer
of ownership to Mayfair and the registration of the property in its
name. The execution of documents and the transfer of the property
were directly between Equatorial and Mayfair. Our decision in 1996
(G.R. No. 106063) affirmed the appellate decision. However, while
the 1978 deed of sale questioned by Mayfair was rescinded, we
ordered Carmelo to first return to Equatorial the purchase price of
the property, whereupon Equatorial would return ownership to
Carmelo, after which Mayfair would buy the lot for P11,300,000.00
from Carmelo.
When the case was remanded to the RTC for execution of the
decision, it was ascertained that Carmelo and Bauermann, Inc. was
no longer in existence. The Sheriff could not enforce the portions of
the judgment calling for acts to be performed by Carmelo. Mayfair,
therefore, deposited the amount of P11,300,000.00 with the RTC for
payment to Equatorial, hoping that the latter would faithfully comply
with this Court's decision. In this regard, it may be mentioned that
buyer Mayfair also paid P847,000.00 in taxes which the vendors
should have paid. The RTC ordered the execution of deeds of
transfer, the cancellation of Equatorial's titles to the property, and
the issuance of new titles in favor of Mayfair. Accordingly, the
property was registered in the name of Mayfair and titles issued in
its favor.
Equatorial, however, saw an opening for further litigation. It
questioned the method employed by the RTC to execute the Court's
judgment, arguing that the directives involving Carmelo's
participation were ignored by the trial court. The litigation over the
alleged incorrectness of the execution eventually led to the second
petition earlier mentioned G.R. No. 136221.
It may be mentioned at this point that on July 9, 1987, while the
right-of-first-refusal and cancellation case was pending, Equatorial
filed an action for ejectment against Mayfair. Because the issue of
ownership was still pending in the case for rescission of deed of sale
including the enforcement of the right-of-first-refusal provision, the
ejectment case was dismissed. Appeals to the RTC and the Court of
Appeals were denied.
On March 26, 1990, still another ejectment case was filed by
Equatorial. In decisions which reached all the way to this Court in
G.R. No. 103311, the cases for ejectment did not prosper. Mayfair
won the cases on March 4, 1992.
The three cases decided by the Court in these litigations between
Equatorial and Mayfair, all of them in favor of Mayfair, are
antecedents of the present and fourth petition. Equatorial has been
adjudged as having unlawfully and in bad faith acquired property
that should have belonged to Mayfair since 1978. Ownership and
title have been unquestionably transferred to Mayfair.
Seemingly, Equatorial now seeks to profit from its bad faith. While
the case involving the allegedly incorrect execution of the 1996
decision on cancellation of the deed of sale in G.R. No. 106063 was
being litigated, Equatorial filed on September 18, 1997 with the RTC
of Manila two complaints for payment of back and increased rentals
arising from the use by Mayfair of the lot, building, and other fixed
improvements. From the time the property was sold by Carmelo to
Equatorial, lessee Mayfair had been paying to Equatorial the rentals
fixed in the 1967 and 1969 lease contracts with the original owner.
This was during the pendency of the complaint for annulment of the
contract of sale, specific performance of the right-of-first-refusal
provision, and damages.
As found in our 1998 decision in G.R. No. 106063, the disputed
property should have actually belonged to Mayfair at the time.
However, to avoid the ejectment cases, which Equatorial nonetheless
later filed, Mayfair was forced to pay rentals to Equatorial. It paid
the rentals based on the rates fixed by Carmelo in the lease
contracts.
Equatorial, claiming the 1967 and 1969 rentals to be inadequate,
claimed increased amounts as reasonable compensation. Because
the amounts fixed by the lease contract with Carmelo but paid to
Equatorial were only at the rate of P17,966.21 monthly while
Equatorial wanted P210,000.00 every month plus legal interests, the
suit was for the payment of P115,947,867.68 as of June 19, 1997.
Citing the 1996 decision in G.R. No. 106063, Mayfair contended that
it owned the property under the decision. It stated that the sale by
Carmelo to Equatorial had been cancelled, and, as owner, Mayfair
owed no increased rentals to Equatorial based on said decision.
The present case on back rentals could not be conclusively decided
because the execution and finality of the issue of ownership were
being contested for 5 years in the petition on the proper execution
filed in G.R. No. 136221. This petition had to wait for the resolution
of G.R. No. 136221.
In its decision dated May 12, 2000, in G.R. No. 136221 (First Division,
per Mr. Justice Pardo; Davide, Jr., C.J., Kapunan, and Ynares-
Santiago, JJ., concurring), this Court reiterated the judgment in G.R.
No. 106063. It emphasized that the 1996 decision awarding the
property to Mayfair was clear. It stated that the decision having
attained finality, there was nothing left for the parties to do but to
adhere to the mandates of the decision. AISHcD

In the dispositive portion, however, the Court ordered the trial court
"to carry out the execution following strictly the terms" of the 1996
decision. However, as earlier stated, this could not be done because
Carmelo had ceased to exist. There was no longer any Carmelo which
could return the P11,300,000.00 consideration of the 1978 sale to
Equatorial as ordered in the dispositive portion of the 1996 decision.
Equatorial could not and would not also execute the deeds returning
the property to Carmelo, as directed in the decision. Neither could
the defunct Carmelo sell the property to Mayfair at the sale price in
1978 when the right of first refusal was violated.
Mayfair had to file a motion for partial reconsideration, emphasizing
that it was impossible for a corporation which has gone out of
existence to obey the specific orders of this Court. A resolution was,
therefore, rendered on June 25, 2001 putting an end to the
controversy over the proper implementation of the 1996 judgment.
This June 25, 2001 Resolution in G.R. No. 136221 validated the
issuance of new titles in the name of the adjudicated owner,
Mayfair. The Court ordered the direct release to Equatorial of the
P11,300,000.00 deposited in court for the account of the defunct
Carmelo.
In the follow-up Resolution of the First Division in G.R. No. 136221
dated June 25, 2001, the Court, after describing the case as a
Promethean one involving the execution of a decision which has
been long final, and after calling the efforts to stave off execution as
a travesty of justice, instructed the trial court:
1.To execute the Court's Decision strictly in accordance with the
ruling in G.R. No. 106063 by validating the acts of the sheriff of
Manila and the titles in the name of Mayfair Theater, Inc. issued by
the Register of Deeds of Manila consistent therewith;
2.In case of failure of Carmelo and Bauermann to accept the amount
of P11,300,000.00 deposited by Mayfair Theater, Inc. with the Clerk
of Court, Regional Trial Court, Manila, to authorize the Clerk of Court
to RELEASE the amount of P11,300,000.00 deposited with the court
for the account of Carmelo and Bauermann, Inc. to petitioner;
3.To devolve upon the trial court the determination of other issues
that may remain unresolved among the parties, relating to the
execution of this Court's final decision in G.R. No. 106063.
In light of the Court's judgments in G.R. No. 106063 and G.R. No.
136221, the present petition in G.R. No. 133879 for back rentals
should now be finally resolved, applying the rulings in those earlier
decisions.
Indubitably, the 1978 deed of sale executed by Carmelo in favor of
Equatorial over the disputed property has been set aside by this
Court. Equatorial was declared a buyer in bad faith. The contract was
characterized as a fraudulent sale and the entirety of the indivisible
property sold to Equatorial was the property we ordered to be
conveyed to Mayfair for the same price paid by Equatorial to
Carmelo.
It is also beyond question that the method of execution of the 1996
decision by the RTC, the direct payment by Mayfair to Equatorial,
bypassing and detouring the defunct Carmelo corporation, has been
validated by this Court. There are no longer any procedural obstacles
to the full implementation of the decision.
And finally, the property sold to Equatorial in violation of Mayfair's
right of first refusal is now indisputably possessed by, and owned and
titled in the name of, respondent Mayfair.
Parenthetically, the issue on the payment of back and increased
rentals, plus interests, was actually settled in the 1996 decision in
G.R. No. 106063. It could not be enforced at the time only because of
the controversy unfortunately raised by Equatorial over the proper
execution of the 1996 decision. DTAESI
It is now time to reiterate the 1996 decision on interests and settle
the dispute between Mayfair and Equatorial once and for all.
Thus, we reiterate that:
On the question of interest payments on the principal amount of
P11,300.000.00, it must be borne in mind that both Carmelo and
Equatorial acted in bad faith. Carmelo knowingly and deliberately
broke a contract entered into with Mayfair. It sold the property to
Equatorial with purpose and intent to withhold any notice or
knowledge of the sale coming to the attention of Mayfair. All the
circumstances point to a calculated and contrived plan of non-
compliance with the agreement of first refusal.
On the part of Equatorial, it cannot be a buyer in good faith because
it bought the property with notice and full knowledge the Mayfair
had a right to or interest in the property superior to its own. Carmelo
and Equatorial took unconscientious advantage of Mayfair.
Neither may Carmelo and Equatorial avail of consideration based on
equity which might warrant the grant of interests.The vendor
received as payment from the vendee what, at the time, was a full
and fair price for the property. It has used the P11,300,000.00 all
these years earning income or interest from the amount. Equatorial,
on the other hand, has received rents and otherwise profited from
the use of the property turned over to it by Carmelo. In fact, during
all the years that this controversy was being litigated. Mayfair paid
rentals regularly to the buyer who had an inferior right to purchase
the property. Mayfair is under no obligation to pay any interests
arising from this judgment to either Carmelo or Equatorial (264 SCRA
483, pp. 511-512).
Worthy quoting too is the concurring opinion in our 1996 decision of
Mr. Justice Teodoro R. Padilla as follows:
The equities of the case support the foregoing legal disposition.
During the intervening years between 1 August 1978 and this
date, Equatorial (after acquiring the C.M. Recto property for the
price of P11,300,000.00) had been leasing the property and deriving
rental income therefrom. In fact, one of the lessees in the property
was Mayfair. Carmelo had, in turn, been using the proceeds of the
sale, investment-wise and/or operation wise in its own
business. cSaADC
It may appear, at first blush, that Mayfair is unduly favored by the
solution submitted by this opinion, because the price of
P11,300,000.00 which it has to pay Carmelo in the exercise of its
right of first refusal, has been subjected to the inroads of inflation so
that its purchasing power today is less than when the same amount
was paid by Equatorial to Carmelo. But then it cannot be overlooked
that it was Carmelo's breach of Mayfair's right of first refusal that
prevented Mayfair from paying the price of P11,300,000.00 to
Carmelo at about the same time the amount was paid by Equatorial
to Carmelo. Moreover, it cannot be ignored that Mayfair had also
incurred consequential or "opportunity" losses by reason of its failure
to acquire and use the property under its right of first refusal. In fine,
any loss in purchasing power of the price of P11,300,000.00 is for
Carmelo to incur or absorb on account of its bad faith in breaching
Mayfair's contractual right of first refusal to the subject property.
(ibid., pp. 511-512).
It can be seen from the above ruling that the issue of rentals and
interests was fully discussed and passed upon in 1996. Equatorial
profited from the use of the building for all the years when it had no
right or, as stated in our decision, had an inferior right over the
property. Mayfair, which had the superior right, continued to pay
rent but it was the rate fixed in the lease contract with Carmelo. We
see no reason for us to now deviate from the reasoning given in our
main decision. The decision has been final and executory for five (5)
years and petitioner has failed to present any valid and reasonable
ground to reconsider, modify or reverse it. Let that which has been
fairly adjudicated remain final. CTEacH
My second observation relates to the clever but, to my mind,
deceptive argument foisted by Equatorial on the Court.
Equatorial relies on the Civil Code provision on rescissible contracts
to bolster its claim. Its argument is that a rescissible contract
remains valid and binding upon the parties thereto until the same is
rescinded in an appropriate judicial proceeding.
Equatorial conveniently fails to state that the July 31, 1978 Deed of
Absolute Sale was between Equatorial and Carmelo only.
Respondent Mayfair was not a party to the contract. The deed of
sale was surreptitiously entered into between Carmelo and
Equatorial behind the back and in violation of the rights of Mayfair.
Why should the innocent and wronged party now be made to bear
the consequences of an unlawful contract to which it was not privy?
Insofar as Equatorial and Carmelo are concerned, their 1978 contract
may have validly transferred ownership from one to the other. But
not as far as Mayfair is concerned.
Mayfair starts its arguments with a discussion of Article 1381 of the
Civil Code that contracts entered into in fraud of creditors are
rescissible. There is merit in Mayfair's contention that the legal
effects are not restricted to the contracting parties only. On the
contrary, the rescission is for the benefit of a third party, a stranger
to the contract. Mayfair correctly states that as far as the injured
third party is concerned, the fraudulent contract, once rescinded, is
non-existent or void from its inception. Hence, from Mayfair's
standpoint, the deed of absolute sale which should not have been
executed in the first place by reason of Mayfair's superior right to
purchase the property and which deed was cancelled for that reason
by this Court, is legally non-existent. There must be a restoration of
things to the condition prior to the celebration of the contract
(Respondent relies on Almeda vs. J.M. & Company, 43072-R,
December 16, 1975, as cited in the Philippine Law Dictionary; IV
Arturo M. Tolentino, Civil Code of the Philippines, 570, 1990 Ed.,
citing Manresa; IV Edgardo L. Paras, Civil Code of the Philippines,
717-718, 1994 Ed.).
It is hard not to agree with the explanations of Mayfair, to wit:

4.22.As a consequence of the rescission of the Deed of Absolute Sale,
it was as if Equatorial never bought and became the lessor of the
subject properties. Thus, the court a quo did not err in ruling that
Equatorial is not the owner and does not have any right to demand
back rentals from [the] subject property.
4.23.Tolentino, supra, at 577-578 further explains that the effects of
rescission in an accion pauliana retroact to the date when the credit
or right being enforced was acquired.
"While it is necessary that the credit of the plaintiff in the accion
pauliana must be prior to the fraudulent alienation, the date of the
judgment enforcing it is immaterial. Even if the judgment be
subsequent to the alienation, it is merely declaratory, with
retroactive effect to the date when the credit was constituted. . . ."
(emphasis supplied)
4.24.The clear rationale behind this is to prevent conniving parties,
such as Equatorial and Carmelo, from benefiting in any manner from
their unlawful act of entering into a contract in fraud of innocent
parties with superior rights like Mayfair. Thus, to allow Equatorial to
further collect rentals from Mayfair is to allow the former to profit
from its own act of bad faith. Ex dolo malo non oritur actio.
(Respondent's Comment, pp. 338-339, Rollo).
This brings me to my third and final observation in this case. This
Court emphasized in the main case that the contract of sale between
Equatorial and Carmelo was characterized by bad faith. The Court
described the sale as "fraudulent" in its 1996 decision. It stated that
the damages which Mayfair suffered are in terms of actual injury
and lost opportunities, emphasizing that Mayfair should not be given
an empty or vacuous victory. Moreover, altogether too many suits
have been filed in this case. Four separate petitions have come
before us, necessitating full length decisions in at least 3 of them.
The 1996 decision stressed that the Court has always been against
multiplicity of suits.
There was bad faith from the execution of the deed of sale because
Equatorial and Carmelo affirmatively operated with furtive design or
with some motive of self-interest or ill-will or for ulterior purposes
(Air France vs. Carrascoso, 18 SCRA 166 [1966]). There was breach of
a known duty by the two parties to the unlawful contract arising
from motives of interests or ill-will calculated to cause damage to
another (Lopez vs. Pan American World Airways, 123 Phil. 264
[1966]).
The presence of bad faith is clear from the records. Our resolution of
this issue in 1996 (G.R. 106063) is res judicata.
We stated:
First and foremost is that the petitioners (referring to Equatorial and
Carmelo) acted in bad faith to render Paragraph 8 "inutile." TcDAHS
xxx xxx xxx
Since Equatorial is a buyer in bad faith, this finding renders the sale
to it of the property in question rescissible. We agree with
respondent Appellate Court that the records bear out the fact that
Equatorial was aware of the lease contracts because its lawyers had,
prior to the sale, studied the said contracts. As such Equatorial
cannot tenably claim to be a purchaser in good faith and, therefore,
rescission lies.
xxx xxx xxx
As also earlier emphasized, the contract of sale between Equatorial
and Carmelo is characterized by bad faith, since it was knowingly
entered into in violation of the rights of and to the prejudice of
Mayfair. In fact, as correctly observed by the Court of Appeals,
Equatorial admitted that its lawyers had studied the contract of
lease prior to the sale. Equatorial's knowledge of the stipulations
therein should have cautioned it to look further into the agreement
to determine if it involved stipulations that would prejudice its own
interests.
xxx xxx xxx
On the part of Equatorial, it cannot be a buyer in good faith because
it bought the property with notice and full knowledge that Mayfair
had a right to or interest in the property superior to its own. Carmelo
and Equatorial took unconscientious advantage of Mayfair (264
SCRA 506, 507-511).
We ruled that because of bad faith, neither may Carmelo and
Equatorial avail themselves of considerations based on equity which
might warrant the grant of interests and, in this case,
unconscionably increased rentals.
Verily, if Mayfair were a natural person it could very well have asked
for moral damages instead of facing a lengthy and expensive suit to
pay rentals many times higher than those stipulated in the contract
of lease. Under the Civil Code, Mayfair is the victim in a breach of
contract where Carmelo and Equatorial acted fraudulently and in
bad faith.
Considering the judgments in our 3 earlier decisions, Mayfair is under
no obligation to pay any interests, whether based on law or equity,
to Carmelo or Equatorial. Mayfair is the wronged entity, the one
which has suffered injury since 1978 or for the 23 years it was
deprived of the property. cETCID
Equatorial has received rentals and other benefits from the use of
the property during these 23 years, rents and benefits which would
have accrued to Mayfair if its rights had not been violated.
There is no obligation on the part of respondent Mayfair to pay any
increased, additional, back or future rentals or interests of any kind
to petitioner Equatorial under the circumstances of this case.
I, therefore, concur with the majority opinion in denying due course
and dismissing the petition.
VITUG, J., dissenting opinion:
Civil Law, in its usual sophistication, classifies defective contracts
(unlike the seemingly generic treatment in Common Law),
into,first, the rescissible contracts, 1 which are the least infirm;
followed by, second, the voidable contracts; 2 then, third, the
unenforceable contracts; 3 and, finally, fourth, the worst of all or the
void contracts. 4 In terms of their efficaciousness, rescissible
contracts are regarded, among the four, as being the closest to
perfectly executed contracts. A rescissible contract contains all the
requisites of a valid contract and are considered legally binding, but
by reason of injury or damage to either of the contracting parties or
to third persons, such as creditors, it is susceptible to rescission at
the instance of the party who may be prejudiced thereby. A
rescissible contract is valid, binding and effective until it is rescinded.
The proper way by which it can be assailed is by an action for
rescission based on any of the causes expressly specified by law. 5
The remedy of rescission in the case of rescissible contracts under
Article 1381 is not to be confused with the remedy of rescission, or
more properly termed "resolution," of reciprocal obligations under
Article 1191 of the Civil Code. While both remedies presuppose the
existence of a juridical relation that, once rescinded, would require
mutual restitution, it is basically, however, in this aspect alone when
the two concepts coincide.
Resolution under Article 1191 would totally release each of the
obligors from compliance with their respective covenants. It might be
worthwhile to note that in some cases, notably Ocampo vs. Court of
Appeals, 6 and Velarde vs. Court of Appeals, 7 where the Court
referred to rescission as being likened to contracts which are deemed
"void at inception," the focal issue is the breach of the obligation
involved that would allow resolution pursuant to Article 1191 of the
Civil Code. The obvious reason is that when parties are reciprocally
bound, the refusal or failure of one of them to comply with his part
of the bargain should allow the other party to resolve their juridical
relationship rather than to leave the matter in a state of continuing
uncertainty. The result of the resolution, when decreed, renders the
reciprocal obligations inoperative "at inception."
Upon the other hand, the rescission of a rescissible contract under
Article 1381, taken in conjunction with Article 1385, is a relief which
the law grants for the protection of a contracting party or a third
person from injury and damage that the contract may cause, or to
protect some incompatible and preferent right created by the
contract. 8 Rescissible contracts are not void abinitio,and the
principle, "quod nullum est nullum producit effectum," in void and
inexistent contracts is inapplicable. Until set aside in an appropriate
action rescissible contracts are respected as being legally valid,
binding and in force. It would be wrong to say that rescissible
contracts produce no legal effects whatsoever and that no
acquisition or loss of rights could meanwhile occur and be attributed
to the terminated contract. The effects of the rescission, prospective
in nature, can come about only upon its proper declaration as such.
Thus, when the Court 9 held the contract to be "deemed rescinded"
in G.R. No. 106063, the Court did not mean a "declaration of nullity"
of the questioned contract. The agreement between petitioner and
Carmelo, being efficacious until rescinded, validly transferred
ownership over the property to petitioner from the time the deed of
sale was executed in a public instrument on 30 July 1978 up to the
time that the decision in G.R. No. 106063 became final on 17 March
1997. It was only from the latter date that the contract had ceased
to be efficacious. The fact that the subject property was in the hands
of a lessee, or for that matter of any possessor with a juridical title
derived from an owner, would not preclude a conferment of
ownership upon the purchaser nor be an impediment from the
transfer of ownership from the seller to the buyer. Petitioner, being
the owner of the property (and none other) until the judicial
rescission of the sale in its favor, was entitled to all incidents of
ownership inclusive of, among its other elements, the right to the
fruits of the property. Rentals or rental value over that disputed
property from 30 July 1978 up to 17 March 1997 should then
properly pertain to petitioner. In this respect, the much abused terms
of "good faith" or "bad faith" play no role; ownership, unlike other
concepts, is never described as being either in good faith or in bad
faith.

With all due respect, I am thus unable to join in this instance my
colleagues in the majority.
SANDOVAL-GUTIERREZ, J., dissenting opinion:
"Stare decisis et non quieta movere follow past precedents and do
not disturb what has been settled. Adherence to this principle is
imperative if this Court is to maintain stability in jurisprudence.
I regret that I am unable to agree with the majority opinion.
The principal issue in this case is whether a rescissible contract is void
and ineffective from its inception. This issue is not a novel one.
Neither is it difficult to resolve as it involves the application of
elementary principles in the law on contracts, specifically on
rescissible contracts, as distinguished from void or inexistent
contracts.
The facts are simple.
On June 1, 1967, respondent Mayfair Theater, Inc. (Mayfair) leased
portions of the ground, mezzanine and second floors of a two storey
commercial building located along C.M. Recto Avenue, Manila. The
building together with the land on which it was constructed was then
owned by Carmelo & Bauermann, Inc. (Carmelo). Respondent used
these premises as "Maxim Theater." The lease was for a period of
twenty (20) years. IEHSDA
On March 31, 1969, Mayfair leased from Carmelo another portion of
the second floor, as well as two (2) store spaces on the ground and
mezzanine floors of the same building. Respondent Mayfair used the
premises as a movie theater known as "Miramar Theater."
Both leases contained the following identical provisions:
"That if the LESSOR should desire to sell the leased premises, the
LESSEE shall be given 30-days exclusive option to purchase the same.
In the event, however, that the leased premises is sold to someone
other than the LESSEE, the LESSOR is bound and obligated, as it
hereby binds and obligates itself, to stipulate in the Deed of Sale
thereof that the purchaser shall recognize this lease and be bound by
all the terms and conditions thereof.
On July 31, 1978, Carmelo entered into a Deed of Absolute Sale
whereby it sold the subject land and two-storey building to petitioner
Equatorial Realty Development, Inc. (Equatorial) for P11,300,000.00.
Having acquired from Carmelo ownership of the subject property,
Equatorial received rents from Mayfair for sometime. cEaCTS
Subsequently, Mayfair, claiming it had been denied its right to
purchase the leased property in accordance with the provisions of its
lease contracts with Carmelo, filed with the Regional Trial Court,
Branch 7, Manila, a suit for specific performance and annulment of
sale with prayer to enforce its "exclusive option to purchase" the
property. The dispute between Mayfair, on the one hand, and
Carmelo and Equatorial on the other, reached this Court in G.R. No.
106063, "Equatorial Realty Development, Inc. & Carmelo &
Bauermann, Inc. vs. Mayfair Theater, Inc." 1 On November 21, 1996,
this Court rendered a Decision, the dispositive portion of which
reads:
"WHEREFORE, the petition for review of the decision of the Court of
Appeals, dated June 23, 1992, in CA-G.R. CV No. 32918, is HEREBY
DENIED. The Deed of Absolute Sale between petitioners Equatorial
Realty Development, Inc. and Carmelo & Bauermann, Inc. is hereby
deemed rescinded; Carmelo & Bauermann is ordered to return to
petitioner Equatorial Realty Development the purchase price. The
latter is directed to execute the deeds and documents necessary to
return ownership to Carmelo & Bauermann of the disputed lots.
Carmelo & Bauermann is ordered to allow Mayfair Theater, Inc. to
buy the aforesaid lots for P11,300,000.00.
SO ORDERED."
The Decision of this Court in G.R. No. 106063 became final and
executory on March 17, 1997.
On April 25, 1997, Mayfair filed with the trial court a motion for
execution which was granted.
However, Carmelo could no longer be located. Thus, Mayfair
deposited with the trial court its payment to Carmelo in the sum of
P11,300,000.00 less P847,000.00 as withholding tax.
The Clerk of Court of the Manila Regional Trial Court, as sheriff,
executed a deed of re-conveyance in favor of Carmelo and a deed of
sale in favor of Mayfair. On the basis of these documents, the
Registry of Deeds of Manila cancelled Equatorial's titles and issued
new Certificates of Title 2 in the name of Mayfair.
In G.R. No. 136221, 3 "Equatorial Realty Development, Inc. vs.
Mayfair Theater, Inc.," this Court instructed the trial court to execute
strictly this Court's Decision in G.R. No. 106063.
On September 18, 1997, or after the execution of this Court's
Decision in G.R. No. 106063, Equatorial filed with the Regional Trial
Court of Manila, Branch 8, an action for collection of a sum of money
against Mayfair, docketed as Civil Case No. 97-85141. Equatorial
prayed that the trial court render judgment ordering Mayfair to pay:
(1)the sum of P11,548,941.76 plus legal interest, representing the
total amount of unpaid monthly rentals/reasonable compensation
from June 1, 1987 (Maxim Theater) and March 31, 1989 (Miramar
Theater) to July 31, 1997; cACTaI
(2)the sums of P849,567.12 and P458,853.44 a month, plus legal
interest, as rental/reasonable compensation for the use and
occupation of the subject property from August 1, 1997 to May 31,
1998 (Maxim Theater) and March 31, 1998 (Miramar Theater);
(3)the sum of P500,000.00 as and for attorney's fees, plus other
expenses of litigation; and
(4)the costs of the suit. 4
On October 14, 1997, before filing its answer, Mayfair filed a
"Motion to Dismiss" Civil Case No. 97-85141 on the following
grounds:
"(A)
PLAINTIFF IS GUILTY OF FORUM SHOPPING.
(B)
PLAINTIFF'S CAUSE OF ACTION, IF ANY, IS BARRED BY PRIOR
JUDGMENT." 5
On March 11, 1998, the court a quo issued an order dismissing Civil
Case No. 97-85141 on the ground that since this Court, in G.R. No.
106063, rescinded the Deed of Absolute Sale between Carmelo and
Equatorial, the contract is void at its inception. 6Correspondingly,
Equatorial is not the owner of the subject property and, therefore,
does not have any right to demand from Mayfair payment of rentals
or reasonable compensation for its use and occupation of the
premises.
Equatorial filed a motion for reconsideration but was denied.
Hence, the present petition.
At this stage, I beg to disagree with the ruling of the majority
that (1) Equatorial did not acquire ownership of the disputed
property from Carmelo because of lack of delivery; and
that (2) Equatorial is not entitled to the payment of rentals because
of its bad faith.SHEIDC
Firmly incorporated in our Law on Sales is the principle that
ownership is transferred to the vendee by means of delivery, actual
or constructive. 7 There is actual delivery when the thing sold is
placed in the control and possession of the vendee. 8 Upon the other
hand, there is constructive delivery when the delivery of the thing
sold is represented by other signs or acts indicative thereof. Article
1498 of the Civil Code is in point. It provides that "When the sale is
made through a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the object of the
contract, if from the deed the contrary does not appear or cannot
clearly be inferred." 9
Contrary to the majority opinion, the facts and circumstances of the
instant case clearly indicate that there was indeed actual and
constructive delivery of the disputed property from Carmelo to
Equatorial.
Let me substantiate my claim.
First, I must take exception to the majority's statement that this
Court found in G.R. No. 106063 10 that, "no right of ownership
wastransferred from Carmelo to Equatorial in view of a patent
failure to deliver the property to the buyer." 11
A perusal of the Decision dated November 21, 1996 would reveal
otherwise.
To say that this Court found no transfer of ownership between
Equatorial and Carmelo is very inaccurate. For one, this Court, in
disposing of G.R. No. 106063, explicitly ordered Equatorial to
"execute the deeds and documents necessary to return ownership to
Carmelo & Bauermann of the disputed lots." 12 I suppose this Court
would not have made such an order if it did not recognize the
transfer of ownership from Carmelo to Equatorial under the contract
of sale. For why would the Court order Equatorial to execute the
deeds and documents necessary to return ownership to Carmelo if,
all along, it believed that ownership remained with Carmelo?
Furthermore, is Court explicitly stated in the Decision that Equatorial
received rentals from Mayfair during the pendency of the case. Let
me quote the pertinent portion of the Decision, thus:
". . . Equatorial, on the other hand, has received rents and otherwise
profited from the use of the property turned over to it by Carmelo. In
fact, during all the years that this controversy was being
litigated, Mayfair paid rentals regularly to the buyer (Equatorial)
who had an inferior right to purchase the property. Mayfair is under
no obligation to pay any interests arising from this judgment to
either Carmelo or Equatorial." 13
Justice Teodoro R. Padilla, in his Separate Opinion, made the
following similar observations:
"The equities of the case support the foregoing legal disposition.
During the intervening years between 1 August 1978 and this
date, Equatorial (after acquiring the C.M. Recto property for the
price of P11,300,000.00) had been leasing the property and deriving
rental income therefrom. In fact, one of the lessees in the property
was Mayfair. Carmelo had, in turn, been using the proceeds of the
sale, investment-wise and/or operation-wise in its own business." 14
Obviously, this Court acknowledged the delivery of the property from
Carmelo to Equatorial. As aptly described by Justice Panganiban
himself, the sale between Carmelo and Equatorial had not only been
"perfected" but also "consummated." 15
That actual possession of the property was turned over by Carmelo
to Equatorial is clear from the fact that the latter received rents from
Mayfair. Significantly, receiving rentals is an exercise of actual
possession. Possession, as defined in the Civil Code, is the holding of
a thing or the enjoyment of a right. 16 It may either be by material
occupation or by merely subjecting the thing or right to the action of
our will. 17 Possession may therefore be exercised through one's self
or through another. 18 It is not necessary that the person in
possession should himself be the occupant of the property, the
occupancy can be held by another in the name of the one who claims
possession. In the case at bench, Equatorial exercised possession
over the disputed property through Mayfair. When Mayfair paid its
monthly rentals to Equatorial, the said lessee recognized the superior
right of Equatorial to the possession of the property. And even if
Mayfair did not recognize Equatorial's superior right over the
disputed property, the fact remains that Equatorial was then
enjoying the fruits of its possession.

At this juncture, it will be of aid to lay down the degrees of
possession. The first degree is the mere holding, or possession
without title whatsoever, and in violation of the right of the owner.
Here, both the possessor and the public know that the possession is
wrongful. An example of this is the possession of a thief or a usurper
of land. The second is possession with juridical title, but not that of
ownership. This is possession peaceably acquired, such that of a
tenant, depositary, or pledge. The third is possession with a just title,
or a title sufficient to transfer ownership, but not from the true
owner. An example is the possession of a vendee of a piece of land
from one who pretends to be the owner but is in fact not the owner
thereof. And the fourth is possession with a just title from the true
owner. This is possession that springs from
ownership. 19 Undoubtedly, Mayfair's possession is by virtue of
juridical title under the contract of lease, while that of Equatorial is
by virtue of its right of ownership under the contract of sale.
Second, granting arguendo that there was indeed no actual delivery,
would Mayfair's alleged "timely objection to the sale and continued
actual possession of the property" constitute an "impediment" that
may prevent the passing of the property from Carmelo to
Equatorial? 20
I believe the answer is no.
The fact that Mayfair has remained in "actual possession of the
property," after the perfection of the contract of sale between
Carmelo and Equatorial up to the finality of this Court's Decision in
G.R. No. 106063 (and even up to the present), could not prevent the
consummation of such contract. As I have previously intimated,
Mayfair's possession is not under a claim of ownership. It cannot in
any way clash with the ownership accruing to Equatorial by virtue of
the sale. The principle has always been that the one who possesses
as a mere holder acknowledges in another a superior right or right of
ownership. A tenant possesses the thing leased as a mere holder, so
does the usufructuary of the thing in usufruct; and the borrower of
the thing loaned incommodatum. None of these holders asserts a
claim of ownership in himself over the thing. Similarly, Mayfair does
not claim ownership, but only possession as a lessee with the prior
right to purchase the property. HATICc
In G.R. No. 106063, Mayfair's main concern in its action for specific
performance was the recognition of its right of first refusal. Hence,
the most that Mayfair could secure from the institution of its suit
was to be allowed to exercise its right to buy the property upon
rescission of the contract of sale. Not until Mayfair actually exercised
what it was allowed to do by this Court in G.R. No.106063,
specifically to buy the disputed property for P11,300,000.00, would it
have any right of ownership. How then, at that early stage, could
Mayfair's action be an impediment in the consummation of the
contract between Carmelo and Equatorial?
Pertinently, it does not always follow that, because a transaction is
prohibited or illegal, title, as between the parties to the transaction,
does not pass from the seller, donor, or transferor to the vendee,
donee or transferee. 21
And third, conformably to the foregoing disquisition, I maintain that
Equatorial has the right to be paid whatever monthly rentals during
the period that the contract of sale was in existence minus the rents
already paid. In Guzman v. Court of Appeals, 22 this Court decreed
that upon the purchase of the leased property and proper notice by
the vendee, the lessee must pay the agreed monthly rentals to the
new owner since, by virtue of the sale, the vendee steps into the
shoes of the original lessor to whom the lessee bound himself to pay.
His belief that the subject property should have been sold to him
does not justify the unilateral withholding of rental payments due to
the new owner of the property. 23 It must be stressed that under
Article 1658 of the Civil Code, there are only two instances wherein
the lessee may suspend payment of rent, namely: in case the lessor
fails to make the necessary repairs or to maintain the lessee in
peaceful and adequate enjoyment of the property leased. 24 In this
case, the fact remains that Mayfair occupied the leased property. It
derived benefit from such occupation, thus, it should pay the
corresponding rentals due. Nemo cum alterius detrimento locupletari
potest. No one shall enrich himself at the expense of another. 25
Neither should the presence of bad faith prevent the award of rent to
Equatorial. While Equatorial committed bad faith in entering into the
contract with Carmelo, it has been equitably punished when this
Court rendered the contract rescissible. That such bad faith was the
very reason why the contract was declared rescissible is evident from
the Decision itself. 26 To utilize it again, this time, to deprive
Equatorial of its entitlement to the rent corresponding to the period
during which the contract was supposed to validly exist, would not
only be unjust, it would also disturb the very nature of a rescissible
contract. cAEaSC
Let me elucidate on the matter.
Articles 1380 through 1389 of the Civil Code deal with rescissible
contracts. A rescissible contract is one that is validly entered into, but
is subsequently terminated or rescinded for causes provided for by
law.
This is the clear implication of Article 1380 of the same Code which
provides:
"Art. 1380.Contracts validly agreed upon may be rescinded in the
cases established by law."
Rescission has been defined as follows:
"Rescission is a remedy granted by law to the contracting parties and
even to third persons, to secure the reparation of damages caused to
them by a contract, even if this should be valid, by means of the
restoration of things to their condition at the moment prior to the
celebration of said contract. It is a relief for the protection of one of
the contracting parties and third persons from all injury and damage
the contract may cause, or to protect some incompatible and
preferential right created by the contract. It implies a contract which,
even if initially valid, produces a lesion or pecuniary damage to
someone. It sets aside the act or contract for justifiable reasons of
equity." 27
Necessarily, therefore, a rescissible contract remains valid and
binding upon the parties thereto until the same is rescinded in an
appropriate judicial proceeding. aCcADT
On the other hand, a void contract, which is treated in Articles 1409
through 1422 of the Civil Code, is inexistent and produces no legal
effect whatsoever. The contracting parties are not bound thereby
and such contract is not subject to ratification.
In dismissing petitioner Equatorial's complaint in Civil Case No. 97-
85141, the trial court was apparently of the impression that a
rescissible contract has the same effect as a void contract, thus:
"However, the words in the dispositive portion of the Supreme Court
"is hereby deemed rescinded" does not allow any other meaning. The
said Deed of Absolute Sale is void at its inception.
xxx xxx xxx
The subject Deed of Absolute Sale having been rescinded by the
Supreme Court, Equatorial is not the owner and does not have any
right to demand back rentals from subject property. The law states
that only an owner can enjoy the fruits of a certain property or jus
utendi which includes the right to receive from subject property what
it produces, . . ."
The trial court erred. In G.R. No. 106063 (involving Mayfair's suit for
specific performance), this Court clearly characterized the Deed of
Absolute Sale between Carmelo and petitioner Equatorial as a
rescissible contract. We stated therein that:
"Since Equatorial is a buyer in bad faith, this finding renders the sale
to it of the property in question rescissible. We agree with
respondent Appellate Court that the records bear out the fact that
Equatorial was aware of the lease contracts because its lawyers had,
prior to the sale, studied the said contracts. As such, Equatorial
cannot tenably claim to be a purchaser in good faith, and therefore,
rescission lies."
This Court did not declare the Deed of Absolute Sale between
Carmelo and Equatorial void but merely rescissible. Consequently,
the contract was, at inception, valid and naturally, it validly
transferred ownership of the subject property to Equatorial. It bears
emphasis that Equatorial was not automatically divested of its
ownership. Rather, as clearly directed in the dispositive portion of
our Decision, Carmelo should return the purchase price to Equatorial
which, in turn, must execute such deeds and documents necessary to
enable Carmelo to reacquire its ownership of the property.
As mentioned earlier, Mayfair deposited with the Regional Trial
Court, Branch 7, Manila, the purchase price of P10,452,000.00
(P11,300,000.00 less P847,000.00 as withholding tax). In turn, the
Clerk of Court executed the deed of sale of the subject property in
favor of Mayfair.
In the meantime, Mayfair has continued to occupy and use the
premises, the reason why Equatorial filed against it Civil Case No. 97-
85141 for sum of money representing rentals and reasonable
compensation.
At this point, I must reiterate that Equatorial purchased the subject
property from Carmelo and became its owner on July 31, 1978. While
the contract of sale was "deemed rescinded" by this Court in G.R. No.
106063, nevertheless the sale had remained valid and binding
between the contracting parties until March 17, 1997 when the
Decision in G.R. No. 106063 became final. Consequently, being the
owner, Equatorial has the right to demand from Mayfair payment of
rentals corresponding to the period from July 31, 1978 up to March
17, 1997. THIcCA
Records show that the rentals and reasonable compensation which
Equatorial demands from Mayfair are those which accrued from the
year 1987 to 1998. As earlier stated, prior thereto, Mayfair had been
paying the rents to Equatorial.

In line with this Court's finding that Equatorial was the owner of the
disputed property from July 31, 1978 to March 17, 1997, it is,
therefore, entitled to the payment of rentals accruing to such period.
Consequently, whether or not Mayfair paid Equatorial the rentals
specified in the lease contracts from June 1, 1987 to March 17,
1997 is for the trial court to resolve.
One last word. In effect, the majority have enunciated that:
1.A lessor, in a contract of sale, cannot transfer ownership of his
property, occupied by the lessee, to the buyer because there can be
no delivery of such property to the latter; and
2.Not only a possessor, but also an owner, can be in bad faith.
I cannot subscribe to such doctrines.
WHEREFORE, I vote to GRANT the petition.
||| (Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.,
G.R. No. 133879, November 21, 2001)





















Continua.
Over immovables.
Artificial/industrial BPS
EN BANC
[G.R. No. 44606. November 28, 1938.]
VICENTE STO. DOMINGO BERNARDO, plaintiff-appellant, vs.
CATALINO BATACLAN, defendant-appellant.TORIBIO
TEODORO, purchaser-appellee.
Pedro de Leon, for plaintiff-appellant.
Angel H. Mojica and Francisco Lavides, for defendant-appellant.
Jose Y. Garde, for appellee.
SYLLABUS
1.OWNERSHIP; ACCESSION; LAND AND IMPROVEMENTS. The Civil
Code confirms certain time-honored principles of the law of property.
One of these is the principle of accession whereby the owner of
property acquires not only that which it produces but that which is
united to it either naturally or artificially. Whatever is built, planted
or sown on the land of another, and the improvements or repairs
made thereon, belong to the owner of the land. Where, however, the
planter, builder, or sewer 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.
2.ID.; ID.; ID.; OPTION GRANTED TO OWNER OF LAND. In view of
the impracticability of creating what Manresa calls a state of "forced
coownership" (vol. 3, 4th ed., p. 213), the law has provided a just and
equitable 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 sewer to
pay the proper rent. It is the owner of the land who is allowed 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. The plaintiff, as owner of the land, chose to require
the defendant, as owner of the improvements, to pay for the land.
When the latter failed to pay for the land, he lost his right of
retention.
D E C I S I O N
LAUREL, J p:
This is an appeal taken by both the plaintiff and the defendant from
the order of September 26, 1935, hereinbelow referred to, of the
Court of First Instance of Cavite in Civil Case No. 2428.
There is no controversy as to the facts. By a contract of sale executed
on July 17, 1920, the plaintiff herein acquired from Pastor Samonte
and others ownership of the parcel of land of about 90 hectares
situated in sitio Balayunan, Silang Cavite. To secure possession of the
land from the vendors the said plaintiff, on July 20, 1929, instituted
Civil Case No. 1935 in the Court of First Instance of Cavite. The trial
court found for the plaintiff in a decision which was affirmed by this
Supreme Court on appeal (G. R. No. 33017). 1 When plaintiff entered
upon the premises, however, he found the defendant herein,
Catalino Bataclan, who appears to have been authorized by former
owners, as far back as 1922, to clear the land and make
improvements thereon, As Bataclan, who appears to have been
authorized by former owners, as far bank as 1922, to clear the land
and make improvements thereon. As Bataclan was not a party in
Case No. 1935, plaintiff, on June 11, 1931, instituted against him, in
the Court of First Instance of Cavite, Civil Case No. 2428. In this case,
plaintiff was declared owner but the defendant was held to be
possessor in good faith, entitled to reimbursement in the total sum
of P1,642, for work done and improvements made. The dispositive
part of the decision reads:
"Por las consideraciones expuestas, se declara al demandante
Vicente Santo Domingo Bernardo dueo con derecho a la posesion
del terreno que se describe en la demanda, y al demandado Catalino
Bataclan con derecho a que el demandante le pague la suma de
P1,642 por gastos utiles hechos de buena fe en el terreno, y por el
cerco y ponos de coco y abaca existentes en el mismo, y con derecho,
ademas a retener la posesion del terreno hasta que se le pague dicha
cantidad. Al demandante puede optar, en el plazo de treinta dias, a
partir de la fecha en que fuere notificado de la presente, por pagar
esa suma al demandado, haciendo asi suyos el cerco y todas las
plantaciones existentes en el terreno, a razon de trescientos pesos la
hectarea. En el caso de que el demandante optara por que el
demandado le pagara el precio del terreno, el demandado efectuara
el pago en el plazo conveniente por las partes o que sera fijado por el
Juzgado. Sin costas."
Both parties appealed to this court (G. R. No. 37319). 1 The decision
appealed from was modified by allowing the defendant to recover
compensation amount to P2,212 and by reducing the price at which
the plaintiff could require the defendant to purchase the land in
question from P300 to P200 per hectare. Plaintiff was given by this
court 30 days from the date when the decision became final within
which to exercise his option, either to sell the land to the defendant
or to buy the improvements from him. On January 9, 1934, the
plaintiff manifested to the lower court his desire "to require the
defendant to pay him the value of the land at the rate of P200 per
hectare or a total price of P18,000 for the whole tract of land." The
defendant informed the lower court that he was unable to pay for
the land and, on January 24, 1934, an order was issued giving the
plaintiff 30 days within which to pay the defendant the sum of
P2,212 stating that, in the event of failure to make such payment,
the land would be ordered sold at public auction "Para hacer pago al
demandante de la suma de P2,212 y el remanente despus de
deducidos los gastos legales de la venta en publica subasta sera
entregado al demandante." On February 21, 1934, plaintiff moved to
reconsider the foregoing order so that he would have preference
over the defendant in the order of payment. The motion was denied
on March 1, 1934 but on March 16 following the court below, muto
proprio, modified its order of January 24, "en el sentido de que el
demandante tiene derecho preferente al importe del terreno no se
vendiere en publica subasta, a razon de P200 por hecatarea y el
remanente, si acaso o hubiere se entregara el demandado en pago
de la cantidad de P2,212 por la limpieza del terreno y las mejoras
introducidas en el mismo por el citado demandado." On April 24,
1934, the court below, at the instance of the plaintiff and without
objection on the part of the defendant, ordered the sale of the land
in question at public auction. The land was sold on April 5, 1935 to
Toribio Teodoro, the highest bidder, for P8,000. In the certificate of
sale issued to said purchaser on the very day of sale, it was stated
that the period of redemption of the land sold was to expire on April
5, 1936. Upon petition of Toribio Teodoro the court below ordered
the provincial sheriff to issue another certificate not qualified by any
equity of redemption. This was complied with by the sheriff on July
30, 1935. On September 18, 1935, Teodoro moved that he be placed
in possession of the land purchased by him. The motion was granted
by order of September 26, 1935, the dispositive part of which is as
follows:
"Por tanto, se ordena al Shriff Provincial de Cavite ponga a Toribio
Teodoro en posesion del terreno comprado por el en subasta publica
y por el cual se le expidio certificado de vente definitiva, reservando
al demandado su derecho de ejercitar una accion ordinaria para
reclamar del demandante la cantidad de P2,212 a que tiene derecho
por la limpieza y mejoras del terreno y cuya suma, en justicia y
equidad, debe ser descontada y deducida de la suma de P8,000 que
ya ha recibido el demandante."
The Civil Code confirms certain time-honored principles of the law of
property. One of these is the principle of accession whereby the
owner of property acquires not only that which it produces but that
which is united to it either naturally or artificially. (Art. 353.)
Whatever is built, planted or sown on the land of another, and the
improvements or repairs made thereon, belong to the owner of the
land (art. 358). Where, however, the planter, builder, 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 what Manresa calls a state of "forced
coownership" (vol. 3, 4th ed., p. 213), the law has provided a just and
equitable 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 to
pay the proper rent (art. 361). It is the owner of the land who is
allowed 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 (3 Manresa, 4th ed., p. 213). In the case before us,
the plaintiff, as owner of the land, chose to require the defendant, as
owner of the improvements, to pay for the land.
The defendant states that he is a possessor in good faith and that
the amount of P2,212 to which he is entitled has not yet been paid to
him. Therefore, he says, he has a right to retain the land in
accordance with the provisions of article 453 of the Civil Code. We do
not doubt the validity of the premises stated. "Considera la ley tan
sagrada y legitima la deuda, que, hasta que sea pagada, no
consiente que la cosa se restituya al vencedor." (4 Manresa, 4th ed.,
p., 304.) We find, however, that the defendant has lost his right to
retention. In obedience to the decision of his right to retention. In
obedience to the decision of this court in G. R. No. 37319, the
plaintiff expressed his desire to require the defendant to pay for the
value of the land. The said defendant could have become owner of
both land and improvements and continued in possession thereof.
But he said he could not pay and the land was sold at public auction
to Toribio Teodoro. The law, as we have already said, requires no
more than that the owner of the land should choose between
indemnifying the owner of the improvements or requiring the latter
to pay for the land. When he failed to pay for the land, the defendant
herein lost his right of retention.
The sale at public auction having been asked by the plaintiff himself
(p. 22, bill of exceptions) and the purchase price of P8,000 received
by him from Toribio Teodoro, we find no reason to justify a rupture
of the situation has created between them, the defendant- appellant
not being entitled, after all, to recover from the plaintiff the sum of
P2,212.
The judgment of the lower court is accordingly modified by
eliminating therefrom the reservation made in favor of the
defendant- appellant to recover from the plaintiff the sum of P2,212.
In all other respects, the same is affirmed, without pronouncement
regarding costs. So ordered.
Avancea, C.J., Villa-Real, Imperial and Diaz, JJ., concur.
||| (Bernardo v. Bataclan, G.R. No. 44606, November 28, 1938)
EN BANC
[G.R. No. L-175. April 30, 1946.]
DAMIAN IGNACIO, FRANCISCO IGNACIO and LUIS
IGNACIO, petitioners, vs. ELIAS HILARIO and his wife DIONISIA
DRES, and FELIPE NATIVIDAD, Judge of First Instance of
Pangasinan, respondents.
Leoncio R. Esliza for petitioners.
Mauricio M. Monta for respondent.
SYLLABUS
1.PROPERTY; IMPROVEMENTS; RIGHT AND OBLIGATIONS OF
OWNERS OF LAND AND OF OWNER OF IMPROVEMENTS. The
owner of the building erected in good faith on a land owned by
another, is entitled to retain the possession of the land until he is
paid the value of his building, under article 453 of the Civil Code. The
owner of the land, upon the other hand, has the option, under article
361, either to pay for the building or to sell his land to the owner of
the building. But he cannot, as respondents here did, refuse both to
pay for the building and to sell the land and compel the owner of the
building to remove it from the land where it is erected. He is entitled
to such remotion only when, after having chosen to sell his land, the
other party fails to pay for the same.
2.JUDGMENTS; ADDITIONS TO FINAL JUDGMENTS; SHERIFF NOT
AUTHORIZED TO SETTLE MATTERS INVOLVING EXERCISE OF JUDICIAL
DISCRETION; CASE AT BAR. The trial court's decision defining
rightly the rights of both parties under articles 361 and 453 of the
Civil Code, fails to determine the value of the buildings and of the lot
where they are erected as well as the periods of time within which
the option may be exercised and payment should be made, these
particulars having been left for determination apparently after the
judgment has become final. This procedure is erroneous, for after the
judgment has become final, no additions can be made thereto and
nothing can be done therewith except its execution. And execution
cannot be had, the sheriff being ignorant as to how, for how much,
and within what time may be the option be exercised, and certainly
no authority is vested in him to settle these matters which involve
exercise of judicial discretion. Thus the appealed judgment has never
become final, it having left matters to be settled for its completion in
a subsequent proceeding, matters which remained unsettled up to
the time the petition is filed in the instant case.
D E C I S I O N
MORAN, C.J p:
This is a petition for certiorari arising from a case in the Court of First
Instance of Pangasinan between the herein respondents Elias Hilario
and his wife Dionisia Dres as plaintiffs, and the herein petitioners
Damian, Francisco and Luis surnamed Ignacio, as defendants,
concerning the ownership of a parcel of land, partly rice-land and
partly residential. After the trial of the case, the lower court,
presided over by Hon. Alfonso Felix, rendered judgment holding
plaintiffs as the legal owners of the whole property but conceding to
defendants the ownership of the houses and granaries built by them
on the residential portion with the rights of a possessor in good faith,
in accordance with article 361 of the Civil Code. The dispositive part
of the decision , hub of this controversy, follows:
"Wherefore, judgment is hereby rendered declaring:
"(1)That the plaintiffs are the owners of the whole property
described in transfer certificate of title No. 12872 (Exhibit A) issued in
their name, and entitled to the possession of the same;
"(2)That the defendants are entitled to hold the possession of the
residential lot until after they are paid the actual market value of
their houses and granaries erected thereon, unless the plaintiffs
prefer to sell them said residential lot, in which case defendants shall
pay the plaintiffs the proportionate value of said residential lot
taking as a basis the price paid for the whole land according to
Exhibit B; and
"(3)That upon defendant's failure to purchase the residential lot in
question, said defendants shall remove their houses and granaries
after this decision becomes final and within the periods of sixty (60)
days from the date that the court is informed in writing of the
attitude of the parties in this respect.
"No pronouncement is made as to damages and costs.
"Once this decision becomes final, the plaintiffs and defendants may
appear again before this court for the purpose of determining their
respective rights under article 361 of the Civil Code, if they cannot
come to an extra-judicial settlement with regard to said rights."
Subsequently, in a motion filed in the same Court of First Instance
but now presided over by the herein respondent Judge Hon. Felipe
Natividad, the plaintiffs prayed for an order of execution alleging
that since they chose neither to pay defendants for the buildings nor
to sell to them the residential lot, said defendants should be ordered
to remove the structure at their own expense and to restore plaintiffs
in the possession of said lot. Defendants objected to this motion
which, after hearing, was granted by Judge Natividad. Hence, this
petition by defendants praying for (a) a restraint and annulment of
the order of execution issued by Judge Natividad; (b) an order to
compel plaintiffs to pay them the sum of P2,000 for the buildings, or
sell to them the residential lot for P45; or (c) a rehearing of the case
for a determination of the rights of the parties upon failure of extra-
judicial settlement.
The judgment rendered by Judge Felix is founded on articles 361 and
453 of the Civil Code which are as follows:
"ART. 361.The owner of land on which anything has been built, sown
or planted in good faith, shall have the right to appropriate as his
own the work, sowing or planting, after the payment of the
indemnity stated in articles 453 and 454, or to oblige the one who
built or planted to pay the price of the land, and the one who sowed,
the proper rent.
"ART. 453.Necessary expenses shall be refunded to every possessor;
but only the possessor in good faith may retain the thing until such
expenses are made good to him.
"Useful expenses shall be refunded 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 paying the increase in value which the thing may have
acquired in consequence thereof."
The owner of the building erected in good faith on a land owned by
another, is entitled to retain the possession of the land until he is
paid the value of his building, under article 453. The owner of the
land, upon the other hand, has the option, under article 361, either
to pay for the building or to sell his land to the owner of the building.
But he cannot, as respondents here did, refuse both to pay for the
building and to sell the land and compel the owner of the building to
remove it from the land where it is erected. He is entitled to such
remotion only when, after having chosen to sell his land, the other
party fails to pay for the same. But this is not the case before us.
We hold, therefore, that the order of Judge Natividad compelling
defendants-petitioners to remove their buildings from the land
belonging to plaintiffs-respondents only because the latter chose
neither to pay for such buildings nor to sell the land, is null and void,
for it amends substantially the judgment sought to be executed and
is, furthermore, offensive to articles 361 and 453 of the Civil Code.
There is. however, in the decision of Judge Felix a question of
procedure which calls for clarification, to avoid uncertainty and delay
in the disposition of cases. In that decision, the rights of both parties
are well defined under articles 361 and 453 of the Civil Code, but it
fails to determine the value of the buildings and of the lot where they
are erected as well as the periods of time within which the option
may be exercised and payment should be made, these particulars
having been left for determination apparently after the judgment
has become final. This procedure is erroneous, for after the judgment
has become final, no additions can be made thereto and nothing can
be done therewith except its execution. And execution cannot be
had, the sheriff being ignorant as to how, for how much, and within
what time may the option be exercised, and certainty no authority is
vested in him to settle these matters which involve exercise of
judicial discretion. Thus the judgment rendered by Judge Felix has
never become final, it having left matters to be settled for its
completion in a subsequent proceeding, matters which remained
unsettled up to the time the petition is filed in the instant case.
For all the foregoing, the writ of execution issued by Judge Natividad
is hereby set aside and the lower court ordered to hold a hearing in
the principal case wherein it must determine the prices of the
buildings and of the residential lot where they are erected, as well as
the period of time within which the plaintiffs-respondents may
exercise their option either to pay for the buildings or to sell their
land, and, in the last instance, the period of time within which the
defendants-petitioners may pay for the land, all these periods to be
counted from the date the judgment becomes executory or
unappealable. After such hearing, the court shall render a final
judgment according to the evidence presented by the parties.
The costs shall be paid by plaintiffs-respondents.
Ozaeta, Paras, Jaranilla, Feria, De Joya, Pablo, Perfecto, Hilado,
Bengzon, and Briones, JJ., concur.

||| (Ignacio v. Hilario, G.R. No. L-175, April 30, 1946)












SECOND DIVISION
[G.R. No. 57288. April 30, 1984.]
LEONILA SARMIENTO, petitioner, vs. HON. ENRIQUE A. AGANA,
District Judge, Court of First Instance of Rizal, Seventh Judicial
District, Branch XXVIII, Pasay City, and SPOUSES ERNESTO
VALENTlNO and REBECCA LORENZO-VALENTINO, respondents.
Mercedes M . Respicio for petitioner.
Romulo R. Bobadilla for private respondents.
SYLLABUS
1.CIVIL LAW; PROPERTY; POSSESSION; BUILDERS IN GOOD FAITH;
GOOD FAITH MANIFESTED WHERE RESIDENTIAL HOUSE WAS BUILT
WITH THE CONSENT OF THE ALLEGED OWNER. We agree that
Ernesto and wife were builders in good faith in view of the peculiar
circumstances under which they had constructed the residential
house. As far as they knew, the land was owned by Ernesto's mother-
in-law who, having stated they could build on the property, could
reasonably be expected to later on give them the land.
2.ID.; ID.; ID.; ID.; OPTIONS OF LANDOWNER; CASE AT BAR. The
challenged decision of respondent Court, based on valuations of
P25,000.00 for the land and P40,000.00 for the residential house,
cannot be viewed as not supported by the evidence. The provision for
the exercise of petitioner Sarmiento of either the option to indemnify
private respondents in the amount of P40,000.00 or the option to
allow private respondents to purchase the land at P25,000.00, in our
opinion, was a correct decision. "The owner of the building erected in
good faith on a land owned by another, is entitled to retain
possession of the land until he is paid the value of his building under
Article 453 (now Article 546). The owner of the land, upon the other
hand, has the option, under Article 361 (now Article 448), either to
pay for the building or to sell his land to the owner of the building.
But he cannot . . . refuse both to pay for the building and to sell the
land and compel the owner of the building to remove it from the land
where it is erected. He is entitled to such remotion only when, after
having chosen to sell his land, the other party fails to pay for the
same" (Ignacio vs. Hilario, 76 Phil. 605, 608 [1946]).
D E C I S I O N
MELENCIO-HERRERA, J p:
This Petition for Certiorari questions a March 29, 1979. Decision
rendered by the then Court of First Instance of Pasay City. The
Decision was one made on memoranda, pursuant to the provisions
of RA 6031, and it modified, on October 17, 1977, a judgment of the
then Municipal Court of Paraaque, Rizal, in an Ejectment suit
instituted by herein petitioner Leonila SARMIENTO against private
respondents, the spouses ERNESTO Valentino and Rebecca Lorenzo.
For the facts, therefore, we have to look to the evidence presented
by the parties at the original level. cdll
It appears that while ERNESTO was still courting his wife, the latter's
mother had told him the couple could build a RESIDENTIAL HOUSE on
a lot of 145 sq. ms., being Lot D of a subdivision in Paraaque (the
LAND, for short). In 1967, ERNESTO did construct a RESIDENTIAL
HOUSE on the LAND at a cost of P8,000.00 to P10,000.00. It was
probably assumed that the wife's mother was the owner of the LAND
and that, eventually, it would somehow be transferred to the
spouses.
It subsequently turned out that the LAND had been titled in the name
of Mr. & Mrs. Jose C. Santos, Jr. who, on September 7, 1974, sold the
same to petitioner SARMIENTO. The following January 6, 1975,
SARMIENTO asked ERNESTO and wife to vacate and, on April 21,
1975, filed an Ejectment suit against them. In the evidentiary
hearings before the Municipal Court, SARMIENTO submitted the
deed of sale of the LAND in her favor, which showed the price to be
P15,000.00. On the other hand, ERNESTO testified that the then cost
of the RESIDENTIAL HOUSE would be from P30,000.00 to P40,000.00.
The figures were not questioned by SARMIENTO.
The Municipal Court found that private respondents had built the
RESIDENTIAL HOUSE in good faith, and, disregarding the testimony
of ERNESTO, that it had a value of P20,000.00. It then ordered
ERNESTO and wife to vacate the LAND after SARMIENTO has paid
them the mentioned sum of P20,000.00.
The Ejectment suit was elevated to the Court of First Instance of
Pasay where, after the submission of memoranda, said Court
rendered a modifying Decision under Article 448 of the Civil Code.
SARMIENTO was required, within 60 days, to exercise the option to
reimburse ERNESTO and wife the sum of P40,000.00 as the value of
the RESIDENTIAL HOUSE, or the option to allow them to purchase the
LAND for P25,000.00. SARMIENTO did not exercise any of the two
options within the indicated period, and ERNESTO was then allowed
to deposit the sum of P25,000.00 with the Court as the purchase
price for the LAND. This is the hub of the controversy. SARMIENTO
then instituted the instant Certiorari proceedings. LLjur
We agree that ERNESTO and wife were builders in good faith in view
of the peculiar circumstances under which they had constructed the
RESIDENTIAL HOUSE. As far as they knew, the LAND was owned by
ERNESTO's mother-in-law who, having stated they could build on the
property, could reasonably be expected to later on give them the
LAND.
In regards to builders in good faith, Article 448 of the Code provides:
"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."
(Paragraphing supplied).
The value of the LAND, purchased for P15,000.00 on September 7,
1974, could not have been very much more than that amount during
the following January when ERNESTO and wife were asked to vacate.
However, ERNESTO and wife have not questioned the P25,000.00
valuation determined by the Court of First Instance.
In regards to the valuation of the RESIDENTIAL HOUSE, the only
evidence presented was the testimony of ERNESTO that its worth at
the time of the trial should be from P30,000.00 to P40,000.00. The
Municipal Court chose to assess its value at P20,000.00, or below the
minimum testified by ERNESTO, while the Court of First Instance
chose the maximum of P40,000.00. In the latter case, it cannot be
said that the Court of First Instance had abused its discretion.
The challenged decision of respondent Court, based on valuations of
P25,000.00 for the LAND and P40,000.00 for the RESIDENTIAL
HOUSE, cannot be viewed as not supported by the evidence. The
provision for the exercise by petitioner SARMIENTO of either the
option to indemnify private respondents in the amount of
P40,000.00, or the option to allow private respondents to purchase
the LAND at P25,000.00, in our opinion, was a correct
decision. LexLib
"The owner of the building erected in good faith on a land owned by
another, is entitled to retain the possession of the land until he is
paid the value of his building, under article 453 (now Article 546).
The owner of the land, upon the other hand, has the option, under
article 361 (now Article 448), either to pay for the building or to sell
his land to the owner of the building. But he cannot as respondents
here did, refuse both to pay for the building and to sell the land and
compel the owner of the building to remove it from the land where it
is erected. He is entitled to such remotion only when, after having
chosen to sell his land, the other party fails to pay for the same.
(emphasis supplied).
"We hold, therefore, that the order of Judge Natividad compelling
defendants-petitioners to remove their buildings from the land
belonging to plaintiffs-respondents only because the latter chose
neither to pay for such buildings nor to sell the land, is null and void,
for it amends substantially the judgment sought to be executed and
is, furthermore, offensive to articles 361 (now Article 448) and 453
(now Article 546) of the Civil Code." (Ignacio vs. Hilario, 76 Phil. 605,
608 [1946]).
WHEREFORE, the Petition for Certiorari is hereby ordered dismissed,
without pronouncement as to costs.
SO ORDERED.
Teehankee, Plana, Relova, Gutierrez, Jr. and De la Fuente,
JJ ., concur.

||| (Sarmiento v. Agana, G.R. No. 57288, April 30, 1984)
















FIRST DIVISION
[G.R. No. L-57348. May 16, 1985.]
FRANCISCO DEPRA, plaintiff-appellee, vs. AGUSTIN
DUMLAO, defendant-appellant.
Roberto D. Dineros for plaintiff-appellee.
Neil D. Hechanova for defendant-appellant.
D E C I S I O N
MELENCIO-HERRERA, J p:
This is an appeal from the Order of the former Court of First Instance
of Iloilo to the then Court of Appeals, which the latter certified to this
instance as involving pure questions of law.
Plaintiff-appellee, Francisco Depra, is the owner of a parcel of land
registered under Transfer Certificate of Title No. T-3087, known as
Lot No. 685, situated in the municipality of Dumangas, Iloilo, with an
area of approximately 8,870 square meters. Agustin Dumlao,
defendant-appellant, owns an adjoining lot, designated as Lot No.
683, with an approximate area of 231 sq. ms.
Sometime in 1972, when DUMLAO constructed his house on his lot,
the kitchen thereof had encroached on an area of thirty four (34)
square meters of DEPRA's property. After the encroachment was
discovered in a relocation survey of DEPRA's lot made on November
2, 1972, his mother, Beatriz Derla, after writing a demand letter
asking DUMLAO to move back from his encroachment, filed an
action for Unlawful Detainer on February 6, 1973 against DUMLAO
in the Municipal Court of Dumangas, docketed as Civil Case No. I.
Said complaint was later amended to include DEPRA as a party
plaintiff.
After trial the Municipal Court found that DUMLAO was a builder in
good faith, and applying Article 448 of the Civil Code, rendered
judgment on September 29, 1973, the dispositive portion of which
reads: Cdpr
"Ordering that a forced lease is created between the parties with the
plaintiffs, as lessors, and the defendants as lessees, over the disputed
portion with an area of thirty four (34) square meters, the rent to be
paid is five (P5.00) pesos a month, payable by the lessee to the
lessors within the first five (5) days of the month the rent is due; and
the lease shall commence on that day that this decision shall have
become final."
From the foregoing judgment, neither party appealed so that, if it
were a valid judgment, it would have ordinarily lapsed into finality,
but even then, DEPRA did not accept payment of rentals so that
DUMLAO deposited such rentals with the Municipal Court.
On July 15, 1974, DEPRA filed a Complaint for Quieting of Title
against DUMLAO before the then Court of First Instance of Iloilo,
Branch IV (Trial Court), involving the very same 34 square meters,
which was the bone of contention in the Municipal Court. DUMLAO,
in his Answer, admitted the encroachment but alleged, in the main,
that the present suit is barred by res judicata by virtue of the
Decision of the Municipal Court, which had become final and
executory.
After the case had been set for pre-trial, the parties submitted a Joint
Motion for Judgment based on the Stipulation of Facts attached
thereto. Premised thereon, the Trial Court on October 31, 1974,
issued the assailed Order, decreeing:
"WHEREFORE, the Court finds and so holds that the thirty four (34)
square meters subject of this litigation is part and parcel of Lot 685
of the Cadastral Survey of Dumangas of which the plaintiff is owner
as evidenced by Transfer Certificate of Title No. 3087 and such
plaintiff is entitled to possess the same.
"Without pronouncement as to costs.
"SO ORDERED."
Rebutting the argument of res judicata relied upon by DUMLAO,
DEPRA claims that the Decision of the Municipal Court was null and
void ab initio because its jurisdiction is limited to the sole issue of
possession, whereas decisions affecting lease, which is an
encumbrance on real property, may only be rendered by Courts of
First Instance.
Addressing ourselves to the issue of validity of the Decision of the
Municipal Court, we hold the same to be null and void. The judgment
in a detainer case is effective in respect of possession only (Sec. 7,
Rule 70, Rules of Court). 1 The Municipal Court overstepped its
bounds when it imposed upon the parties a situation of "forced
lease", which like "forced co-ownership" is not favored in law.
Furthermore, a lease is an interest in real property, jurisdiction over
which belongs to Courts of First Instance (now Regional Trial Courts)
(Sec. 44(b), Judiciary Act of 1948; 2 Sec. 19 (2) Batas Pambansa Blg.
129). 3 Since the Municipal Court, acted without jurisdiction, its
Decision was null and void and cannot operate as res judicata to the
subject complaint for Queting of Title. Besides, even if the Decision
were valid, the rule on res judicata would not apply due to difference
in cause of action. In the Municipal Court, the cause of action was
the deprivation of possession, while in the action to quiet title, the
cause of action was based on ownership. Furthermore, Sec. 7, Rule
70 of the Rules of Court explicitly provides that judgment in a
detainer case "shall not bar an action between the same parties
respecting title to the land." 4
Conceded in the Stipulation of Facts between the parties is that
DUMLAO was a builder in good faith. Thus, LLpr
"8.That the subject matter in the unlawful detainer case, Civil Case
No. 1, before the Municipal Court of Dumangas, Iloilo involves the
same subject matter in the present case, the Thirty-four (34) square
meters portion of land and built thereon in good faith is a portion of
defendant's kitchen and has been in the possession of the defendant
since 1952 continuously up to the present; . . ." (Italics ours)
Consistent with the principles that our Court system, like any other,
must be a dispute resolving mechanism, we accord legal effect to the
agreement of the parties, within the context of their mutual
concession and stipulation. They have, thereby, chosen a legal
formula to resolve their dispute to apply to DUMLAO the rights of
a "builder in good faith" and to DEPRA those of a "landowner in good
faith" as prescribed in Article 448. Hence, we shall refrain from
further examining whether the factual situations of DUMLAO and
DEPRA conform to the juridical positions respectively defined law, for
a "builder in good faith" under Article 448, a "possessor in good
faith" under Article 526 and a "landowner in good faith" under
Article 448.
In regards to builders in good faith, Article 448 of the Civil Code
provides:
"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."
(Paragraphing supplied)
Pursuant to the foregoing provision, DEPRA has the option either to
pay for the encroaching part of DUMLAO's kitchen, or to sell the
encroached 34 square meters of his lot to DUMLAO. He cannot
refuse to pay for the encroaching part of the building, and to sell the
encroached part of his land, 5 as he had manifested before the
Municipal Court. But that manifestation is not binding because it
was made in a void proceeding.
However, the good faith of DUMLAO. is part of the Stipulation of
Facts in the Court of First Instance. It was thus error for the Trial
Court to have ruled that DEPRA is "entitled to possession," without
more, of the disputed portion implying thereby that he is entitled to
have the kitchen removed. He is entitled to such removal only when,
after having chosen to sell his encroached land, DUMLAO fails to pay
for the same. 6 In this case, DUMLAO had expressed his willingness
to pay for the land, but DEPRA refused to sell.
"The owner of the building erected in good faith on a land owned by
another, is entitled to retain the possession of the land until he is
paid the value of his building, under article 453 (now Article 546).
The owner of the land, upon the other hand, has the option, under
article 361 (now Article 448), either to pay for the building or to sell
his land to the owner of the building. But he cannot, as respondents
here did refuse both to pay for the building and to sell the land and
compel the owner of the building to remove it from the land where it
erected. He is entitled to such remotion only when, after having
chosen to sell his land, the other party fails to pay for the same
(italics ours).
"We hold, therefore, that the order of Judge Natividad compelling
defendants-petitioners to remove their buildings from the land
belonging to plaintiffs-respondents only because the latter chose
neither to pay for such buildings nor to sell the land, is null and void,
for it amends substantially the judgment sought to be executed and
is, furthermore, offensive to articles 361 (now Article 448) and 453
(now Article 546) of the Civil Code. (Ignacio vs. Hilario, 76 Phil. 605,
608 [1946])."
A word anent the philosophy behind Article 448 of the Civil Code.
The original provision was found in Article 361 of the Spanish Civil
Code, which provided:
"ART. 361.The owner of land on which anything has been built, sown
or planted in good faith, shall have the right to appropriate as his
own the work, sowing or planting, after the payment of the
indemnity stated in Articles 453 and 454, or to oblige the one who
built or planted to pay the price of the land, and the one who sowed,
the proper rent."
As will be seen, the Article favors the owner of the land, by giving
him one of the two options mentioned in the Article. Some
commentators have questioned the preference in favor of the owner
of the land, but Manresa's opinion is that the Article is just and
fair. LLpr

". . . es justa la facultad que el codigo da al dueo del suelo en el
articulo 361, en el caso de edificacion o plantacion? Algunos
comentaristas la conceptuan injusta, y como un extraordinario
privilegio en favor de la propiedad territorial. Entienden que impone
el Codigo una pena al poseedor de buena fe; y como advierte uno de
los comentaristas aludidos, 'no se ve claro el por que de tal pena . . .
al obligar al que obro de buena fe a quedarse con el edificio o
plantacion, previo el pago del terreno que ocupa, porque si bien es
verdad que cuando edifico o planto demostro con este hecho, que
queria para si el edificio o plantio, tambien lo es que el que edifico o
planto de buena fe lo hizo en la erronea inteligencia de creerse
dueo del terreno. Posible es que, de saber lo contrario, y de tener
noticia de que habia que comprar y pagar el terreno, no se hubiera
decidido a plantar ni a eddficar. La ley, obligandole a hacerlo, fuerza
su voluntad, y la fuerza por un hecho inocente de que no debe ser
responsable'. Asi podra suceder; pero la realidad es que con ese
hecho voluntario, aunque sea inocente, se ha eniquecido
torticeramente con perjuicio de otro a quien es justo indemnizarle.
"En nuestra opinion, el Codigo ha resuelto el conflicto de la manera
mas justa y equitativa, y respetando en lo posible el principio que
para la accesion se establece en el art. 358." 7
Our own Code Commission must have taken account of the
objections to Article 361 of the Spanish Civil Code. Hence, the
Commission provided a modification thereof, and Article 448 of our
Code has been made to provide:
"ART. 448.The owner of the land on which 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."
Additional benefits were extended to the builder but the landowner
retained his options.
The fairness of the rules in Article 448 has also been explained as
follows:
"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 co-ownership, 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 to pay for
the proper rent. 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. (3 Manresa 213; Bernardo vs. Bataclan, 37 Off. Gaz.
1382; Co Tao vs. Chan Chico, G.R. No. 49167, April 30, 1949; Article
applied: see Cabral, et al vs. Ibaez [S.C.] 52 Off. Gaz. 217; Marfori
vs. Velasco, [C.A.] 52 Off. Gaz. 2050)." 8
WHEREFORE, the judgment of the trial Court is hereby set aside, and
this case is hereby ordered remanded to the Regional Trial Court of
Iloilo for further proceedings consistent with Articles 448 and 546 of
the Civil Code, as follows:
1.The trial Court shall determine
a)the present fair price of DEPRA's 34 square meter-area of land;
b)the amount of the expenses spent by DUMLAO for the building of
the kitchen;
c)the increase in value ("plus value") which the said area of 34
square meters may have acquired by reason thereof, and
d)whether the value of said area of land is considerably more than
that of the kitchen built thereon.
2.After said amounts shall have been determined by competent
evidence, the Regional Trial Court shall render judgment, as follows:
a)The trial Court shall grant DEPRA a period of fifteen (15) days
within which to exercise his option under the law (Article 448, Civil
Code), whether to appropriate the kitchen a his own by paying to
DUMLAO either the amount of the expenses spent by DUMLAO for
the building of the kitchen, or the increase in value ("plus value")
which the said area of 34 square meters may have acquired by
reason thereof, or to oblige DUMLAO to pay the price of said area.
The amounts to be respectively paid by DUMLAO and DEPRA, in
accordance with the option thus exercised by written notice of the
other party and to the Court, shall be paid by the obligor within
fifteen (15) days from such notice of the option by tendering the
amount to the Court in favor of the party entitled to receive it;
b)The trial Court shall further order that if DEPRA exercises the
option to oblige DUMLAO to pay the price of the land but the latter
rejects such purchase because, as found by the trial Court, the value
of the land is considerably more than that of the kitchen, DUMLAO
shall give written notice of such rejection to DEPRA and to the Court
within fifteen (15) days from notice of DEPRA's option to sell the
land. In that event, the parties shall be given a period of fifteen (15)
days from such notice of rejection within which to agree upon the
terms of the lease, and give the Court formal written notice of such
agreement and its provisos. If no agreement is reached by the
parties, the trial Court, within fifteen (15) days from and after the
termination of the said period fixed for negotiation, shall then fix the
terms of the lease, provided that the monthly rental to be fixed by
the Court shall not be less than Ten Pesos (P10.00) per month,
payable within the first five (5) days of each calendar month. The
period for the forced lease shall not be more than two (2) years,
counted from the finality of the judgment, considering the long
period of time since 1952 that DUMLAO has occupied the subject
area. The rental thus fixed shall be increased by ten percent (10%)
for the second year of the forced lease. DUMLAO shall not make any
further constructions or improvements on the kitchen. Upon
expiration of the two-year period, or upon default by DUMLAO in the
payment of rentals for two (2) consecutive months, DEPRA shall be
entitled to terminate the forced lease, to recover his land, and to
have the kitchen removed by DUMLAO or at the latter's expense. The
rentals herein provided shall be tendered by DUMLAO to the Court
for payment to DEPRA, and such tender shall constitute evidence of
whether or not compliance was made within the period fixed by the
Court. LLphil
c)In any event, DUMLAO shall pay DEPRA an amount computed at
Ten Pesos (P10.00) per month as reasonable compensation for the
occupancy of DEPRA's land for the period counted from 1952, the
year DUMLAO occupied the subject area, up to the commencement
date of the forced lease referred to in the preceding paragraph;
d)The periods to be fixed by the trial Court in its Decision shall be
inextendible, and upon failure of the party obliged to tender to the
trial Court the amount due to the obligee, the party entitled to such
payment shall be entitled to an order of execution for the
enforcement of payment of the amount due and for compliance with
such other acts as may be required by the prestation due the obligee.
No costs.
SO ORDERED.
Teehankee, Actg. C.J., Plana, Relova, De la Fuente and Alampay,
JJ., concur.
Gutierrez, Jr., J., took no part.
||| (Depra v. Dumlao, G.R. No. L-57348, May 16, 1985)

































THIRD DIVISION
[G.R. No. 108894. February 10, 1997.]
TECNOGAS PHILIPPINES MANUFACTURING
CORPORATION, petitioner, vs. COURT OF APPEALS (FORMER
SPECIAL SEVENTEENTH DIVISION) and EDUARDO UY, respondents.
De Jesus Paguio and Manimtim for petitioner.
M.R. Pamaran Law Offices for private respondent.
Acebes Del Carmen Cinco & Cordova for private respondent.
SYLLABUS
1.CIVIL LAW; PROPERTY; POSSESSION; GOOD FAITH, PRESUMED.
When petitioner purchased the land from Pariz Industries, the
buildings and other structures were already in existence. The record
is not clear as to who actually built those structures, but it may well
be assumed that petitioner's predecessor-in-interest, Pariz Industries,
did so. Article 527 of the Civil Code presumes good faith, and since no
proof exists to show that the encroachment over a narrow, needle-
shaped portion of private respondent's land was done in bad faith by
the builder of the encroaching structures, the latter should be
presumed to have built them in good faith. It is presumed that
possession continues to be enjoyed in the same character in which it
was acquired, until the contrary is proved. Good faith consists in the
belief of the builder that the land he is building on is his, and his
ignorance of any defect or flaw in his title. Hence, such good faith, by
law passed on to Pariz's successor, petitioner in this case. Further,
"(w)here one derives title to property from another, the act,
declaration, or omission of the latter, while holding the title, in
relation to the property, is evidence against the former." And
possession acquired in good faith does not lose this character except
in case and from the moment facts exist which show that the
possessor is not unaware that he possesses the thing improperly or
wrongfully. The good faith ceases from the moment defects in the
title are made known to the possessor, by extraneous evidence or by
suit for recovery of the property by the true owner.
2.ID.; ID.; OWNERSHIP; RIGHT OF ACCESSION; IMMOVABLE
PROPERTY; BUILDER IN GOOD FAITH CAN COMPEL THE LANDOWNER
TO EXERCISE HIS OPTION UNDER ART. 448; APPLICABLE TO BUYER IN
GOOD FAITH. The builder in good faith under Article 448 of the
Civil Code, instead of being outrightly ejected from the land, can
compel the landowner to make a choice between the two options:
(1) to appropriate the building by paying the indemnity required by
law, or (2) sell the land to the builder. The landowner cannot refuse
to exercise either option and compel instead the owner of the
building to remove it from the land. The same benefit can be invoked
by petitioner who is not the builder of the offending structures but
possesses them in good faith as buyer. Petitioner is deemed to have
stepped into the shoes of the seller in regard to all rights of
ownership over the immovable sold, including the right to compel
the private respondent to exercise either of the two options provided
under Article 448 of the Civil Code.
3.ID.; ID.; ID.; ID.; ID.; ID.; ID. Petitioner did not lose its rights
under Article 448 of the Civil Code on the basis merely of the fact
that some years after acquiring the property in good faith, it learned
about and aptly recognized the right of private respondent to a
portion of the land occupied by its building. The supervening
awareness of the encroachment by petitioner does not militate
against its right to claim the status of a builder in good faith. In fact,
a judicious reading of said Article 448 will readily show that the
landowner's exercise of his option can only take place after the
builder shall have come to know of the intrusion in short, when
both parties shall have become aware of it. Only then will the
occasion for exercising the option arise, for it is only then that both
parties will have been aware that a problem exists in regard to their
property rights.
4.ID.; ID.; ID.; ID.; ID.; ARTICLE 148; APPLICATION IN CASE AT BAR;
ATTORNEY'S FEES, AWARD OF, UNWARRANTED. In line with the
case of Depra vs. Dumlao, this case will have to be remanded to the
trial court for further proceedings to fully implement the mandate of
Art. 448. It is a rule of procedure for the Supreme Court to strive to
settle the entire controversy in a single proceeding leaving no root or
branch to bear the seeds of future litigation. Petitioner, however,
must also pay the rent for the property occupied by its building as
prescribed by respondent Court from October 4, 1979, but only up to
the date private respondent serves notice of its option upon
petitioner and the trial court; that is, if such option is for private
respondent to appropriate the encroaching structure. In such event,
petitioner would have a right of retention which negates the
obligation to pay rent. The rent should however continue if the
option chosen is compulsory sale, but only up to the actual transfer
of ownership. The award of attorney's fees by respondent Court
against petitioner is unwarranted since the action appears to have
been filed in good faith. Besides, there should be no penalty on the
right to litigate.
D E C I S I O N
PANGANIBAN, J p:
The parties in this case are owners of adjoining lots in Paraaque,
Metro Manila. It was discovered in a survey that a portion of a
building of petitioner, which was presumably constructed by its
predecessor-in-interest, encroached on a portion of the lot owned by
private respondent. What are the rights and obligations of the
parties? Is petitioner considered a builder in bad faith because, as
held by respondent Court, he is "presumed to know the metes and
bounds of his property as described in his certificate of title"? Does
petitioner succeed into the good faith or bad faith of his predecessor-
in-interest which presumably constructed the building?
These are the questions raised in the petition for review of the
Decision 1 dated August 28, 1992, in CA-G.R. CV No. 28293 of
respondent Court 2 where the disposition reads: 3
"WHEREFORE, premises considered, the Decision of the Regional
Trial Court is hereby reversed and set aside and another one entered

1.Dismissing the complaint for lack of cause of action;
2.Ordering Tecnogas to pay the sum of P2,000.00 per month as
reasonable rental from October 4, 1979 until appellee vacates the
land;
3.To remove the structures and surrounding walls on the encroached
area;
4.Ordering appellee to pay the value of the land occupied by the two-
storey building;
5.Ordering appellee to pay the sum of P20,000.00 for and as
attorney's fees;
6.Costs against appellee."
Acting on the motions for reconsideration of both petitioner and
private respondent, respondent Court ordered the deletion of
paragraph 4 of the dispositive portion in an Amended Decision dated
February 9, 1993, as follows: 4
"WHEREFORE, premises considered, our decision of August 28, 1992
is hereby modified deleting paragraph 4 of the dispositive portion of
our decision which reads:
'4.Ordering appellee to pay the value of the land occupied by the
two-storey building.'
The motion for reconsideration of appellee is hereby DENIED for lack
of merit."
The foregoing Amended Decision is also challenged in the instant
petition.
The Facts
The facts are not disputed. Respondent Court merely reproduced the
factual findings of the trial court, as follows: 5
"That plaintiff (herein petitioner) which is a corporation duly
organized and existing under and by virtue of Philippine laws is the
registered owner of a parcel of land situated in Barrio San Dionisio,
Paraaque, Metro Manila known as Lot 4331-A (should be 4531-A)
of Lot 4531 of the Cadastral Survey of Paraaque, Metro Manila,
covered by Transfer Certificate of Title No. 409316 of the Registry of
Deeds of the Province of Rizal; that said land was purchased by
plaintiff from Pariz Industries, Inc. in 1970, together with all the
buildings and improvements including the wall existing thereon; that
the defendant (herein private respondent) is the registered owner of
a parcel of land known as Lot No. 4531-B of Lot 4531 of the
Cadastral Survey of Paraaque, LRC (GLRO) Rec. No. 19645 covered
by Transfer Certificate of Title No. 279838, of the Registry of Deeds
for the Province of Rizal; that said land which adjoins plaintiff's land
was purchased by defendant from a certain Enrile Antonio also in
1970; that in 1971, defendant purchased another lot also adjoining
plaintiff's land from a certain Miguel Rodriguez and the same was
registered in defendant's name under Transfer Certificate of Title No.
31390, of the Registry of Deeds for the Province of Rizal; that
portions of the buildings and wall bought by plaintiff together with
the land from Pariz Industries are occupying a portion of defendant's
adjoining land; that upon learning of the encroachment or
occupation by its buildings and wall of a portion of defendant's land,
plaintiff offered to buy from defendant that particular portion of
defendant's land occupied by portions of its buildings and wall with
an area of 770 square meters, more or less, but defendant, however,
refused the offer. In 1973, the parties entered into a private
agreement before a certain Col. Rosales in Malacaang, wherein
plaintiff agreed to demolish the wall at the back portion of its land
thus giving to defendant possession of a portion of his land
previously enclosed by plaintiff's wall; that defendant later filed a
complaint before the office of Municipal Engineer of Paraaque,
Metro Manila as well as before the Office of the Provincial Fiscal of
Rizal against plaintiff in connection with the encroachment or
occupation by plaintiff's buildings and walls of a portion of its land
but said complaint did not prosper; that defendant dug or caused to
be dug a canal along plaintiff's wall, a portion of which collapsed in
June, 1980, and led to the filing by plaintiff of the supplemental
complaint in the above-entitled case and a separate criminal
complaint for malicious mischief against defendant and his wife
which ultimately resulted into the conviction in court of defendant's
wife for the crime of malicious mischief; that while trial of the case
was in progress, plaintiff filed in Court a formal proposal for
settlement of the case but said proposal, however, was ignored by
defendant."

After trial on the merits, the Regional Trial Court 6 of Pasay City,
Branch 117, in Civil Case No. PQ-7631-P, rendered a decision dated
December 4, 1989 in favor of petitioner who was the plaintiff
therein. The dispositive portion reads: 7
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and
against defendant and ordering the latter to sell to plaintiff that
portion of land owned by him and occupied by portions of plaintiff's
buildings and wall at the price of P2,000.00 per square meter and to
pay the former:
1.The sum of P44,000.00 to compensate for the losses in materials
and properties incurred by plaintiff through thievery as a result of
the destruction of its wall;
2.The sum of P7,500.00 as and by way of attorney's fees; and
3.The costs of this suit."
Appeal was duly interposed with respondent Court, which as
previously stated, reversed and set aside the decision of the Regional
Trial Court and rendered the assailed Decision and Amended
Decision. Hence, this recourse under Rule 45 of the Rules of Court.
The Issues
The petition raises the following issues: 8
"(A)
Whether or not the respondent Court of Appeals erred in holding the
petitioner a builder in bad faith because it is 'presumed to know the
metes and bounds of his property.'
(B)
Whether or not the respondent Court of Appeals erred when it used
the amicable settlement between the petitioner and the private
respondent, where both parties agreed to the demolition of the rear
portion of the fence, as estoppel amounting to recognition by
petitioner of respondent's right over his property including the
portions of the land where the other structures and the building
stand, which were not included in the settlement.
(C)
Whether or not the respondent Court of Appeals erred in ordering
the removal of the 'structures and surrounding walls on the
encroached area' and in withdrawing its earlier ruling in its August
28, 1992 decision for the petitioner 'to pay for the value of the land
occupied' by the building, only because the private respondent has
'manifested its choice to demolish' it despite the absence of
compulsory sale where the builder fails to pay for the land, and
which 'choice' private respondent deliberately deleted from its
September 1, 1980 answer to the supplemental complaint in the
Regional Trial Court."
In its Memorandum, petitioner poses the following issues:
"A.
The time when to determine the good faith of the builder under
Article 448 of the New Civil Code, is reckoned during the period when
it was actually being built; and in a case where no evidence was
presented nor introduced as to the good faith or bad faith of the
builder at that time, as in this case, he must be presumed to be a
'builder in good faith,' since 'bad faith cannot be presumed.' 9
B.
In a specific 'boundary overlap situation' which involves a builder in
good faith, as in this case, it is now well settled that the lot owner,
who builds on the adjacent lot is not charged with 'constructive
notice' of the technical metes and bounds contained in their torrens
titles to determine the exact and precise extent of his boundary
perimeter. 10
C.
The respondent court's citation of the twin cases of Tuason &
Co. v. Lumanlan and Tuason & Co. v. Macalindong is notthe 'judicial
authority' for a boundary dispute situation between adjacent torrens
titled lot owners, as the facts of the present case do not fall
within nor square with the involved principle of a dissimilar case. 11
D.
Quite contrary to respondent Uy's reasoning, petitioner Tecnogas
continues to be a builder in good faith, even if it subsequently
built/repaired the walls/other permanent structures thereon while
the case a quo was pending and even while respondent sent the
petitioner many letters/filed cases thereon. 12
D. (E.)
The amicable settlement between the parties should be interpreted
as a contract and enforced only in accordance with its explicit terms,
and not over and beyond that agreed upon; because the courts
do not have the power to create a contract nor expand its scope. 13
E. (F.)
As a general rule, although the landowner has the option to choose
between: (1) 'buying the building built in good faith', or (2)
'selling the portion of his land on which stands the building' under
Article 448 of the Civil Code; the first option is not absolute, because
an exception thereto, once it would be impractical for the landowner
to choose to exercise the first alternative, i.e. buy that portion of the
house standing on his land, for the whole building might be rendered
useless. The workable solution is for him to select the second
alternative, namely, to sell to the builder that part of his land on
which was constructed a portion of the house." 14
Private respondent, on the other hand, argues that the petition is
"suffering from the following flaws: 15
1.It did not give the exact citations of cases decided by the Honorable
Supreme Court that allegedly contradicts the ruling of the Hon. Court
of Appeals based on the doctrine laid down in Tuason vs. Lumanlan
case citing also Tuason vs. Macalindong case (Supra).
2.Assuming that the doctrine in the alleged Co Tao vs. Chico case is
contradictory to the doctrine in Tuason vs. Lumanlan and Tuason vs.
Macalindong, the two cases being more current, the same should
prevail."
Further, private respondent contends that the following
"unmistakably" point to the bad faith of petitioner: (1) private
respondent's purchase of the two lots, "was ahead of the purchase
by petitioner of the building and lot from Pariz Industries"; (2) the
declaration of the General Manager of Tecnogas that the sale
between petitioner and Pariz Industries "was not registered" because
of some problems with China Banking Corporation; and (3) the Deed
of Sale in favor of petitioner was registered in its name only in "the
month of May 1973." 16
The Court's Ruling
The petition should be granted.
Good Faith or Bad Faith
Respondent Court, citing the cases of J. M. Tuason &
Co., Inc. vs. Vda. de Lumanlan 17 and J. M. Tuason & Co.,
Inc. vs. Macalindong,18 ruled that petitioner "cannot be considered
in good faith" because as a land owner, it is "presumed to know the
metes and bounds of his own property, specially if the same are
reflected in a properly issued certificate of title. One who erroneously
builds on the adjoining lot should be considered a builder in (b)ad
(f)aith, there being presumptive knowledge of the Torrens title, the
area, and the extent of the boundaries." 19 cda
We disagree with respondent Court. The two cases it relied upon do
not support its main pronouncement that a registered owner of land
has presumptive knowledge of the metes and bounds of its own land,
and is therefore in bad faith if he mistakenly builds on an adjoining
land. Aside from the fact that those cases had factual moorings
radically different from those obtaining here, there is nothing in
those cases which would suggest, however remotely, that bad faith
is imputable to a registered owner of land when a part of his building
encroaches upon a neighbor's land, simply because he is supposedly
presumed to know the boundaries of his land as described in his
certificate of title. No such doctrinal statement could have been
made in those cases because such issue was not before the Supreme
Court. Quite the contrary, we have rejected such a theory in Co Tao
vs. Chico, 20 where we held that unless one is versed in the science of
surveying, "no one can determine the precise extent or location of his
property by merely examining his paper title."
There is no question that when petitioner purchased the land from
Pariz Industries, the buildings and other structures were already in
existence. The record is not clear as to who actually built those
structures, but it may well be assumed that petitioner's predecessor-
in-interest, Pariz Industries, did so. Article 527 of the Civil Code
presumes good faith, and since no proof exists to show that the
encroachment over a narrow, needle-shaped portion of private
respondent's land was done in bad faith by the builder of the
encroaching structures, the latter should be presumed to have built
them in good faith. 21 It is presumed that possession continues to be
enjoyed in the same character in which it was acquired, until the
contrary is proved. 22 Good faith consists in the belief of the builder
that the land he is building on is his, and his ignorance of any defect
or flaw in his title. 23 Hence, such good faith, by law, passed on to
Pariz's successor, petitioner in this case. Further, "(w)here one
derives title to property from another, the act, declaration, or
omission of the latter, while holding the title, in relation to the
property, is evidence against the former." 24 And possession
acquired in good faith does not lose this character except in case and
from the moment facts exist which show that the possessor is not
unaware that he possesses the thing improperly or
wrongfully. 25 The good faith ceases from the moment defects in the
title are made known to the possessor, by extraneous evidence or by
suit for recovery of the property by the true owner. 26
Recall that the encroachment in the present case was caused by a
very slight deviation of the erected wall (as fence) which was
supposed to run in a straight line from point 9 to point 1 of
petitioner's lot. It was an error which, in the context of the attendant
facts, was consistent with good faith. Consequently, the builder, if
sued by the aggrieved landowner for recovery of possession, could
have invoked the provisions of Art. 448 of the Civil Code, which
reads:
"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."

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 the two options: (1) to appropriate the
building by paying the indemnity required by law, or (2) sell the land
to the builder. The landowner cannot refuse to exercise either option
and compel instead the owner of the building to remove it from the
land. 27
The question, however, is whether the same benefit can be invoked
by petitioner who, as earlier stated, is not the builder of the
offending structures but possesses them as buyer.
We answer such question in the affirmative.
In the first place, there is no sufficient showing that petitioner was
aware of the encroachment at the time it acquired the property from
Pariz Industries. We agree with the trial court that various factors in
evidence adequately show petitioner's lack of awareness thereof. In
any case, contrary proof has not overthrown the presumption of
good faith under Article 527 of the Civil Code, as already stated,
taken together with the disputable presumptions of the law on
evidence. These presumptions state, under Section 3 (a) of Rule 131
of the Rules of Court, that the person is innocent of a crime or wrong;
and under Section 3 (ff) of Rule 131, that the law has been obeyed. In
fact, private respondent Eduardo Uy himself was unaware of such
intrusion into his property until after 1971 when he hired a surveyor,
following his purchase of another adjoining lot, to survey all his
newly acquired lots. Upon being apprised of the encroachment,
petitioner immediately offered to buy the area occupied by its
building a species of conduct consistent with good faith.
In the second place, upon delivery of the property by Pariz Industries,
as seller, to the petitioner, as buyer, the latter acquired ownership of
the property. Consequently and as earlier discussed, petitioner is
deemed to have stepped into the shoes of the seller in regard to all
rights of ownership over the immovable sold, including the right to
compel the private respondent to exercise either of the two options
provided under Article 448 of the Civil Code.
Estoppel
Respondent Court ruled that the amicable settlement entered into
between petitioner and private respondent estops the former from
questioning the private respondent's "right" over the disputed
property. It held that by undertaking to demolish the fence under
said settlement, petitioner recognized private respondent's right over
the property, and "cannot later on compel" private respondent "to
sell to it the land since" private respondent "is under no obligation to
sell." 28
We do not agree. Petitioner cannot be held in estoppel for entering
into the amicable settlement, the pertinent portions of which
read: 29
"That the parties hereto have agreed that the rear portion of the
fence that separates the property of the complainant and
respondent shall be demolished up to the back of the building
housing the machineries which demolision (sic) shall be undertaken
by the complainant at anytime.
That the fence which serve(s) as a wall housing the electroplating
machineries shall not be demolished in the mean time which portion
shall be subject to negotiation by herein parties."
From the foregoing, it is clear that petitioner agreed only to the
demolition of a portion of the wall separating the adjoining
properties of the parties i.e. "up to the back of the building
housing the machineries." But that portion of the fence which served
as the wall housing the electro-plating machineries was not to be
demolished. Rather, it was to "be subject to negotiation by herein
parties." The settlement may have recognized the ownership of
private respondent but such admission cannot be equated with bad
faith. Petitioner was only trying to avoid a litigation, one reason for
entering into an amicable settlement.
As was ruled in Osmea vs. Commission on Audit, 30
"A compromise is a bilateral act or transaction that is expressly
acknowledged as a juridical agreement by the Civil Code and is
therein dealt with in some detail. 'A compromise,' declares Article
2208 of said Code, 'is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one
already commenced.'
xxx xxx xxx
The Civil Code not only defines and authorizes compromises, it in fact
encourages them in civil actions. Art. 2029 states that 'The Court
shall endeavor to persuade the litigants in a civil case to agree upon
some fair compromise.' . . ."
In the context of the established facts, we hold that petitioner did
not lose its rights under Article 448 of the Civil Code on the basis
merely of the fact that some years after acquiring the property in
good faith, it learned about and aptly recognized the right of
private respondent to a portion of the land occupied by its building.
The supervening awareness of the encroachment by petitioner does
not militate against its right to claim the status of a builder in good
faith. In fact, a judicious reading of said Article 448 will readily show
that the landowner's exercise of his option can only take place after
the builder shall have come to know of the intrusion in short,
when both parties shall have become aware of it. Only then will the
occasion for exercising the option arise, for it is only then that both
parties will have been aware that a problem exists in regard to their
property rights.
Options of Private Respondent
What then is the applicable provision in this case which private
respondent may invoke as his remedy: Article 448 or Article 450 31of
the Civil Code?
In view of the good faith of both petitioner and private respondent,
their rights and obligations are to be governed by Art. 448. The
essential fairness of this codal provision has been pointed out by
Mme. Justice Ameurfina Melencio-Herrera, citing Manresa and
applicable precedents, in the case of Depra vs. Dumlao, 32 to wit:
"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 impracticality of
creating a state of forced co-ownership, 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 to pay the
proper rent. 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 (3
Manresa 213; Bernardo vs. Bataclan, 37 Off. Gaz. 1382; Co Tao vs.
Chan Chico, G. R. No. 49167, April 30, 1949; Article applied; see
Cabral, et al. vs. Ibaez [S.C.] 52 Off. Gaz. 217; Marfori vs. Velasco,
[C.A.] 52 Off. Gaz. 2050)."
The private respondent's insistence on the removal of the
encroaching structures as the proper remedy, which respondent
Court sustained in its assailed Decisions, is thus legally flawed. This is
not one of the remedies bestowed upon him by law. It would be
available only if and when he chooses to compel the petitioner to buy
the land at a reasonable price but the latter fails to pay such
price. 33 This has not taken place. Hence, his options are limited to:
(1) appropriating the encroaching portion of petitioner's building
after payment of proper indemnity, or (2) obliging the latter to buy
the lot occupied by the structure. He cannot exercise a remedy of his
own liking.
Neither is petitioner's prayer that private respondent be ordered to
sell the land 34 the proper remedy. While that was dubbed as the
"more workable solution in Grana and Torralba vs. The Court of
Appeals, et al., 35 it was not the relief granted in that case as the
landowners were directed to exercise "within 30 days from this
decision their option to either buy the portion of the petitioners'
house on their land or sell to said petitioners the portion of their land
on which it stands." 36 Moreover, in Grana and Torralba, the area
involved was only 87 square meters while this case involves 520
square meters 37 . In line with the case of Depra vs. Dumlao,38 this
case will have to be remanded to the trial court for further
proceedings to fully implement the mandate of Art. 448. It is a rule of
procedure for the Supreme Court to strive to settle the entire
controversy in a single proceeding leaving no root or branch to bear
the seeds of future litigation. 39
Petitioner, however, must also pay the rent for the property occupied
by its building as prescribed by respondent Court from October 4,
1979, but only up to the date private respondent serves notice of its
option upon petitioner and the trial court; that is, if such option is for
private respondent to appropriate the encroaching structure. In such
event, petitioner would have a right of retention which negates the
obligation to pay rent. 40 The rent should however continue if the
option chosen is compulsory sale, but only up to the actual transfer
of ownership.
The award of attorney's fees by respondent Court against petitioner
is unwarranted since the action appears to have been filed in good
faith. Besides, there should be no penalty on the right to litigate. 41
WHEREFORE, premises considered, the petition is hereby GRANTED
and the assailed Decision and the Amended Decision are REVERSED
and SET ASIDE. In accordance with the case of Depra
vs. Dumlao, 42 this case is REMANDED to the Regional Trial Court of
Pasay City, Branch 117, for further proceedings consistent with
Articles 448 and 546 43 of the Civil Code, as follows: cdt
1.The trial court shall determine:
a)the present fair price of private respondent's 520 square-meter
area of land;

b)the increase in value ("plus value") which the said area of 520
square meters may have acquired by reason of the existence of the
portion of the building on the area;
c)the fair market value of the encroaching portion of the building;
and
d)whether the value of said area of land is considerably more than
the fair market value of the portion of the building thereon.
2.After said amounts shall have been determined by competent
evidence, the regional trial court shall render judgment as follows:
a)The private respondent shall be granted a period of fifteen (15)
days within which to exercise his option under the law (Article 448,
Civil Code), whether to appropriate the portion of the building as his
own by paying to petitioner its fair market value, or to oblige
petitioner to pay the price of said area. The amounts to be
respectively paid by petitioner and private respondent, in accordance
with the option thus exercised by written notice of the other party
and to the court, shall be paid by the obligor within fifteen (15) days
from such notice of the option by tendering the amount to the trial
court in favor of the party entitled to receive it;
b)If private respondent exercises the option to oblige petitioner to
pay the price of the land but the latter rejects such purchase
because, as found by the trial court, the value of the land is
considerably more than that of the portion of the building, petitioner
shall give written notice of such rejection to private respondent and
to the trial court within fifteen (15) days from notice of private
respondent's option to sell the land. In that event, the parties shall
be given a period of fifteen (15) days from such notice of rejection
within which to agree upon the terms of the lease, and give the trial
court formal written notice of the agreement and its provisos. If no
agreement is reached by the parties, the trial court, within fifteen
(15) days from and after the termination of the said period fixed for
negotiation, shall then fix the terms of the lease provided that the
monthly rental to be fixed by the Court shall not be less than two
thousand pesos (P2,000.00) per month, payable within the first five
(5) days of each calendar month. The period for the forced lease shall
not be more than two (2) years, counted from the finality of the
judgment, considering the long period of time since 1970 that
petitioner has occupied the subject area. The rental thus fixed shall
be increased by ten percent (10%) for the second year of the forced
lease. Petitioner shall not make any further constructions or
improvements on the building. Upon expiration of the two-year
period, or upon default by petitioner in the payment of rentals for
two (2) consecutive months, private respondent shall be entitled to
terminate the forced lease, to recover his land, and to have the
portion of the building removed by petitioner or at latter's expense.
The rentals herein provided shall be tendered by petitioner to the
trial court for payment to private respondent, and such tender shall
constitute evidence of whether or not compliance was made within
the period fixed by the said court.
c)In any event, petitioner shall pay private respondent an amount
computed at two thousand pesos (P2,000.00) per month as
reasonable compensation for the occupancy of private respondent's
land for the period counted from October 4, 1979, up to the date
private respondent serves notice of its option to appropriate the
encroaching structures, otherwise up to the actual transfer of
ownership to petitioner or, in case a forced lease has to be imposed,
up to the commencement date of the forced lease referred to in the
preceding paragraph;
d)The periods to be fixed by the trial court in its decision shall be non-
extendible, and upon failure of the party obliged to tender to the trial
court the amount due to the obligee, the party entitled to such
payment shall be entitled to an order of execution for the
enforcement of payment of the amount due and for compliance with
such other acts as may be required by the prestation due the obligee.


No costs.
SO ORDERED.
Narvasa, C .J ., Davide, Jr., Melo and Francisco, JJ ., concur.
||| (Tecnogas Philippines Manufacturing Corp. v. Court of Appeals,
G.R. No. 108894, February 10, 1997)



































COND DIVISION
[G.R. No. L-32974. July 30, 1979.]
BARTOLOME ORTIZ, petitioner, vs. HON. UNION C. KAYANAN, in his
capacity as Judge of the Court of First Instance of Quezon, Branch
IV; ELEUTERIO ZAMORA, QUIRINO COMINTAN, VICENTE FERRO,
AND GREGORIO PAMISARAN, respondents.
Salonga, Ordoez, Yap, Sicat & Associates and Salvador, Ulgado &
Carbon for petitioner.
Jose A. Cusi for private respondents.
D E C I S I O N
ANTONIO, J p:
Petition for Certiorari and Prohibition with Preliminary Injunction to
nullify the Order of respondent Judge directing the execution of the
final judgment in Civil Case No. C-90, entitled "Bartolome
Ortiz vs. Secretary of Agriculture and Natural Resources, et al.," and
the Writ of Execution issued to implement said Order, allegedly for
being inconsistent with the Judgment sought to be enforced. LLpr
Civil Case No. C-90 was filed by Bartolome Ortiz who sought the
review and/or annulment of the decision of the Secretary of
Agriculture and Natural Resources, giving preference to the sales
applications of private respondents Quirino Comintan and Eleuterio
Zamora over Lot No. 5785, PLS-45, located at Barrio Cabuluan,
Calauag, Quezon.
I
The factual background of the case, as found by respondent Court, is
as follows:
". . . The lot in controversy was formerly the subject of Homestead
Application No. 122417 of Martin Dolorico II, plaintiff's ward who
died on August 20, 1931; that since then it was plaintiff who
continued the cultivation and possession of the property, without
however filing any application to acquire title thereon; that in the
Homestead Application No. 122417, Martin Dolorico II named his
uncle, Martin Dolorico I as his heir and successor in interest, so that
in 1951 Martin Dolorico I executed an affidavit relinquishing his
rights over the property in favor of defendants Quirino Comintan and
Eleuterio Zamora, his grandson and son-in-law, respectively, and
requested the Director of Lands to cancel the homestead application;
that on the strength of the affidavit, Homestead Application No.
122417 was cancelled and thereafter, defendants Comintan and
Zamora filed their respective sales applications Nos. 8433 and 9258;
that plaintiff filed his protest on November 26, 1951 alleging that he
should be given preference to purchase the lot inasmuch as he is the
actual occupant and has been in continuous possession of the same
since 1931; and inspite of plaintiff's opposition, 'Portion A' of the
property was sold at public auction wherein defendant Comintan
was the only bidder; that on June 8, 1957, investigation was
conducted on plaintiff's protest by Assistant Public Lands Inspector
Serapion Bauzon who submitted his report to the Regional Land
Officer, and who in turn rendered a decision on April 9, 1958,
dismissing plaintiff's claim and giving due course to defendants' sales
applications on the ground that the relinquishment of the homestead
rights of Martin Dolorico I in favor of Comintan and Zamora is
proper, the former having been designated as successor in interest of
the original homestead applicant and that because plaintiff failed to
participate in the public auction, he is forever barred to claim the
property; that plaintiff filed a motion for reconsideration of this
decision which was denied by the Director of Lands in his order dated
June 10, 1959; that finally, on appeal to the Secretary of Agriculture
and Natural Resources, the decision rendered by the Regional Land
Officer was affirmed in toto." 1
On March 22, 1966, respondent Court rendered judgment in the
afore-mentioned civil case, the dispositive portion of which reads as
follows:
"IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby
rendered awarding Lot No. 5785-A of PLS-45, (Calauag Public Land
Subdivision) one-half portion of the property in litigation located at
Bo. Cabuluan, Calauag, Quezon in favor of defendant QUIRINO
COMINTAN, being the successful bidder in the public auction
conducted by the Bureau of Lands on April 18, 1955, and hereby
giving due course to the Sales Application No. 9258 of defendant
Eleuterio Zamora over the other half, Lot No. 5785-B of PLS-45,
Calauag, without prejudice to the right of plaintiff BARTOLOME
ORTIZ to participate in the public bidding of the same to be
announced by the Bureau of Lands, Manila. However, should plaintiff
Bartolome Ortiz be not declared the successful bidder thereof
defendants Quirino Comintan and Eleuterio Zamora are ordered to
reimburse jointly said plaintiff the improvements he has introduced
on the whole property in the amount of THIRTEEN THOUSAND SIX
HUNDRED THIRTY-TWO (P13,632.00) PESOS, the latter having the
right to retain the property until after he has been fully paid therefor,
without interest since he enjoys the fruits of the property in question,
with prejudice and with costs against the plaintiff." 2
Plaintiff appealed the decision to the Court of Appeals.
Two (2) years after the rendition of the judgment by the court a quo,
while the case was pending appeal and upon petition of private
respondents Quirino Comintan and Eleuterio Zamora, respondent
Court appointed respondent Vicente Ferro, Clerk of Court, as
Receiver to collect tolls on a portion of the property used as a
diversion road. On August 19, 1969, the Court of Appeals issued a
Resolution annulling the Order appointing the Receiver.
Subsequently, on February 19, 1970, the Appellate Court affirmed
the decision of the trial court. A petition for review on certiorari of
the decision of the Court of Appeals was denied by this Court on April
6, 1970. At this point, private respondents filed a petition for
appointment of a new receiver with the court a quo.This petition was
granted and the receiver was reappointed. Petitioner sought the
annulment of this Order with the Court of Appeals, but said Court
ruled that its decision had already become final and that the records
of the case were to be remanded to the trial court. LLpr
Not satisfied with such denial, petitioner filed a petition for
certiorari, prohibition and mandamus with preliminary injunction
before this Court, 3 praying for the annulment of the Order
reappointing the Receiver. On July 13, 1970, the petition was
dismissed by this Court on the ground of insufficient showing of
grave abuse of discretion.
II
The judgment having become final and executory private
respondents filed a motion for the execution of the same, praying as
follows:
"WHEREFORE, it is respectfully prayed of this Honorable Court to
order the issuance of a writ of execution in accordance with the
judgment of this Honorable Court, confirmed by the Court of Appeals
and the Supreme Court, commanding any lawful officer to deliver to
defendants Comintan and Zamora the land subject of the decision in
this case but allowing defendants to file a bond in such amount as
this Honorable Court may fix, in lieu of the P13,632.00 required to be
paid to plaintiff, conditioned that after the accounting of the tools
collected by plaintiff, there is still an amount due and payable to said
plaintiff, then if such amount is not paid on demand, including the
legal interests, said bond shall be held answerable.
"Ordering further the plaintiff to render an accounting of the tolls he
collected from March of 1967 to December 31, 1968 and from
September 1969 to March 31, 1970, and deliver said tolls collected to
the receiver and if judgment is already executed, then to Quirino
Comintan and Eleuterio Zamora; and,
"Finally, to condemn plaintiff to pay moral damages for withholding
the tools which belong to your movant in an amount this Court may
deem just in the premises." 4
Acting upon the foregoing motion, respondent Judge issued an
Order, dated September 23, 1970, stating, among others, the
following:
"The records further disclosed that from March 1967 to December
31, 1968, plaintiff Bartolome Ortiz collected tolls on a portion of the
property in question wherein he has not introduced any
improvement particularly on Lot No. 5785-A; PLS-45 awarded to
defendant Quirino Comintan, thru which vehicular traffic was
detoured or diverted, and again from September 1969 to March 31,
1970, the plaintiff resumed the collection of tools on the same
portion without rendering any accounting on said tolls to the
Receiver, who was reappointed after submitting the required bond
and specifically authorized only to collect tolls leaving the harvesting
of the improvements to the plaintiff.
xxxxxxxxx
"In virtue of the findings of this Court as contained in the dispositive
portion of its decision, the defendants are jointly obligated to pay the
plaintiff in the amount of P13,632.00 as reasonable value of the
improvements he introduced on the whole property in question, and
that he has the right of retention until fully paid. It can be gleaned
from the motion of the defendants that if plaintiff submits an
accounting of the tolls he collected during the periods above alluded
to, their damages of about P25,000.00 can more than offset their
obligation of P13,362.00 in favor of the plaintiff, thereafter the
possession of the land he delivered to the defendants since the
decision of the Supreme Court has already become final and
executory, but in the interregnum pending such accounting and
recovery by the Receiver of the tolls collected by the plaintiff, the
defendants pray that they allowed to put up a bond in lieu of the said
P13,632.00 to answer for damages of the former, if any.
"On the other hand, plaintiff contends in his opposition, admitting
that the decision of the Supreme Court has become final and
executory; (1) the offer of a bond in lieu of payment of P13,632.00
does not, and cannot, satisfy the condition imposed in the decision of
this Court which was affirmed in toto; (2) the public sale of Portion
'B' of the land has still to take place as ordained before the decision
could be executed; and, (3) that whatever sums plaintiff may derive
from the property cannot be set off against what is due him for the
improvements he made, for which he has to be reimbursed as
ordered.

xxxxxxxxx
"Let it be known that plaintiff does not dispute his having collected
tolls during the periods from March 1967 to December 31, 1968 and
from September 1969 to March 31, 1970. The Supreme Court
affirmed the decision of this Court in its findings that said tolls
belong to the defendants, considering that the same were collected
on a portion of the land in question where the plaintiff
did not introduce any improvement. The reimbursement to the
plaintiff pertains only to the value of the improvements, like coconut
trees and other plants which he introduced on the whole property.
The tolls collected by the plaintiff on an unimproved portion
naturally belong to the defendants, following the doctrine on
accretion. Further, the reappointment of a Receiver by this Court was
upheld by the Supreme Court when it denied the petition for
certiorari filed by the plaintiff, bolstering the legal claim of
defendants over said tolls. Thus, the decision of the Supreme Court
rendered the decision of this Court retroactive from March 22, 1966
although pending appeal its implementation was suspended. It is our
honest conviction, therefore, that the putting up of a bond by the
defendants pending accounting of the tolls collected by the plaintiff
is justified and will not prejudice anybody, but certainly would
substantially satisfy the conditions imposed in the decision. However,
insofar as the one-half portion 'B' of the property, the decision may
he executed only after public sale by the Bureau of Lands shall be
accomplished.
"WHEREFORE, finding the Motion for Execution filed by the
defendants to be meritorious, the same is granted; provided,
however, that they put up a bond equal the adjudicated amount of
P13,632.00 accruing in favor of the plaintiff, from a reputable or
recognized bonding or surety company, conditioned that after an
accounting of the tolls collected by the plaintiff should there be
found out any balance due and payable to him after reckoning said
obligation of P13,632.00 the bond shall be held answerable
therefor." 5
Accordingly, a Writ of Execution was issued after private respondent
Quirino Comintan had filed the required bond. The writ directed the
Sheriff to enforce the decision of the Court, and stated, in part, the
following:
"But should there be found any amount collectible after accounting
and deducting the amount of P13,632.00, you are hereby ordered
that of the goods and chattels of Bartolome Ortiz of Bo. Kabuluan,
Calauag, Quezon, be caused to be made any excess in the
abovementioned amount together with your lawful fees and that
you render same to defendant Quirino Comintan. If sufficient
personal property cannot be found thereof to satisfy this execution
and lawful fees thereon, then you are commanded that of the lands
and buildings of the said BARTOLOME ORTIZ you make the said
excess amount in the manner required by the Rules of Court, and
make return of your proceedings within this Court within sixty (60)
days from date of service.
"You are also ordered to cause Bartolome Ortiz to vacate the
property within fifteen (15) days after service thereof the defendant
Quirino Comintan having filed the required bond in the amount of
THIRTEEN THOUSAND SIX HUNDRED THIRTY-TWO (P13,632.00)
PESOS." 6
On October 12, 1970, petitioner filed a Motion for Reconsideration of
the aforesaid Order and Writ of Execution, alleging:
"(a)That the respondent judge has no authority to place respondents
in possession of the property;
"(b)That the Supreme Court has never affirmed any decision of the
trial court that tolls collected from the diversionary road on the
property, which is public land, belong to said respondents;
"(c)That to assess petitioner a P25,000.00 liability for damages is
purely punitive imposition without factual or legal justification."
The foregoing Motion for Reconsideration was denied by respondent
Judge per Order dated November 18, 1970. Said Order states, in
part:
"It goes without saying that defendant Comintan is entitled to be
placed in possession of Lot No. 5785-A of PLS-45 (Calauag Public
Land Subdivision) and enjoyment of the tolls from March, 1967 to
March, 1968 and from September, 1969 to March 31, 1970 which
were received by plaintiff Bartolome Ortiz, collected from the
property by reason of the diversion road where vehicular traffic was
detoured. To defendant Comintan belongs the tolls thus collected
from a portion of the land awarded to him used as a diversionary
road by the doctrine of accretion and his right over the same is ipso
jure, there being no need of any action to possess said addition. It is
so because as consistently maintained by the Supreme Court, an
applicant who has complied with all the terms and conditions which
entitle him to a patent for a particular tract of public land, acquires a
vested right therein and is to be regarded as equitable owner thereof
so that even without a patent, a perfected homestead or sales
application is a property right in the fullest sense, unaffected by the
fact that the paramount title is still in the Government and no
subsequent law can deprive him of that vested right. The question of
the actual damages suffered by defendant Comintan by reason of
the unaccounted tolls received by plaintiff had already been fully
discussed in the order of September 23, 1970 and the Court is
honestly convinced and believes it to be proper and regular under
the circumstances.
"Incidentally, the Court stands to correct itself when in the same
order, it directed the execution of the decision with respect to the
one-half portion 'B' of the property only after the public sale by the
Bureau of Lands, the same being an oversight, it appearing that the
Sales Application of defendant Eleuterio Zamora had already been
recognized and fully confirmed by the Supreme Court.
"In view thereof, finding the motion filed by plaintiff to be without
merit, the Court hereby denies the same and the order of September
23, 1970 shall remain in full force subject to the amendment that the
execution of the decision with respect to the one-half portion 'B' shall
not be conditioned to the public sale by the Bureau of Lands.
"SO ORDERED." 7
III
Petitioner thus filed the instant petition, contending that in having
issued the Order and Writ of Execution, respondent Court "acted
without or in excess of jurisdiction, and/or with grave abuse of
discretion, because the said order and writ in effect vary the terms of
the judgment they purportedly seek to enforce." He argued that
since said judgment declared the petitioner a possessor in good faith,
he is entitled to the payment of the value of the improvements
introduced by him on the whole property, with right to retain the
land until he has been fully paid such value. He likewise averred that
no payment for improvements has been made and, instead, a bond
therefor had been filed by defendants (private respondents), which,
according to petitioner, is not the payment envisaged in the decision
which would entitle private respondents to the possession of the
property. Furthermore, with respect to portion "B", petitioner alleges
that, under the decision, he has the right to retain the same until
after he has participated and lost in the public bidding of the land to
be conducted by the Bureau of Lands. It is claimed that it is only in
the event that he loses in the bidding that he can be legally
dispossessed thereof. cdll
It is the position of petitioner that all the fruits of the property,
including the tolls collected by him from the passing vehicles, which
according to the trial court amounts to P25,000.00, belongs to
petitioner and not to defendant/private respondent Quirino
Comintan, in accordance with the decision itself, which decreed that
the fruits of the property shall be in lieu of interest on the amount to
be paid to petitioner as reimbursement for improvements. Any
contrary opinion, in his view, would be tantamount to an
amendment of a decision which has long become final and executory
and, therefore, cannot be lawfully done.
Petitioner, therefore, prayed that (1) a Writ of Preliminary Injunction
be issued enjoining the enforcement of the Orders of September 23,
1970 and November 18, 1970, and the Writ of Execution issued
thereto, or restoring to petitioner the possession of the property if
the private respondents had been placed in possession thereof; (2)
annulling said Orders as well as the Writ of Execution, dissolving the
receivership established over the property; and (3) ordering private
respondents to account to petitioner all the fruits they may have
gathered or collected from the property in question from the time of
petitioner's illegal dispossession thereof.
On January 29, 1971, this Court issued the Writ of Preliminary
Injunction. On January 30, 1971, private respondents filed a Motion
for Reconsideration and/or Modification of the Order dated January
29, 1971. This was followed by a Supplemental Motion for
Reconsideration and Manifestation on February 3, 1971. In the latter
motion, private respondents manifested that the amount of
P14,040.96, representing the amount decreed in the judgment as
reimbursement to petitioner for the improvements, plus interest for
six months, has already been deposited by them in court, "with the
understanding that said amount shall be turned over to the plaintiff
after the court a quo shall have determined the improvement on Lot
5785-A, and subsequently the remaining balance of the deposit shall
be delivered to the petitioner (plaintiff therein) in the event he loses
the bid for Lot 5785-B in favor of private respondent Eleuterio
Zamora." 8 The deposit is evidenced by a certification made by the
Clerk of the Court a quo. 9Contending that said deposit was a faithful
compliance with the judgment of the trial court, private respondent
Quirino Comintan prayed for the dissolution of the Writ of
Injunction. llcd
It appears that as a consequence of the deposit made by private
respondents, the Deputy Sheriff of Calauag, Quezon ousted
petitioner's representative from the land in question and put private
respondents in possession thereof. 10

On March 10, 1971, petitioner filed a "Comment on Respondents'
'Motion for Reconsideration' dated January 29, 1971' and
'Supplemental Motion for Reconsideration and Manifestation,"'
contending that the tender of deposit mentioned in the
Supplemental Motion was not really and officially made, "'inasmuch
as the same is not supported by any official receipt from the lower
court, or from its clerk or cashier, as required by law;" that said
deposit does not constitute sufficient compliance with the judgment
sought to be enforced, neither was it legally and validly made
because the requisites for consignation had not been complied with;
that the tender of legal interest for six months cannot substitute
petitioner's enjoyment of the fruits of the property as long as the
judgment in Civil Case No. C-90 has not been implemented in the
manner decreed therein; that contrary to the allegations of private
respondents, the value of the improvements on the whole property
had been determined by the lower court, and the segregation of the
improvements for each lot should have been raised by them at the
opportune moment by asking for the modification of the decision
before it became final and executory; and that the tolls on the
property constituted "civil fruits" to which the petitioner is entitled
under the terms of the decision.
IV
The issue decisive of the controvercy is after the rendition by the
trial court of its judgment in Civil Case No. C-90 on March 22, 1966
confirming the award of one-half of the property to Quirino
Comintan whether or not petitioner is still entitled to retain for his
own exclusive benefit all the fruits of the property, such as the tolls
collected by him from March 1967 to December 1968, and
September 1969 to March 31, 1970, amounting to about P25,000.00.
In other words, petitioner contends that so long as the aforesaid
amount of P13,632.00 decreed in the judgment representing the
expenses for clearing the land and the value of the coconuts and fruit
trees planted by him remains unpaid, he can appropriate for his
exclusive benefit all the fruits which he may derive from the property,
without any obligation to apply any portion thereof to the payment
of the interest and the principal of the debt. LexLib
We find this contention untenable.
There is no question that a possessor in good faith is entitled to the
fruits received before the possession is legally
interrupted. 11Possession in good faith ceases or is legally
interrupted from the moment defects in the title are made known to
the possessor, by extraneous evidence or by the filing of an action in
court by the true owner for the recovery of the property. 12 Hence,
all the fruits that the possessor may receive from the time he is
summoned in court, or when he answers the complaint, must be
delivered and paid by him to the owner or lawful possessor. 13
However, even after his good faith ceases, the possessor in fact can
still retain the property, pursuant to Article 546 of the New Civil
Code, until he has been fully reimbursed for all the necessary and
useful expenses made by him on the property. This right of retention
has been considered as one of the conglomerate of measures devised
by the law for the protection of the possessor in good faith. Its object
is to guarantee the reimbursement of the expenses, such as those for
the preservation of the property, 14 or for the enhancement of its
utility or productivity. 15 It permits the actual possessor to remain in
possession while he has not been reimbursed by the person who
defeated him in the possession for those necessary expenses and
useful improvements made by him on the thing possessed. The
principal characteristic of the right of retention is its accessory
character. It is accessory to a principal obligation. Considering that
the right of the possessor to receive the fruits terminates when his
good faith ceases, it is necessary, in order that this right to retain
may be useful, to concede to the creditor the right to secure
reimbursement from the fruits of the property by utilizing its
proceeds for the payment of the interest as well as the principal of
the debt while he remains in possession. This right of retention of the
property by the creditor, according to Scaevola, in the light of the
provisions of Article 502 of the Spanish Civil Code, 16 is considered
not a coercive measure to oblige the debtor to pay, depriving him
temporarily of the enjoyment of the fruits of his property, but as a
means of obtaining compensation for the debt. The right of retention
in this case is analogous to a contract of antichresis and it can be
considered as a means of extinguishing the obligation, inasmuch as
the right to retain the thing lasts only for the period necessary to
enable the creditor to be reimbursed from the fruits for the necessary
and useful expenses. 17
According to Manresa, the right of retention is, therefore, analogous
to that of a pledge, if the property retained is a movable, and to that
of antichresis, if the property held is immovable. 18 This construction
appears to be in harmony with similar provisions of the civil law
which employs the right of retention as a means or device by which a
creditor is able to obtain the payment of a debt. Thus, under Article
1731 of the New Civil Code, any person who has performed work
upon a movable has a right to retain it by way of pledge until he is
paid. Similarly, under Article 1914 of the same Code, the agent may
retain in pledge the things which are the object of the agency until
the principal effects reimbursement of the funds advanced by the
former for the execution of the agency, or he is indemnified for all
damages which he may have suffered as a consequence of the
execution of the agency, provided he is free from fault. To the same
effect, the depository, under Article 1994 of the same Code, may
retain the thing in pledge until the full payment of what may be due
him by reason of the deposit. The usufructuary, pursuant to Article
612 of the same Code, may retain the property until he is reimbursed
for the amount paid for taxes levied on the capital (Article 597) and
for extraordinary repairs (Article 594). LLjur
In all of these cases, the right of retention is used as a means of
extinguishing the obligation. As amply observed by Manresa: "El
derecho de retencion, lo hemos dicho, es el derecho de prenda o el
de anticresis constituido por la ley con independencia de la voluntad
de las partes." 19 In a pledge if the thing pledged earns or produces
fruits, income, dividends or interests, the creditor shall compensate
what he receives with those which are owing him. 20 In the same
manner, in a contract of antichresis, the creditor acquires the right to
receive the fruits of an immovable of his debtor with the obligation
to apply them to the payment of the interest, if owing, and
thereafter to the principal of his credit. 21 The debtor can not
reacquire enjoyment of the immovable until he has actually paid
what he owes the creditor. 22
Applying the afore-cited principles to the case at bar, petitioner
cannot appropriate for his own exclusive benefit the tolls which he
collected from the property retained by him. It was his duty under
the law, after deducting the necessary expenses for his
administration, to apply such amount collected to the payment of
the interest, and the balance to the payment of the principal of the
obligation.
We hold, therefore, that the disputed tolls, after deducting
petitioner's expenses for administration, belong to Quirino
Comintan, owner of the land through which the toll road passed,
further considering that the same was on portions of the property on
which petitioner had not introduced any improvement. The trial
court itself clarified this matter when it placed the toll road under
receivership. The omission of any mention of the tolls in the decision
itself may be attributed to the fact that the tolls appear to have been
collected after the rendition of the judgment of the trial court.
The records further reveal that earnest efforts have been made by
private respondents to have the judgment executed in the most
practicable manner. They deposited in court the amount of the
judgment in the sum of P13,632.00 in cash, subject only to the
accounting of the tolls collected by the petitioner so that whatever is
due from him may be set off with the amount of reimbursement. This
is just and proper under the circumstances and, under the law,
compensation or set off may take place, either totally or partially.
Considering that petitioner is the creditor with respect to the
judgment obligation and the debtor with respect to the tolls
collected, Comintan being the owner thereof, the trial court's order
for an accounting and compensation is in accord with law. 23
With respect to the amount of reimbursement to be paid by
Comintan, it appears that the dispositive portion of the decision was
lacking in specificity, as it merely provided that Comintan and
Zamora are jointly liable therefor. When two persons are liable under
a contract or under a judgment, and no words appear in the contract
or judgment to make each liable for the entire obligation, the
presumption is that their obligation is joint or mancomunada, and
each debtor is liable only for a proportionate part of the
obligation. 24 The judgment debt of P13,632.00 should, therefore, be
pro-rated in equal shares to Comintan and Zamora.
Regarding Lot 5785-B, it appears that no public sale has yet been
conducted by the Bureau of Lands and, therefore, petitioner is
entitled to remain in possession thereof. This is not disputed by
respondent Eleuterio Zamora. 25 After public sale is had and in the
event that Ortiz is not declared the successful bidder, then he should
be reimbursed by respondent Zamora in the corresponding amount
for the improvements on Lot 5785-B.

WHEREFORE, in view hereof, the Order of respondent Court of
November 18, 1970 is hereby modified to conform to the foregoing
judgment. The Writ of Preliminary Injunction, dated January 29,
1971, is hereby dissolved. Without special pronouncement as to
costs.
Barredo (Chairman), Concepcion, Jr., and Guerrero, JJ., concur.
Aquino, J., concurs in the result.
Santos and Abad Santos, JJ., are on leave.
Guerrero, J., was designated to sit in the Second Division.
||| (Ortiz v. Kayanan, G.R. No. L-32974, July 30, 1979)


























THIRD DIVISION
[G.R. No. 120303. July 24, 1996.]
FEDERICO GEMINIANO, MARIA GEMINIANO, ERNESTO
GEMINIANO, ASUNCION GEMINIANO, LARRY GEMINIANO, and
MARLYN GEMINIANO, petitioners, vs. COURT OF APPEALS,
DOMINADOR NICOLAS, and MARY A. NICOLAS, respondents.
Decano and Decano Law Office for petitioners.
Bengson, Baraan, Fernandez Law Offices for private respondents.
SYLLABUS
1.CIVIL LAW; PROPERTY; OWNERSHIP; RIGHT TO FULL
REIMBURSEMENT OF USEFUL IMPROVEMENTS AND RETENTION OF
THE PREMISES UNTIL REIMBURSEMENT IS MADE, APPLIES ONLY TO
A POSSESSOR IN GOOD FAITH. This Court has held that Article 448
of the Civil Code, in relation to Article 546 of the same Code, which
allowed 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 land with the belief
that he is the owner thereof. It does not apply where one's only
interest is that of a lessee under a rental contract; otherwise, it
would always be in the power of the tenant to "improve" his landlord
out of his property.
2.ID.; LEASE; THE RIGHT TO INDEMNITY ARISES ONLY IF THE LESSOR
OPTS TO APPROPRIATE THE IMPROVEMENTS. The right to
indemnity under Article 1678 of the Civil Code arises only if the lessor
opts to appropriate the improvements. Once the petitioners refused
to exercise that option, the private respondents cannot compel them
to reimburse the one-half value of the house and improvements.
Neither can they retain the premises until reimbursement is made.
The private respondents' sole right then is to remove the
improvements without causing any more impairment upon the
property leased than is necessary.
D E C I S I O N
DAVIDE, JR., J p:
This petition for review on certiorari has its origins in Civil Case No.
9214 of Branch 3 of the Municipal Trial Court in Cities (MTCC) in
Dagupan City for unlawful detainer and damages. The petitioners
ask the Court to set aside the decision of the Court of Appeals
affirming the decision of Branch 40 of the Regional Trial Court (RTC)
of Dagupan City, which, in turn, reversed the MTCC; ordered the
petitioners to reimburse the private respondents the value of the
house in question and other improvements; and allowed the latter to
retain the premises until reimbursement was made.
It appears that Lot No. 3765-B-1 containing an area of 314 square
meters was originally owned by the petitioners' mother, Paulina
Amado vda. de Geminiano. On a 12-square-meter portion of that lot
stood the petitioners' unfinished bungalow, which the petitioners
sold in November 1978 to the private respondents for the sum of
P6,000.00, with an alleged promise to sell to the latter that portion
of the lot occupied by the house. Subsequently, the petitioners'
mother executed a contract of lease over a 126 square-meter portion
of the lot, including that portion on which the house stood, in favor
of the private respondents for P40.00 per month for a period of
seven years commencing on 15 November 1978. 1 The private
respondents then introduced additional improvements and
registered the house in their names. After the expiration of the lease
contract in November 1985, however, the petitioners' mother
refused to accept the monthly rentals.
It turned out that the lot in question was the subject of a suit, which
resulted in its acquisition by one Maria Lee in 1972. In 1982, Lee sold
the lot to Lily Salcedo, who in turn sold it in 1984 to the spouses
Agustin and Ester Dionisio.
On 14 February 1992, the Dionisio spouses executed a Deed of
Quitclaim over the said property in favor of the petitioners. 2 As
such, the lot was registered in the latter's names. 3
On 9 February 1993, the petitioners sent, via registered mail, a letter
addressed to private respondent Mary Nicolas demanding that she
vacate the premises and pay the rentals in arrears within twenty
days from notice. 4
Upon failure of the private respondents to heed the demand, the
petitioners filed with the MTCC of Dagupan City a complaint for
unlawful detainer and damages.
During the pre-trial conference, the parties agreed to confine the
issues to: (1) whether there was an implied renewal of the lease
which expired in November 1985; (2) whether the lessees were
builders in good faith and entitled to reimbursement of the value of
the house and improvements; and (3) the value of the house.
The parties then submitted their respective position papers and the
case was heard under the Rule on Summary Procedure.
On the first issue, the court held that since the petitioners' mother
was no longer the owner of the lot in question at the time the lease
contract was executed in 1978, in view of its acquisition by Maria Lee
as early as 1972, there was no lease to speak of, much less, a
renewal thereof. And even if the lease legally existed, its implied
renewal was not for the period stipulated in the original contract,
but only on a month-to-month basis pursuant to Article 1687 of the
Civil Code. The refusal of the petitioners' mother to accept the
rentals starting January 1986 was then a clear indication of her
desire to terminate the monthly lease. As regards the petitioners'
alleged failed promise to sell to the private respondents the lot
occupied by the house, the court held that such should be litigated in
a proper case before the proper forum, not an ejectment case where
the only issue was physical possession of the property.
The court resolved the second issue in the negative, holding that
Articles 448 and 546 of the Civil Code, which allow possessors in
good faith to recover the value of improvements and retain the
premises until reimbursed, did not apply to lessees like the private
respondents, because the latter knew that their occupation of the
premises would continue only during the life of the lease. Besides,
the rights of the private respondents were specifically governed by
Article 1678, which allows reimbursement of up to one-half of the
value of the useful improvements, or removal of the improvements
should the lessor refuse to reimburse.
On the third issue, the court deemed as conclusive the private
respondents' allegation that the value of the house and
improvements was P180,000.00, there being no controverting
evidence presented.
The trial court thus ordered the private respondents to vacate the
premises, pay the petitioners P40.00 a month as reasonable
compensation for their stay thereon from the filing of the complaint
on 14 April 1993 until they vacated, and to pay the sum of P1,000.00
as attorney's fees, plus costs. 5
On appeal by the private respondents, the RTC of Dagupan City
reversed the trial court's decision and rendered a new judgment: (1)
ordering the petitioners to reimburse the private respondents for the
value of the house and improvements in the amount of P180,000.00
and to pay the latter P10,000.00 as attorney's fees and P2,000.00 as
litigation expenses; and (2) allowing the private respondents to
remain in possession of the premises until they were fully reimbursed
for the value of the house. 6 It ruled that since the private
respondents were assured by the petitioners that the lot they leased
would eventually be sold to them, they could be considered builders
in good faith, and as such, were entitled to reimbursement of the
value of the house and improvements with the right of retention
until reimbursement had been made.
On appeal, this time by the petitioners, the Court of Appeals affirmed
the decision of the RTC 7 and denied 8 the petitioners' motion for
reconsideration. Hence, the present petition.
The Court is confronted with the issue of which provision of law
governs the case at bench: Article 448 or Article 1678 of the Civil
Code? The said articles read as follows:
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.
xxx xxx xxx
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.
The crux of the said issue then is whether the private respondents
are builders in good faith or mere lessees.
The private respondents claim they are builders in good faith, hence,
Article 448 of the Civil Code should apply. They rely on the lack of
title of the petitioners' mother at the time of the execution of the
contract of lease, as well as the alleged assurance made by the
petitioners that the lot on which the house stood would be sold to
them.
It has been said that while the right to let property is an incident of
title and possession, a person may be a lessor and occupy the
position of a landlord to the tenant although he is not the owner of
the premises let. 9 After all, ownership of the property is not being
transferred, 10 only the temporary use and enjoyment thereof. 11

In this case, both parties admit that the land in question was
originally owned by the petitioners' mother. The land was allegedly
acquired later by one Maria Lee by virtue of an extrajudicial
foreclosure of mortgage. Lee, however, never sought a writ of
possession in order that she gain possession of the property in
question. 12 The petitioners' mother therefore remained in
possession of the lot.
It is undisputed that the private respondents came into possession of
a 126 square-meter portion of the said lot by virtue of a contract of
lease executed by the petitioners' mother in their favor. The juridical
relation between the petitioners' mother as lessor, and the private
respondents as lessees, is therefore well-established, and carries
with it a recognition of the lessor's title. 13The private respondents,
as lessees who had undisturbed possession for the entire term under
the lease, are then estopped to deny their landlord's title, or to assert
a better title not only in themselves, but also in some third person
while they remain in possession of the leased premises and until they
surrender possession to the landlord. 14 This estoppel applies even
though the lessor had no title at the time the relation of lessor and
lessee was created, 15 and may be asserted not only by the original
lessor, but also by those who succeed to his title. 16
Being mere lessees, the private respondents knew that their
occupation of the premises would continue only for the life of the
lease. Plainly, they cannot be considered as possessors nor builders
in good faith. 17
In a plethora of cases, 18 this Court has held that Article 448 of the
Civil Code, in relation to Article 546 of the same Code, which allows
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 land with the belief that he is the
owner thereof. It does not apply where one's only interest is that of a
lessee under a rental contract; otherwise, it would always be in the
power of the tenant to "improve" his landlord out of his property.
Anent the alleged promise of the petitioners to sell the lot occupied
by the private respondents' house, the same was not substantiated
by convincing evidence. Neither the deed of sale over the house nor
the contract of lease contained an option in favor of the respondent
spouses to purchase the said lot. And even if the petitioners indeed
promised to sell, it would not make the private respondents
possessors or builders in good faith so as to be covered by the
provisions of Article 448 of the Civil Code. The latter cannot raise the
mere expectancy of ownership of the aforementioned lot because
the alleged promise to sell was not fulfilled nor its existence even
proven. The first thing that the private respondents should have
done was to reduce the alleged promise into writing, because
under Article 1403 of the Civil Code, an agreement for the sale of real
property or an interest therein is unenforceable, unless some note or
memorandum thereof be produced. Not having taken any steps in
order that the alleged promise to sell may be enforced, the private
respondents cannot bank on that promise and profess any claim nor
color of title over the lot in question.
There is no need to apply by analogy the provisions of Article 448 on
indemnity as was done in Pecson vs. Court of Appeals, 19because the
situation sought to be avoided and which would justify the
application of that provision, is not present in this case. Suffice it to
say, "a state of forced co-ownership" would not be created between
the petitioners and the private respondents. For, as correctly pointed
out by the petitioners, the rights of the private respondents as
lessees are governed by Article 1678 of the Civil Code which allows
reimbursement to the extent of one-half of the value of the useful
improvements.
It must be stressed, however, that the right to indemnity under
Article 1678 of the Civil Code arises only if the lessor opts to
appropriate the improvements. Since the petitioners refused to
exercise that option, 20 the private respondents cannot compel them
to reimburse the one-half value of the house and improvements.
Neither can they retain the premises until reimbursement is made.
The private respondents' sole right then is to remove the
improvements without causing any more impairment upon the
property leased than is necessary. 21
WHEREFORE, judgment is hereby rendered GRANTING the instant
petition; REVERSING and SETTING ASIDE the decision of the Court of
Appeals of 27 January 1995 in CA-G.R. SP No. 34337; and
REINSTATING the decision of Branch 3 of the Municipal Trial Court in
Cities of Dagupan City in Civil Case No. 9214 entitled "Federico
Geminiano, et al. vs. Dominador Nicolas, et al."
Costs against the private respondents
SO ORDERED.
Narvasa, C . J ., Melo, Francisco, and Panganiban, JJ ., concur.
||| (Geminiano v. Court of Appeals, G.R. No. 120303, July 24, 1996)




























THIRD DIVISION
[G.R. No. 79688. February 1, 1996.]
PLEASANTVILLE DEVELOPMENT CORPORATION, petitioner, vs.
COURT OF APPEALS, WILSON KEE, C.T. TORRES ENTERPRISES, INC.
and ELDRED JARDINICO, respondents.
Mirano, Mirano & Associates Law Offices for petitioner.
Abraham D. Caa for Wilson Kee.
SYLLABUS
1.CIVIL LAW; PROPERTY; OWNERSHIP; BUILDER IN GOOD FAITH;
BUILDER IN GOOD FAITH DEFINED; APPLICATION IN CASE AT BAR.
Petitioner fails to persuade this Court to abandon the findings and
conclusions of the Court of Appeals that Kee was a builder in good
faith. Good faith consists in the belief of the builder that the land he
is building on is his and his ignorance of any defect or flaw in his title.
And as good faith is presumed, petitioner has the burden of proving
bad faith on the part of Kee. At the time he built improvements on
Lot 8, Kee believed that said lot was what he bought from petitioner.
He was not aware that the lot delivered to him was not Lot 8. Thus,
Kee's good faith. Petitioner failed to prove otherwise. cdll
2.ID.; AGENCY; PETITIONER, AS PRINCIPAL, IS RESPONSIBLE FOR THE
NEGLIGENCE OF ITS AGENT, CTTEI, WHICH ACTED WITHIN THE
SCOPE OF ITS AUTHORITY. The rule is that the principal is
responsible for the acts of the agent, done within the scope of his
authority, and should bear the damage caused to third persons. On
the other hand, the agent who exceeds his authority is personally
liable for the damage. CTTEI was acting within its authority as the
sole real estate representative of petitioner when it made the
delivery to Kee. In acting within its scope of authority, it was,
however, negligent. It is this negligence that is the basis of
petitioner's liability, as principal of CTTEI, per Articles 1909 and 1910
of the Civil Code.
3.ID.; DAMAGES; AMOUNT OF DAMAGES TO BE AWARDED IS A
FACTUAL ISSUE WHICH SHOULD BE DETERMINED AFTER EVIDENCE IS
ADDUCED. Now, the extent and/or amount of damages to be
awarded is a factual issue which should be determined after
evidence is adduced. However, there is no showing that such
evidence was actually presented in the trial court; hence no damages
could now be awarded.
4.LEGAL ETHICS; ATTORNEY'S FEES; THE AWARD OF ATTORNEY'S
FEES LIES WITHIN THE DISCRETION OF THE COURT AND DEPENDS
UPON THE CIRCUMSTANCES OF EACH CASE. The award of
attorney's fees lies within the discretion of the court and depends
upon the circumstances of each case. We shall not interfere with the
discretion of the Court of Appeals. Jardinico was compelled to litigate
for the protection of his interests and for the recovery of damages
sustained as a result of the negligence of petitioner's agent.
D E C I S I O N
PANGANIBAN, J p:
Is a lot buyer who constructs improvements on the wrong property
erroneously delivered by the owner's agent, a builder in good faith?
This is the main issue resolved in this petition for review
on certiorari to reverse the Decision 1 of the Court of Appeals 2 in
CA-G.R. SP No. 11040, promulgated on August 20, 1987. cda
By resolution dated November 13, 1995, the First Division of this
Court resolved to transfer this case (along with several others) to the
Third Division. After due deliberation and consultation, the Court
assigned the writing of this Decision to the undersignedponente.
The Facts
The facts, as found by respondent Court, are as follows:
Edith Robillo purchased from petitioner a parcel of land designated
as Lot 9, Phase II and located at Taculing Road, Pleasantville
Subdivision, Bacolod City. In 1975, respondent Eldred Jardinico
bought the rights to the lot from Robillo. At that time, Lot 9 was
vacant.
Upon completing all payments, Jardinico secured from the Register
of Deeds of Bacolod City on December 19, 1978 Transfer Certificate
of Title No. 106367 in his name. It was then that he discovered that
improvements had been introduced on Lot 9 by respondent Wilson
Kee, who had taken possession thereof.
It appears that on March 26, 1974, Kee bought on installment Lot 8
of the same subdivision from C.T. Torres Enterprises, Inc. (CTTEI), the
exclusive real estate agent of petitioner. Under the Contract to Sell
on Installment, Kee could possess the lot even before the completion
of all installment payments. On January 20, 1975, Kee paid CTTEI the
relocation fee of P50.00 and another P50.00 on January 27, 1975, for
the preparation of the lot plan. These amounts were paid prior to
Kee's taking actual possession of Lot 8. After the preparation of the
lot plan and a copy thereof given to Kee, CTTEI through its employee,
Zenaida Octaviano, accompanied Kee's wife, Donabelle Kee, to
inspect Lot 8. Unfortunately, the parcel of land pointed by Octaviano
was Lot 9. Thereafter, Kee proceeded to construct his residence, a
store, an auto repair shop and other improvements on the lot.
After discovering that Lot 9 was occupied by Kee, Jardinico
confronted him. The parties tried to reach an amicable settlement,
but failed.
On January 30, 1981, Jardinico's lawyer wrote Kee, demanding that
the latter remove all improvements and vacate Lot 9. When Kee
refused to vacate Lot 9, Jardinico filed with the Municipal Trial Court
in Cities, Branch 3, Bacolod City (MTCC), a complaint for ejectment
with damages against Kee.
Kee, in turn, filed a third-party complaint against petitioner and
CTTEI.
The MTCC held that the erroneous delivery of Lot 9 to Kee was
attributable to CTTEI. It further ruled that petitioner and CTTEI could
not successfully invoke as a defense the failure of Kee to give notice
of his intention to begin construction required under paragraph 22 of
the Contract to Sell on Installment and his having built a sari-sari
store without the prior approval of petitioner required under
paragraph 26 of said contract, saying that the purpose of these
requirements was merely to regulate the type of improvements to be
constructed on the lot. 3
However, the MTCC found that petitioner had already rescinded its
contract with Kee over Lot 8 for the latter's failure to pay the
installments due, and that Kee had not contested the rescission. The
rescission was effected in 1979, before the complaint was instituted.
The MTCC concluded that Kee no longer had any right over the lot
subject of the contract between him and petitioner. Consequently,
Kee must pay reasonable rentals for the use of Lot 9, and,
furthermore, he cannot claim reimbursement for the improvements
he introduced on said lot.
The MTCC thus disposed:
"IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered as
follows:
1.Defendant Wilson Kee is ordered to vacate the premises of Lot 9,
covered by TCT No. 106367 and to remove all structures and
improvements he introduced thereon;
2.Defendant Wilson Kee is ordered to pay to the plaintiff rentals at
the rate of P15.00 a day computed from the time this suit was filed
on March 12, 1981 until he actually vacates the premises. This
amount shall bear interests (sic) at the rate of 12 per cent (sic) per
annum.
3.Third-Party Defendant C.T. Torres Enterprises, Inc. and
Pleasantville Subdivision are ordered to pay the plaintiff jointly and
severally the sum of P3,000.00 as attorney's fees and P700.00 as cost
and litigation expenses." 4
On appeal, the Regional Trial Court, Branch 48, Bacolod City (RTC)
ruled that petitioner and CTTEI were not at fault or were not
negligent, there being no preponderant evidence to show that they
directly participated in the delivery of Lot 9 to Kee. 5 It found Kee a
builder in bad faith. It further ruled that even
assuming arguendo that Kee was acting in good faith, he was,
nonetheless, guilty of unlawfully usurping the possessory right of
Jardinico over Lot 9 from the time he was served with notice to
vacate said lot, and thus was liable for rental.
The RTC thus disposed:
"WHEREFORE, the decision appealed from is affirmed with respect to
the order against the defendant to vacate the premises of Lot No. 9
covered by Transfer Certificate of Title No. T-106367 of the land
records of Bacolod City; the removal of all structures and
improvements introduced thereon at his expense and the payment to
plaintiff (sic) the sum of Fifteen (P15.00) Pesos a day as reasonable
rental to be computed from January 30, 1981, the date of the
demand, and not from the date of the filing of the complaint, until he
had vacated (sic) the premises, with interest thereon at 12%per
annum. This Court further renders judgment against the defendant
to pay the plaintiff the sum of Three Thousand (P3,000.00) Pesos as
attorney's fees, plus costs of litigation.
"The third-party complaint against Third-Party Defendants
Pleasantville Development Corporation and C.T. Torres Enterprises,
Inc. is dismissed. The order against Third-Party Defendants to pay
attorney's fees to plaintiff and costs of litigation is reversed." 6
Following the denial of his motion for reconsideration on October 20,
1986, Kee appealed directly to the Supreme Court, which referred the
matter to the Court of Appeals.
The appellate court ruled that Kee was a builder in good faith, as he
was unaware of the "mix-up" when he began construction of the
improvements on Lot 8. It further ruled that the erroneous delivery
was due to the negligence of CITEI, and that such wrong delivery was
likewise imputable to its principal, petitioner herein. The appellate
court also ruled that the award of rentals was without basis.
Thus, the Court of Appeals disposed:
"WHEREFORE, the petition is GRANTED, the appealed decision is
REVERSED, and judgment is rendered as follows:
1. Wilson Kee is declared a builder in good faith with respect to the
improvements he introduced on Lot 9, and is entitled to the rights
granted him under Articles 448, 546 and 548 of the New Civil Code.
2. Third-party defendants C.T. Torres Enterprises, Inc. and
Pleasantville Development Corporation are solidarily liable under the
following circumstances:
a.If Eldred Jardinico decides to appropriate the improvements and,
thereafter, remove these structures, the third-party defendants shall
answer for all demolition expenses and the value of the
improvements thus destroyed or rendered useless;

b.If Jardinico prefers that Kee buy the land, the third-party
defendants shall answer for the amount representing the value of
Lot 9 that Kee should pay to Jardinico.
3. Third-party defendants C.T. Torres Enterprises, Inc. and
Pleasantville Development Corporation are ordered to pay in
solidum the amount of P3,000.00 to Jardinico as attorney's fees, as
well as litigation expenses.
4. The award of rentals to Jardinico is dispensed with.
"Furthermore, the case is REMANDED to the court of origin for the
determination of the actual value of the improvements and the
property (Lot 9), as well as for further proceedings in conformity with
Article 448 of the New Civil Code." 7
Petitioner then filed the instant petition against Kee, Jardinico and
CTTEI.
The Issues
The petition submitted the following grounds to justify a review of
the respondent Court's Decision, as follows:
"1.The Court of Appeals has decided the case in a way probably not
in accord with law or the the (sic) applicable decisions of the
Supreme Court on third-party complaints, by ordering third-party
defendants to pay the demolition expenses and/or price of the land;
"2.The Court of Appeals has so far departed from the accepted
course of judicial proceedings, by granting to private respondent Kee
the rights of a builder in good faith in excess of what the law
provides, thus enriching private respondent Kee at the expense of the
petitioner;
"3.In the light of the subsequent events or circumstances which
changed the rights of the parties, it becomes imperative to set aside
or at least modify the judgment of the Court of Appeals to harmonize
with justice and the facts;
"4.Private respondent Kee in accordance with the findings of facts of
the lower court is clearly a builder in bad faith, having violated
several provisions of the contract to sell on installments;
"5.The decision of the Court of Appeals, holding the principal,
Pleasantville Development Corporation (liable) for the acts made by
the agent in excess of its authority is clearly in violation of the
provision of the law; cdlex
"6.The award of attorney's fees is clearly without basis and is
equivalent to putting a premium in (sic) court litigation."
From these grounds, the issues could be re-stated as follows:
(1)Was Kee a builder in good faith?
(2)What is the liability, if any, of petitioner and its agent, C.T. Torres
Enterprises, Inc.? and
(3)Is the award of attorney's fees proper?
The First Issue: Good Faith
Petitioner contends that the Court of Appeals erred in reversing the
RTC's ruling that Kee was a builder in bad faith.
Petitioner fails to persuade this Court to abandon the findings and
conclusions of the Court of Appeals that Kee was a builder in good
faith. We agree with the followi ng observation of the Court of
Appeals:
"The roots of the controversy can be traced directly to the errors
committed by CTTEI, when it pointed the wrong property to Wilson
Kee and his wife. It is highly improbable that a purchaser of a lot
would knowingly and willingly build his residence on a lot owned by
another, deliberately exposing himself and his family to the risk of
being ejected from the land and losing all improvements thereon,
not to mention the social humiliation that would follow.
"Under the circumstances, Kee had acted in the manner of a prudent
man in ascertaining the identity of his property. Lot 8 is covered by
Transfer Certificate of Title No. T-69561, while Lot 9 is identified in
Transfer Certificate of Title No. T-106367. Hence, under the Torrens
system of land registration, Kee is presumed to have knowledge of
the metes and bounds of the property with which he is dealing. . . .
xxx xxx xxx
"But as Kee is a layman not versed in the technical description of his
property, he had to find a way to ascertain that what was described
in TCT No. 69561 matched Lot 8. Thus, he went to the subdivision
developer's agent and applied and paid for the relocation of the lot,
as well as for the production of a lot plan by CTTEI's geodetic
engineer. Upon Kee's receipt of the map, his wife went to the
subdivision site accompanied by CTTEI's employee, Octaviano, who
authoritatively declared that the land she was pointing to was
indeed Lot 8. Having full faith and confidence in the reputation of
CTTEI, and because of the company's positive identification of the
property, Kee saw no reason to suspect that there had been a
misdelivery. The steps Kee had taken to protect his interests were
reasonable. There was no need for him to have acted ex-
abundantia cautela, such as being present during the geodetic
engineer's relocation survey or hiring an independent geodetic
engineer to countercheck for errors, for the final delivery of
subdivision lots to their owners is part of the regular course of
everyday business of CTTEI. Because of CTTEI's blunder, what Kee
had hoped to forestall did in fact transpire. Kee's efforts all went to
naught." 8
Good faith consists in the belief of the builder that the land he is
building on is his and his ignorance of any defect or flaw in his title.
9 And as good faith is presumed, petitioner has the burden of
proving bad faith on the part of Kee. 10
At the time he built improvements on Lot 8, Kee believed that said lot
was what he bought from petitioner. He was not aware that the lot
delivered to him was not Lot 8. Thus, Kee's good faith. Petitioner
failed to prove otherwise.
To demonstrate Kee's bad faith, petitioner points to Kee's violation of
paragraphs 22 and 26 of the Contract of Sale on Installment.
We disagree. Such violations have no bearing whatsoever on
whether Kee was a builder in good faith, that is, on his state of mind
at the time he built the improvements on Lot 9. These alleged
violations may give rise to petitioner's cause of action against Kee
under the said contract (contractual breach), but may not be bases
to negate the presumption that Kee was a builder in good faith.
Petitioner also points out that, as found by the trial court, the
Contract of Sale on Installment covering Lot 8 between it and Kee
was rescinded long before the present action was instituted. This has
no relevance on the liability of petitioner, as such fact does not
negate the negligence of its agent in pointing out the wrong lot to
Kee. Such circumstance is relevant only as it gives Jardinico a cause
of action for unlawful detainer against Kee. Lex Libris
Petitioner next contends that Kee cannot "claim that another lot was
erroneously pointed out to him" because the latter agreed to the
following provision in the Contract of Sale on Installment, to wit:
"13.The Vendee hereby declares that prior to the execution of his
contract he/she has personally examined or inspected the property
made subject-matter hereof, as to its location, contours, as well as
the natural condition of the lots and from the date hereof whatever
consequential change therein made due to erosion, the said Vendee
shall bear the expenses of the necessary fillings, when the same is so
desired by him/her." 11
The subject matter of this provision of the contract is the change of
the location, contour and condition of the lot due to erosion. It
merely provides that the vendee, having examined the property prior
to the execution of the contract, agrees to shoulder the expenses
resulting from such change.
We do not agree with the interpretation of petitioner that Kee
contracted away his right to recover damages resulting from
petitioner's negligence. Such waiver would be contrary to public
policy and cannot be allowed. "Rights may be waived, unless the
waiver is contrary to law, public order, public policy, morals, or good
customs, or prejudicial to a third person with a right recognized by
law." 12
The Second Issue: Petitioner's Liability
Kee filed a third-party complaint against petitioner and CTTEI, which
was dismissed by the RTC after ruling that there was no evidence
from which fault or negligence on the part of petitioner and CTTEI
can be inferred. The Court of Appeals disagreed and found CTTEI
negligent for the erroneous delivery of the lot by Octaviano, its
employee.
Petitioner does not dispute the fact that CTTEI was its agent. But it
contends that the erroneous delivery of Lot 9 to Kee was an act
which was clearly outside the scope of its authority, and
consequently, CTTEI alone should be liable. It asserts that "while
[CTTEI] was authorized to sell the lot belonging to the herein
petitioner, it was never authorized to deliver the wrong lot to Kee."
13
Petitioner's contention is without merit. LLpr
The rule is that the principal is responsible for the acts of the agent,
done within the scope of his authority, and should bear the damage
caused to third persons. 14 On the other hand, the agent who
exceeds his authority is personally liable for the damage. 15
CTTEI was acting within its authority as the sole real estate
representative of petitioner when it made the delivery to Kee. In
acting within its scope of authority, it was, however, negligent. It is
this negligence that is the basis of petitioner's liability, as principal of
CTTEI, per Articles 1909 and 1910 of the Civil Code.
Pending resolution of the case before the Court of Appeals, Jardinico
and Kee on July 24, 1987 entered into a deed of sale, wherein the
former sold Lot 9 to Kee. Jardinico and Kee did not inform the Court
of Appeals of such deal.
The deed of sale contained the following provision:
"1.That Civil Case No. 3815 entitled "Jardinico vs. Kee" which is now
pending appeal with the Court of Appeals, regardless of the outcome
of the decision shall be mutually disregarded and shall not be
pursued by the parties herein and shall be considered dismissed and
without effect whatsoever;" 16
Kee asserts though that the "terms and conditions in the said deed of
sale are strictly for the parties thereto" and that "(t)here is no waiver
made by either of the parties in said deed of whatever favorable
judgment or award the honorable respondent Court of Appeals may
make in their favor against herein petitioner Pleasantville
Development Corporation and/or private respondent C.T. Torres
Enterprises, Inc." 17

Obviously, the deed of sale can have no effect on the liability of
petitioner. As we have earlier stated, petitioner's liability is grounded
on the negligence of its agent. On the other hand, what the deed of
sale regulates are the reciprocal rights of Kee and Jardinico; it
stressed that they had reached an agreement independent of the
outcome of the case.
Petitioner further assails the following holding of the Court of
Appeals:
"2.Third-party defendants C.T. Torres Enterprises, Inc. and
Pleasantville Development Corporation are solidarily liable under the
following circumstances:
"a.If Eldred Jardinico decides to appropriate the improvements and,
thereafter, remove these structures, the third-party defendants shall
answer for all demolition expenses and the value of the
improvements thus destroyed or rendered useless;
"b.If Jardinico prefers that Kee buy the land, the third-party
defendants shall answer for the amount representing the value of
Lot 9 that Kee should pay to Jardinico." 18
Petitioner contends that if the above holding would be carried out,
Kee would be unjustly enriched at its expense. In other words, Kee
would be able to own the lot, as buyer, without having to pay
anything on it, because the aforequoted portion of respondent
Court's Decision would require petitioner and CTTEI jointly and
solidarily to "answer" or reimburse Kee therefor.
We agree with petitioner. cda
Petitioner's liability lies in the negligence of its agent CTTEI. For such
negligence, the petitioner should be held liable for damages. Now,
the extent and/or amount of damages to be awarded is a factual
issue which should be determined after evidence is adduced.
However, there is no showing that such evidence was actually
presented in the trial court; hence no damages could now be
awarded.
The rights of Kee and Jardinico vis-a-vis each other, as builder in
good faith and owner in good faith, respectively, are regulated by
law (i.e., Arts. 448, 546 and 548 of the Civil Code). It was error for the
Court of Appeals to make a "slight modification" in the application of
such law, on the ground of "equity". At any rate, as it stands now,
Kee and Jardinico have amicably settled through their deed of sale
their rights and obligations with regards to Lot 9. Thus, we delete
items 2 (a) and (b) of the dispositive portion of the Court of Appeals'
Decision [as reproduced above] holding petitioner and CTTEI
solidarily liable.
The Third Issue: Attorney's Fees
The MTCC awarded Jardinico attorney's fees and costs in the amount
of P3,000.00 and P700.00, respectively, as prayed for in his
complaint. The RTC deleted the award, consistent with its ruling that
petitioner was without fault or negligence. The Court of Appeals,
however, reinstated the award of attorney's fees after ruling that
petitioner was liable for its agent's negligence.
The award of attorney's fees lies within the discretion of the court
and depends upon the circumstances of each case. 19We shall not
interfere with the discretion of the Court of Appeals. Jardinico was
compelled to litigate for the protection of his interests and for the
recovery of damages sustained as a result of the negligence of
petitioner's agent. 20
In sum, we rule that Kee is a builder in good faith. The disposition of
the Court of Appeals that Kee "is entitled to the rights granted him
under the Articles 448, 546 and 548 of the New Civil Code" is deleted,
in view of the deed of sale entered into by Kee and Jardinico, which
deed now governs the rights of Jardinico and Kee as to each other.
There is also no further need, as ruled by the appellate Court, to
remand the case to the court of origin "for determination of the
actual value of the improvements and the property (Lot 9), as well as
for further proceedings in conformity with Article 448 of the New
Civil Code."
WHEREFORE, the petition is partially GRANTED. The Decision of the
Court of Appeals is hereby MODIFIED as follows:
(1)Wilson Kee is declared a builder in good faith;
(2)Petitioner Pleasantville Development Corporation and respondent
C.T. Torres Enterprises, Inc. are declared solidarily liable for damages
due to negligence; however, since the amount and/or extent of such
damages was proven during the trial, the same cannot now be
quantified and awarded;
(3)Petitioner Pleasantville Development Corporation and respondent
C.T. Torres Enterprises, Inc. are ordered to pay in solidum the
amount of P3,000.00 to Jardinico as attorney's fees, as well as
litigation expenses; and
(4)The award of rentals to Jardinico is dispensed with.
SO ORDERED.
Narvasa, C.J., Davide, Jr., and Melo, JJ., concur.
Francisco, J., took no part. Member of the division in the CA which
rendered the assailed decision.
||| (Pleasantville Development Corp. v. Court of Appeals, G.R. No.
79688, February 01, 1996)












EN BANC
[G.R. No. L-11269. February 28, 1958.]
SILVERIO FELICES, plaintiff-appellee, vs. MAMERTO
IRIOLA, defendant-appellant.
Ezekiel S. Grageda for appellant.
Reyes & Dy-Liaco for appellee.
SYLLABUS
1.PUBLIC LANDS; HOMESTEAD; SALE WITHIN PROHIBITIVE PERIOD,
NULL AND VOID; EFFECT ON TITLE OF GRANTEE. A sale of
homestead executed within the five-year prohibitive period under
Section 118 of the Public Land Law is null and void ab initio.
Consequently, the grantee- vendor never lost his title or ownership
over the homestead, and there is no need for him to repurchase the
same from the vendee, or for the latter to execute a deed of
reconveyance in his favor. The case is actually for mutual restitution,
incident to the nullity of the conveyance.
2.ID.; ID.; ID.; FORFEITURE OF IMPROVEMENTS MADE IN BAD FAITH.
While both grantee and vendee acted in bad faith because they
knew that the sale was illegal and void, and consequently, under Art.
453 of the Civil Code, their rights should be the same as though both
had acted in good faith, however, the vendee in the case at bar, can
not recover the value of the improvements introduced by him
because they were made on the premises only after the grantee had
tried to recover the land in question from him. By so doing, he acted
in bad faith and as a penalty therefor, he must forfeit his
improvements without any right to reimbursement. "He who builds,
plants or sows in bad faith on the land of another, loses what is built,
planted or sown without right to indemnity" (Art. 449, New Civil
Code).
D E C I S I O N
REYES, J. B. L., J p:
Originally brought to the Court of Appeals, this appeal was certified
to us by that Court on the ground that it does not raise any genuine
issue of fact.
It appears that plaintiff and appellee Silverio Felices was the grantee
of a homestead of over eight hectares located in barrio Curry,
Municipality of Pili, Province of Camarines Sur, under Homestead
Patent No. V-2117 dated January 26, 1949, and by virtue of which he
was issued Original Certificate of Title No. 104 over said property.
The month following the issuance of his patent, on February 24,
1949, appellee conveyed in conditional sale to defendant and
appellant Mamerto Iriola a portion of his homestead of more than
four hectares, for the consideration of P1,700. The conveyance (Exh.
1) expressly stipulates that the sale was subject to the provisions of
Sec. 119 of Act 141, as amended, and to the prohibitions spread on
the vendor's patent; and that after the lapse of five years or as soon
as may be allowed by law, the vendor or his successors would
execute in vendee's favor a deed of absolute sale over the land in
question.
Two years after the sale, on April 19, 1951, appellee tried to recover
the land in question from appellant, but the latter refused to allow it
unless he was paid the amount of P2,000 as the alleged value of
improvements he had introduced on the property. In view of
appellant's persistent refusal, plaintiff deposited the received price in
court and filed this action on October 4, 1951.
In the court below, appellant, while recognizing appellee's right to
"redeem", insisted that he must first be reimbursed the value of his
improvements. Whereupon, the court appointed a commissioner to
ascertain the nature and value of the alleged improvements, and
thereafter found that said improvements were made by defendant
either after plaintiff had informed him of his intention to recover the
land, or after the complaint had been filed; some of the
improvements were even introduced after a commissioner had
already been appointed to appraise their value. Wherefore, the
lower court held defendant in bad faith and not entitled to
reimbursement for his improvements. Defendant was, likewise,
ordered to accept the amount of P1,700 deposited by plaintiff in
court, to execute in favor of the latter the corresponding deed of
reconveyance, and to restore him in possession of the land in
question.
At the outset, it must be made clear that as the sale in question was
executed by the parties within the five-year prohibitive period under
section 118 of the Public Land Law, the same is absolutely null and
void and ineffective from its inception. Consequently, appellee never
lost his title or ownership over the land in question, and there was no
need either for him to repurchase the same from appellant, or for
the latter to execute a deed of reconveyance in his favor. The case is
actually for mutual restitution, incident to the nullity ab initio of the
conveyance.
The question now is: May appellant recover or be reimbursed the
value of his improvements on the land in question, on the theory that
as both he and appellee knew that their sale was illegal and void,
they were both in bad faith and consequently, Art. 453 of the Civil
Code applies in that "the rights of one and the other shall be the
same as though both had acted in good faith"?
The rule of Art. 453 of the Civil Code invoked by appellant1 can not
be applied to the instant case for the reason that the lower court
found, and appellant admits, that the improvements in question
were made on the premises only after appellee had tried to recover
the land in question from appellant, and even during the pendency of
this action in the court below. After appellant had refused to restore
the land to the appellee, to the extent that the latter even had to
resort to the present action to recover his property, appellee could
no longer be regarded as having impliedly assented or conformed to
the improvements thereafter made by appellant on the premises.
Upon the other hand, appellant, recognizing as he does appellee's
right to get back his property, continued to act in bad faith when he
made improvements on the land in question after he had already
been asked extra-judicially and judicially, to surrender and return its
possession to appellee; and as a penalty for such bad faith, he must
forfeit his improvements without any right to reimbursement
therefor. "He who builds, plants or sows in bad faith on the land of
another, loses what is built, planted, or sown without right to
indemnity" (Art. 449, New Civil Code).
Wherefore, the judgment appealed from is affirmed, with the sole
modification that appellant need not execute a deed of
reconveyance in appellee's favor, the original conveyance being
hereby declared void ab initio. Costs against appellant Mamerto
Iriola. So ordered.
Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo,
Labrador, Concepcion, Endencia and Felix, JJ., concur.
||| (Felices v. Iriola, G.R. No. L-11269, February 28, 1958)


FIRST DIVISION
[G.R. No. 151815. February 23, 2005.]
SPOUSES JUAN NUGUID AND ERLINDA T. NUGUID, petitioners, vs.
HON. COURT OF APPEALS AND PEDRO P. PECSON, respondents.
D E C I S I O N
QUISUMBING, J p:
This is a petition for review on certiorari of the Decision 1 dated May
21, 2001, of the Court of Appeals in CA-G.R. CV No. 64295, which
modified the Order dated July 31, 1998 of the Regional Trial Court
(RTC) of Quezon City, Branch 101 in Civil Case No. Q-41470. The trial
court ordered the defendants, among them petitioner herein Juan
Nuguid, to pay respondent herein Pedro P. Pecson, the sum of
P1,344,000 as reimbursement of unrealized income for the period
beginning November 22, 1993 to December 1997. The appellate
court, however, reduced the trial court's award in favor of Pecson
from the said P1,344,000 to P280,000. Equally assailed by the
petitioners is the appellate court's Resolution 2 dated January 10,
2002, denying the motion for reconsideration.
It may be recalled that relatedly in our Decision dated May 26, 1995,
in G.R. No. 115814, entitled Pecson v. Court of Appeals, we set aside
the decision of the Court of Appeals in CA-G.R. SP No. 32679 and the
Order dated November 15, 1993, of the RTC of Quezon City, Branch
101 and remanded the case to the trial court for the determination
of the current market value of the four-door two-storey apartment
building on the 256-square meter commercial lot.
The antecedent facts in this case are as follows:
Pedro P. Pecson owned a commercial lot located at 27 Kamias Road,
Quezon City, on which he built a four-door two-storey apartment
building. For failure to pay realty taxes, the lot was sold at public
auction by the City Treasurer of Quezon City to Mamerto
Nepomuceno, who in turn sold it for P103,000 to the spouses Juan
and Erlinda Nuguid. EcICDT
Pecson challenged the validity of the auction sale before the RTC of
Quezon City in Civil Case No. Q-41470. In its Decision, 3 dated
February 8, 1989, the RTC upheld the spouses' title but declared that
the four-door two-storey apartment building was not included in the
auction sale. 4 This was affirmed in toto by the Court of Appeals and
thereafter by this Court, in its Decision 5 dated May 25, 1993, in G.R.
No. 105360 entitled Pecson v. Court of Appeals.
On June 23, 1993, by virtue of the Entry of Judgment of the aforesaid
decision in G.R. No. 105360, the Nuguids became the uncontested
owners of the 256-square meter commercial lot.
As a result, the Nuguid spouses moved for delivery of possession of
the lot and the apartment building.
In its Order 6 of November 15, 1993, the trial court, relying upon
Article 546 7 of the Civil Code, ruled that the Spouses Nuguid were to
reimburse Pecson for his construction cost of P53,000, following
which, the spouses Nuguid were entitled to immediate issuance of a
writ of possession over the lot and improvements. In the same order
the RTC also directed Pecson to pay the same amount of monthly
rentals to the Nuguids as paid by the tenants occupying the
apartment units or P21,000 per month from June 23, 1993, and
allowed the offset of the amount of P53,000 due from the Nuguids
against the amount of rents collected by Pecson from June 23, 1993
to September 23, 1993 from the tenants of the apartment. 8
Pecson duly moved for reconsideration, but on November 8, 1993,
the RTC issued a Writ of Possession, 9 directing the deputy sheriff to
put the spouses Nuguid in possession of the subject property with all
the improvements thereon and to eject all the occupants
therein. caAICE
Aggrieved, Pecson then filed a special civil action for certiorari and
prohibition docketed as CA-G.R. SP No. 32679 with the Court of
Appeals. jur2005cd
In its decision of June 7, 1994, the appellate court, relying upon
Article 448 10 of the Civil Code, affirmed the order of payment of
construction costs but rendered the issue of possession moot on
appeal, thus:
WHEREFORE, while it appears that private respondents [spouses
Nuguid] have not yet indemnified petitioner [Pecson] with the cost of
the improvements, since Annex I shows that the Deputy Sheriff has
enforced the Writ of Possession and the premises have been turned
over to the possession of private respondents, the quest of petitioner
that he be restored in possession of the premises is rendered moot
and academic, although it is but fair and just that private
respondents pay petitioner the construction cost of P53,000.00; and
that petitioner be ordered to account for any and all fruits of the
improvements received by him starting on June 23, 1993, with the
amount of P53,000.00 to be offset therefrom.
IT IS SO ORDERED. 11 [Underscoring supplied.]
Frustrated by this turn of events, Pecson filed a petition for review
docketed as G.R. No. 115814 before this Court.
On May 26, 1995, the Court handed down the decision in G.R. No
115814, to wit:
WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No.
32679 and the Order of 15 November 1993 of the Regional Trial
Court, Branch 101, Quezon City in Civil Case No. Q-41470 are hereby
SET ASIDE.
The case is hereby remanded to the trial court for it to determine the
current market value of the apartment building on the lot. For this
purpose, the parties shall be allowed to adduce evidence on the
current market value of the apartment building. The value so
determined shall be forthwith paid by the private respondents
[Spouses Juan and Erlinda Nuguid] to the petitioner [Pedro
Pecson] otherwise the petitioner shall be restored to the possession
of the apartment building until payment of the required indemnity.
No costs.
SO ORDERED. 12 [Emphasis supplied.]
In so ruling, this Court pointed out that: (1) Article 448 of the Civil
Code is not apposite to the case at bar where the owner of the land
is the builder, sower, or planter who then later lost ownership of the
land by sale, but may, however, be applied by analogy; (2) the
current market value of the improvements should be made as the
basis of reimbursement; (3) Pecson was entitled to retain ownership
of the building and, necessarily, the income therefrom; (4) the Court
of Appeals erred not only in upholding the trial court's determination
of the indemnity, but also in ordering Pecson to account for the
rentals of the apartment building from June 23, 1993 to September
23, 1993.
On the basis of this Court's decision in G.R. No. 115814, Pecson filed
a Motion to Restore Possession and a Motion to Render Accounting,
praying respectively for restoration of his possession over the subject
256-square meter commercial lot and for the spouses Nuguid to be
directed to render an accounting under oath, of the income derived
from the subject four-door apartment from November 22, 1993 until
possession of the same was restored to him.
In an Order 13 dated January 26, 1996, the RTC denied the Motion to
Restore Possession to the plaintiff averring that the current market
value of the building should first be determined. Pending the said
determination, the resolution of the Motion for Accounting was
likewise held in abeyance.
With the submission of the parties' assessment and the reports of
the subject realty, and the reports of the Quezon City Assessor, as
well as the members of the duly constituted assessment committee,
the trial court issued the following Order 14 dated October 7, 1997,
to wit:
On November 21, 1996, the parties manifested that they have
arrived at a compromise agreement that the value of the said
improvement/building is P400,000.00 The Court notes that the
plaintiff has already received P300,000.00. However, when
defendant was ready to pay the balance of P100,000.00, the plaintiff
now insists that there should be a rental to be paid by defendants.
Whether or not this should be paid by defendants, incident is hereby
scheduled for hearing on November 12, 1997 at 8:30 a.m. DCASEc
Meantime, defendants are directed to pay plaintiff the balance of
P100,000.00.
SO ORDERED. 15
On December 1997, after paying the said P100,000 balance to Pedro
Pecson the spouses Nuguid prayed for the closure and termination of
the case, as well as the cancellation of the notice of lis pendens on
the title of the property on the ground that Pedro Pecson's claim for
rentals was devoid of factual and legal bases. 16
After conducting a hearing, the lower court issued an Order dated
July 31, 1998, directing the spouses to pay the sum of P1,344,000 as
reimbursement of the unrealized income of Pecson for the period
beginning November 22, 1993 up to December 1997. The sum was
based on the computation of P28,000/month rentals of the four-door
apartment, thus:
The Court finds plaintiff's motion valid and meritorious. The decision
of the Supreme Court in the aforesaid case [Pecson vs. Court of
Appeals, 244 SCRA 407] which set aside the Order of this Court of
November 15, 1993 has in effect upheld plaintiff's right of possession
of the building for as long as he is not fully paid the value thereof. It
follows, as declared by the Supreme Court in said decision that the
plaintiff is entitled to the income derived therefrom, thus
xxx xxx xxx
Records show that the plaintiff was dispossessed of the premises on
November 22, 1993 and that he was fully paid the value of his
building in December 1997. Therefore, he is entitled to the income
thereof beginning on November 22, 1993, the time he was
dispossessed, up to the time of said full payment, in December 1997,
or a total of 48 months.
The only question left is the determination of income of the four
units of apartments per month. But as correctly pointed out by
plaintiff, the defendants have themselves submitted their affidavits
attesting that the income derived from three of the four units of the
apartment building is P21,000.00 or P7,000.00 each per month, or
P28,000.00 per month for the whole four units. Hence, at P28,000.00
per month, multiplied by 48 months, plaintiff is entitled to be paid by
defendants the amount of P1,344,000.00. 17

The Nuguid spouses filed a motion for reconsideration but this was
denied for lack of merit. 18
The Nuguid couple then appealed the trial court's ruling to the Court
of Appeals, their action docketed as CA-G.R. CV No. 64295.
In the Court of Appeals, the order appealed from in CA-G.R. CV No.
64295, was modified. The CA reduced the rentals from P1,344,000 to
P280,000 in favor of the appellee. 19 The said amount represents
accrued rentals from the determination of the current market value
on January 31, 1997 20 until its full payment on December 12, 1997.
Hence, petitioners state the sole assignment of error now before us
as follows:
THE COURT OF APPEALS ERRED IN HOLDING PETITIONERS LIABLE TO
PAY RENT OVER AND ABOVE THE CURRENT MARKET VALUE OF THE
IMPROVEMENT WHEN SUCH WAS NOT PROVIDED FOR IN THE
DISPOSITIVE PORTION OF THE SUPREME COURT'S RULING IN G.R.
No. 115814. ECTSDa
Petitioners call our attention to the fact that after reaching an
agreed price of P400,000 for the improvements, they only made a
partial payment of P300,000. Thus, they contend that their failure to
pay the full price for the improvements will, at most, entitle
respondent to be restored to possession, but not to collect any
rentals. Petitioners insist that this is the proper interpretation of the
dispositive portion of the decision in G.R. No. 115814, which states in
part that "[t]he value so determined shall be forthwith paid by the
private respondents [Spouses Juan and Erlinda Nuguid] to the
petitioner [Pedro Pecson] otherwise the petitioner shall be restored
to the possession of the apartment building until payment of the
required indemnity." 21
Now herein respondent, Pecson, disagrees with herein petitioners'
contention. He argues that petitioners are wrong in claiming that
inasmuch as his claim for rentals was not determined in the
dispositive portion of the decision in G.R. No. 115814, it could not be
the subject of execution. He points out that in moving for an
accounting, all he asked was that the value of the fruits of the
property during the period he was dispossessed be accounted for,
since this Court explicitly recognized in G.R. No. 115814, he was
entitled to the property. He points out that this Court ruled that
"[t]he petitioner [Pecson] not having been so paid, he was entitled to
retain ownership of the building and, necessarily, the income
therefrom." 22 In other words, says respondent, accounting was
necessary. For accordingly, he was entitled to rental income from the
property. This should be given effect. The Court could have very well
specifically included rent (as fruit or income of the property), but
could not have done so at the time the Court pronounced judgment
because its value had yet to be determined, according to him.
Additionally, he faults the appellate court for modifying the order of
the RTC, thus defeating his right as a builder in good faith entitled to
rental from the period of his dispossession to full payment of the
price of his improvements, which spans from November 22, 1993 to
December 1997, or a period of more than four years.
It is not disputed that the construction of the four-door two-storey
apartment, subject of this dispute, was undertaken at the time when
Pecson was still the owner of the lot. When the Nuguids became the
uncontested owner of the lot on June 23, 1993, by virtue of entry of
judgment of the Court's decision, dated May 25, 1993, in G.R. No.
105360, the apartment building was already in existence and
occupied by tenants. In its decision dated May 26, 1995 in G.R. No.
115814, the Court declared the rights and obligations of the litigants
in accordance with Articles 448 and 546 of the Civil Code. These
provisions of the Code are directly applicable to the instant case.
Under Article 448, the landowner is given the option, either to
appropriate the improvement as his own upon payment of the
proper amount of indemnity or to sell the land to the possessor in
good faith. Relatedly, Article 546 provides that a builder in good faith
is entitled to full reimbursement for all the necessary and useful
expenses incurred; it also gives him right of retention until full
reimbursement is made.
While the law aims to concentrate in one person the ownership of
the land and the improvements thereon in view of the
impracticability of creating a state of forced co-ownership, 23 it
guards against unjust enrichment insofar as the good-faith builder's
improvements are concerned. The right of retention is considered as
one of the measures devised by the law for the protection of builders
in good faith. Its object is to guarantee full and prompt
reimbursement as it permits the actual possessor to remain in
possession while he has not been reimbursed (by the person who
defeated him in the case for possession of the property) for those
necessary expenses and useful improvements made by him on the
thing possessed. 24 Accordingly, a builder in good faith cannot be
compelled to pay rentals during the period of retention 25 nor be
disturbed in his possession by ordering him to vacate. In addition, as
in this case, the owner of the land is prohibited from offsetting or
compensating the necessary and useful expenses with the fruits
received by the builder-possessor in good faith. Otherwise, the
security provided by law would be impaired. This is so because the
right to the expenses and the right to the fruits both pertain to the
possessor, making compensation juridically impossible; and one
cannot be used to reduce the other. 26
As we earlier held, since petitioners opted to appropriate the
improvement for themselves as early as June 1993, when they
applied for a writ of execution despite knowledge that the auction
sale did not include the apartment building, they could not benefit
from the lot's improvement, until they reimbursed the improver in
full, based on the current market value of the property.DTIaHE
Despite the Court's recognition of Pecson's right of ownership over
the apartment building, the petitioners still insisted on dispossessing
Pecson by filing for a Writ of Possession to cover both the lot and the
building. Clearly, this resulted in a violation of respondent's right of
retention. Worse, petitioners took advantage of the situation to
benefit from the highly valued, income-yielding, four-unit apartment
building by collecting rentals thereon, before they paid for the cost of
the apartment building. It was only four years later that they finally
paid its full value to the respondent.
Petitioners' interpretation of our holding in G.R. No. 115814 has
neither factual nor legal basis. The decision of May 26, 1995, should
be construed in connection with the legal principles which form the
basis of the decision, guided by the precept that judgments are to
have a reasonable intendment to do justice and avoid wrong. 27
The text of the decision in G.R. No. 115814 expressly exempted
Pecson from liability to pay rentals, for we found that the Court of
Appeals erred not only in upholding the trial court's determination of
the indemnity, but also in ordering him to account for the rentals of
the apartment building from June 23, 1993 to September 23, 1993,
the period from entry of judgment until Pecson's dispossession. As
pointed out by Pecson, the dispositive portion of our decision in G.R.
No. 115814 need not specifically include the income derived from the
improvement in order to entitle him, as a builder in good faith, to
such income. The right of retention, which entitles the builder in
good faith to the possession as well as the income derived
therefrom, is already provided for under Article 546 of the Civil Code.
Given the circumstances of the instant case where the builder in
good faith has been clearly denied his right of retention for almost
half a decade, we find that the increased award of rentals by the RTC
was reasonable and equitable. The petitioners had reaped all the
benefits from the improvement introduced by the respondent during
said period, without paying any amount to the latter as
reimbursement for his construction costs and expenses. They should
account and pay for such benefits.
We need not belabor now the appellate court's recognition of herein
respondent's entitlement to rentals from the date of the
determination of the current market value until its full payment.
Respondent is clearly entitled to payment by virtue of his right of
retention over the said improvement.
WHEREFORE, the instant petition is DENIED for lack of merit. The
Decision dated May 21, 2001 of the Court of Appeals in CA-G.R. CV
No. 64295 is SET ASIDE and the Order dated July 31, 1998, of the
Regional Trial Court, Branch 101, Quezon City, in Civil Case No. Q-
41470 ordering the herein petitioners, Spouses Juan and Erlinda
Nuguid, to account for the rental income of the four-door two-storey
apartment building from November 1993 until December 1997, in
the amount of P1,344,000, computed on the basis of Twenty-eight
Thousand (P28,000.00) pesos monthly, for a period of 48 months, is
hereby REINSTATED. Until fully paid, said amount of rentals should
bear the legal rate of interest set at six percent (6%) per annum
computed from the date of RTC judgment. If any portion thereof
shall thereafter remain unpaid, despite notice of finality of this
Court's judgment, said remaining unpaid amount shall bear the rate
of interest set at twelve percent (12%) per annum computed from
the date of said notice. Costs against petitioners. SETaHC
SO ORDERED.
Davide, Jr., C.J., Ynares-Santiago, Carpio and Azcuna, JJ., concur.
||| (Spouses Nuguid v. Court of Appeals, G.R. No. 151815, February
23, 2005)


















Natural
Alluvium
FIRST DIVISION
[G.R. No. L-61647. October 12, 1984.]
REPUBLIC OF THE PHILIPPINES (DIRECTOR OF
LANDS), petitioner, vs. THE HON. COURT OF APPEALS, BENJAMIN
TANCINCO, AZUCENA TANCINCO REYES, MARINA TANCINCO
IMPERIAL and MARIO C. TANCINCO, respondents.
The Solicitor General for petitioner.
Martin B. Laurea for private respondents.
SYLLABUS
1.REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF THE TRIAL
COURT AND THE COURT OF APPEALS ARE BINDING IN THE SUPREME
COURT; EXCEPTIONS, The rule that the findings of fact of the trial
court and the Court of Appeals are binding upon this Court admits of
certain exceptions. Thus in Carolina Industries Inc. vs. CMS Stock
Brokerage, Inc. (97 SCRA 734) we held that this Court retains the
power to review and rectify the findings of fact of said courts when
(1) the conclusion is a finding grounded entirely on speculations,
surmises and conjectures; (2) when the inference made is manifestly
mistaken, absurd, and impossible; (3) where there is grave abuse of
discretion; (4) when the: judgment is based on a misapprehension of
facts; and (5) when the court, in making its findings, went beyond
the issues of the case and the same are contrary to the admissions of
both appellant and appellee.
2.CIVIL LAW; OWNERSHIP; RIGHT OF ACCESSION; REQUISITES OF
ACCRETION. The above-quoted article requires the concurrence of
three requisites before an accretion covered by this particular
provision is said to have taken place. They are (1) that the deposit be
gradual and imperceptible; (2) that it be made through the effects of
the current of the water, and (3) that the land where accretion takes
place is adjacent to the banks of rivers.
3.ID.; ID.; ID.; ID.; ALLUVION MUST BE THE EXCLUSIVE WORK OF
NATURE; CASE AT BAR. The requirement that the deposit should
be due to the effect of the current of the river is indispensable. This
excludes from Art. 457 of the New Civil Code all deposits caused by
human intervention. Alluvion must be the exclusive work of nature.
In the instant case, there is no evidence whatsoever to prove that the
addition to the said property was made gradually through the effects
of the current of the Meycauayan and Bocaue rivers. We agree with
the observation of the Solicitor General that it is preposterous to
believe that almost four (4) hectares of land came into being because
of the effects of the Meycauayan and Bocaue Rivers. There is
evidence that the alleged alluvial deposits were artificial and man-
made and not the exclusive result of the current of the Meycauayan
and Bocaue rivers. The alleged alluvial deposits came into being not
because of the sole effect of the current of the rivers but as result of
the transfer of the dike towards the river and encroaching upon it.
The land sought to be registered is not even dry land cast
imperceptibly and gradually by the river's current on the fishpond
adjoining it. It is under two meters of water. The private
respondents' own evidence shows that the water in the fishpond is
two meters deep on the side of the pilapil facing the fishpond and
only one meter deep on the side of the pilapil facing river.
4.ID.; ID.; ID.; LAW GIVES RIPARIAN OWNER THE RIGHT TO ANY
LAND OR ALLUVION; RATIONALE. The reason behind the law
giving the riparian owner the right to any land or alluvion deposited
by a river is to compensate him for the danger of loss that he suffers
because of the location of his land. If estates bordering on rivers are
exposed to floods and other evils produced by the destructive force
of the waters and if by virtue of lawful provisions, said estates are
subject to incumbrances and various kinds of easements, it is proper
that the risk or danger which may prejudice the owner thereof
should be compensated by the right of accretion (Cortes vs. City of
Manila, 10 Phil. 567). Hence, the riparian owner does not acquire the
additions to his land caused by special works expressly intended or
designed to bring about accretion. When the private respondents
transferred their dikes towards the river beds, the dikes were meant
for reclamation purposes and not protect their property from the
destructive force of the waters of the river.
D E C I S I O N
GUTIERREZ, JR., J p:
This is a petition for certiorari to set aside the decision of the
respondent Court of Appeals (now Intermediate Appellate Court)
affirming the decision of the Court of First Instance of Bulacan, Fifth
Judicial District, Branch VIII, which found that Lots 1 and 2 of Plan
Psu-131892 are accretion to the land covered by Transfer Certificate
of Title No. 89709 and ordered their registration in the names of the
private respondents.
Respondents Benjamin Tancinco, Azucena Tancinco Reyes, Marina
(should be "Maria") Tancinco Imperial and Mario C. Tancinco are
registered owners of a parcel of land covered by Transfer Certificate
of Title No. T-89709 situated at Barrio Ubihan, Meycauayan, Bulacan
bordering on the Meycauayan and Bocaue rivers.
On June 24, 1973, the private respondents filed an application for the
registration of three lots adjacent to their fishpond property and
particularly described as follows:
"Lot 1 Psu-131892
(Maria C. Tancinco)
"A parcel of land (lot 1 as shown on plan Psu-131892), situated in the
Barrio of Ubihan, Municipality of Meycauayan, Province of Bulacan.
Bounded on the NE., along line 1-2, by Lot 3 of plan Psu-131892; on
the SE., along lines 2-3-4, by Meycauayan River; on the S.W., along
lines 4-5-6-7-8-9, by Bocaue River; on the NE., along line 9-10, by
property of Joaquina Santiago; on the E., NE., and NW., along lines
10-11-12-1, by property of Mariano Tancinco (Lot 2, Psu-111877). . . .
containing an area of THIRTY THREE THOUSAND NINE HUNDRED
THIRTY SEVEN (33,937) SQUARE METERS. . . . "
"Lot 2 Psu-131892
(Maria C. Tancinco)
"A parcel of land (Lot 2 as shown on plan Psu-131892), situated in
the Barrio of Ubihan, Municipality of Meycauayan, Province of
Bulacan, Bounded on the E., along line 1-2, by property of Rafael
Singson; on the S., along line 2-3, by Meycauayan River; on the SW.,
along line 3-4, by Lot 3 of plan Psu-131892; and on the N., along line
4-1, by property of Mariano Tancinco (Lot 1, Psu-111877). . . .
containing an area of FIVE THOUSAND FOUR HUNDRED FIFTY THREE
(5,453) SQUARE METERS. . . . "
"Lot 3 Psu-131892
(Maria C. Tancinco)
"A parcel of land (Lot 3 as shown on plan Psu-131892), situated in
the Barrio of Ubihan, Municipality of Meycauayan, Province of
Bulacan, Bounded on the NE., along line 1-2, by property of Mariano
Tancinco (Lot 1, Psu-111877); and along line 2-3, by Lot 2 of plan
Psu-131892; on the S., along line 3-4, by Meycauayan River, on the
SW., along line 4-5, by Lot 1 of plan Psu-131892; and along line 5-6
by property of Mariano Tancinco (Lot 2, Psu-111877), and on the
NW., along line 6-1, by property of Joaquina Santiago. . . . containing
an area of ONE THOUSAND NINE HUNDRED EIGHTY FIVE (1,985)
SQUARE METERS. . . . "
On April 5, 1974, Assistant Provincial Fiscal Amando C. Vicente, in
representation of the Bureau of Lands filed a written opposition to
the application for registration.
On March 6, 1975, the private respondents filed a partial withdrawal
of the application for registration with respect to Lot 3 of Plan Psu-
131892 in line with the recommendation of the Commissioner
appointed by the Court.
On March 7, 1975, Lot 3 was ordered withdrawn from the
application and trial proceeded only with respect to Lots 1 and 2
covered by Plan Psu-131892.
On June 26, 1976, the lower court rendered a decision granting the
application on the finding that the lands in question are accretions to
the private respondents' fishponds covered by Transfer Certificate of
Title No. 89709. The dispositive portion of the decision reads:
"WHEREFORE, it appearing that Lots 1 & 2 of plan Psu-131892 (Exh.
H) are accretions to the land covered by Transfer Certificate of Title
No. 89709 of the Register of Deeds of Bulacan, they belong to the
owner of said property. The Court, therefore, orders the registration
of Lots 1 & 2 situated in the barrio of Ubihan, municipality of
Meycauayan, province of Bulacan, and more particularly described in
plan Psu-131892 (Exh. H) and their accompanying technical
descriptions (Exhs. E, E-1) in favor of Benjamin Tancinco, married to
Alma Fernandez and residing at 3662 Heatherdown, Toledo, Ohio
43614 U.S.A.; Azucena Tancinco Reyes, married to Alex Reyes, Jr.,
residing at 4th St., New Manila, Quezon City; Marina Tancinco
Imperial, married to Juan Imperial, residing at Pasay Road,
Dasmarias Village, Makati, Rizal; and Mario C. Tancinco, married to
Leticia Regidor, residing at 1616 Cypress St., Dasmarias Village,
Makati, Rizal, all of legal age, all Filipino citizens."
On July 30, 1976, the petitioner Republic appealed to the respondent
Court of Appeals.
On August 19, 1982, the respondent Court rendered a decision
affirming in toto the decision of the lower court. The dispositive
portion of the decision reads:
"DAHIL DITO, ang hatol na iniakyat ay sinasangayunan at
pinagtitibay sa kanyang kabuuan nang walang bayad."
The rule that the findings of fact of the trial court and the Court of
Appeals are binding upon this Court admits of certain exceptions.
Thus in Carolina Industries Inc. v. CMS Stock Brokerage, Inc. (97 SCRA
734) we held that this Court retains the power to review and rectify
the findings of fact of said courts when (1) the conclusion is a finding
grounded entirely on speculations, surmises and conjectures; (2)
when the inference made is manifestly mistaken, absurd, and
impossible; (3) where there is grave abuse of discretion; (4) when the
judgment is based on a misapprehension of facts; and (5) when the
court, in making its findings, went beyond the issues of the case and
the same are contrary to the admissions of both appellant and
appellee.
There are facts and circumstances in the record which render
untenable the findings of the trial court and the Court of Appeals
that the lands in question are accretions to the private respondents'
fishponds.

The petitioner submits that there is no accretion to speak of under
Article 457 of the New Civil Code because what actually happened is
that the private respondents simply transferred their dikes further
down the river bed of the Meycauayan River, and thus, if there is any
accretion to speak of, it is man-made and artificial and not the result
of the gradual and imperceptible sedimentation by the waters of the
river.
On the other hand, the private respondents rely on the testimony of
Mrs. Virginia Acua to the effect that: llcd
xxx xxx xxx
". . . when witness first saw the land namely, Lots 1 & 2, they were
already dry almost at the level of the Pilapil of the property of Dr.
Tancinco, and that from the boundaries of the lots, for about two (2)
arms length the land was still dry up to the edge of the river; that
sometime in 1951, a new Pilapil was established on the boundaries
of Lots 1 & 2 and soil from the old Pilapil was transferred to the new
Pilapil and this was done sometime in 1951; that the new lots were
then converted into fishpond, and water in this fishpond was two (2)
meters deep on the side of the Pilapil facing the fishpond . . . . "
The private respondents submit that the foregoing evidence
establishes the fact of accretion without human intervention because
the transfer of the dike occurred after the accretion was complete.
We agree with the petitioner.
Article 457 of the New Civil Code provides:
"To the owners of lands adjoining the banks of rivers belong the
accretion which they gradually receive from the effects of the current
of the waters."
The above-quoted article requires the concurrence of three requisites
before an accretion covered by this particular provision is said to
have taken place. They are (1) that the deposit be gradual and
imperceptible; (2) that it be made through the effects of the current
of the water; and (3) that the land where accretion takes place is
adjacent to the banks of rivers. Cdpr
The requirement that the deposit should be due to the effect of the
current of the river is indispensable. This excludes from Art. 457 of
the New Civil Code all deposits caused by human intervention.
Alluvion must be the exclusive work of nature. In the instant case,
there is no evidence whatsoever to prove that the addition to the
said property was made gradually through the effects of the current
of the Meycauayan and Bocaue rivers. We agree with the
observation of the Solicitor General that it is preposterous to believe
that almost four (4) hectares of land came into being because of the
effects of the Meycauayan and Bocaue rivers. The lone witness of the
private respondents who happens to be their overseer and whose
husband was first cousin of their father noticed the four hectare
accretion to the twelve hectare fishpond only in 1939. The
respondents claim that at this point in time, accretion had already
taken place. If so, their witness was incompetent to testify to a
gradual and imperceptible increase to their land in the years before
1939. However, the witness testified that in that
year, she observed an increase in the area of the original fishpond
which is now the land in question. If she was telling the truth, the
accretion was sudden. However, there is evidence that the alleged
alluvial deposits were artificial and man-made and not the exclusive
result of the current of the Meycauayan and Bocaue rivers. The
alleged alluvial deposits came into being not because of the sole
effect of the current of the rivers but as a result of the transfer of the
dike towards the river and encroaching upon it. The land sought to
be registered is not even dry land cast imperceptibly and gradually
by the river's current on the fishpond adjoining it. It is under two
meters of water. The private respondents' own evidence shows that
the water in the fishpond is two meters deep on the side of the pilapil
facing the fishpond and only one meter deep on the side of the pilapil
facing the river.
The reason behind the law giving the riparian owner the right to any
land or alluvion deposited by a river is to compensate him for the
danger of loss that he suffers because of the location of his land. If
estates bordering on rivers are exposed to floods and other evils
produced by the destructive force of the waters and if by virtue of
lawful provisions, said estates are subject to incumbrances and
various kinds of easements, it is proper that the risk or danger which
may prejudice the owners thereof should be compensated by the
right of accretion. (Cortes v. City of Manila, 10 Phil. 567). Hence, the
riparian owner does not acquire the additions to his land caused by
special works expressly intended or designed to bring about
accretion. When the private respondents transferred their dikes
towards the river bed, the dikes were meant for reclamation
purposes and not to protect their property from the destructive force
of the waters of the river.
We agree with the submission of the Solicitor General that the
testimony of the private respondents' lone witness to the effect that
as early as 1939 there already existed such alleged alluvial deposits,
deserves no merit. It should be noted that the lots in question were
not included in the survey of their adjacent property conducted on
May 10, 1940 and in the Cadastral Survey of the entire Municipality
of Meycauayan conducted between the years 1958 to 1960. The
alleged accretion was declared for taxation purposes only in 1972 or
33 years after it had supposedly permanently formed. The only valid
conclusion therefore is that the said areas could not have been there
in 1939. They existed only after the private respondents transferred
their dikes towards the bed of the Meycauayan river in 1951. What
private respondents claim as accretion is really an encroachment of a
portion of the Meycauayan river by reclamation. LLpr
The lower court cannot validly order the registration of Lots 1 & 2 in
the names of the private respondents. These lots were portions of
the bed of the Meycauayan river and are therefore classified as
property of the public domain under Article 420 paragraph 1 and
Article 502, paragraph 1 of the Civil Code of the Philippines. They are
not open to registration under the Land Registration Act. The
adjudication of the lands in question as private property in the
names of the private respondents is null and void.
WHEREFORE, the instant petition is GRANTED. The decision appealed
from is hereby REVERSED and SET ASIDE. The private respondents
are ordered to move back the dikes of their fishponds to their
original location and return the disputed property to the river to
which it belongs.
SO ORDERED.
Teehankee, Melencio-Herrera, Plana, Relova and De la Fuente, JJ .,
concur.

||| (Republic v. Court of Appeals, G.R. No. L-61647, October 12,
1984)

EN BANC
[G.R. No. L-17652. June 30, 1962.]
IGNACIO GRANDE, ET AL., petitioners, vs. HON. COURT OF APPEALS,
DOMINGO CALALUNG and ESTEBAN CALALUNG, respondents.
Bartolome Guirao and Antonio M. Orara for petitioners.
Gonzales & Fernandez for respondent.
SYLLABUS
1.PROPERTY; ACCRETION; ALLUVIAL DEPOSITS ON REGISTERED
LAND; INCREMENT NOT AUTOMATICALLY REGISTERED. An
accretion does not automatically become registered land just
because the lot which receives such accretion is covered by a Torrens
title. Ownership of a piece of land is one thing; registration under the
Torrens system of that ownership is another. Ownership over the
accretion received by the land adjoining a river is governed by the
Civil Code. Imprescriptibility of registered land is provided in the
registration law. Registration under the Land Registration and
Cadastral Acts does not vest or give title to the land, but merely
confirms and, thereafter, protects the title already possessed by the
owner, making it imprescriptible by occupation of third parties. But
to obtain this protection, the land must be placed under the
operation of the registration laws, wherein certain judicial
procedures have been provided.
D E C I S I O N
BARRERA, J p:
This is an appeal taken by petitioners Ignacio, Eulogia, Alfonso,
Eulalia, and Sofia Grande, from the decision of the Court of Appeals
(CA-G. R. No. 25169-R) reversing that of the Court of First Instance of
Isabela (Civil Case No. 1171), and dismissing petitioners' action
against respondents Domingo and Esteban Calalung, to quiet title to
and recover possession of a parcel of land allegedly occupied by the
latter without petitioners' consent.
The facts of the case, which are undisputed, briefly are: Petitioners
are the owners of a parcel of land, with an area of 3.5032 hectares,
located at barrio Ragan, municipality of Magsaysay (formerly
Tumauini), province of Isabela, by inheritance from their deceased
mother Patricia Angui (who inherited it from her parents Isidro Angui
and Ana Lopez, in whose name said land appears registered, as
shown by Original Certificate of Title No. 2982, issued on June 9,
1934). Said property is identified as Lot No. 1, Plan PSU-83342. When
it was surveyed for purposes of registration sometime in 1930, its
northeastern boundary was the Cagayan River (the same boundary
stated in the (title). Since then, and for many years thereafter, a
gradual accretion on the northeastern side took place, by action of
the current of the Cagayan River, so much so, that by 1958, the bank
thereof had receded to a distance of about 105 meters from its
original site, and an alluvial deposit of 19,964 square meters (1.9964
hectares), more or less, had been added to the registered area (Exh.
C-1).
On January 25, 1958, petitioners instituted the present action in the
Court of First Instance of Isabela against respondents, to quiet title
to said portion (19,964 square meters) formed by accretion, alleging
in their complaint (docketed as Civil Case No. 1171) that they and
their predecessors-in-interest, were formerly in peaceful and
continuous possession thereof, until September, 1948, when
respondents entered upon the land under claim of ownership.
Petitioners also asked for damages corresponding to the value of the
fruits of the land as well as attorney's fees and costs. In their answer
(dated February 18, 1958), respondents claim ownership in
themselves, asserting that they have been in continuous, open, and
undisturbed possession of said portion, since prior to the year 1933
to the present.
After trial, the Court of First Instance of Isabela, on May 4, 1959,
rendered a decision adjudging the ownership of the portion in
question to petitioners, and ordering respondents to vacate the
premises and deliver possession thereof to petitioners, and to pay to
the latter P250.00 as damages and costs. Said decision, in part,
reads:
"It is admitted by the parties that the land involved in this action was
formed by the gradual deposit of alluvium brought about by the
action of the Cagayan River, a navigable river. We are inclined to
believe that the accretion was formed on the northeastern side of
the land covered by Original Certificate of Title No. 2982 after the
survey of the registered land in 1931, because the surveyors found
out that the northeastern boundary of the land surveyed by them
was the Cagayan River, and not the land in question. Which is
indicative of the fact that the accretion has not yet started or began
in 1931. And, as declared by Pedro Laman, defendants' witness and
the boundary owner on the northwest of the registered land of the
plaintiffs, the accretion was a little more than one hectare, including
the stony portion, in 1940 or 1941. Therefore, the declarations of the
defendant Domingo Calalung and his witness, Vicente C. Bacani, to
the effect that the land in question was formed by accretion since
1933 do not only contradict the testimony of defendants' witness
Pedro Laman, but could not overthrow the incontestable fact that
the accretion with an area of 4 hectares, more or less, was formed in
1948, reason for which, it was only declared in that same year for
taxation purposes by the defendants under Tax Dec. No. 257 (Exh.
'2') when they entered upon the land. We could not give credence to
defendants' assertion that Tax Dec. No. 257 (Exh. '2') cancelled Tax
Dec. No. 28226 (Exh. '1'), because Exh. "2" says that 'tax under this
declaration begins with the year 1948. But, the fact that defendants
declared the land for taxation purposes since 1948, does not mean
that they become the owner of the land by mere occupancy, for it is
a new provision of the New Civil Code that ownership of a piece of
land cannot be acquired by occupation (Art. 714, New Civil Code).
The land in question being an accretion to the mother or registered
land of the plaintiffs, the accretion belongs to the plaintiffs (Art. 457,
New Civil Code; Art. 366, Old Civil Code). Assuming, arguendo, that
the accretion has been occupied by the defendants since 1948, or
earlier, is of no moment, because the law does not require any act of
possession on the part of the owner of the riparian owner, from the
moment the deposit becomes manifest (Roxas vs. Tuason, 9 Phil.
408; Cortez vs. City of Manila, 10 Phil. 567). Further, no act of
appropriation on the part of the riparian owner is necessary, in order
to acquire ownership of the alluvial formation, as the law does not
require the same (3 Manresa, C.C., pp. 321-326).
"This brings us now to the determination of whether the defendants,
granting that they have been in possession of the alluvium since
1948, could have acquired the property by prescription. Assuming
that they occupied the land in September, 1948, but considering that
the action was commenced on January 25, 1958, they have not been
in possession of the land for ten (10) years; hence, they could not
have acquired the land by ordinary prescription (Arts. 1134 and
1138, New Civil Code). Moreover, as the alluvium is, by law, part and
parcel of the registered property, the same may be considered as
registered property, within the meaning of Section 46 of Act No. 496;
and, therefore, it could not be acquired by prescription or adverse
possession by another person."
Unsatisfied, respondents appealed to the Court of Appeals, which
rendered, on September 14, 1960, the decision adverted to at the
beginning of this opinion, partly stating:
"That the area in controversy has been formed through a gradual
process of alluvion, which started in the early thirties, is a fact
conclusively established by the evidence for both parties. By law,
therefore, unless some superior title has supervened, it should
properly belong to the riparian owners, specifically in accordance
with the rule of natural accession in Article 366 of the old Civil Code
(now Article 457), which provides that 'to the owner of lands
adjoining the banks of rivers, belongs the accretion which they
gradually receive from the effects of the current of the water.' The
defendants, however, contend that they have acquired ownership
through prescription. This contention poses the real issue in this case.
The Court a quo, has resolved it in favor of the plaintiffs, on two
grounds: First, since by accession, the land in question pertains to the
original estate, and since in this instance the original estate is
registered, the accretion, consequently, falls within the purview of
Section 46 of Act No. 496, which states that 'no title to registered
land in derogation to that of the registered owner shall be acquired
by prescription or adverse possession'; and, second, the adverse
possession of the defendant began only in the month of September,
1948, or less than the 10-year period required for prescription before
the present action was instituted.
"As a legal proposition, the first ground relied upon by the trial court,
is not quite correct. An accretion to registered land, while declared
by specific provision of the Civil Code to belong to the owner of the
land as a natural accession thereof, does not ipso jure become
entitled to the protection of the rule of imprescriptibility of title
established by the Land Registration Act. Such protection does not
extend beyond the area given and described in the certificate. To
hold otherwise, would be productive of confusion. It would virtually
deprive the title, and the technical description of the land given
therein, of their character of conclusiveness as to the identity and
area of the land that is registered. Just as the Supreme Court, albeit
in a negative manner, has stated that registration does not protect
the riparian owner against the erosion of the area of his land
through gradual changes in the course of the adjoining stream
(Payatas Estate Development Co. vs. Tuason, 53 Phil. 55), so
registration does not entitle him to all the rights conferred by the
Land Registration Act, in so far as the area added by accretion is
concerned. What rights he has, are declared not by said Act, but by
the provisions of the Civil Code on accession; and these provisions do
not preclude acquisition of the additional area by another person
through prescription. This Court has held as much in the case of
Galindez, et al. vs. Baguisa, et al., CA-G. R. No. 19249-R, July 17,
1959.

"We now proposed to review the second ground relied upon by the
trial court, regarding the length of time that the defendants have
been in possession. Domingo Calalung testified that he occupied the
land in question for the first time in 1934, not in 1948 as claimed by
the plaintiffs. The area under occupancy gradually increased as the
years went by. In 1946, he declared the land for purposes of taxation
(Exhibit 1). This tax declaration was superseded in 1948 by another
(Exhibit 2), after the name of the municipality wherein it is located
was changed from Tumauini to Magsaysay. Calalung's testimony is
corroborated by two witnesses, both owners of properties nearby.
Pedro Laman, 72 years of age, who was Municipal president of
Tumauini for three terms, said that the land in question adjoins his
own on the south, and that since 1940 or 1941, he has always known
it to be in the peaceful possession of the defendants. Vicente C.
Bacani testified to the same effect, although, he said that the
defendants' possession started sometime in 1933 or 1934. The area
thereof, he said, was then less than one hectare.
"We find the testimony of the said witnesses entitled to much
greater weight and credence than that of the plaintiff Pedro Grande
and his lone witness, Laureana Rodriguez. The first stated that the
defendants occupied the land in question only in 1948; that he called
the latter's attention to the fact that the land was his, but the
defendants, in turn, claimed that they were the owners; that the
plaintiffs did not file an action until 1958, because it was only then
that they were able to obtain the certificate of title from the
surveyor, Domingo Parlan; and that they never declared the land in
question for taxation purposes or paid the taxes thereon. Pedro
Grande admitted that the defendants had the said land surveyed in
April, 1958, and that he tried to stop it, not because he claimed the
accretion for himself and his co-plaintiffs, but because the survey
included a portion of the property covered by their title. This last fact
is conceded by the defendants who, accordingly, relinquished their
possession to the part thus included, containing an area of some 458
square meters.
"The oral evidence for the defendants concerning the period of their
possession from 1933 to 1958 is not only preponderant in itself,
but is, moreover, supported by the fact that it is they and not the
plaintiffs who declared the disputed property for taxation, and by the
additional circumstance that if the plaintiffs had really been in prior
possession and were deprived thereof in 1948, they would have
immediately taken steps to recover the same. The excuse they gave
for not doing so, namely, that they did not receive their copy of the
certificate of title to their property until 1958 for lack of funds to pay
the fees of the surveyor Domingo Parlan, is too flimsy to merit any
serious consideration. The payment of the surveyor's fees had
nothing to do with their right to obtain a copy of the certificate.
Besides, it was not necessary for them to have it in their hands, in
order to file an action to recover the land which was legally theirs by
accession and of which, as they allege, they had been illegally
deprived by the defendants. We are convinced, upon consideration
of the evidence, that the latter, were really in possession since 1934,
immediately after the process of alluvion started, and that the
plaintiffs woke up to their rights only when they received their copy
of the title in 1958. By then, however, prescription had already
supervened in favor of the defendants."
It is this decision of the Court of Appeals which petitioners seek to be
reviewed by us.
The sole issue for resolution in this case is whether respondents have
acquired the alluvial property in question through prescription.
There can be no dispute that both under Article 457 of the new Civil
Code and Article 366 of the old, petitioners are the lawful owners of
said alluvial property, as they are the registered owners of the land
to which it adjoins. The question is whether the accretion becomes
automatically registered land just because the lot which receives it is
covered by a Torrens title thereby making the alluvial property
imprescriptible. We agree with the Court of Appeals that it does not,
just as an unregistered land purchased by the registered owner of
the adjoining land does not, by extension, become ipso
facto registered land. Ownership of a piece of land is one thing, and
registration under the Torrens system of that ownership is quite
another. Ownership over the accretion received by the land adjoining
a river is governed by the Civil Code. Imprescriptibility of registered
land is provided in the registration law. Registration under the Land
Registration and Cadastral Acts does not vest or give title to the
land, but merely confirms and thereafter protects the title already
possessed by the owner, making it imprescriptible by occupation of
third parties. But to obtain this protection, the land must be placed
under the operation of the registration laws wherein certain judicial
procedures have been provided. The fact remains, however, that
petitioners never sought registration of said alluvial property (which
was formed sometime after petitioners' property covered by Original
Certificate of Title No. 2982 was registered on June 9, 1934) up to the
time they instituted the present action in the Court of First Instance
of Isabela in 1958. The increment, therefore, never became
registered property, and hence is not entitled or subject to the
protection of imprescriptibility enjoyed by registered property under
the Torrens system. Consequently, it was subject to acquisition
through prescription by third persons.
The next issue is, did respondents acquire said alluvial property
through acquisitive prescription? This is a question which requires
determination of facts: physical possession and dates or duration of
such possession. The Court of Appeals, after analyzing the evidence,
found that respondents-appellees were in possession of the alluvial
lot since 1933 or 1934, openly, continuously and adversely, under a
claim of ownership up to the filing of the action in 1958. This finding
of the existence of these facts, arrived at by the Court of Appeals
after an examination of the evidence presented by the parties, is
conclusive as to them and can not be reviewed by us.
The law on prescription applicable to the case is that provided in Act
190 and not the provisions of the Civil Code, since the possession
started in 1933 or 1934 when the pertinent articles of the Old Civil
Code were not in force and before the effectivity of the New Civil
Code in 1950. Hence, the conclusion of the Court of Appeals that the
respondents acquired the alluvial lot in question by acquisitive
prescription is in accordance with law.
The decision of the Court of Appeals under review is hereby affirmed,
with costs against the petitions. So ordered.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion,
Paredes and Dizon, JJ., concur.
Reyes, J.B.L., Regala and Makalintal, JJ., took no part.

||| (Grande v. Court of Appeals, G.R. No. L-17652, June 30, 1962)















FIRST DIVISION
[G.R. No. L-61647. October 12, 1984.]
REPUBLIC OF THE PHILIPPINES (DIRECTOR OF
LANDS), petitioner, vs.THE HON. COURT OF APPEALS, BENJAMIN
TANCINCO, AZUCENA TANCINCO REYES, MARINA TANCINCO
IMPERIAL and MARIO C. TANCINCO, respondents.
The Solicitor General for petitioner.
Martin B. Laurea for private respondents.
SYLLABUS
1.REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF THE TRIAL
COURT AND THE COURT OF APPEALS ARE BINDING IN THE SUPREME
COURT; EXCEPTIONS, The rule that the findings of fact of the trial
court and the Court of Appeals are binding upon this Court admits of
certain exceptions. Thus in Carolina Industries Inc. vs. CMS Stock
Brokerage, Inc. (97 SCRA 734) we held that this Court retains the
power to review and rectify the findings of fact of said courts when
(1) the conclusion is a finding grounded entirely on speculations,
surmises and conjectures; (2) when the inference made is manifestly
mistaken, absurd, and impossible; (3) where there is grave abuse of
discretion; (4) when the: judgment is based on a misapprehension of
facts; and (5) when the court, in making its findings, went beyond
the issues of the case and the same are contrary to the admissions of
both appellant and appellee.
2.CIVIL LAW; OWNERSHIP; RIGHT OF ACCESSION; REQUISITES OF
ACCRETION. The above-quoted article requires the concurrence of
three requisites before an accretion covered by this particular
provision is said to have taken place. They are (1) that the deposit be
gradual and imperceptible; (2) that it be made through the effects of
the current of the water, and (3) that the land where accretion takes
place is adjacent to the banks of rivers.
3.ID.; ID.; ID.; ID.; ALLUVION MUST BE THE EXCLUSIVE WORK OF
NATURE; CASE AT BAR. The requirement that the deposit should
be due to the effect of the current of the river is indispensable. This
excludes from Art. 457 of the New Civil Code all deposits caused by
human intervention. Alluvion must be the exclusive work of nature.
In the instant case, there is no evidence whatsoever to prove that the
addition to the said property was made gradually through the effects
of the current of the Meycauayan and Bocaue rivers. We agree with
the observation of the Solicitor General that it is preposterous to
believe that almost four (4) hectares of land came into being because
of the effects of the Meycauayan and Bocaue Rivers. There is
evidence that the alleged alluvial deposits were artificial and man-
made and not the exclusive result of the current of the Meycauayan
and Bocaue rivers. The alleged alluvial deposits came into being not
because of the sole effect of the current of the rivers but as result of
the transfer of the dike towards the river and encroaching upon it.
The land sought to be registered is not even dry land cast
imperceptibly and gradually by the river's current on the fishpond
adjoining it. It is under two meters of water. The private
respondents' own evidence shows that the water in the fishpond is
two meters deep on the side of the pilapil facing the fishpond and
only one meter deep on the side of the pilapil facing river.
4.ID.; ID.; ID.; LAW GIVES RIPARIAN OWNER THE RIGHT TO ANY
LAND OR ALLUVION; RATIONALE. The reason behind the law
giving the riparian owner the right to any land or alluvion deposited
by a river is to compensate him for the danger of loss that he suffers
because of the location of his land. If estates bordering on rivers are
exposed to floods and other evils produced by the destructive force
of the waters and if by virtue of lawful provisions, said estates are
subject to incumbrances and various kinds of easements, it is proper
that the risk or danger which may prejudice the owner thereof
should be compensated by the right of accretion (Cortes vs. City of
Manila, 10 Phil. 567). Hence, the riparian owner does not acquire the
additions to his land caused by special works expressly intended or
designed to bring about accretion. When the private respondents
transferred their dikes towards the river beds, the dikes were meant
for reclamation purposes and not protect their property from the
destructive force of the waters of the river.
D E C I S I O N
GUTIERREZ, JR., J p:
This is a petition for certiorari to set aside the decision of the
respondent Court of Appeals (now Intermediate Appellate Court)
affirming the decision of the Court of First Instance of Bulacan, Fifth
Judicial District, Branch VIII, which found that Lots 1 and 2 of Plan
Psu-131892 are accretion to the land covered by Transfer Certificate
of Title No. 89709 and ordered their registration in the names of the
private respondents.
Respondents Benjamin Tancinco, Azucena Tancinco Reyes, Marina
(should be "Maria") Tancinco Imperial and Mario C. Tancinco are
registered owners of a parcel of land covered by Transfer Certificate
of Title No. T-89709 situated at Barrio Ubihan, Meycauayan, Bulacan
bordering on the Meycauayan and Bocaue rivers.
On June 24, 1973, the private respondents filed an application for the
registration of three lots adjacent to their fishpond property and
particularly described as follows:
"Lot 1 Psu-131892
(Maria C. Tancinco)
"A parcel of land (lot 1 as shown on plan Psu-131892), situated in the
Barrio of Ubihan, Municipality of Meycauayan, Province of Bulacan.
Bounded on the NE., along line 1-2, by Lot 3 of plan Psu-131892; on
the SE., along lines 2-3-4, by Meycauayan River; on the S.W., along
lines 4-5-6-7-8-9, by Bocaue River; on the NE., along line 9-10, by
property of Joaquina Santiago; on the E., NE., and NW., along lines
10-11-12-1, by property of Mariano Tancinco (Lot 2, Psu-111877). . . .
containing an area of THIRTY THREE THOUSAND NINE HUNDRED
THIRTY SEVEN (33,937) SQUARE METERS. . . . "
"Lot 2 Psu-131892
(Maria C. Tancinco)
"A parcel of land (Lot 2 as shown on plan Psu-131892), situated in
the Barrio of Ubihan, Municipality of Meycauayan, Province of
Bulacan, Bounded on the E., along line 1-2, by property of Rafael
Singson; on the S., along line 2-3, by Meycauayan River; on the SW.,
along line 3-4, by Lot 3 of plan Psu-131892; and on the N., along line
4-1, by property of Mariano Tancinco (Lot 1, Psu-111877). . . .
containing an area of FIVE THOUSAND FOUR HUNDRED FIFTY THREE
(5,453) SQUARE METERS. . . . "
"Lot 3 Psu-131892
(Maria C. Tancinco)
"A parcel of land (Lot 3 as shown on plan Psu-131892), situated in
the Barrio of Ubihan, Municipality of Meycauayan, Province of
Bulacan, Bounded on the NE., along line 1-2, by property of Mariano
Tancinco (Lot 1, Psu-111877); and along line 2-3, by Lot 2 of plan
Psu-131892; on the S., along line 3-4, by Meycauayan River, on the
SW., along line 4-5, by Lot 1 of plan Psu-131892; and along line 5-6
by property of Mariano Tancinco (Lot 2, Psu-111877), and on the
NW., along line 6-1, by property of Joaquina Santiago. . . . containing
an area of ONE THOUSAND NINE HUNDRED EIGHTY FIVE (1,985)
SQUARE METERS. . . . "
On April 5, 1974, Assistant Provincial Fiscal Amando C. Vicente, in
representation of the Bureau of Lands filed a written opposition to
the application for registration.
On March 6, 1975, the private respondents filed a partial withdrawal
of the application for registration with respect to Lot 3 of Plan Psu-
131892 in line with the recommendation of the Commissioner
appointed by the Court.
On March 7, 1975, Lot 3 was ordered withdrawn from the
application and trial proceeded only with respect to Lots 1 and 2
covered by Plan Psu-131892.
On June 26, 1976, the lower court rendered a decision granting the
application on the finding that the lands in question are accretions to
the private respondents' fishponds covered by Transfer Certificate of
Title No. 89709. The dispositive portion of the decision reads:
"WHEREFORE, it appearing that Lots 1 & 2 of plan Psu-131892 (Exh.
H) are accretions to the land covered by Transfer Certificate of Title
No. 89709 of the Register of Deeds of Bulacan, they belong to the
owner of said property. The Court, therefore, orders the registration
of Lots 1 & 2 situated in the barrio of Ubihan, municipality of
Meycauayan, province of Bulacan, and more particularly described in
plan Psu-131892 (Exh. H) and their accompanying technical
descriptions (Exhs. E, E-1) in favor of Benjamin Tancinco, married to
Alma Fernandez and residing at 3662 Heatherdown, Toledo, Ohio
43614 U.S.A.; Azucena Tancinco Reyes, married to Alex Reyes, Jr.,
residing at 4th St., New Manila, Quezon City; Marina Tancinco
Imperial, married to Juan Imperial, residing at Pasay Road,
Dasmarias Village, Makati, Rizal; and Mario C. Tancinco, married to
Leticia Regidor, residing at 1616 Cypress St., Dasmarias Village,
Makati, Rizal, all of legal age, all Filipino citizens."
On July 30, 1976, the petitioner Republic appealed to the respondent
Court of Appeals.
On August 19, 1982, the respondent Court rendered a decision
affirming in toto the decision of the lower court. The dispositive
portion of the decision reads:
"DAHIL DITO, ang hatol na iniakyat ay sinasangayunan at
pinagtitibay sa kanyang kabuuan nang walang bayad."
The rule that the findings of fact of the trial court and the Court of
Appeals are binding upon this Court admits of certain exceptions.
Thus in Carolina Industries Inc. v. CMS Stock Brokerage, Inc. (97 SCRA
734) we held that this Court retains the power to review and rectify
the findings of fact of said courts when (1) the conclusion is a finding
grounded entirely on speculations, surmises and conjectures; (2)
when the inference made is manifestly mistaken, absurd, and
impossible; (3) where there is grave abuse of discretion; (4) when the
judgment is based on a misapprehension of facts; and (5) when the
court, in making its findings, went beyond the issues of the case and
the same are contrary to the admissions of both appellant and
appellee.
There are facts and circumstances in the record which render
untenable the findings of the trial court and the Court of Appeals
that the lands in question are accretions to the private respondents'
fishponds.

The petitioner submits that there is no accretion to speak of under
Article 457 of the New Civil Code because what actually happened is
that the private respondents simply transferred their dikes further
down the river bed of the Meycauayan River, and thus, if there is any
accretion to speak of, it is man-made and artificial and not the result
of the gradual and imperceptible sedimentation by the waters of the
river.
On the other hand, the private respondents rely on the testimony of
Mrs. Virginia Acua to the effect that: llcd
xxx xxx xxx
". . . when witness first saw the land namely, Lots 1 & 2, they were
already dry almost at the level of the Pilapil of the property of Dr.
Tancinco, and that from the boundaries of the lots, for about two (2)
arms length the land was still dry up to the edge of the river; that
sometime in 1951, a new Pilapil was established on the boundaries
of Lots 1 & 2 and soil from the old Pilapil was transferred to the new
Pilapil and this was done sometime in 1951; that the new lots were
then converted into fishpond, and water in this fishpond was two (2)
meters deep on the side of the Pilapil facing the fishpond . . . . "
The private respondents submit that the foregoing evidence
establishes the fact of accretion without human intervention because
the transfer of the dike occurred after the accretion was complete.
We agree with the petitioner.
Article 457 of the New Civil Code provides:
"To the owners of lands adjoining the banks of rivers belong the
accretion which they gradually receive from the effects of the current
of the waters."
The above-quoted article requires the concurrence of three requisites
before an accretion covered by this particular provision is said to
have taken place. They are (1) that the deposit be gradual and
imperceptible; (2) that it be made through the effects of the current
of the water; and (3) that the land where accretion takes place is
adjacent to the banks of rivers. Cdpr
The requirement that the deposit should be due to the effect of the
current of the river is indispensable. This excludes from Art. 457 of
the New Civil Code all deposits caused by human intervention.
Alluvion must be the exclusive work of nature. In the instant case,
there is no evidence whatsoever to prove that the addition to the
said property was made gradually through the effects of the current
of the Meycauayan and Bocaue rivers. We agree with the
observation of the Solicitor General that it is preposterous to believe
that almost four (4) hectares of land came into being because of the
effects of the Meycauayan and Bocaue rivers. The lone witness of the
private respondents who happens to be their overseer and whose
husband was first cousin of their father noticed the four hectare
accretion to the twelve hectare fishpond only in 1939. The
respondents claim that at this point in time, accretion had already
taken place. If so, their witness was incompetent to testify to a
gradual and imperceptible increase to their land in the years before
1939. However, the witness testified that in that
year, she observed an increase in the area of the original fishpond
which is now the land in question. If she was telling the truth, the
accretion was sudden. However, there is evidence that the alleged
alluvial deposits were artificial and man-made and not the exclusive
result of the current of the Meycauayan and Bocaue rivers. The
alleged alluvial deposits came into being not because of the sole
effect of the current of the rivers but as a result of the transfer of the
dike towards the river and encroaching upon it. The land sought to
be registered is not even dry land cast imperceptibly and gradually
by the river's current on the fishpond adjoining it. It is under two
meters of water. The private respondents' own evidence shows that
the water in the fishpond is two meters deep on the side of the pilapil
facing the fishpond and only one meter deep on the side of the pilapil
facing the river.
The reason behind the law giving the riparian owner the right to any
land or alluvion deposited by a river is to compensate him for the
danger of loss that he suffers because of the location of his land. If
estates bordering on rivers are exposed to floods and other evils
produced by the destructive force of the waters and if by virtue of
lawful provisions, said estates are subject to incumbrances and
various kinds of easements, it is proper that the risk or danger which
may prejudice the owners thereof should be compensated by the
right of accretion. (Cortes v. City of Manila, 10 Phil. 567). Hence, the
riparian owner does not acquire the additions to his land caused by
special works expressly intended or designed to bring about
accretion. When the private respondents transferred their dikes
towards the river bed, the dikes were meant for reclamation
purposes and not to protect their property from the destructive force
of the waters of the river.
We agree with the submission of the Solicitor General that the
testimony of the private respondents' lone witness to the effect that
as early as 1939 there already existed such alleged alluvial deposits,
deserves no merit. It should be noted that the lots in question were
not included in the survey of their adjacent property conducted on
May 10, 1940 and in the Cadastral Survey of the entire Municipality
of Meycauayan conducted between the years 1958 to 1960. The
alleged accretion was declared for taxation purposes only in 1972 or
33 years after it had supposedly permanently formed. The only valid
conclusion therefore is that the said areas could not have been there
in 1939. They existed only after the private respondents transferred
their dikes towards the bed of the Meycauayan river in 1951. What
private respondents claim as accretion is really an encroachment of a
portion of the Meycauayan river by reclamation. LLpr
The lower court cannot validly order the registration of Lots 1 & 2 in
the names of the private respondents. These lots were portions of
the bed of the Meycauayan river and are therefore classified as
property of the public domain under Article 420 paragraph 1 and
Article 502, paragraph 1 of the Civil Code of the Philippines. They are
not open to registration under the Land Registration Act. The
adjudication of the lands in question as private property in the
names of the private respondents is null and void.
WHEREFORE, the instant petition is GRANTED. The decision appealed
from is hereby REVERSED and SET ASIDE. The private respondents
are ordered to move back the dikes of their fishponds to their
original location and return the disputed property to the river to
which it belongs.
SO ORDERED.
Teehankee, Melencio-Herrera, Plana, Relova and De la Fuente, JJ .,
concur.


||| (Republic v. Court of Appeals, G.R. No. L-61647, October 12,
1984)